Dirt Bikes USA Background: Dirt Bikes USA was founded in 1991 by Carl Schmidt and Steven McFadden. These two entrepreneurs saw the increasing demand for Dirt bikes, and took the initiative to capitalize on their idea. These two former bikers took their knowledge of dirt bikes and their love of the sport and developed on that foundation. Their idea was to give the customer a product that was aptly suited for the specific needs of the customer. Also the duo wanted to give something more than just a bike, they wanted to provide the highest possible satisfaction at a reduced cost than their competitors.
To reach this goal they developed frames for dirt bikes that were more suited to off-road handling and started using these frames to build their own dirt bike models using motorcycle engines manufactured by other companies, such as Honda and Rotax Motors of Austria. One of their main selling points was to provide the customer with low priced yet quality product that is situated for the specific use the customer demands. Dirt Bikes USA manufactures bikes that surpass the competition by using using the best custom parts available. The shape their own frame for a unique look they are noted for.
With so much demand and interest in Carl and Steve’s bikes they decided to open a production facility that could manufacture large numbers of their dirt bikes for the retail market. The products that Dirt Bikes started off with in when they opened included The Enduro 250 which retails for $3250, the Enduro 550 which retails for $7600, the Moto 300 which retails for $4295 and the Moto 450 which retails for $8995. Some services included providing customer service to repair everything that they made making it very convenient for the customer.
They also sell their products at certified Dirt Bikes stores only, although if a customer lives more than 50 miles from the store, they can purchase the product from a certified affiliate bike store. With so much interest in the company, they decided to open a small production facility in Carbondale. This facility has since expanded to house 120 workers involved in production, design, and engineering and a corporate sales and administrative staff of close to 20 employees.
Over the years Dirt Bikes USA has enhanced and expanded its product line to include dirt bike models optimized for racing and for offroad recreational use. Its racing models have placed well-and often placed first– in the many dirt bike races staged throughout the United States. A final selling point was to show that the durability of their products were so well made that they can withstand the rigors the of the Barstow race which pits riders across 500 miles of desert from Las Vegas to Los Angeles.
Organization: There are approximately 120 employees work in design, engineering and production, including 3 full-time product designers and 3 engineers. In addition to a 4person parts department, Dirt Bikes maintain a ten-person service department to service warranties and customer problems with parts and motorcycle performance. Five employees work in Dirt Bikes’ shipping and receiving department. Dirt Bikes’ sales staff consists of a marketing manager and 5 sales representatives, two for the West coast and Western United States, one for the Midwest, one for the Northeast and one for the South.
The corporate administrative staff consists of a controller, one accountant, one administrative assistant; two human resources staff members, three secretaries, and two information systems specialists to support systems servicing all of the business functional areas. The company maintains a very friendly family atmosphere, encouraging teamwork, attention to detail and quality, and continual learning and innovation. Employees, distributors, and retail customers are urged to contribute ideas on how to improve Dirt Bikes’ products and service.
With all this cumulative knowledge and support among the company, Dirt Bike’s hopes to rapidly take the lead in innovative products and quality customer service. The employee model can be represented by this graph. A better way to read the model is to say that the organization structure is sort of flat, hence it is still a growing company, but 5 different groups report to one department and then that department as well as two others report to the CEO and COO as aptly outlined by the model.
With little expertise in the E-commerce business, it gives Dirt Bikes’ competitors a slight advantage in marketing its products on the web. The Problem: Dirt Bikes USA do not have an adequate internet based platform as to which it can sell its products. This means that its competitors have the advantage to sell in prime estate areas that would normally be essential to Dirt Bikes success. To overcome this problem the implementation of a web site and more software are a necessity. To implement systems such as SAP or an Oracle system, Dirt bikes will need to invest some serious money into the transition.
However some downfalls that arise when technology is introduced into a company include, teaching the staff to use the technology effectively and intelligently, lost money at the point of implementation, and the possibility for the system to crash if not set up properly. Dirt Bikes will also need a user-friendly, visually stimulating, easy to navigate web site. This means that more money will need to be spent in order to get the ball rolling on this new transition. Because Dirt Bikes do not sell directly to retail customers, it relies on a network of 40 distributors concentrated in the Western and Midwestern United States.
A small percentage of Dirt Bikes are sold in Europe using independent distributors that sell other brands of dirt bikes and motorcycles as well as Dirt Bikes. Dirt Bikes’ motorcycles, parts, and service, including warranty repairs, can only be obtained through an authorized Dirt Bikes dealer. All motorcycle and spare parts sales, shipping and set-up must be handled by a certified dealer. If a potential customer lives more than 50 miles from the nearest authorized Dirt Bikes dealer, the customer can purchase a Dirt Bike or Dirt Bike parts through a certified independent motorcycle dealer.
Retail customers can purchase spare parts directly from Dirt Bikes only by verifying that they live more than 50 miles from an authorized Dirt Bikes dealer. A solution to the limited retail space that the company sells, is to generate income with a website, and reduce the cost of day to day expenses, this means making the company more efficient. By creating a website Dirt Bikes will be able to sell too more customers throughout the world meaning that their business will grow in the digital marketplace, without having to spend money on retail outlets which can run up huge over costs on the entire corporation.
Their recent revenue models are shown below: Consolidated Satements of Income (in thousands) 2002 2001 2000 Revenue Net sales Cost of goods sold Gross profit/(loss) Gross margin Operating expenses Sales and marketing Engineering and product development General and administrative Total operating expenses Operating income/loss 60,144 45,835 14,309 64,063 43,155 20,908 61,529 41,072 20,457 4,733 3,141 1,913 9,787 4,522 4,537 2,992 1,601 9,130 11,778 3,944 2,339 1,392 7,675 12,782
It’s easy to see that over the past three years, Dirt Bikes has actually declined in the amount of revenue they have generated. Their greatest year was 2001, and it seems that whatever the business model they were using, was working. If Dirt Bikes looks at their records and examines what worked and what didn’t work, they will be able to get back on track. To help them do that however they must examine their competition and ask themselves, what other companies are Dirt Bikes’ major competitors? How do their products compare in price to those of Dirt Bikes?
What are some of the product features they emphasize? The answers to these questions are as follows: ? Yamaha: prices between $1,100 and 7,100; about 20 models ? Suzuki: prices between $1,100 and 9,000; about 18 models ? Honda: prices between $1,300 and 7,200; about 16 models ? Kawasaki: prices between $1,200 and 6,800; about 14 models ? Emphasis on such things as starter (electric or kick start), engine (size, power, etc. ), fuel system, and finally the specific application for which it is designed for. DirtBikes USA doesn’t make quite as many models as their competitors.
However, an effective angle on this might be to say something like “designing fewer models allows us to focus all of our attention and brain power to the ones that we do design thus resulting in the best bike possible. ” Also, DirtBikes, historically, has appealed mainly to “enduro,” or long-distance riders. They’ve just recently begun to enter to the motocross market, so it’s important for them to market themselves effectively to get to the same level as their competitors. Catchy advertisements and promotions would certainly be a atalyst in the process. Also the activities that create the most value for DirtBikes is ? Promotion at motocross events and competitions. ? Magazine advertisements, articles reporting new products or race victories and upcoming venues. ? Parts and service sector create about 15% of total revenue. Using these statistics it’s easy to see why DirtBikes’ revenue may have slipped over the past years. The motorcycle business is a very competitive market in which a number of companies are trying to get their product herd and purchased.
This makes it very difficult for a new company such as DirtBikes to get into the mainstream business of products dealing with Dirt Bikes, when its competitor’s have been around for so long, and have grown to become such large companies. The latest selling model of DirtBikes’ products is conveniently outlined in this table: Model Enduro 250 Enduro 550 Moto 300 Moto 450 TOTAL 1998 1201 2832 1755 463 6251 Sales by Model 1999 2000 1663 2291 3290 3759 1932 2454 598 661 7483 9165 2001 2312 4078 2615 773 9778 2002 2195 3647 2627 823 9292
Again this shows that the total numbers of bikes sold was the greatest in 2001 and have steadily declined during 2002. Many factors can contribute to these declining sales, including the need for more employees, the training time, inflation, higher costs in materials and parts, and the way the bikes are put together(meaning how efficient they are) Another table that further shows the need for change is illustrated in the amount of domestic vs. international sales. Domestic International TOTAL % International 1998 5723 528 6251 8. 4% 1999 6843 640 7483 8. 6% 2000 8254 911 9165 9. 9% 2001 8889 889 9778 9. % 2002 8530 762 9292 8. 2% By examining this table it is clear that the international sales are generating little revenue compared to that of the Domestic sales within the business. Also the cost of shipping these bikes overseas may not even produce a sufficient amount of money for each bike when all is said and done, meaning that the money made by selling a bike may be about the same cost of shipping the bike overseas resulting in a small profit. To solve this problem of being inefficient and not making the sales quota that DirtBikes have hoped for, they will need to dramatically change the way they perate. This means not just throwing money at the problem, but using money in a smart and effective manner that will, in the long run, generate more profit for the company. This brings us to our next point. The Solution: The solution to this problem is an easy yet smart one that will give DirtBikes the edge they need to compete in the online marketplace as well as making the company more efficient in its day to day operations. DirtBikes need to enter the ecommerce world and get in with the technology that dictates mostly all of today’s marketing operations.
They should ask themselves questions like “How could Dirt Bikes benefit from ecommerce? Should it sell motorcycles or parts over the web? Should it use the wed site primarily to advertise its products and services? Should it use the Web for customer service? The answer to these question is all YES!. Technology is the future of the marketplace and will be for many years to come. Companies everywhere are using technology to gain the competitive edge in selling their products. It provides a valuable advantage over someone that doesn’t have a web site, or ERP software.
By having a web site that company is able to reach more potential customers by making information about their products more readily available. This in turn means that by having the information on demand, the consumer is able to make their decision more rapidly on whether or not they would like to purchase a product from DirtBikes. In this new age, technology can take a company into the future. If DirtBikes decide to invest in e-commerce it will be beneficial, in theory, because E-business covers a wider market and reaches out to more customers.
Other benefits include versatility and flexibility of shopping from home as well as reasonably fast payback over the traditional catalogue-mail order system. The projected costs that DirtBikes must take into account is Web Site Building, Hosting, Maintenance, Third Party Fees(IT Staff), and Advertising Through the Web. First, If they would like to build a website then typical costs can range anywhere between $500 and $100,000. With two types of web sites, static and dynamic, making the right decision is crucial.
Static web sites consist of HTML code, whereas Dynamic web sites consist of database and a backend which can constantly be updated on demand. Because a dynamic web site is ever changing, they are typically more expensive, but generate more revenue, which saves the company money in the long run. Secondly, by doing some research, we found that Ghost Systems recommended www. webrivernet. com. They provide complete web hosting service as well as offer complete support for all popular database applications including MS Access, MySQL Server, and Oracle.
There also compatible with FrontPage extensions and have very reliable back end database support. On top of creating a Web Site, the typical monthly hosting fee (including bandwidth fees) ranges from $150-$300. The third consideration as outlined in the implementation of an e-commerce decision is Web Site Maintenance. One route is to hire a full time IT Staff person to maintain the web site and perform upgrades and updates. But given DirtBikes status, they probably don’t need to spend the extra money on such a person; instead they could hire a part time programmer/IT intern.
The fourth consideration is Third Party Fees. This isn’t just keeping the Web Site updated, this includes every aspect of the technology that will be used within DirtBikes. The IT staff could include 2 part time programmers. Part time is better because they would come out to be cheaper that a full time, high demand programmer. This might run the company an additional $20,000 to $25,000 for each person. Finally the last thing that must be taken into consideration is how DirtBikes plan on advertising their products. Should DirtBikes use a Mail Ordering catalogue or a Web Based ordering method?
This table gives a simple yet effective comparison. Mail-Based catalog orders Convenient for customers who prefer mail-based ordering Not very secure Web-Based catalog orders Faster transactions Expensive to implement, but worth it Ordering is more secure Mailing costs No mailing costs Not fast No need to print catalogs Will be obsolete in a few years The proposed Web-Site should include the main aspects that the leading web sites offer like: Company History and Mission Statement, Contact Information, Product Catalogue, Customer Service Feedback Forum, Customer Forum.
What DirtBikes must remember is that “you get what you pay for” that is the more money you spend, typically, the better the result. So it’s VERY IMPORTANT that DirtBikes spend their money wisely and do some research. They should only spend money on the things that matter. DirtBikes can profit from an e-commerce site that can sell bikes and create the latest buzz on upcoming models. Dirt Bike should sell bikes over the web and replaceable parts to current customers. Because DirtBikes already have a customer service system in place the web should be used for a more general customer service.
A web site would connect the company to more customers around the world and not have to rely on distributors and the site would be able to generate buzz on current and upcoming products. Another way to get the word out about the company would be to advertise through the web. This includes: • • • • • • Search Engine Submissions Pop-Up Ads Banners On Other Related Sites Tradeshow Give-a-ways Corporate Gifts and Novelties Promotional Wearable and Merchandise Combined Marketing Cost: Around $700 for a one time fee plus about $100 per month.
DirtBikes can profit from an e-commerce site that can sell bikes and create the latest buzz on upcoming models. Dirt Bike should sell bikes over the web and replaceable parts to current customers. Because DirtBikes already have a customer service system in place the web should be used for a more general customer service. A web site would connect the company to more customers around the world and not have to rely on distributors and the site would be able to generate buzz on current and upcoming products.
Again because this is a low volume- high profit item selling company, an ecommerce site would only take 10% off the sale, so the company would only incur a cost when it has sold a product. Nonetheless however having a website will defiantly give DirtBikes the strategic advantage in selling its products. With features like model specs, cost, retail stores, contact us, and services page, DirtBikes will be able to generate more news about what the company is and what it does, and this will ultimately generate more money for the company. Dirt Bikes web site should be able to show the product, its apabilities, and the evolution of the design and ultimately the purchase of the bike. Also there should be a setup to view races that the bikes have been helpful in winning. Again, this is all up to Dirt Bikes USA if they just want to us the site to get people to come down to the store. If they want to sell bikes or parts on the web they will need more “cookies” In any case the less information they take the happier people will be. As long as information is collected, it will help make the visitors stay longer and more enjoyable, then people will not mind if data is collected about them in small increments.
Cookies raise a good question as to whether or not they should be used. If people buy things frequently, then cookies will help both Dirt Bikes and the consumer in making future purchases easier. Dirt Bikes will know what is selling the best and where, and it will help the user by sending them emails telling them what the deals of the month are and incentives that the company provides. Another hurdle is whether or not to use TRUSTe to certify that it has adopted approved privacy practices. Due to a number of big names in the online community, this may not be a big deal but is certainly an issue.
Due to the cost, the best thing to do at this time would be to set it up as a TRUSTe but don’t not sign up for it until you see how the site does. The final question they must ask themselves about having a website is should they (DirtBikes) design their site so that it conforms to P3P standards? P3P are industry standards that are designed to give the user more control over personal information that is gathered on Web sites that they visit. P3P stands for Platform for Privacy Preferences. This is something they will have to decide for themselves, but a smart idea would be to adopt an “opt-in” model.
The Opt-in approach is a model of informed consent that prohibits any organization from collecting any personal information unless the individual specifically takes action to approve information collection and use. P3P is not needed for a company this size at this time if they site does well then they can bring the site up to P3P standards in less then a week. The final thing that DirtBikes will need to do, and one that will not be quite as important, will be to implement some sort of business software solution. An ERP database that could be used would be SAP, Oracle platform to help the company become more efficient.
DirtBikes will need to update their entire systems to have a chance in the Dirt Bikes marketplace. But DirtBikes can choose a system, they needs to dramatically change their Customer Database. Their current database is out of date and collects little about the customers. We think that given the information it will look something like this: Customers Name Address, and Email Telephone Number Model Purchased Date Purchased Distributor purchased from Customers Age Is the customer a new customer? no Send Monthly News letter, Information about special event races, and sales on parts
How much schooling have they had? yes Send Monthly News letter, Information about special event races, and sales on parts Do they own any other motorcycles? yes no What other sports are they interested in? From what distributor was the motorcycle purchased? Take no action When was it purchased? What make and model is it? Is the motorcycle a DirtBikes model? no What other sports are they interested in? yes What model is it? Send Monthly News letter, Information about special event races, and sales on parts From what distributor was the motorcycle purchased? When was it purchased?
Store information for future use Send Monthly News letter, Information about special event races, and sales on parts What other sports are they interested in? With a properly working customer database, DirtBikes is now able to target their customers, and at the same time will be able to gather essential information so that they can track trends that will help them in time to make their marketing more effective. Again this will cost DirtBikes some money, but it should quickly make it back if the system is set up properly and no major problems arise during the implementation of the software.
DirtBikes will also need software to use in their day to day operations. To do this they will need software that they can use for their day-to-day activities such as word processing and spreadsheets. As part of updated technology Sun Star Office has the lowest cost software with all of the applications needed. The total cost of ownership of the technology over a three year period is $1093. 15. After doing a comparison these were the results: Software Microsoft Office 2003 Office XP Sun StarOffice Price $229. 00 $189 $69. 0 Word Processing Y Y Y Spreadsheet Y Y Y Database NONE NONE Y Electronic Presentation Y NONE Y E-mail Software Tools Y Y Y Draw Y With this information, DirtBikes can now make an easier decision as to which software they will need. Along with this software, additional software will need to be used like instant messaging and email accounts for each person that is involved in the company. Some options would be to subscribe to America Online (AOL). This service uses features like instant messaging to have people talk to each other the web quickly and cost effectively.
By giving everyone a “screen name” the employees within the company are able to find out where one division is at any given point in time on any given project. That means that the production can message the service department, saying that they need to order more tailpipes. Or the marketing department can email the customer relations department and find out what trends are selling the best as well as what they believe will sell in the future based on reports. With software issues out of the way, and a focused outlook on which products and services they will use, DirtBikes USA is ready for their next obstacle.
This obstacle is communication. When DirtBikes needs to talk to its employees or representatives in other states, it can be very expensive to travel and hold conferences. Having conferences means renting out space and spending more money on something that can be solved with new technology. This new technology is Web Cameras to solve traveling time and time spent away from the office. Web Conferences will almost eliminate the need for travel thus reducing expenses and increasing the time that can be spent on actual business.
Plus webcams offer both parties to instantly talk to each other over the internet which also reduced costs of over seas telephone charges. Finally the benefit to webcams is the time in which a conference can be set up. It might take 2 days to travel somewhere and have the conference compared to both parties instantly creating a chartroom in which they can communicate their ideas. Other ideas to increase efficiency and productivity with internet tools are modeled with this simple table: Email Electronic Message Boards A good easy way for them to be able to see new things… anyone can post something. ntranet or extranet Forums Instant Messaging Gives employees a quick way to speak with each other. Easy way to ask a quick question, and could also be used as a meeting tool. Non Management Positions Keeps each worker up to date on things happening in the company. Not used for short conversations. Used more as a discussion tool, rather than keeping in touch with other employees Probably not as important for non management positions. Middle Management Executive Keeps Middle management aware of what is happening in the company.
It is a good way for him/her to speak with workers in non management positions. Can be kept up to date with things in the company. Same as above Enables management to keep track of what other employees are saying. It can be viewed by anyone Allows non management employees to ask middle management quick questions. Same as above Same as above Allows executives to have meetings, some instant messaging services have the ability to use web cams, while talking. Also by setting up an extranet within the company, it would increase communication with different branches of the company on different platforms.
Intranets are important for the manufacturing and production departments because it would allow them to see what kind of demand there is for the product. Which in turn would show them how much of the product to actually produce. The final challenge that DirtBikes face is Logistics, and by implementing new technology, they can reduce their shipping time. Take gas tanks for instance. Gas tanks come from a number of places and choosing the fastest and most reliable carrier is essential in getting the specific motorcycle done and out on the selling floor.
This table helps to carry the point: SUPPLIER IMS Gas Tanks Clarke Manufacturing COST $15. 12 $13. 05 SHIPPING TIME 5 days 5 days COST FOR MULTIPLE TANKS (10) $151. 20 $130. 50 SHIPPING TIME 4 5 After researching alternative suppliers for motorcycle fuel tanks we have come to the conclusion that Clark Manufacturing would be the best for Dirt Bikes to use. The chart details that Clarke is better suited than IMS Gas Tanks. Its cost is cheaper at $13. 02 and its total cost for multiple tanks are cheaper at $130. 50.
IBS has been ranked by AMR Research, as one of the largest international vendors of supply chain software, supply chain management software & supply chain planning software. IBS is the only worldwide software company, coming from the distribution side of the supply chain. IBS’ software is developed to help our customers increase profitability by boosting sales, reducing costs and tied-up capital, shortening lead-times, improving customer service, increasing efficiency in internal and external processes, and quickly accessing decision-support information.
Regardless of platform, our solutions let you collaborate with your business partners and integrate both your processes and systems. Advanced Planning and Production Scheduling, APS, and Supply Chain Management, SCM, are becoming increasingly important in manufacturing companies, as they look to enhance their enterprise applications to take account of real-time status of suppliers, customers and their own plant.
There is a need for tools that will enable companies to react in a timely manner to events both upstream and downstream of their position within each of their supply chains. For a small business like DirtBikes we would conclude that IBS would be the best supply chain management software for our company. Conclusion: With all this said and done, we think that DirtBikes can greatly increase their revenue and get the company back on its feet.
These small changes within the company such as changing carriers can cause that extra edge in profit. Other changes which are substantially larger like the implementation in a totally new technology platform will cause some degree of pain for everyone that fears change, this is true, but will most defiantly save the company money in the long run. By having everything connected, on demand, and unified on one central platform everyone will have the power at their fingertips to make the company run a lot more smoothly.