Thursday, June 9, 2011

Cannondale Corporation

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Section 1


Introduction


Cannondale started in a crowded loft above a pickle factory in 171. The chief executive officer and president of Cannondale Corporation was Joesph Montgomery. Based in Connecticut, Cannondale manufactures virtually all of its products in Pennsylvania, and operates subsidiaries in Europe, Japan, and Australia. Cannondale was so popular with cyclists worldwide they exported their American-made products to more than 60 countries. Cannondale has come a long way since it introduced the cycling industries first bicycle trailer. The company raised eyebrows in 18 by offering an aluminum bicycle that was both lighter and more flex-resistant than the steel models that dominated the industry. But because it had earned a solid reputation for innovation and quality by that time, bike dealers and customers were willing to give the bike a try, and widespread industry skepticism quickly gave way to a host of imitators. Cannondale Corporation is a leading maker of high-performance, light weight mountain bikes, road racing, multi-sport, recreational, and specialty bicycles, as well as cycle apparel and accessories. Cannondale also makes bicycle-related items such as CODA parts and HeadShok suspension forks. The company co-sponsors racing teams with other major companies to help promote and improve its products. It has expanded into off-road motorcycles and all-terrain vehicles. Cannondale sells about 70 bike models through specialty bike retailers in about 60 countries worldwide.


Strategy Identification


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There are five key elements to Cannondale’s strategy. The five key elements of Cannondale’s strategy are product innovation, manufacturing, purchasing, sales and distribution, and research and development. In this section we will discuss the five key elements of Cannondale’s strategy.


Product Innovation Cannondale strives to differentiate itself through its innovations. They have made light, faster, stronger, and more comfortable bikes for their customers. They were the first company to introduce the mountain bike in 184 and led the industry in suspension systems. This is a definite competitive advantage for Cannondale Corporation.


Manufacturing The strategy here is to maintain Cannondale’s competitive position by supporting research into further improvements into its manufacturing process, and reducing the time required to design and produce new models. Cannondale’s manufacturing takes place domestically, which is another advantage. According to the case, the majority of bike companies buy their models from the Far East, where they produce the same model for different companies, resulting in three similar bikes with different brand names.


Purchasing Cannondale’s purchasing strategy has shifted to use more domestic suppliers. They believe this will reduce lead times and lower their inventory levels. Concentrating on fewer suppliers will also lower costs because they can take advantage of high-volume purchase discounts.


Sales & Distribution This is another aspect of their strategy that sets them apart from most of their competition. Cannondale sells its bikes through specialty retailers. Their reasoning behind this is simple; their customers will get more attention and receive knowledgeable assistance regarding technical and performance concerns. They are also committed to increasing its domestic dealer base by 10-15% per year.


Research & Development We believe that this may be Cannondale’s strongest aspect of their strategy. Historically, they have been very committed to developing lighter, stronger and more comfortable bikes. They have also been responsible for starting new trends in mountain bikes such as front and rear suspensions. Also, because of their Volvo/Cannondale racing team, they have a reputable testing group; this also benefits their marketing strategy.


Section


The Mountain Bike Industry and Competition


There is a great deal of competition in this industry. Cannondale is only involved in the high-performance segment of the industry. In this particular industry, the strongest of Porter’s five forces of competition is threat of substitutes between competitors. If a specialized bike is priced higher than a Mongoose, with no apparent advantage, a consumer will have no problem purchasing the Mongoose. On the other hand, the weakest competitive force would be threat to entry. Companies looking to enter into this industry would need a substantial capitol investment, as well as access to worldwide distribution channels. The industry has evolved since Cannondale entered, where a “garage type” operation could prosper. Now, the demand for innovative products, with a recognizable brand name is crucial for success, making it very difficult for an unknown firm to capture any share of the market.


The Dominant Characteristics of the Mountain Bike Industry and Key Success Factors


One of the dominant characteristics of the mountain bike industry is that there are many firms and demand is elastic with respect to price. There are also some significant barriers to entry and exit. Other dominant characteristics include product differentiation and technological innovation. These are the dominant characteristics of the mountain bike industry.


There are several key factors for success in the mountain bike industry. Product innovation seems to be very important. Cannondale has been such a success because they focused on their target market, and what they demanded. Their products are designed for cyclists who want a high-performance, high-quality bike. The ongoing focus on innovation will differentiate one company’s bike from another’s. Cannondale has successfully developed lighter, faster and more comfortable bikes because of their commitment to research and development. Price is another factor, but not as critical as innovating your product. The top mountain bike companies have certain models that are competitively priced. Some customers are not so concerned with price when they can get a better quality product for $0 more.











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