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VIDEO CASE 2–1 Specialized Bicycle Components, Inc.

The speaker leans forward with both intensity and pride in his voice. “We’re in the business of creating a bike that delivers the customer their best possible ride,” he explains. “When the customer sees our red ‘S,’ they say this is the company that understands the cyclist. It’s a company of riders. The products they make are the rider’s products.” The speaker is Chris Murphy, director of marketing for Specialized Bicycle Components, Inc.—or just “Specialized” to serious riders.

The Company

Specialized was founded in 1974 by Mike Sinyard, a cycling enthusiast who sold his VW van for the $1500 startup capital. Sinyard started out importing hard-to-find “specialized” bike components, but the company began to produce its own bike parts by 1976. Specialized introduced the first major production mountain bike in the world in 1980, revolutionizing the bike industry, and since then has maintained a reputation as the technological leader in the bike and bike accessory market. In fact, since the company’s founding, its formal mission statement has remained unchanged: “To give everyone the best ride of their life!”

You probably recognize the Stumpjumper and the Rockhopper, both made by Specialized, as two of the most popular mountain bikes today. The company continues to innovate, with its introduction of a European-style city bike, the Globe. It also sells road bikes and an extensive line of bike accessories, including helmets, water bottles, jerseys, and shoes. As Murphy says, “The customer is buying the ride from us, not just the bike. 

The first professional mountain bike racing team was created by Specialized in 1983, and Ned Overland, the Team Specialized captain, became the first-ever world champion. Specialized also counts Overland as one of its design consultants. The company banks on the perception, and reality, that this race-proven technology trickles down to the entire line of Specialized bikes and products.

The Environment

The bike market is driven by innovation and technology, and with the market becoming more crowded and competitive, the fight for the consumer is intense. Specialized divides the bike market into two categories: (1) the independent retailer, and (2) the end-user consumer. While its focus in designing the product is on the end-user consumer, it sells directly only to the retailer, and realizes that a strong relationship with the dealers is a key factor for success.

The end-user consumer is broken down into two target age groups: the 18- to 25-year-old college or university students and the 30- to 40-year-old professional “techies.” To differentiate itself from the rest of the market, Specialized positions itself as the innovator in mountain bikes—its models are what the rest of the industry imitates.

Mountain bikes account for approximately two-thirds of total industry bike sales, with road bikes accounting for the other third. The sport of mountain biking experienced a huge surge from 1989 to 1993, but in the mid-1990s sales began to flatten. Does Murphy believe this trend will hurt Specialized? “We believe we will see growth in the next six or seven years as the entry level participants trade up—trade their lower end bikes for higher end bikes,” he explains.

Specialized now has an extensive global distribution with subsidiaries in 25 countries in Asia, North America, South America, Europe, and Australia.

The Issues

How can Specialized stay at the forefront of an industry that now includes more than 20 manufacturers? Strategic placement in the marketplace is one way. Specialized recently designed its own server, the World Ride Web, on the Internet (www.specialized.com/bikes/). The Website offers international mountain bike trail and road bike trail directories, e-mail access to Specialized engineers, a trail preservation network, and a dealer directory that connects users directly to dealer homepages, in addition to the standard product information. Specialized’s new bike, the Globe, appeared on Seinfeld and was on display in Gap clothing stores. Specialized believes these nontraditional promotional strategies are helping to keep the Specialized name on the cutting edge and in front of the end-user consumer.

Targeting its other market segment, the dealers, Specialized launched a “Best Ride Tour.” It loaded up trailers full of the new models and visited over 30 cities, enabling retailers and shop employees to test-ride the bikes they will be ordering for the coming year—“Ride Before You Buy.”

To keep its technological edge, Specialized has also become involved in joint ventures, including one with DuPont that led to a more aerodynamic wheel. Specialized has also entered a distribution relationship with GripShift, allowing the high-end gear manufacturer access to its extensive dealer network.

Specialized sponsors races, provides racer support teams, initiates mountain biking safety programs, and is involved in trail-access advocacy groups all over the world. But, as it was in Specialized’s early years, Sinyard sees a commitment to top quality and design as the most important factor for future success: “Even though we’ve been around for 20 years, this company still feels like it has something to prove. I expect it will always be that way.”

1		1 Do a SWOT analysis for Specialized. Use Figure 2–7 in Chapter 2 and Figure 1 in Appendix A as guides. In assessing internal factors (strengths and weaknesses), use the material provided in the case. In assessing external factors (opportunities and threats), augment the case material with what you see happening in the bicycle industry.
2		As part of Step 2 of the planning phase, and using your SWOT analysis, select target markets that you might focus on for present and potential bikers.
3		As part of Step 3 of the planning phase and using your answers in questions 1 and 2 above, outline Specialized's marketing programs for the target market segments you chose.