CASE: DEVINCI CYCLES

 Why foray into the Asia-Pacific?

FSA Analysis
 Feasibility analysis

 Sales - $5bn, 36% of global demand

 Mountain bike sales growing@9.84% p.a. from $13.8bn in 2017
to (e)$16bn, bn 2023, about 24% of total market!
- Large number of races in the region indicate interest in the sport
 CASE: DEVINCI CYCLES

 Online sales show high WTP; interest from distributors in China,

Hong Kong, Japan, NZ show demand exists!
 Many key markets like Australia, NZ, India, Hong Kong, Singapore
are English speaking, so psychic distance low!
 Increased cost of personnel, travel, promotion materials,
translations will be incurred
Prima facie, Asia Pacific appears to be feasible
 CASE: DEVINCI CYCLES

 Suitability analysis
 Objective to sell 1000 mountain bikes annually; grow @20%p.a. till
2021-> needs new markets since it is well established in USA, EU
 the current export-led model is suitable to Asia
 COO of Canada high in Asia - Pacific

Asia-Pacific market is suitable for Devinci

 CASE: DEVINCI CYCLES

 Acceptability Analysis

 There don’t appear to be any barriers, tariff or non-tariff

 Export led model will not entail big resource commitments
 Gauthier’s resource constraint and risk taking ability is unknown!!
Prima facie, the option appears to be acceptable to the company
 CASE: DEVINCI CYCLES

 Which data to use? select specific, general, growth related

criteria
 specific: demand elasticity of product category
 general: GDP, urbanization, EODB
 growth: industry revenue, potential!!
 Can use Ghemavat’s CAGE Framework, McKinsey’s MECE
 CASE: DEVINCI CYCLES

From the case, which criteria are selected? why?

 estimated demand per country: footnote 1, ex.5-includes pop, median
per cap income, no. of retailers - key to determine whether there is
market potential
 EODB index: footnote 2, pg.13- includes trading across borders,
enforcement of contracts- key to Devinci’s export led model and
protection of its proprietary tech!!
 tariff on bikes imported from Canada- will impact retail price, demand
elasticity is key to this as prices may increase 2x with tariff increase!!
 CASE: DEVINCI CYCLES

 cultural distance- English is not the language in many countries,

will incur costs of translation, avoid errors as diff class of
languages, promo materials need to be translated
 problem with technical solutions in HQ in case of a problem, as
Saguenay is a non-urban town with no multi-lingual specialists
 You may also consider number of races as an indicator of interest in
mountain bikes in a country!!
 CASE: DEVINCI CYCLES

which criteria are rejected? why?

 av. per cap income, pop – incorporated in estimated demand, will
result in double counting , skew the index!!
 trading across borders, enforcement of contracts: included in EODB
as above
 presence of competitors: present in all markets, no meaning;
competitor price/p.lines: almost same, not a measure of market
demand/potential
 CASE: DEVINCI CYCLES

 no. of kms of trials: many may be unlisted, esp in countries with

poor infra, only indicates whether this sport exists there!!
 no. of ski resorts: irrelevant, no need for this sport
 google search trends: countries like china, vietnam don't have
google; may not be ubiquitous
 CASE: DEVINCI CYCLES

 need to develop an index to compare countries

establish a basis for comparison since each criterion has diff measures
like pop(nos), per cap income ($) etc.
use intervals- max vale-min value/5, highest 5, min=1
e.g. for estd demand only china, india will be 5, all others are =1. bias
results, so go for revised interval, give china, india =5, others bet 1-4
by taking 2nd largest value.
revised interval= 2nd largest value-min/4. avoids data skew.
 CASE: revised interval method
Interval Estd Tariff Eodb Cult. Distance= 50% (sum
calculation demand on (interval hofstede/6) + 50%
(revised bikes method) (eng=100, no eng=0)
interval (inter (interval method)
method) val)

Min value 21.94 0% 113 21

Max value 807.93 30% 1 78
Cal. interval 196.49 6% 22.4 11.4
Round off 200.00 6% 22 11
 CASE: DEVINCI CYCLES
Final scale Estd Tariff Eodb Cultural Distance
demand on
bikes
1 0-200 24.1+ 89+ 21-32
2 201-400 18.1-24 67-88 33-44
3 401-600 12.1-18 45-66 45-56
4 601-800 6.1-12 23-44 57-68
5 801+ 0-6% 0-22 69+
 FINAL INDEX CALCULATED
Country Estd Tariff on Eodb Cultural
demand bikes from distance
canada
China 5 3 2 1
S.Korea 2 3 5 1
Hong Kong 1 5 5 5
India 5 1 1 5
Indonesia 2 5 2 1
Japan 4 5 4 2
Malaysia 1 5 4 1
Philippines 1 3 1 5
 FINAL INDEX CALCULATED
Country Estd Tariff on Eodb Cultural
demand bikes from distance
canada
Singapore 1 5 5 5
Taiwan 1 4 5 1
Thailand 1 5 4 1
Vietnam 1 5 2 1
 FINAL INDEX CALCULATED

Country Simple Final Weighted Final score

Score = sum Weights = Estd demand 50%,
of index/4 tariff 20%, EODB 20%,
cultural distance 10%
China 2.75 3.60
S.Korea 2.75 2.70
Hong Kong 4.00 3.00
India 3.00 3.40
Indonesia 2.50 2.50
Japan 3.75 4.00
Malaysia 2.75 2.40
 FINAL INDEX CALCULATED

Country Simple Final Weighted Final score

Score = sum Weights = Estd demand 50%,
of index/4 tariff 20%, EODB 20%,
cultural distance 10%
Philippines 2.50 1.80
Singapore 4.00 3.00
Taiwan 2.75 2.40
Thailand 2.75 2.40
Vietnam 2.75 2.00
taking a cut-off of 3.00 as a conservative estimate, given
Devinci’s low risk profile, the countries in order of preference
are:
Japan
China
India
Hong Kong
Singapore
Australia and NZ will qualify
other factors
existing distribution agreements in countries
no. of mountain bike races may be considered as measure
of interest in the sport
morphology of asians shorter, height of frames need to be
adjusted for them, may not be a problem for Australia and
NZ!!
India / China may have lower WTP or very few with WTP