Fox Factory Holding Corp.
Jump Bikes. El Tayeb El Mami 201405854 Mohamed Mohamed. 201301083 Abdul Rahim Anisetty. 201304097 Sakib Ahmed. 201108809 Strategic Management Dr. Shobha Das Jump is generally company that produces on-demand electric bikes, electric scooters and hardware/software for bike sharing.
Jump founded in 2010 as Social Bicycles by Ryan Rzepecki and it started operating in Germany and United States. Recently, Jump has been acquired by Uber and it became a subsidiary of Uber, such action taken by Uber reflects that Uber is following expanding company scope (Related Diversification) corporate strategy by offering new ways of transportation to its customers. On the other hand –The most important subject- the corporate strategy of Jump company before and after the acquisition, the amount of money that Uber payed to Jump in order to acquire it was undisclosed but some sources said it close to $200 million, now it’s obvious that Jump did sold its business and choose to work with Uber as subsidiaryis a result of following specific corporate strategy. After doing researches about Jump Company and its latest actions, the company is trying to reduce the company scope by using restructuring and downsizing corporate strategy. The conclusion about the corporate strategy of Jump Company was based on some facts.
First, the company did cut back and exit one of its major business areas and such action is a result of responding to declining financial performance, according to Brad Higgins, he used to be a major investor in Jump Company, the management is spending almost half of the time trying to raise the additional capital, but now with Uber’s financial strength they will be able to spend more time improving their situation in the market. According to Uber, Jump Company was able to generate $ 1.1 billion increase in revenues comparing to the last year before the acquisition which represent 63% growth rate. To be more specific Jump Company did choose Exit strategy in order to continue at the Restructuring and Downsizing goals, the main exit method that Jump Company apply is Divestment which applied by selling the business unit to another company, and the other company in this case is Uber. Comparing Jump with Fox Factory Holding Corp that has many business units like designing and manufacturing ride dynamics products vehicles, motorbikes, and its accessories all this beside manufacturing bikes. In case Fox Factory Holding Corp chooses to apply Exist strategies its reason and method to do so will be very different than what Jump Company did, because the size of the activities of each company is not the same. The reason that could make Fox to exit its bikes manufacturing business could be to deal with diversification discount, and the proper method to do so could be Harvest.
Coming back to Uber and jump after the acquisition and them working together, Uber now allow its customers in 40 cities across 6 countries to request a different kind of wheels by its app, such new service consistent with Uber’s vision and ultimate goal “…. Making it easier to live without owning a personal car”. Jump company already own fleet of 12,000 dockless bicycles which means customers can drop the bikes off anywhere they can find a bike parking, all the bikes have built in-lock to secure the bikes and customers can get the pass code through the app, pedal assistance to give boost whenever it used. References: http://fortune.com/go/finance/jump-bikes-uber-acquisition/ investor.ridefox.com/investor-relations https://youtu.be/Mcn4-5NEyU0Business Strategy JUMP has currently been acquired by UBER for around $200 million in hope for taking advantage of UBER’s technology and market information.
The urban population needs a reliable and stress-free commuting options that save the users from the burdens of ownership of bikes and scooters. Its business strategy is focused to support the urban population specially the ones that are fond of using phone applications and support the idea of communal asset sharing which gives them access to a few hundred bikes around their location that they can pick and leave just about anywhere. The Industry is growing and fragmented as urban growth has led to the need of commuting small distances and greener solutions are always preferred due to increased environmental awareness while there is still no consolidated platform of e-bike providers, there exists many small companies that provide E-bike to customers. JUMP has both a cost advantage and a differentiation advantage over the businesses that sell e-bikes as the cost of an annual JUMP bike pass of $60 is less than 10% of the initial cost of buying an E-bike which mostly are $1000 or above 1 on the other hand it is cheaper to use JUMP annually than its competitors.
Its strategy is different from the e-bike manufacturers as the there is no need for owning a bike and it lets the users be quite care free about the bike without the risk of having it stolen or crashed. It has also had a competitive advantage over the other bike renting companies as they are able to reach the customer base of UBER which has already established itself quite well in the ride sharing market, not only is JUMP able to aid from UBER’s business knowledge and customer statistics but also is able to provide customer services through the UBER app. Its focus is broad as it focuses on multiple customer types who are willing to pay hourly, monthly or annually. It is not only providing bikes also provides scooters for the users not only in USA but also abroad.
Its joining of UBER can also be seen as an attempt to act as a consolidated industry. This step can also lead to it having an advantage of having a greater market share compared to its rivals. That will further increase its cost leadership as it would have increased buying power and chain location strength. More customers can help the company be able to provide them with more lucrative offers increasing their brand loyalty. It would also cut on management costs through merging with UBER.
This merge can be seen as a proof for its functional strategy to be consistent with its business strategy. It would improve the customer experience which would add value to the service4. It can be seen from the above discussion that JUMP’s business strategies have Consonance as the users prefer using one single app for multiple task instead of two different as can be seen from the example of WeChat in the Chinese Market and how it has turned into of the most convenient apps for the people 2. Its business strategy further enables its feasibility to move to more locations as they have more buying power3. Reference http://www.wearethecyclists.com/the-5-top-rated-best-cheap-electric-bikes-of-2017/https://www.theverge.com/2018/2/1/16721230/wechat-china-app-mini-programs-messaging-electronic-id-systemhttp://fortune.com/2018/04/10/jump-bikes-uber-acquisition/https://research-methodology.net/uber-business-strategy-user-convenience-technological-innovation/Fox Factory Holding Corp. Corporate strategy Fox Factory Holding Corp.
Is a “company that manufactures and design performance defining ride dynamics products primarily for bicycles, on-road and off-road vehicles” according to their website. Furthermore, Fox Factory is a direct supplier to the original equipment manufacturers (“OEMs”). Additionally, Fox Factory supplies top bicycle OEMs with their contract manufacturers, the company also provides products to retailers and distributors. Fox Factory Holding Corp company was founded in 2007 by its parent organization Compass Diversified Holdings, Staffmark LLC. Since it was founded Fox Factory Holding Corp. Expanded and now it have 10 subsidiaries such as Fox Factory UK Limited, Sport Truck USA, inc.
And Race Face Performance Products. The company’s headquarter is located in Scotts Valley, California, United States. The corporate strategy for Fox Factory Holding is a Related Diversification Strategy. Evaluating Corporate Strategy Industry attractiveness test: The bicycles industry is always growing bigger and bigger as fox factory has reported that since 2010 the company’s revenue has been growing at 15% per year.
The sales growth slowed down in the year the company went public and released its shares but in 2015 it’s revenue started growing again going back to 15% each year. In 2018 the company reported that the growth in sales did slow down but it’s still growing, in the first quarter of 2018 the company reported a 10.3% growth in sales of bike products. According to a research done by Research and Markets website the bike industry is expected to keep on growing at 2.7% until 2022. Cost of entry test: The cost of entry right now is high for new companies but the is mainly because of the competitors that make bike at large quantities and sell them for cheap, so the economies of scales the largest obstacle for new companies. But when Fox Factory entered the market the cost of entry was not as high as its right now and the company has made much more profit that its cost of entry as we can see from its profitability ratios. Ratios 2017 2016 2015 Return on Assets 10.08% 10.63% 8.98% Return on Equity 18.39% 19.29% 16.39% Return on sales 9.08% 8.85% 6.8% As we can see from the profitability ratios that the profits from sales have been increasing in past 3 years specially between 2015 and 2016.
Better off test: The company have 2 main business units which are Bikes and Power Vehicles, the company’s businesses preforms better under one roof than as stand alone businesses, and we can see that through the fact that Fox Factory Holding Corp have 3 manufacturing facilities in just California. That way the businesses can share resources which might help Fox Factory Holding lower its costs even more. References: http://files.shareholder.com/downloads/AMDA-20BZ12/0x0xS1424929-18-6/1424929/filing.pdfhttp://www.annualreports.com/HostedData/AnnualReportArchive/f/NASDAQ_FOXF_2016.pdfhttp://www.annualreports.com/Company/fox-factory-holding-corphttps://www.bicycleretailer.com/industry-news/2018/05/02/fox-factory-reports-103-sales-growth-bike-products-q1#.W_MdITgzapohttps://www.citizen-times.com/story/news/local/2018/07/20/fox-factory-unveils-fletcher-facility-were-gonna-keep-growing/796029002/https://sgbonline.com/fox-factory-sees-growth-in-mountain-bike-markethttps://seekingalpha.com/article/3555436-fox-factory-earnings-rise-70-percent-2017https://www.ashevillechamber.org/news-events/press-releases/fox-factory-holding-corp-announces-east-coast-bike-operations-in-asheville/https://www.researchandmarkets.com/reports/4206998/growth-opportunities-in-the-global-bicyclhttp://nathanbalon.com/eastern_projects/mgmt490/Analysis_of_the_External.pdfhttp://investor.ridefox.com/static-files/76f5a787-7374-4af1-9b61-4f7b4140d114Business Strategy Fox Factory customers’ needs to satisfy are increasing in performance and control over off track and mountain bikes. Fox factory has two market segments they focus on, they are action sport events and mountain bikers. Firstly, leading action sports organized by original equipment manufacturers who demand specially designed bike suspensions.
Secondly, the mountain bikers or off-track heavy bike users who want to get adventurous bike riding experience. Fox factory has strong research and development unit that continuously come up with enhanced, adaptable and more convenience suspensions in variety of designs and shapes for different use and needs. Fox factory enforce the brand name on all their products and events banners to create brand recognition and loyal customer base The Value Chain operations Fox factory operates in United states, Canada, Europe and Taiwan. They have very strong Research and development unit in California that continuously bring up advanced suspensions and bike deigns that satisfies customers need. Then they manufacture the suspension and bike parts at Europe and Taiwan because of labor cost and availability and closeness to the bike markets. After that they sell it to the global bike distributers such as QBP, who sell at premium.
They also participate in bikes sport events and exhibitions to satisfy customers thrills and engage with customer fans in their main action. Type of business strategy Fox factory became a choice for seventy percent of mountain bike riders, and it sets a highly competitive standards for mountain bikes. Fox factory has narrow focus on racing and high performance and bike users Fox factory uses value-based pricing method, where they suggest retailers to price in the upper quartile of respective products categories. Fox factory build high end bikes with advanced technologies, durable, reliable and well designed, that have critical features for high performance and control. In addition to the brand name, customers are perceiving fair value for the price they are paying for. Moreover, customers became loyal to the brand and they refer other and buy Fox bike for gifting, which shows the importance of Fox suspension in bikers’ communities.
As result, Fox Factory uses Focused differentiation strategy. Bike industry combination According to the bicycle industry trend, the industry is Fragmented and growing. The competition is strong, and companies are easily entering the industry specially in Taiwan. Companies that with strong R;D unit will sustain, because advanced technologies and designs influence the purchase decision and new area in bike industry are growing such as E-bikes. In this industry Fox factory can collect revenues and develop loyal brand name.
Moreover, Fox Factory is acquiring many mountain bike manufacturers such as Marzocchi, and expanding in many countries like changing the headquarter from California to Georgia for market advantage in Europe. Evaluation of business strategy Consistency: Fox Factory’s R&D and Marketing units are very focused with the business strategy Consonance: the market demand is growing for Fox suspensions and bike parts, and Fox factory made expansions to meet with the demand. The financial reports show an increasing in revenue of bike business unit Feasibility: Fox factory’s capital and technology capabilities are directed toward achieving the business strategy. Competitive advantage: Fox Factory has Intellectual property that is a strong competitive advantage for the quality and brand name of Fox products.
However, competitors like Rock Shox and X-Fusion have similar features and sells at lower prices that can affect the competitiveness of Fox Resources list FOX FACTORY http://investor.ridefox.com/static-files/ec27e305-1093-4541-82a0-3785f20e1912 https://www.investors.com/research/the-new-america/fox-factory-holding-suspension-products/ http://investor.ridefox.com/news-releases/news-release-details/fox-factory-holding-corp-acquire-assets-race-face-performance https://singletrackworld.com/2014/02/a-discussion-with-fox-factory-ceo-larry-enterline/ https://www.bicycleretailer.com/industry-news/2018/11/01/fox-shares-more-details-relocations#.W_BEgej7TIU https://singletrackworld.com/2015/11/fox-still-mulling-over-new-direction-for-marzocchi/ https://www.ridefox.com/subhome.php?m=bike https://www.bicycleretailer.com/industry-news/2018/09/04/bob-fox-retire-fox-factory-holding-board#.W_G0iej7TIU https://www.bicycleretailer.com/industry-news/2018/10/31/fox-factory-plans-move-headquarters-california-georgia#.W_G0juj7TIU https://www.bikemag.com/industry-news/competition-core-fox-factory-acquisition/ https://seekingalpha.com/article/2850036-fox-factory-why-it-should-outfox-the-competition-and-deliver-positive-returns-for-investors https://www.bike-eu.com/home/artikel/2013/11/fox-shifts-production-to-taiwan-1012800?vakmedianet-approve-cookies=1;_ga=2.124715722.1148841768.1542566507-75332497.1542566507 BIKE INDUSTRY https://qbp.com/brands/partners http://www.eurobike-show.com/exhibitors-info2019/ https://www.grandviewresearch.com/industry-analysis/bicycle-market https://www.persistencemarketresearch.com/market-research/bicycle-market.asp http://bicycleadventures.com/blog/2018/01/24/top-cycling-trends-2018/ https://www.bicycleretailer.com/studies-reports-0 https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/the-us-bike-specialty-market-pedals-ahead-with-mountain-and-electric-bicycles-leading-the-pack/
