Case Study On:Schwinn: Reviving a Classic American Brand

Q: How would Schwinn mountain bikes be classified as a product?

The rise and fall of the Schwinn Bicycle Company seem unreal especially after having over 100 years of experience manufacturing bicycles. Schwinn was once a household name in its category of bicycles in the U.S.A. You didn’t have to be rich to own a bicycle by Schwinn because the bicycle was always very affordable. They were known for their quality but they kept their product too simple for too long. Schwinn started out as the most desired bicycle in the bicycle manufacturing industry in the U.S. The baby boomers would dream of having a bicycle for Christmas, birthday, or any special occasion and the parent would be glad to purchase the Schwinn bicycle just to see the smile on their innocent faces.

Before the 1970s, the majority of the US bike market had been one of style and fun. Bikes had sci-fi names like the phantom (1950s), and the banana seated Sting Ray (1960s). In the US, two factors changed this: technology and oil. In the 1970s, OPEC induced oil shocks that led to a dramatic increase in the use of bikes for transportation, and ingrained the bike in the imagination of the mainstream population. Bike lanes were placed on the streets of many US cities in order to help accommodate their use. In Europe, with its more condensed cities and higher gas taxes, bicycles had long enjoyed this sort of utilitarian use. Secondly, derailleur’s, or gear-shifts, were first mass manufactured by Schwinn in the 1960s, and by the 1970s they were standard. This derailleur’s allowed bikes to climb hills much more easily, giving the bike an extended range of terrain and usefulness. These changes were important to the future of the bicycle. Still, the predominant use for the bike continued to be for recreational and fitness reasons. Recent figures from the Interbike Directory (www.interbike.com) show that 94.5% of bike riders ride for recreation or fitness, while 5.2% do so for transportation, and 0.03% for racing.

SOCIAL   Schwinn has a very diverse customer base, from parents buying their first bicycle for their child, college students, to bicycles for professional cyclists.   Schwinn products reach a larger range of customers.

ECONOMYSome of the target market of Schwinn is price conscious because they have low to middle income. Therefore, any decline in the economy that can impact those customers will definitely impact the company as well.

Q: Evaluate Schwinn management’s decision to launch the Black Phantom.

Competitive Situation

In the past, Schwinn was the leader of bicycle manufacturing in the U.S. and was very successful at maintaining the lead in market shares for their products until bicycles were being manufactured by many other companies such as: Trek, Cannondale, Murray, Huffy and Roadmaster. These are Schwinn’s biggest competitors.

The bicycle industry is very competitive and very hard to maintain a lead if you can’t guarantee superior quality product. Schwinn’s competitors gave them a run for their money because unlike Schwinn, the other competitors were not afraid to expand their business with new innovative ideas and technology. Mountain bikes, as a major new product, could have taken the bicycles in the U.S. to a whole new height, but Schwinn stuck its head in the sand and declined to promote such a product. Before it was too late, Schwinn lost its lead and other competitors were soon taking over the industry. Schwinn made some very poor choices in their marketing strategy. They targeted the children and the middle-aged of at least 40 years old to sell the robust, vintage bikes to. The bikes were heavy, plain, but cheap. This is what the social environment of people were looking for at the time.

Schwinn has lost considerable market share due to its failure to capitalize on the increasing popularity of mountain bikes and the decline in popularity of its road bikes.   Manufacturers such as Trek, Cannondale, and Specialized have become the standard for these very successful bikes leaving Schwinn in serious trouble. Since the beginning of mountain biking dominance, in the early 1980s, Trek Bicycles have become the standard, pulling almost a quarter of the entire bicycle market’s revenue in 1995.Trek’s phenomenal market share is even more so when you look at the company’s history compared to Schwinn. Trek is with 24 percent of the market was less than 20 years old while Schwinn with 7 percent was celebrating its 100th year of production. Most of their success can be directly attributed to being one of the first firms to produce quality, hand-built mountain bikes just at the time they were first being introduced and becoming popular. Trek also chooses to maintain the mountain bike segment as their lone market.   This gives them a competitive advantage by specializing in one key area.   Other industry leaders such as Cannondale and Specialized however, offer bikes of many different sorts.

Manoj Jung Thapa

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