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VIDEO CASE 19-1 Specialized Bicycle Components, Inc.: Ride the Red "S"

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 $1,500 start-up capital. Mike 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!"

The company continues to innovate. It also sells road bikes and an extensive line of bike accessories, including helmets, water bottles, jerseys, and shoes. As Chris 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. Team members often serve as 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. 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 only sells directly to the retailer, and realizes a strong relationship with the dealers is a key factor for success. Steve Meineke, president of Specialized USA (the domestic unit of Specialized), refers to the on-floor salesperson as "our most important partner."

The end-user consumer is broken down into two target age groups: the 18- to 25-year-old college 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 Chris 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 network 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 home pages. Specialized believes guest appearances on TV talk shows and displays in retail shops help to keep the Specialized name 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 30 cities nationwide, enabling retailers and shop employees to test ride the bikes they will be ordering for the coming year- "Ride Before You Buy."

Specialized is also eager to become involved in joint ventures to keep its technological edge, including one with Du Pont that led to a more aerodynamic wheel. Specialized also entered into a distribution relationship with GripShift in 1994, 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, Mike 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."

Questions

Do a SWOT analysis for Specialized. Use Figure 19-9 in Chapter 19. 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.
As part of step 2 of the planning phase, and using your SWOT analysis, select target markets on which you might focus for present and potential bikers.
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.

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