Table of Contents

  1. Organizational overview 1
  2. Company Strategic Business Unit 1
  3. External environmental scanning 2

3.1 PESTEL analysis 2

3.2 Porter’s five forces framework 3

3.3 Opportunities and Threats grid 4

  1. Internal environmental scanning 4

4.1 Resource-based view analysis 4

4.2 Product Lifecycle and BCG matrix 6

4.3 Marketing mix 8

4.4 Strengths and Weaknesses grid 8

  1. Complete SWOT analysis 8

Reference 10

 

 

 

  1. Organizational overview

Founded in 1976, Trek Bicycle Corporation is a key bicycle and periphery product manufacturer under the brand name Trek. The headquarter of the renowned mountain bike company is located in Waterloo, Wisconsin. As reflected from the US website, the company’s mission statement is to “build the best bikes in the world”. Other value propositions also include helping the world “use the bicycle as a simple solution to complex problems” (Trekbikes.com/us).

 

What deserves mention is that Trek made a name for itself by helping former world road race champion Lance Armstrong to play on United States Postal Service Pro Cycling Team in 1997. From the standpoint of product line, Trek Bikes Corporation is specialized in four areas, namely, town bikes, mountain bikes, road bikes and collections. Remarkably, Trek Bikes teamed up with many other suppliers to mass-produce eco-friendly products from 2000. The company also advocates the establishment of multiple communities by working with organizations such as Bicycle Friendly Community and the International Mountain Bicycling Association.

 

After a close examination, Trek Bikes has both strengths and weakness. Among a host of mountain bike market players in the United States, Trek Bikes has successfully built a strong brand image over the years, yet it is still faced with external market threats to maintain due market share in North America.

 

The purpose of the report is to conduct an overall environmental scanning for Trek Bicycle Corporation (United States Branch) by utilizing on an array of analysis tools and framework such as SWOT, PESTEL, Porter’s five forces model, and BCG matrix as well as finding existing problems that hinder the development of its brand.

 

  1. Company Strategic BusinessUnit

In examining Trek’s Strategic Business Unit, it tends to own common segments and competitors for most of the products, which can be considered an opportunity to the company. More specifically, the company has two major product categories- bikes and gears. When it comes to the former category, Trek manufactures town bikes, town bikes, road bikes and a bunch of collection bikes favored by diehard fans. With regard to the riding essential categories, the company has a systemic line featured by bike components, accessories, male apparels and female apparels, which vividly shows that they take the bicycle’s world very seriously to the extent that Trek has changed the bikes they make and the way they make them.

 

  1. External environmental scanning

3.1 PESTEL analysis

A complete PESTEL framework analysis on Trek Bike Corporation can be reflected as follows.

Political Factors

According to CIA Factbook (2011), United States is a federal constitutional republic, in which the President of the United States, Congress, and judiciary share powers reserved to the national government, and the federal government shares sovereignty with the state governments.

Economical Factors

  • The United States had the largest and most technologically powerful economy in the world, with a per capita GDP of $46,900. (Country Watch)
  • The country had the highest level of output in the world, with GDP valued at US$14.3 trillion in 2008. (Country Watch)
  • The purchase power of the US ranked No.3 in the world. 

Social Factors

  • In the United States, time is a very important commodity. People ‘save’ time and ‘spend’ time as if it were money in the bank. (http://www.kwintessential.co.uk).
  • Americans are direct. They value logic and linear thinking and expect people to speak clearly and in a straightforward manner. To them, if you don’t “tell it how it is” you simply waste time, and time is money. (http://www.kwintessential.co.uk)

Technological Factors

In referring to the United States Manufacturing Technology Orders (USMTO) report, the regional and national U.S. has witnessed a boost in orders of domestic and imported machine tools as well as heavy equipments, which is a leading economic indicator that there is an increase in manufacturing industries investment and transformation.

Environmental Factors

According to a Mintel industry report, the oil reserves in the United States are 21 billion barrels, without taking the Strategic Petroleum Reserve into account. The report continues to say that “the U.S. Department of the Interior estimates the total volume of undiscovered, technically recoverable prospective resources in all areas of the United States”, which can be seen as an opportunity as crude oil is the backbone of manufacturing steel and plastics used in bikes.

Legal and Regulatory Factors

Legally, the common law system is based on English common law at the federal level; state legal systems based on common law with the exception of Louisiana, which is based on Napoleonic civil code; judicial review of legislative acts (CIA Factbook, 2011). This shows that business environment in United States is more wholesome than in 3rd-world countries.

3.2 Porter’s five forces framework 

To examine the current competitive landscape, Porter’s Forces framework will be applied to test Trek’s bicycle market attractiveness. First, the market is becoming less attractive as there are some aggressive competitors in this category. Second, the entry and exit barriers are comparatively high because it takes a lot of technological factors to build quality bikes. Third, the likelihood of having new substitutes in United States’ mountain bike market seems slim. Thus this segment is no longer considered promising. Fourth, consumer’s growing bargaining power should be cautiously noted with the emergence of new market followers and continued economic downturn. Fifth, the threat of supplier’s bargaining power can be a problem as most of the bikes and gears are made or assembled in China or Taiwan, indicating thatoperating costs are manipulated by local distributors and international transporters.

3.3 Opportunities and Threats grid

Opportunity

Threat

  • Sound legal system and commercial climate for doing business in United States.
  • A mature industry with sound regulatory system.
  • Retain “ Good Customers “
  • High-end mountain bikers are not price sensitive. 
  • Trek’s customers are early adaptors that can help create buzzin US
  • Own a diverse product line and competitive SBU
  • The market entry barrier is high.
  • Advance technologymakes product environmentally 
  • Americans like to be on time. Bikes can be a great time saver when the road traffic is terrible. 
  • Quite a few competitorson US markets such as Specialized Bicycle Components , Cannondale Bicycle Corporation , and Felt Bicycles (USA)

Economic factors

  • DisadvantageousUS exchange rate to vs. European markets
  • The US economyis still sluggish, making consumers buy less, unless these are life necessities.

 

 

  1. Internal environmental scanning

4.1 Resource-based view analysis

Superior performance

As a bike manufacturer, Trek Bikes are good at what they are doing in the creed that “the bike’s brightest future lies in practical transportation.” (www.trekbikes.com/us) They are dedicated to providing real alternatives to cars running on the street. With Trek’s bikes, customers are convenienced to commute, excurse with friends or ride just for fun. More importantly, one can go further and faster with the help of Electric-driven bikes designed by Trek, a company that values practicality and high performance a lot.

Sustainable Competitive Advantage

One of Trek’s sustainable competitive advantages is their green manufacturing process. It is reported that “Trek is the first manufacturer in Wisconsin to switch entirely to renewable electric power.” More specifically, they are now burning 0.1 million pounds of coal on an annual basis as opposed to consuming 10.5 million 4 years ago. Other remarkable changes they are under optimization include converting the entire Waterloo equipment to low-energy-consumption lighting (Anonymous, 2011).

 

Meanwhile, Trek is working on smart shipping as well. For example, the company has managed to reduce their truck miles from two aspects. First, they are trying to figure out how to minimize shipping between the manufacturers and suppliers. Second, Trek has improved the distribution system in an attempt to capitalize on intermodal shipping, thus eliminating unnecessary miles in a way that efficient freight and transportation can be used.

Core competencies

Technological innovation and marvelous model designs are Trek’s two key core competencies. As early as 1980’s, Trek had already forayed into carbon fiber, a material help to cater the rapidly growing consumer needs of lighter and more endurable bikes. For another example,

 

In 1990 Trek marched into a new era by introducing bikes that “combined the comfort features of a mountain bike with the quick ride of a road bike” That said, MultiTracks has surfaced the water and soon turned out to be a great hit. That same year, the first product line of kids’ bikes was introduced by Trek Company. Other notable competencies include good supplier network and engaging marketing tactics over the past decades.

Capabilities

The long success of the Trek’s business and marketing endeavor was inseparable from the company’s president John Burke, a visionary who strategically instilled the brand heritage to Trek’s key value and products made. In the meantime, Trek rarely neglects its corporate social responsibility by supporting the organizations such as the International Mountain Bicycling Association, the Lance Armstrong Foundation, Breast Cancer Research Foundation to make the world a better place, for bicycles and people alike.

Tangible Resources

From the perspective of tangible resources, Trek is almost unmatched in terms of technology, aesthetic product design, a diverse selection of products catering different demographic groups, numerous retail stores across United States, and dedicated employees around the world.

Intangible Resources

To begin with, Trek’s brand heritage tops its intangible resource list. Back in 1976. Trek started to make bicycle frames and made a good amount of 805 ones. Two years later, aside from pure frames, they company started providing complete bicycles. And recently, Trek has decided to shift from steel frames “in favor of aluminum and composite materials.” Secondly, the corporate values and mission statement play a pivotal part in pushing the business forward. Last but not least, Trek has enjoyed solid customer base and good customer loyalty due to its quality product and services.

4.2 Product Lifecycle and BCG matrix

As illustrated in the below diagram. The Mountain Bikes, one of Trek’s key product lines is on the verge of reaching saturation on its product lifecycle, which can be explained by the intense industry competition and higher market entry barrier. In addition, the sales of Mountain Bikes tended to stabilize in a really long period, coupled with the fact that Trek, among its competitors began to differentiate products features and be aggressive in its promotional and media strategy. This might be a weakness to the company.

 

 

 

Based on the industry trend and market share analysis, the BCG matrix for Trek is as follows.

 

 

Mountain Bikes remains the “Stars” for Trek, whereas “Cash Cow” is more applicable to Town Bikes has this segment is gaining growth momentum when more consumers are educated about eco-friendly commuting and the importance of keeping fit.

4.3 Marketing mix

Product

Trek Bikes Corporation is primarily specialized in bicycles featuring mountain bikes and road bikes as well as biking gears such as components and apparels.

Price

Depending on the product segment, the price ranges from USD2,000 to USD10,1000 per bike.

Place

Retail store is the major distribution channel for Trek Bikes. Store locator services are available on Trek’s website to walk customers through finding a nearest spot.

Promotion

Trek’s promotional mix includes brand community events, print ads, internet, social media (e.g., Facebook and Twitter) and out-of-home ads.

4.4 Strengths and Weaknesses grid

Strength

Weakness

Good US market share

  • Retained 15% market share domestically 
  • Big overseas market potentials
  • “Town Bikes”has a strong growth potential.

Buyer Behavior

  • Lower price sensitivity – after introducing free shipping, customer base increased

 

Brand equity

  • Strong brandpositioning against competitors 
  • Good brand awareness, tons of customer testimonials

 

Limited distribution channel

  • Most consumers purchase bikesby walking in the physical outlets
  • Insufficient distributionchannels in United States

Marketing inadequacy

  • Marketing efforts can be more strengthened.
  • Reaching saturation phase at PLC 

 

 

 

 

  1. Complete SWOT analysis

Based on the above internal and external scanning, SWOT analysis summary can be found as follows.

 

Strength

Weakness

Good US market share

  • Retained 15% market share domestically 
  • Big overseas market potentials
  • “Town Bikes”has a strong growth potential.

Buyer Behavior

  • Lower price sensitivity – after introducing free shipping, customer base increased

 

Brand equity

  • Strong brandpositioning against competitors 
  • Good brand awareness, tons of customer testimonials 

Limited distribution channel

  • Most consumers purchase bikesby walking in the physical outlets
  • Insufficient distributionchannels in United States

Marketing inadequacy

  • Marketing efforts can be more strengthened.
  • Reaching saturation phase at PLC 

 

 

Opportunity

Threat

  • Sound legal system and commercial climate for doing business in United States.
  • A mature industry with sound regulatory system.
  • Retain “ Good Customers “
  • High-end mountain bikers are not price sensitive. 
  • Trek’s customers are early adaptors that can help create buzzin US
  • Own a diverse product line and competitive SBU
  • The market entry barrier is high.
  • Advance technologymakes product environmentally 
  • Americans like to be on time. Bikes can be a great time saver when the road traffic is terrible. 
  • Quite a few competitorson US markets such as Specialized Bicycle Components , Cannondale Bicycle Corporation , and Felt Bicycles (USA)

Economic factors

  • DisadvantageousUS exchange rate to vs. European markets
  • The US economyis still sluggish, making consumers buy less, unless these are life necessities.

 

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