Barriers to new bike sellers are reasonably low as capital costs are not very high, to generate significant sales, a network of global outlets would be required.

Bicycle Industry Forces

There are quite a few competitors in an industry that is not growing very quickly. This means that competition could become more intense with frame manufacturers possible bringing everything in house. The high fixed costs involved in producing bikes and their parts will also add to rivalry intensity. The industry is not totally commoditised and so differentiation depending on the parts used. Branding could be utilised more in influencing customer decisions. The high cost of exiting the market adds to the rivalry – most of the brands in this industry are global therefore exiting the industry would be expensive.

Brand identity and awareness would make it more difficult for new entrants to the market. However an established brand name in another arena with a significant marketing budget could extend their brand to bikes. It could be argued however that unless they were to produce their own bike from scratch themselves, existing players in the market might benefit.

Threat of new entrants


Bargaining power of suppliers


Bargaining power of buyers


+ High-end bike manufacturers are reliant on a number of suppliers e.g. mechanical components, other industry parts, non-moving industry parts. Component manufacturers can control manufacturing times/outputs. + Brand names such as Shimano are important as consumers ask for them by name and this gives them a level of leverage. Shimano also produces the best quality component which also adds to their power. - It would not cost the buyer much to switch from one supplier to another. As there is standardisation of parts, buyers can to some degree pick & choose suppliers of parts. In addition, frame manufacturers already produce their own components.

Threat of Substitutes
+ The bike industry is very , very consumer demand driven and consumers therefore have a lot of power even though each individual does not buy a significant number of bikes. + The retailer has become more powerful . Orders to manufacturers are beginning to be based on more favourable margins.


The threat of alternatives is high. There are a number of different modes of transport or recreational activities that customers can choose. Many of which are cheap or even free. However with specialist high-end racing bikes, there are no real threats of substitution – these are the bikes that required for the role of professional racing.

Porter 1980

- Denotes reduces power + Denotes adds to power

Appendix 1

The entire bike industry is very consumer demand driven. This means that competition between components makers could become more intense. Porter 1980 . + More manufacturers could integrate backwards.Component manufacturers provide a critical part of the bicycle.ENTRY BARRIERS Barriers to new high-end components makers are reasonably high as capital costs would be significant. Frame manufacturers could invest in their own components. SUBSTITUTES . frame manufacturers are also able to produce bike components albeit not as good as the specialists. The cost of entering the components market would not be significant for a company already producing similar products. Components-to-manufacturer is an issue. As retailers push for lower prices from manufacturers. Brand identity and recognition makes it more difficult for new entries. There is also no reason why other big name players in the market such as Other Industries’ Parts and Non-moving Components manufacturers could not diversify and begin to produce high-end components. the high cost of exiting the market and high fixed costs of a component maker will add to rivalry. Threat of new entrants SUPPLIERS Bargaining power of suppliers COMPETITIVE RIVALRY Bargaining power of buyers BUYERS DETERMINANTS OF SUPPLIER POWER Unknown. Cannondale now owned by a private equity firm could decide to produce its own components. In addition to bike component manufacturers. DETERMINANTS OF SUBSTITUTION THREAT The threat of alternatives is fairly high. Competing on speed will become a major supply factor and in turn an area of increased competition. . Component Industry Forces NEW ENTRANTS RIVALRY DETERMINANTS The industry as a whole is not growing rapidly. manufacturers in turn are likely to pressure their suppliers (component makers) for lower prices – perhaps forcing component makers to compete more heavily on price. In addition. the end user therefore has a lot of indirect power over the components industry. Threat of Substitutes DETERMINANTS OF BUYER POWER .Buyers of Shimano products could be considered to be in a fairly weak position as Shimano is requested by name and they are unable to match Shimano quality when they produce their own components.Denotes reduces power + Denotes adds to power Appendix 2 .

g. •A growing number of consumers appear to prefer hybrid bikes (road and mountain bike characteristics). However the “material of choice” is carbon-fibre whereas Shimano produces components that are aluminium or titanium. regeneration. •Growing levels of traffic are an issue. It is uncertain whether this is for legal or regulatory reasons.Shimano SLEPT Analysis Societal •The bike industry is subject to changes in consumer shifts and trends e. As subsequent generations get older they may also like a more comfortable bike and this is perhaps a market that Shimano should develop products for. With obesity growing. Legal & Regulatory •There have been and there is likely to be a number of legislative changes regarding the effects of carbon emissions on the environment. Cycling is seen as a good form of aerobic exercise – less harsh on the body than running and more convenient than swimming. Creating lighter components with aluminium and titanium with better shock absorbing abilities could make these consumers bikes more durable and better for the environment. Shimano will not be able to use an exclusive pricing policy as a method to increase sales of their grouped components. This will affect the use of cars which may in turn increase greener methods of travel such as cycling. Shimano could continue to capitalise on and push the health aspect of cycling. creating components that can withstand heavier riders is something else to consider. •Group pricing policies have ceased. There may also be a trend that sees consumers call for ‘greener’ produced bikes possibly made from recycled or renewable sources and bikes that can also be recycled. This again could result in an increase in the bike market particularly in Europe. Naturally this would be of significant benefit to Shimano as this implication has the potential to grow the market. commuters are often encouraged to cycle. Both initiating and spotting trends early is key to Shimano. •Obesity is a serious problem and a growing concern. Shimano produces bike components that are made from aluminium and titanium. Promoting these recyclable features should be a key part of the Shimano’s communications plan. In London. Shimano’s biggest customers. This eco-trend may also drive an increase in bike sales. Whichever it is. reducing the carbon footprint and using renewable energy sources. In addition. This covers a vast number of areas including recycling. Appendix 3a . there is an ageing population. both of which are far easier to recycle and more durable than carbon-fibre. This may naturally lead to an increase in those wishing to purchase bikes. •With fewer people having children compared to the earlier decades of the last century. •Green issues are on the increase within society. probably for both work and recreational use. the interest in the Tour de France and triathlons. Offering bulk sales discounts is an option for Shimano to offer instead.

advertising or promotional campaigns when gas prices are about to go up.Shimano SLEPT Analysis Contd. rubber. This may require changes to assembly and production lines of players in the bike industry. Shimano will need to maintain high levels of quality and increase production levels to reduce lead times. When times are hard people cut down on the use of their cars.e. alloy. Technological •The bike industry technologically driven. •Meetings such as the G8 Summit on climate change may result in worldwide agreements and laws on reducing harmful emissions. fast developing economy. may help with forward planning as recycled metal prices are more reliable that raw metals this would also be good for Shimano’s corporate social responsibility agenda and in line with their mission. Gasoline price increases pushed bike sales as demonstrated in the 1980s. This will grow the market as a whole which as Porter notes: protecting the market is a typical act of the market leader. Competing with China will be fierce. aluminium. Shimano needs to observe financial trends in order to spot times when manufacturers are likely to need components more readily or the opposite: when cash flow is tight and they may need volume discounts. The quality of Chinese products is increasing. titanium and steel. Appendix 3b . An emerging submarket is electric bikes. •Factories in China are a major threat to Shimano. China is also a BRIC. Economic •The industry is subject to price fluctuations of raw materials and metals such as carbon. • Retailer IT issues. an emerging. China is an emerging economy and will be one of the most populated and powerful countries in the world. Political •Lots of quality production is taking place in China. Again. •Recessions and downturns could also have an impact on sales. •The volatility of the US dollar in Asian markets where Shimano has factories is something to watch as well. •The bike industry is heavily affected by changes in other commodities such as oil/gasoline prices. this may also increase greener modes of transport such as cycling. Chinese factories could become a serious threat to Shimano eroding its market share. Following gas prices will help Shimano with their financial forward planning and should be considered when producing their communications plans i. Obtaining these metals from recycled sources would be good for the environment.

Time Introduction Growth Maturity Decline Appendix 4 . Electric bike market which Shimano currently has no involvement with. Hybrid bike market which prefers carbon fibre components which Shimano does not currently manufacture.Bicycle Life Cycles Sales Mature road bike industry and the majority of Shimano’s revenue streams. A small percentage of Shimano’s income is from the midmarket where hybrid bikes are found.

Growth Rate Cash Cows Shimano bike components accounts for over 70% of their income. Dogs Unknown.Shimano Boston Consulting Group Matrix Analysis Stars Unknown. High High Relative Position Low Appendix 5 . Question Marks ? Low Shimano fishing tackle components accounts for 25% of their sales and is rising.

the development of new products and innovations. the designing of components and tackle.Shimano Value Chain Analysis RESEARCH AND DEVELOPMENT E. bolts. How can Shimano make better use of info gathered by their staff from retailers and cyclists in order to produce better components before their competitors? How can they involve customers more in NPD? What are customer trends looking like? How can Shimano influence consumer trends rather than follow them? DESIGN E. aluminium. Collaborating more with frame makers could give Shimano insight resulting in more innovations.g.g. PRODUCTION E. Can carbon components be produced? What other small precision components in line with Shimano’s culture can cost effectively be made? Appendix 6a . In addition. Expanded overseas production was a good move as this should help with delivery speeds. adapting the designs of current components for other different markets. In order to increase efficiencies. Questions/ Suggestions Shimano’s cold forging of metal appears to be an essential part of their manufacturing process and a key strength. it may be beneficial for the design team to simplify the design of the components so that there are fewer products in the Shimano range. Where are these materials being stored? Is a just in time ordering system being implemented with suppliers? This may reduce costs related to process refinement assuming the process refinement department is linked to the supply of raw materials such as titanium. titanium.g. Questions/ Suggestions A core part of Shimano is the design of its products and how they work with other parts of the bike and fishing equipment.g. How can their R&D be more efficient and effective – a quarter of their staff are focused on this. SUPPLY E. nuts. consumer insight and research Questions/ Suggestions Shimano is well-known for its innovation however it has been more than 10 years since its last major development. the production of the various components. of raw materials such as plastics. screws Questions/ Suggestions Could the materials purchase function be done externally by a larger metal purchasing company? Are there cheaper suppliers? Can other materials be used such as carbon-based for lighter components. The Shimano product range is extensive.

The sales and after sales care function needs to be increased so that a better relationship can be gained with customers. Linking the marketing team more with the after sales care and the design teams could provide customers with a more rounded service. Shimano should create a just in time ordering system with its customers.g. Efficient distribution could potentially grow Shimano’s customer base and add value to the customer offering. making use of celebrities to engage the end user? Negotiate merchandising deals with retailers for better presence in stores? There appears to be no overall global strategy. components distribution could be outsourced to a company that is able to store components cost effectively and distribute quickly. Sales are not core to Shimano’s offering and does not add value and so can be outsourced or deemphasized. DISTRIBUTION E.Shimano Value Chain Analysis Contd SALES & MARKETING E. A tailored approach to customer care could add to Shimano’s bottom line. the making of the various components. Value Chain Summary: Shimano currently adds value in its design of products and engineering. Core customers such as frame manufacturers should have dedicated account managers looking after them so that Shimano can build a stronger relationship . The biggest issue for manufacturers dealing with components suppliers is the speed of delivery. Having after sales care could elevate Shimano. Appendix 6b . Sales of Shimano products could be outsourced or given to sales houses for a commission on units sold. the selling and marketing of Shimano’s products and gathering of market research Questions/ Suggestions Shimano appears to lack any real relationship with its customers with no loyalty scheme in place with manufacturers or communication to the end-user. In addition. Ancillary tasks not crucial to the Shimano offering such as process refinement and distribution can be outsourced.g.g. Questions/ Suggestions What efforts are being made to ensure that customers are happy with Shimano’s products? Shimano needs to create points of difference. Can Shimano offer its customers volume discounts to increase loyalty? Can Shimano invest more in brand building marketing. This function could be kept with the sales and marketing team. the distribution of components to various markets Questions/ Suggestions AFTER SALES CARE E.

market leader with 80% of high end market •Exceptional cold forging abilities suitable for mass production of small parts •Strong design team helping Shimano to be given the tag "Intel of the bike business” . •There is no customer/end-user focus and commitment. • Manufacturers could produce own-label bikes with good components suitable for mid-class bike consumers eroding Shimano’s income from the market • Bike market going into decline Appendix 7 . •Significant overheads including its 5. seen as having “product quality and technological superiority” and breakthrough products •‘Independent’ in that – no single manufacturer accounted for more than 10% of Shimano’s sales •Staff resources: strong internal communications particularly between the production and marketing teams •A company focus on R&D with one quarter of its workforce in research and development. younger brand. technical lock-in and seen as the industry’s components standardiser and brand leader •Innovator and first mover mentality. WEAKNESSES • A significant percentage of Shimano’s revenue is from one area: the high-end bicycle market •Long lead times to Europe and the US •Resentment from some industry players due to Shimano’s technical lock-in and pricing policy (lack of sales discounts) •Too many products (more than double its competitors) possibly hampering production lead times and no recent innovations.400 staff OPPORTUNITIES • Making carbon-based components for mid-class and hybrid bikes •Working with manufacturers to produce electric bikes •Producing recycled components or recycled concept bike • Creating special bike components that help the overweight to exercise more easily • Easier bike component gears for aging cyclists THREATS • Competitors delivering the same quality product faster than Shimano • Vulnerable to competitor action from market challenger SRAM •Retailers chasing savings and lower costs of goods could impact on Shimano’s pricing strategy • Lance Armstrong switching to another drivetrain is a threat.Shimano SWOT Analysis STRENGTHS •Financially well-resourced. no real marketing strategy in place. •Not a new brand and therefore could lose out to a fresher. no new products planned.

For new components for the electric bike see Product Development. This is the safest method of growth. Their focus should be on increasing sales in their weaker markets such as Asia through extensive marketing. and/or loyalty schemes. Sample sports equipment include rock climbing ratchets. NEW PRODUCTS PRODUCT DEVELOPMENT . Appendix 8 . mid-class and hybrid bikes. it is unknown whether there are other uses for it.Shimano cannot gain much more of the high-end bike market however they can grow their mid-market component market by selling more components to existing customers. It is similar to their move into the fishing tackle market.Shimano could supply its existing components (where suitable) for the electric bike market.As Shimano has excellent cold forging capabilities . skis and yachting reels. This market may take off. high-end. These could be produced for all bike markets e. Applying the brand name to non-moving components could provide an additional revenue stream. . makers of quality construction equipment and boots could add to Shimano’s revenues. -Produce carbon fibre components for existing markets . However usage could be increased if the components were able to be adapted easily. This would also fit with their mission statement.Shimano Product-Market Growth Analysis EXISTING PRODUCTS MARKET PENETRATION .Produce new components for electric bikes. volume discounts. creating different components for different markets is a high risk but worthy strategy.In addition. . A specific focus on popular consumer sports that have a ‘man against the elements’ theme where trust in equipment is essential could be taken. UNRELATED DIVERSIFICATION .g.As bike components are quite specific. NEW MARKETS .Produce non-moving components and merchandise.a strategic option similar to that taken by Caterpillar. Shimano is a wellknown brand name. penetrating the fishing tackle market further is another strategic option.A range of high performance cycling clothes: Shimano Gear . EXISTING MARKETS MARKET DEVELOPMENT . RELATED DIVERSIFICATION .

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