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Dirt Bikes USA

Running Case Study


Bryan Gaine Melissa Kelly Brad Michels Erica Riley

Table of Contents
Management Analysis of a Business .....................................................................................4 Analyzing Financial Performance..........................................................................................5 Competitive Analysis .............................................................................................................7 Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets .......................8 New Customer Database Design ...........................................................................................9 Using Internet Tools to Increase Efficiency and Productivity ...............................................10

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Table of Charts
Table 1: Dirt Bikes USA Sales History from 2001 to 2005 .................................................. 5 Table 2: Domestic vs. International Sales from 2001 to 2005 ...............................................6 Table 3: Statement of Income ................................................................................................6 Table 4: Software Suites ........................................................................................................8 Table 5: Customer Database ..................................................................................................9 Table 6: Internet Tools Matrix ...............................................................................................10

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Management Analysis of a Business Dirt Bikes USA is dirt bike production company based in California. This company comes from a background of experience in the dirt bike culture and it was founded in the early 1990s. This was around the time when dirt biking was becoming popular. The founders of this company are Carl Schmidt and Steve McFadden and they started to design dirt bike frames for off road purposes containing engines from foreign companies. Dirt Bikes USAs primary goal is to produce the best quality dirt bikes to rival other international companies. To achieve this goal, they use the highest quality products on the market. The founders felt that coming from a dirt bike culture, as well as the growing popularity in the U.S., they had an advantage being in the center of the marketplace. Dirt Bikes USA has four types of dirt bikes varying in engine size, two for trail riding and two for racing. The names of these different types are Enduro 250, the Enduro 550, the Moto 300 and the Moto 450. The tail riding types are more popular, and the company is expanding into the motocross market. They offer a service department that deals with service warranties and customer problems with parts of the dirt bikes. The company has a network of 40 distributors that they use. They are based mainly out of the Western and Midwestern parts of the U.S. Dirt Bikes USA has authorized dealers that provide spare parts and service warranties. Some exceptions to this are those who do not live within 50 miles of an authorized dealer. Carl Schmidt is the CEO of Dirt Bikes USA and Steve McFadden serves as President and COO. The employees of this company are involved in the design, engineering and production aspects, and include 3 full-time designers, 3 full-time

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engineers, 4 full-time parts specialist, and a 10-employee service department. There is also a marketing manager whose job is to oversee 5 sales representatives. Overall, the company employs 120 people and has expanded greatly since the early 1990s. Dirt Bikes USA relies heavily on database software such as Microsoft Excel and Microsoft Access. This is to keep track of sales, inventory, and employee matters.

Analyzing Financial Performance The best selling product of Dirt Bikes USA has been the Enduro 550 and the worst selling product has been the Moto 450. In the first three years, international sales were consistently rising, and then started to fall during the last two year. They have never contributed more than 10% of the total sales. While costs have increased from $76,750,000 in 2003 to $97,870,000 in 2005, the gross margin have decreased from 33.2% in 2003 to 23.8% in 2005. The company is unfortunately in debt, but they have enough assets to cover it and will allow for the development of new products and information systems.
Sales History 2001-2005 12000

Amount (in thousand dollars)

10000

8000

6000

4000

2000

0 2001 2002 2003 Years 2004 2005

Table 1: Dirt Bikes USA Sales History from 2001 to 2005 -5-

Domestic vs. International Sales 2001-2005


10000 9000

Amount (in thousand dollars)

8000 7000 6000 5000 4000 3000 2000 1000 0 2001 2002 2003 Years 2004 2005 Domestic International

Table 2: Domestic vs. International Sales from 2001 to 2005

Consolidated Statements of Income (in thousands) 2003 2004 2005 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 Other income/expense Interest income/expense Other income/(expense) Income before provision for income taxes Income taxes Net income/(loss) Net margin 61,529 41,072 20,457 33.2% 64,063 43,155 20,908 32.6% 60,144 45,835 14,309 23.8%

3,944 2,339 1,392 7,675 12,782

4,537 2,992 1,601 9,130 11,778

4,733 3,141 1,913 9,787 4,522

80 (3,080) 9,782 535 9,247 15%

175 (2,914) 9,039 1,729 7,310 11%

1,747 (6,254) 15 1,459 (1,444) -2%

Table 3: Statement of Income

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Competitive Analysis Dirt Bikes strongest asset when it comes to value is the companys parts and service department. This department is responsible for about 15% of the companys total revenue each year. Along with a strong parts and service department, Dirt Bikes USA retains value with their warranties and competitive prices on products. The management has decided to focus on using the highest quality parts from around the world in each aspect of the bike and well as concentrating on servicing those parts if they fail. Despite using the best parts available, Dirt Bikes USA has kept their prices competitive to other companys prices. Hondas 450 model costs about $7,400 and Kawasakis costs $7,000 where Dirt Bikes USAs 450 model costs $9,000. The 250 model costs $6,600 at a Honda dealer and $6,100 at a Kawasaki dealer. Dirt Bikes 250 model is only $3,250. The extra cost in Dirt Bike USAs 450 model to ensure the bikes competitiveness in the industry. Their staff is also high trained and educated on each part, which allows better customer service. This is where Dirt Bikes USA exceeds its competitors because it has a better relationship with the public due to its qualified employees. Dirt Bikes USA should concentrate on marketing their products throughout the U.S. as well as the dirt biking community. Dirt Bikes USA has staked its territory in the Western part of the country as well as in the Middle states, but expanding to the East coast as well as into the South will obviously help their revenue and therefore their debt problems. Dirt Bikes USA makes a higher quality product then its competitors and should concentrate on the fact to sell more bikes and to expand to the other sections on the country. The firm should also provide more distributors in the less explored parts of the

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country, like the Eastern states as well as Southern states. Having more availability to customers will promote knowledge of the company and raise sales domestically.

Analyzing the Total Cost of Ownership (TCO) of Desktop Software Assets


Microsoft Office 2003 $128.00 Word 2003 Excel 2003 Access 2003 PowerPoint 2003 Outlook 2003 Microsoft Office XP $89.00 Word 2002 Excel 2002 Access 2002 PowerPoint 2002 Outlook 2002 Sun StarOffice 8 $69.95 Writer Calc Base Impress Writer

Price Word Processing Spreadsheet Database Electronic Presentation E-mail Software Tools Software Tools to Publish Web Pages

Publisher 2003

Enterprise Tools

Additional Cost Technical Support Down-time Cost 30% of Purchase Cost 15% of Initial Purchase Cost

$140 $170

Table 4: Software Suites The two systems that Dirt Bikes USA could use as their information systems could be either the Microsoft Office series or Sun StarOffice 8. Both have all the tools Dirt Bikes need to run efficiently. Our calculations point to Sun StarOffice 8 as the cheapest system between the two. Over the next 3 years, Dirt Bikes would spend about $2,000 on the whole system. The first installation would cost $1,310 including $25 per user, totaling $200. The training of each user would cost $100 per user, totaling $800. Technical support for the system is 30% of the purchase cost, which is $140 while the

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downtime would cost $170 or 15% of the initial purchase cost.

New Customer Database Design


Customer ID 1 Last Name Mann First Name Dwight Street 23 Colby Ln. 3 Pinehill Rd. 38 Ryder Rd. 8 Belle Ave. 66 Skyview Terrace 722 Donald Dr. 11 Buena Vista Dr. 523 Grant St. 68 Clinton St. 95 Canyon Dr. 23 Colby Ln. 38 Ryder Rd. Customer Database City State Zip Tacoma WA 98109 Phone (253)1234333 (435)7973322 (402)4716950 (928)3825877 (505)5824301 (714)2785564 (805)4137922 Model Enduro550 Date 8/11/03 Distributor J&J Cycle

Porter

William

Logan

UT

84321

Enduro 250 Moto 450

3/27/05

WX Cycle

Higgins

Daniel

Lincoln

NE

68526

7/11/04

All-Terrain Cycle Cycle World Bens Cycle Dons Off Road Lightning Cycles

4 5

Langan Delgado

Howard Luis

Flagstaff Las Cruces Hayward

AZ NM

86002 88003

Moto 450 Moto 300

1/12/05 10/5/04

Stratman

Philip

CA

94541

Moto 450

3/21/04

Yates

Gerry

Ventura

CA

93012

Enduro 250

5/16/05

Mickel

Paul

Norman

OK

73072

(405)3251971 (208)2514967 (909)8693955 (253)1234333 (402)4716950

Moto 300

4/17/05

WX Cycle

Podell

James

Pocatello

ID

83202

Enduro 550 Moto 300

5/18/04

Performance Cycles KB Racing

10

Lowe Mark

Pomona

CA

91767

12/5/04

11

Mann

Dwight

Tacoma

WA

98109

Enduro 550 Moto 300

8/11/03

J&J Cycle

12

Higgins

Daniel

Lincoln

NE

68526

6/7/05

Lightning Cycles

Table 5: Customer Database

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Using Internet Tools to Increase Efficiency and Productivity Internet Tools Uses Concerns Benefited Employees

Easy Communication with colleagues. Instant Conversations Messenger are private and can be save for further reference Eliminates costly long distance phone All internet tools can calls. Messages cause distractions to can be sent to employees and may Email multiply require the company recipients. Able to monitor to attach employees online documents and activity. Monitoring multimedia employee activity files. can also be Share controversial as Discussion information and some may feel this is Boards ideas on an invasion of defined topics. privacy. Allows individuals to place phone calls over the internet using VoIP computers and microphones. Much cheaper than conventional telephones. Table 6: Internet Tools Matrix

All

All

CEO, COO, Designers, and Engineers

All

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The Manufacturing and Production department is one of many company departments that could benefit from the efficiencies of a intranet directly specified toward their needs. For example employees could search specifications in the design of the motorcycle and see the changes to the design and execute accordingly. Inventory is another area in which an intranet system can help. An employee can easily access the amount of general parts in a more time efficient manor than searching the warehouse manually. Lastly the production team would be able to benefit by knowing what the sales department is expecting in upcoming distributions. As soon as a sale is made, the production team would be notified immediately allowing them to begin the building process as soon as they are capable.

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