THE UNIVERSITY OF DANANG

VNUK INSTITUTE FOR RESEARCH AND EXECUTIVE EDUCATION

CASE- STUDY
TREK: Building Better Bikes Through Organizational Buying

Angels Team

Course: Introduction to Marketing

Lecturer: Nguyen Truong Gia Bao

Team member: Tran Bao Minh

Nguyen Ngo Quynh Anh
Nguyen Thi Kim Dung
Tran Thi Hong Hanh
Nguyen Tue San
Duong Thi Ngoc Bao
Doan Minh Thu

Confidentiality Statement
This document contains confidential information that must not be disclosed to anyone other than the
instructor and the student unless authorized to do so.

Mar 2024

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Let me tell you a little bit about the history of Trek," says Mark Joslyn, vice president of human
resources at Trek Bicycle Corporation. "It's a fantastic story," he continues proudly. "It's a story
about a business that started in response to a market opportunity." That opportunity was to build
bicycles with the highest-quality frames. In fact, Trek's mission was simple: "Build the best
bikes in the world." To do this Trek needed to find the best raw materials from the best vendors.
Michael Leighton, a Trek product manager, explains, "Our relationship with our vendors is
incredibly important, and one of our recipes for success!"

THE COMPANY

Trek Bicycle was founded in 1976 by Richard Burke and Bevill Hogg. With just five employees
they began manufacturing bicycles in a Wisconsin barn. From the beginning they targeted the
high-quality, prestige segment of the bicycle market, using only the best materials and
components for their bicycles. The first year they manufactured 900 custom-made bicycles
which sold quickly. Soon, Trek exceeded its manufacturing capacity. It built a new 26,000-
square-foot factory and corporate headquarters to help meet growing demand.

Trek's focus on quality meant that it was very sensitive to the materials used to manufacture the
bicycles. The first models, for example, used hand-brazed steel for the frames. Then, borrowing
ideas from the aerospace industry, Trek soon began making frames out of bonded aluminum.
Following on the success of its aluminum bicycles, Trek began manufacturing bicycles out of
carbon fiberThe idea was to be "at the front of technology," explains Joslyn.

The company also expanded its product line. Its first bikes were designed to compete directly
with Japanese and Italian bicycles and included road racing models. In 1983 Trek manufactured
its first mountain bike. In 1990 Trek developed a new category of bicycle- called a multitrack-
that combined the speed of road bikes with the ruggedness of mountain bikesThe company also
began manufacturing children's bikes, tandem bikes, BMX bikesand models used by police
departments and the U.S. Secret Service. In addition, it added a line of cycling apparel called
Trek Wear and cycling accessories such as helmets. Recently, Trek also undertook an Eco
Design initiative to build bicycles and parts that are "green" in terms of the environmental
impact of manufacturing them, how long they last, and how they can be recycled. To
accommodate these production demands, Trek expanded its facilities two more times.

As Trek's popularity increased, it began to expand outside of the United States. For example,
the company acquired a Swiss bicycle company called Villiger and the oldest bicycle company
in Germany, Diamant. It also expanded into China, opening two stores and signing deals with
20 Chinese distributors.

Today, Trek is one of the leading manufacturers of bicycles and cycling products, with more
than $800 million in sales and 2,000 employees. Trek's products are now marketed through
1,700 dealers in North America and wholly owned subsidiaries in seven countries and through
distributors in 90 other countries. Its brands include Trek, Gary Fisher, and Bontrager. As a
global company, Trek's mission has evolved also, and today the mission is to "help the world
use the bicycle as a simple solution to complex problems." Trek employees believe that the
bicycle is the most efficient form of human transportation and that it can combat climate
change, ease urban congestion, and build human fitness. Their motto: "We believe in bikes."
Mark Joslyn explains: In the world today we are faced with a number of challenges. We are
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faced with congestion, issues with mobility, issues with the environment, and quite frankly,
issues with health. We believe that the bicycle is a simple solution to all of those things.

We are clearly an alternative to other forms of transportation and that's evident in the way that
people are embracing cycling not just for recreation but also for transportation. And more and
more, particularly in the United States, we are seeing people move to the bike as a way to get
around and get to the places they need to ultimately get their life done.

ORGANIZATIONAL BUYING AT TREK

Trek's success at accomplishing its mission is the result of many important business practices,
including its organizational buying process. The process begins when managers specify types of
materials such as carbon fiber, component parts such as wheels and shifters, and finishing
materials such as paint and decals needed to produce a Trek product. In addition, they specify
quality requirements, sizing standards, and likely delivery schedules. According to Leighton,
once the requirements are known, the next step is to "go to our buying center and say 'can you
help us find this piece?"

The buying center is the group of individuals who are responsible for finding the best suppliers
and vendors for the organization's purchases. At Trek the buying center consists of a purchasing
manager, buyers who identify domestic and international sources of materials and components,
and representatives from research and development, production, and quality control. The
communication between the product managers and the buying center is important. "I work very
closely with our buying centers to ensure that we're partnering with vendors who can supply
reliable quality, and they are actually the ones who, with our quality control team, go in and say,
'yes this vendor is building product to the quality that meets Trek's standards,' and they also
negotiate the pricing. Our buying center domestically is a relatively small team of people and
they are focused on specific components."

When potential suppliers are identified, they are evaluated on four criteria-quality, delivery
capabilities, price, and environmental impact of their production process. This allows Trek to
compare alternative suppliers and to select the best match for Trek and its customers. Once a
business is selected as a Trek supplier, it is continuously evaluated on elements of the four
criteria. For example, current suppliers might receive scores on the number of defects in a large
quantity of supplies, whether just-in-time orders made their deadlines, if target prices were
maintained, and if recycled packaging was used. At Trek the tool that is used to record
information about potential and existing suppliers is called a "white paper" Michael Leighton
describes how this works: "Our buying center is tasked with developing what we call white
papersIt's a sheet that managers can look at that shows issues and benefits related to working
with these people." Every effort is made to develop long-term relationships with suppliers so
that they become partners with Trek. These partnerships mean that Trek's success also
contributes to the partner's success.

Trek's product managers and the buying center are involved in three types of organizational
purchases. First, new buys are purchases that are made for the first time. Second, modified
rebuys involve changing some aspect of a previously ordered product. Finally, straight rebuys
are reorders of existing products from the list of acceptable suppliers. Leighton offers examples
of each type of purchase at Trek:

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So, [for] a new buy, we work with our buying centers to find new products, something we've
never done before whether it's a new saddle with a new material or a new technology that goes
into the frame that damps vibration or gives a better ride. Another case might be electric bikes-
maybe we are putting a motor in a bike, that's a new thing, so our buying center will help us
find those vendors. A modified rebuy is basically a saddle with a little bit different material but
we are sharing some components of it, so the existing components of the saddle [are the same)
but the cover is new, so it's a little bit different, but it's just the evolution of the product. A
straight rebuy is looking at our strategic vision for the component further down the line where
we are just buying the same component and the volume goes up. We look at how we can make
this a better business; can we save some money or can we make it more worthwhile to keep
buying the same product rather than buying something new.

While each of the types of purchases may occur frequently at Trek, the criteria that are used to
select or evaluate a vendor may vary by the type of purchase and the type of product, making
the buying process a dynamic challenge for managers

ECO BUYING AND THE FUTURE AT TREK

One of Trek's criteria for evaluating existing and potential vendors is their environmental
impactJoslyn says it well: "We evaluate our vendors on many criteria including, increasingly,
the elements that we would consider to be the 'green' part" of their offering. For example, Trek
recently selected a supplier that (1) owned a quarry for extracting material, (2) used its own
manufacturing facilities, and (3) used natural gas instead of coal in its production process. This
was appealing to Trek because it suggested that the supplier had a "thorough understanding" of
the impact of the product on the environment from start to finish.

Trek's organizational buying reflects the growing importance of its "Eco" perspective. Its bikes
are becoming "smarter" as it adds electric-assist components to help them become a practical
transportation alternative. Its bikes are also becoming "greener" as more low-impact materials
and components are used and as packaging size and weight are reduced. Trek is also addressing
the issue of recycling by building the bikes to last longer, using its dealers to help recycle tires
and tubes, and funding a nonprofit organization called Dream Bikes to teach youth to fix and
repair donated bikes.

In addition to changing bikes and the way it makes them, Trek faces several other challenges as
it strives to improve its organizational buying process. For example, the growing number of
suppliers and vendors necessitates constant, coordinated, and real-time communication to
ensure that all components are available when they are neededIn addition, changes in consumer
interests and economic conditions mean that Trek must anticipate fluctuations in demand and
make appropriate changes in order sizes and delivery dates. As Mark Joslyn explains,
"Everything we do all the time can and should be improved. So the search for ideas inside of
our business and outside of our business, always looking for ways that we can improve and
bring new technology and new solutions to the marketplace, is just a core of who we are."

2. What selection criteria does Trek utilize when it selects a new supplier or evaluates an
existing supplier?
Trek utilizes several selection criteria when selecting a new supplier or evaluating an existing
supplier. These criteria include:
• Quality: Trek places a high emphasis on quality and evaluates suppliers based on their
ability to meet Trek's quality standards. They assess the reliability and consistency of the
products supplied by the vendor.

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 • Delivery capabilities: Trek evaluates suppliers based on their ability to meet delivery
schedules and fulfill orders on time. This ensures that the necessary materials and
components are available when needed for production.
• Price: It is an important factor for most companies when choosing a supplier. Trek often
compares prices offered by different suppliers to ensure they are receiving competitive
prices for the goods or services they require. This keeps their production costs down and
maintains profits.
• Environmental Impact: Environmental sustainability has become a key consideration for
many companies, including Trek. When selecting or evaluating suppliers, Trek may
assess the supplier's environmental practices and initiatives. This can include evaluating
their commitment to reducing carbon emissions, energy consumption, waste generation,
and water usage. They may also consider if the supplier has certifications or compliance
with environmental standards or regulations.

4. Provide an example of each of the three buying situations-straight rebuy, modified

rebuy, and new buy at Trek?
- Straight Rebuy: if Trek regularly purchases a specific type of bicycle tire from a particular
supplier and continues to order the same tire in the same quantity without any modifications or
changes, it would be considered a straight rebuy.
- Modified Rebuy: suppose Trek has been purchasing a specific bicycle saddle from a supplier,
but they decide to modify the saddle design by using a different material for the cover while
keeping the existing components unchanged. This would be considered a modified rebuy as
they are altering one aspect of the product.
- New Buy: if Trek decides to introduce electric bikes to their product line and seeks out
suppliers who can provide the necessary components, such as motors and batteries, it would be
considered a new buy. Since electric bikes are a new product category for Trek, they would be
entering into a purchasing agreement for these components for the first time.

5. What 3 problems might Trek have in 2024, and how can they fix them?
In 2024, Trek Bicycle faces several potential challenges that could affect its operations and
growth. These challenges include supply chain disruptions, environmental sustainability
concerns, and market competition and innovation. To address supply chain disruptions, Trek
can diversify its suppliers, strengthen supplier relationships, and implement risk management
strategies. Regarding environmental sustainability, Trek should invest in research and
development for eco-friendly technologies, collaborate with suppliers to improve environmental
practices, and engage with stakeholders to advocate for sustainability. To tackle market
competition and innovation challenges, Trek can diversify its product offerings, focus on brand
identity as a leader in quality and sustainability, and allocate resources to research and
development for cutting-edge products. By proactively addressing these challenges through
strategic planning, collaboration, and innovation, Trek can sustain its growth and maintain its
position as a leader in the bicycle industry.