Analysis of Detroit Bikes Business Model and Strategies

This report provides a comprehensive marketing analysis of Detroit Bikes, examining its business model through PEST and Porter's Five Forces analyses. It identifies the company's competitive advantages, such as its large-scale manufacturing capacity and focus on the 'Made in Detroit' brand, and characterizes its target market as ethically minded customers. The report suggests product expansion as a viable growth strategy, considering the risks and opportunities associated with it. Furthermore, it evaluates the financial aspects, concluding that an investment in Detroit Bikes might not be a wise decision based on the declining net income figures. The analysis also covers the attractiveness of the bicycle industry and the company's brand characterization.

Running head: MARKETING
Marketing
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to question 1:.................................................................................................................3
Answer to question 2:.................................................................................................................5
Competitive advantage of Detroit Bikes:...................................................................................5
Characterization of target market:..............................................................................................5
Characterization of Detroit Bikes:.............................................................................................5
Answer to question 3:.................................................................................................................5
Suggested growth strategy:........................................................................................................5
Risks and opportunities of growth strategy:...............................................................................6
Evaluating the reasonability of investment:...............................................................................6
References list:...........................................................................................................................7

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Answer to question 1:
PEST analysis of the business model of Detroit Bikes is illustrated below:
Political factor- The public system of Detroit was increasingly worsened with
extensive corruption. The prevalence of societal issues of sustainability of environment,
reducing dependence on fossil fuels and increasing price of gas made bicycle gain popularity
and contributed positively to business of Detroit (Balsas 2015).
Economic factor- There was abundant inexpensive expense, machinery expense and
skilled workers. The government in US made significant investment in road development,
bicycle paths and bike related infrastructure.
Social factor- One of the business models of Detroit produces bike of any color and
the riders were assured of smooth ride because bicycles have wheels that is slightly larger
than the average. Since bicycle offered a most environment friendly and cost effective way to
travel, the increasing demand prompted company to increase the manufacture of bicycle
(Grafova et al. 2017).
Technological factor- Detroit has significant production capacity that enabled them
to the largest scale manufacturer of bikes. Customized bikes are produced by company along
with other features such as safe braking, full control, foot and hand brakes.
PORTER five forces analysis of business model of Detroit Bikes:
Threat of substitutes- The threat of substitute of Detroit bikes is weak as many of the
manufacturers producing somewhat similar bikes did not intend to make specification that the
bikes are no longer produced in USA. Detroit was successful in distinguishing itself from
other mass manufacturer companies and was ahead of the manufacturing trend.
Threat of new entrants- Detroit Bikes is the largest producer of bicycle in North
America. Detroit bikes have lower threat of entrants because it enjoys less production cost

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and high scale production. It would be difficult for any new entrant to enjoy the scale of
economies and making them impossible to sustain in the market.
Supplier’s bargaining power- Detroit enjoys lower bargaining power of supplier
because of availability of fewer suppliers and large scale production.
Buyer’s bargaining power- Many of the manufacturers of bikes competitively priced
their product in relation to Detroit (Nurse et al. 2016). Moreover, it produced products at
reasonable price having American components. Other manufacturer such as Trek Bikes
offered wide range of price points to consumers and low to high end bicycle. Therefore, it can
be said that Detroit bike has high bargaining power.
Degree of rivalry amongst competitors- Initially, small level of competition was
faced by Detroit and they threatened them with their price point. Further, it also faced
competition from other companies such as Masi Bikes, Bikes Friday, Worksman cycle and
Trek Bicycle Corporation. All of them competed on the basis of style and price point. Hence,
it can be said that company rivalry is intense.
The market of bicycle industry is thriving and benefitting from the massive growth
and with the growth of bicycle movement due to explosion of interest in events of bicycle
(Frynas and Mellahi 2015). Furthermore, production of bicycle by several manufacturers
offering customers wide range of price points helped in thriving of the industry.

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Answer to question 2:
Competitive advantage of Detroit Bikes:
Detroit being the largest scale manufacturer of bikes enjoys the massive factory
production capacity enabling them to manufacture bicycles in high volume. Therefore, low
cost and diversification is the competitive advantage enjoyed by Detroit Bikes.
Characterization of target market:
Detroit relied on the popularity of made in Detroit brand and they mainly targeted
ethically minded customers. In addition to this, it also targeted customers who were attracted
to the USA brand (detroitbikes.com 2019).
Characterization of Detroit Bikes:
The brand of Detroit Bikes can be characterized as the one focusing on high volume
production and the products being manufactured in United States.
Answer to question 3:
Suggested growth strategy:
The recommended growth strategy for Detroit bikes would be product expansion and
this is so because despite the rapid growth, the types of bicycles produced were minimal (Tan
and Tan 2017). Since, the company enjoys massive scale production; it would be viable to
expand the product which can be considered as the best growth strategy.

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Risks and opportunities of growth strategy:
Expansion of the products would appeal to an existing base of customers making it
relatively low risky for company. Consumers tend to shut down when they are presented with
too many choices. In case of product expansion, the company saves on the cost of introducing
any new brand and providing customers with varieties (Forbes.com 2019).
Evaluating the reasonability of investment:
From the figures of net income of Detroit Bikes, it can be observed that there has been
year on year reduction in the value. Net income generated in year 2014 is recorded at $
730585 compared to $ 665520 in year 2016 indicating a considerable fall in value. Making
investment in the shares of Detroit bikes would not be a wise and feasible decision from the
view point of investors (Frynas and Mellahi 2015).

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References list:
Balsas, C. J., 2015. Sustainable transportation planning, a new academic specialization in the
USA. International Journal of Transportation Science and Technology, 4(1), 1-15.
Bikes, D., 2019. Detroit Bikes. [online] Detroit Bikes. Available at: https://detroitbikes.com/
[Accessed 23 Feb. 2019].
Forbes.com. 2019. At Detroit Bikes, Idealism Meets The Reality Of Manufacturing In The
U.S.A.. [online] Available at: https://www.forbes.com/sites/forbestreptalks/2017/06/12/at-
detroit-bikes-idealism-meets-the-reality-of-manufacturing-in-the-u-s-a/#5c516dac36af
[Accessed 23 Feb. 2019].
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Grafova, T.O., Skorev, M.M., Andreeva, L.Y. and Kirischeeva, I.R., 2017. Tools of financial
management of reputational risks. European Research Studies, 20(3B), p.280.
Moutinho, L. and Phillips, P., 2018. Strategic analysis. In Contemporary Issues in Strategic
Management (pp. 46-79). Routledge.
Nurse, S., Napper, R. and Richardson, M., 2016, November. The Evolution of Cycles from
Front Wheel Drive to Delta Tilting Trike. In Australasian Transport Research Forum
(ATRF), 38th, 2016, Melbourne, Victoria, Australia.
Tan, D. and Tan, J., 2017. Far from the tree? Do private entrepreneurs agglomerate around
public sector incumbents during economic transition?. Organization Science, 28(1), pp.113-
132.