A Tale of Three Wheels in the Bicycle Industry

Pacific Cycle
Chris Hornung, the founder and the first CEO of Pacific Cycle grabs a lion’s share of the U.S. bicycle markets. In 2005, around 19.8 millions of bicycle were sold in U.S. the total retail value of bikes, parts, and accessories were more than $6 billion.

There are basically hundreds of bicycle manufacturers in U.S., but they are small specialized firm. Pacific Cycle is interested in high-volume business. Pacific Cycle designs, markets, and distributes a full range of bikes brands such as GT, Schwinn, Mongoose, Roadmaster, etc. Its’ powerful brand portfolio serves virtually all demographics, price categories, and product categories.

Hornung pioneered the concept of sourcing bicycle from Asia for distribution in the U.S. Hornung’s first mass-market retailers are Target Corp. and Toys ‘R’ Us.

Now, Pacific Cycle is the fastest growing branded consumer companies in the U.S. Hornung achieved this success by combining an aggressive acquisition of powerful brands with low-cost outsourcing, efficient supply chain management, and multichannel retail distribution. In December 2000, Pacific Cycle acquired Brunswick Corp. for $60 million, which includes Mongoose, Mongoose Prop, and Roadmaster brand. In this deal, PC does not only get the brand, but also the a very big customer: Wal-Mart (Brunswick’s biggest account), which doubled PC’s sales. A year later, PC bought the assets of Schwinn/GT Corp. out of bankruptcy for $86 million.

PC’s channels include leading mass-market retailers, sporting goods chains, and independent dealers serving local markets. The broad-based marketing strategy enables PC to provide retailers with one top shopping and to respond efficiently to changes in the marketplace. For example, Schwinn brand was historically sold only at specialty shop. Now, PC brought it to the mass market and broadened access to greater numbers of customers as well as lowered the price (from $387 to $65). Overall, the price of bikes has declined steadily, for around 15% per year. This decline has made it important for PC to control costs.

PC was recently acquired by Doral Inc. and now operate as independent SBU. It is one of the most prolific bicycle suppliers in the world, selling to more than 60 countries via more than 50 international distributors. In 2007, Jeff Frehner replaced Chris Hornung as President and CEO of PC, and will continue to build PC’s international business and strengthen its brand across the globe.

Pacific Cycle adopts the low-cost leadership strategic position as it is focused on lowering its’ cost (as well as price) and its’ scope of arena is broad.

Trek Bicycle
TB is founded in 1976 by Richard Burke and Bevill Hogg. From the beginning, they targeted upper-end users and success came quickly. Today, customers pay top dollar for smooth suspension, customized paint jobs, and innovations in racing geometry. With annual sales of about $400 million (almost the same with PC’s), Trek is now the country’s number one maker of high-quality bikes.

Although most of Trek’s growth has been fueled up by internally developed products, Trek has made a few strategic acquisitions, including Gary Fisher Mountain Bike and two mountain bike competitors in 1995: Bontrager and Klein. Trek now makes various types of bicycle including: mountain, children’s, BMX, police, and road bikes. Trek bikes are sold through wholly owned subsidiaries in 7 countries and through distributors in 65 others. They design all of its bikes at its Wisconsin headquarters and manufacture a quarter of them in U.S.

Trek Bicycle adopts the differentiation strategic position as it is focused on differentiation (high quality bikes) which are targeted at upper-end customers and its’ scope of arena is broad.

Montague
It is a boutique-style bike firm founded by Harry Montague. Montague sells high-performance (sacrificed a little bit), travel-friendly bicycle, which is targeted for serious cyclists who wanted to take their bikes in the car or public transports. After trial-and-errors, Montague succeeded in developing a full-size high performance folding bicycle that he then custom-built and sold out of his garage for Washington riders.

Today, Montague is the world’s leading manufacturer for folding bikes. They have been sold to the military for tactical use and t several car manufacturers for promotional packaging with SUV.

Montague adopts the focused differentiation strategic position as it is focused on differentiation (high quality folding bikes) which are targeted at serious cyclist who wants to bring the bikes and its’ scope of arena is narrow. .