Detroit Bikes: Evaluating Growth Strategies with PEST & Porter's Model

This case study provides an analysis of Detroit Bikes, a bicycle manufacturer, using the PEST and Porter's Five Forces frameworks to assess the attractiveness of its industry. It examines the company's competitive advantages, including diversification, brand image, and focus on the US-made products targeting new urbanite consumers. The study suggests diversification as a growth strategy, weighing its opportunities, such as attracting a large number of consumers with unique products and high prices, against risks like consumer skepticism towards new products. It further discusses whether to invest in research and development versus manufacturing and concludes by emphasizing the importance of market analysis for achieving competitive advantage and market share. This document is available on Desklib, where students can find a wide range of solved assignments and study resources.

Detroit Bikes

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1
PEST
PEST Analysis
Political
Government is the main factor which affect
the growth of the company
Increasing demand of consumer reflects the
increasing investment of the government
(Rugman, & Verbeke, 2017).
As per the case study, US federal government
develops the budget to repair the roads in
order to develop the accessible roads for
Bicycle.
Economical
As the city is largest municipal bankruptcy
filling in US with the amount of $18-20
billion which indicates the poor financial
condition of the city.
It is a negative factor for the company as the
purchasing power of consumer is low due to
poor financial condition of the country.
Social
Unemployment rate of the country is high
due to which the income of consumer is less.
Less income reflects the low purchasing
value of consumer towards the goods and
services.
Taste of consumer is changing towards the
bikes as per the developing technology.
Technology
It has been seen that the country has poor
financial condition due to which it is not able
to invest large amount in technology.
As per the analysis, it is observed that the
company manufacture its product in USA in
order to sale the unique and differentiate
product by using the new technology.

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Porter’s Five Forces Framework
Threat of New Entrants
 It has been seen that the company has
low level of threat of new entrants
 Small and local companies enter the
market such as Shinola and Detrioit
Bikes Company.
 High brand image of the existing
companies is a high threat for new
entrants.
Bargaining power of consumer
Bargaining power of consumer is low which
indicates that the company has high demand
but less supply of products.
There is less number of companies in the
industry that is why the consumers have less
option to negotiate with the different
companies for the prices of product (Burns,
& Dewhurst, 2016).
.
 Bargaining power of Suppliers
 The company has low level of threat
due to less number of suppliers in the
market
 There is less number of companies
which operates under the Bicycle
industry that is why the suppliers
have fewer options to provide the raw
material according to their own
prices.
Competitors
 Low level of threat
 The company has the threat from the
local competitors
 Parlee Cycles, Bilenky Cycle, and
Firefly Bicycle are the top
competitors of the company.
 These companies can less comparable
with the Detroit Bike in the context of

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 As the decision of China Minister, the
manufacturing industry is reduces due
to which rate of unemployment is
increases as well as the suppliers are
also facing the loss due to decreases
manufacturing companies in the
industry.
 Walmart and Toys “R” US are the
main suppliers of the company.
 The suppliers have less choice to
provide services to the multiple
companies.
price and style.
 Masi Bikes, Bike Friday, Trek
Bicycle Corporation, and Worksman
Cycles are the main competitors of
the company and these are
comparable in the terms of price and
style.
Substitute
 The company has high level of threat of substitute products.
 As per the developing technology, the bicycle can replace with the different products.
Large production with the different features is the main quality of the industry which is
highly attractive.
2.
The company attain the competitive advantage by adopting the diversification strategy
(Noe, Hollenbeck, Gerhart, & Wright, 2017). There are many local companies compete the
company which is not comparable in terms of price and style. As per the case study, the main
focus of the company is on large-volume of production with the different target market with
the high-end custom frames. It develops its product different from the other companies by

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manufacturing the product in the United States. The company target the new market with the
new product in order to provide the services to the large number of customer in order to
increase the sale of the company. The company mainly target those consumers who are
attracted towards the USA brands. The target consumer of the company is popular with the
name of new urbanite. Brand image of the company is unique due to its following the current
trends (Ansoff, Kipley, Lewis, Helm-Stevens, & Ansoff, 2019).
3.
Diversification is the best strategy for the company because as per the developing
technology the consumer has new needs and demands. As the behaviour of consumer will
change, the demand will also change due to which it is necessary for the company to develop
the different product in the market.
It has been seen that the company manufacturing the bicycle in USA to develop the
differentiate product. The company has the opportunity to gain the competitive advantage by
attracting the large number of consumers. Also the company has the opportunity to offer the
high prices as per the unique product in the market. The company can gain the high profit
from the market due to diversification strategy. The major risk of this strategy is that, the
consumer has less believe in new types of product. The sale of new products decreases due to
consumer behaviour (David, & David, 2016).
If I have money then I would like to invest in the research and development of their
business to analyse the demand and needs of the consumer. It is necessary for every company
to analyse the market in order to analyse the consumer behaviour and position of the
company in the market. The analysis helps to develop the strategy due to which it can achieve
success in the market by attaining competitive advantage and grab the high market share.
Investing money in research and development is also a bad strategy because the company has
less money to invest in the product. It can also be said that the company has to invest the less

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amount of money in the research and development department and invest large amount in
manufacturing department in order to develop the product with new features.

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References
Ansoff, H.I., Kipley, D., Lewis, A.O., Helm-Stevens, R. & Ansoff, R., (2019). Implanting
strategic management. Springer.
Burns, P., & Dewhurst, J. (2016). Small business and entrepreneurship. Macmillan
International Higher Education.
David, F. R., & David, F. R. (2016). Strategic management: A competitive advantage
approach, concepts and cases. Pearson.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill
Education.
Rugman, A., & Verbeke, A. (2017). Global corporate strategy and trade policy. Routledge.