MikesBikeReport_2010_RGU

Powering

Pedals

Performance Analysis Report

Tushar T. Dalvi

2016

SR. NO. TOPIC PAGE NO.

1 Introduction 1

1.1 Company information 1

1.1.1. Vision 1

1.1.2. Mission 2

1.1.3. Long term objectives 2

2. Strategy Implementation 2

3. Performance management System 5

4. Team Performance 6

5. Individual Performance 7

6. conclusion 8

7. Reference 9

8. Appendix 10

Tushar T. Dalvi 0915557

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1. Introduction:

The report analyses and evaluates the Business strategies,

Functional strategies and Performance management system (PMS)

put forward by the managing board of Powering Pedals. It also

evaluates the individual and team performance of the managing

board. It attempts to correlate the strategies to the vision, mission,

goals and objectives (VMGO) of the company.

1.1. Company information:

Powering Pedals is a bicycle manufacturing and sales company. Its

core business strategy is to produce high quality bicycle in order to

satisfy increasing consumer demand.

The strategy report document produced by the managing board in

2009 (when business was taken over by the current managing board

from the previous owner) introduced the following Vision, Mission and

Long term objectives for the company.

1.1.1. Vision:

Our vision is a framework to fulfil the expectations of our

customers, shareholders and employees.

• Our Customers: to be the customers’ first choice of quality

products by satisfying their desires and needs.

• Our Shareholders: to keep our shareholders happy while

being mindful of our overall responsibility.

• Our Employees: to be the best employer where employees

are given opportunities to be their best.


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1.1.2. Mission:

• To manufacture and deliver high quality and most reliable

bicycles which suit the desire and needs of our targeted

customers.

• To create healthy environment for our employees.

• To maintain growing shareholder value.

• To constantly seek for renewal via continuous learning and

research.

• To apply new technologies and best business practices.

1.1.3. Long term objectives:

The important long term objective for the company was to

become the market leader and sustain its position. The company

during its first two years of business managed to be the market

leader. The managing board had aimed to increase the share

holder value (SHV) of the company more than 60% and market

share of 70% within the taken timeframe. The managing board

was impractical in its decision to capture 70% of market share,

this also shows that managing board failed to consider or under

estimated the competition. The company aimed to develop and

maintain highly skilled and efficient employees and did manage to

increase the employee skill index by approximately 15 – 20%

(Appendix 1, chart 6).

2. Strategy Implementation:

This section of the report analyses and evaluates the business and

functional strategies portrayed in the 2009 Strategy Report. The

company adopts one of the porter’s three generic strategies, i.e.

differentiation (Lynch 2006). The strategy of providing products

which offer benefits different (in our case better quality) from that of


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the competition and is valued by the customers is called

differentiation (Johnson, Scholes and Whittington, 2008). The

managing board in support of differentiation strategy agreed on

focusing only onto three segments namely Adventure, Kids and

Racers. A product development plan was also forecasted. The

forecasted project development plan couldn’t help the company to

achieve first mover’s advantage. The competitors took the advantage

and intensified the competition. Thus forecasted project development

plan underwent some drastic changes (Appendix 2). This helped the

company to diversify into new markets, capture competitors market

and try to sustain the captured market share.

The managing board had planned to increase the amount of

distributors and establishing long-term relationship by giving

continuous and steady extra support and adequate retail margin. The

managing board didn’t actually implement this plan as company got

stuck in the price war and started reducing extra cost. The appendix

1 chart 7 shows that 2011 became the beginning of the price war.

The company managing board had implemented a premium pricing

strategy which later on was replaced by competition based

pricing. This shift in pricing strategy has proved to be useful in

terms of growth in sales revenue. But couldn’t be of much help as

other expenses, such as sales expense, distribution expense,

administration expense and financial expense all together had

increased by approximately 50%. Thus the gross margin was also

eaten up to approximately 70-80% (Appendix 1 chart 8).

The managing board had decided to give more importance to internal

processes to fulfil its VMGO. The managing board concentrated its

attention towards increasing productivity, implementing Total

Quality Management System (TQMS) and increase

responsiveness within its internal process. To increase the

productivity the managing board focused on increasing production

capacity and maximizing capacity utilization. The managing board

made following year over year changes such as increased the


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workforce and plant size, made huge investments on setup time

reduction, supplier relations, raw material and finished goods

warehousing, etc. Thus managing board achieved 93% production

utilization but couldn’t achieve the planned production and targeted

sales volume. The reasons for these could be inappropriate demand

forecasting and/or market saturation of our products. The demand

for product of any company is determined by variables such as

‘Value for Money’ or Attractiveness, which is based upon

attributes, price, advertising, quality, distribution, and delivery of the

product to the segment. This helps to identify the segment share of

the product, which is further used with segment demand to

determine the share of the product of any company with in the

overall segment demand (See Description Demand, Mikes bikes

Advance Help). The implementation of our original strategy in the

first year helped us to achieve the leading position in the market.

However, we didn’t meet the targeted sales volume which resulted in

losing the leading position in the market, and let competitors take a

lead in the market.

The company as per its core business strategy of producing high

quality bikes had invested a significant amount of money on

developing and maintaining TQMS. The company had both proactive

and reactive policy of quality control which increased our TQMS

budgets. The huge percentage of money invested on TQMS was

contributed towards inspection cost. The huge investments made

before entering the price war paid off as we were able to provide the

best quality products (Appendix 1 chart 4). But after entering the

price war and focusing on reducing cost the company saw negative

variances for quality system index and warranty claims. This explains

the direct relation between the investments made on TQMS and

quality system index and inverse relation between investments made

and warranty claims (Appendix 1 chart 4 & 3).

The company had decided to increase its responsiveness by reducing

manufacturing cycle time or production lead time and stocking


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adequate amount of raw materials and finished goods. The company

successfully achieved the desired delivery index and was producing

almost as much as planned production (during certain years) but

couldn’t achieve the required sale volume. There are two possible

reasons: first, the company overshadowed the main element of

balancing the capacity and demand; over purchased the

capacity and produced more than its share of product segment

demand. Second, their existed a demand saturation.

The company had planned to maintain the increasing earnings per

share which has ultimate impact on share price and share holder

value. This was planned to achieve through adopting minimum risk

policy by maintain low gearing debt/equity ratio. This helped us for

few months in the beginning by giving approximate average of 30%

of the sales revenue as profit, but as the business started growing

bigger, more and more products were launched in the market (2014-

2015) the cost started increasing leaving back only approximately

5% or -5%(loss) of the sales revenue made.

3. Performance management system (PMS):

The PMS is also termed as Strategic Performance management

by Waal, Kourtit and Nijkamp 2009. The management decide to use

Balance Score Card (BSC) which according to Kaplan and Norton as

cited in Lawrie, G. et al. (2004) combines traditional financial

measures with non financial measures and provide managers with

critical information about organizational performance. The BCS

containing the variance analysis helped the company in identifying

the areas of improvement and overall performance of the company.

The appendix 1 chart 1 shows that EPS had a sudden drop in 2014

and 2015 which is consistent with outcomes of other KPIs during

these periods of business. The appendix 2 explains the density of the

business activities taken place during 2014 and 2015. In 2014 we


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had 7 products in the market and one product in development phase

where as 8 product in market in 2015. The sales volume raised as

the no of products in market during 2014 and 2015 was almost

double that of previous years(Appendix 1 chart 2), prices were

dropped as the company changed its strategy of premium pricing to

competition based pricing (Appendix 1 chart 7). The decrease in EPS

can be explained by the Income and Expense chart (Appendix 1 chart

8) which portrays sales revenue, cost of goods sold, gross margin,

other expenses and income. It is clear from this chart that the

company made best sales revenue compared to other years but the

cost of goods sold and other expenses were huge which reduced the

income and made loss during 2014 and 2015 respectively. This is

also reflected on Share holder value (SHV) of the company (appendix

1 chart 9).

The Key Performance indicators selected by the company served

their purpose. They were useful to determine elements of the

business that need more attention and those which were doing well.

4. Team Performance:

Team performed the role of managing board members of Powering

Pedals Company. Each member performed according to the allocated

areas of roles and responsibilities as decided in our RACI chart.

Company adopted functional structure, where in members were

allocated responsibility of different functions.

This assorting of responsibility was limited to the RACI and Strategy

report, where as in real life the responsibilities were shared, passed

on and most of the time taken by some other department head. Most

of the time the allocated tasks for the meeting were completed by

every member but sometimes whole group had to waste their time

just because a member had failed to accomplish his/her task, was

late or couldn’t come to meeting. As every other team even we had


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different ideas and opinions, disagreements, debates and sometimes

arguments. The debates and arguments were both helpful and

sometimes misleading and time consuming. The amount of these

useless debates and arguments decreased over period. There was an

inverse relation between the time and the failure to complete the

task, coming late and not-attending the meetings. This also proved

the increasing involvement of every member. As we were passing

through every decision we started realizing the importance of

technical skills. Being new to actual business environment we had to

learn new terms, concepts, theories, etc. and revises the previously

learned. Till the final year of business every member was more or

less an expertise in his or her department.

5. Individual Performance:

Performing the role of Managing Director of Powering Pedals was a

learning experience. It helped me in developing leadership skills,

understanding team members and responding accordingly,

appreciate the qualities of colleagues/subordinates and delegate

roles accordingly. The position made be accountable for almost all

the activities within and outside the company. Along with the

department heads I was responsible for every decision taken for that

particular department. It was a huge responsibility and a lot of new

things to learn. Being accountable and responsible for all activities I

was expected to know every bits and pieces of the company. This

also made me realize my lack of knowledge. Hence it motivated me

to learn the technical terms and concepts of the business.

Looking back through the past meetings I could see myself

developing into a good listener. In the beginning we used to get

into debates and arguments to justify our opinions and ignore others.

This use to lead in a heated discussion and waste significant amount

of time. Later on after realizing the mistake I use to listen to other


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member and respond accordingly. I also made other members listen

and cool down the heated discussions between them.

Working in a team helped me in becoming a good team player. It

made me understand the importance of individual contribution

towards team performance.

6. Conclusion:

The some of the strategies put forward by the company helped,

where as some had to be replaced considering the competition. The

main issues that came forward through this report were as follows:

Inappropriate use of finance, distribution and advertising

expenditures were reduced where as huge investments were made

on increasing workforce and plant size. Under estimating

competitors, the managing board under estimated the competition

and missed the opportunity of first movers in some segments. But,

then continuous competitor analysis was implemented. Inappropriate

demand forecast; overestimated planned production, lost of sales

and accumulating closing inventories.

The PMS implemented by the managing board utilised appropriate

KPI’s which helped the business to survive the competition and rise

from the downturn. The managing board could have done better if it

had given more attention towards the variance analysis.

The members slowly evolved into team members and developed a

good communication and coordination within. Despite the mistakes

done the managing board performed well as a team and helped

Powering Pedal to rise up, develop and diversify its business.

Finally, at certain times the passion of winning use to overrule the

determined strategies. Powering Pedal as a company did perform well

but its competitors did better.

8. Reference:

JOHNSON, G., SCHOLES, K. and WHITTINGTON, R., 2008. Exploring

Corporate Strategy: Text and Cases. 8th

ed. Harlow: Pearson Education Limited.

LAWRIE, G., COBBOLD, I. and MARSHALL, J., 2004. Corporate

performance management system in a developed UK governmental

organization: a case study. International Journal of Productivity and

Performance Management. 53 (4), pp. 353-370.

LYNCH, R. L., 2006, Corporate Strategy, 4th ed. Harlow: Financial Times

Prentice Hall - Pearson Education Limited

WAAL, A., KOURIT, K. and NIJKAMP, P., 2009. The relationship between

the level of completeness of a strategic performance management system and

perceived advantages and disadvantages. International Journal of operation and

Production Management. 29 (12), pp. 1242-1265.

9. Appendix

a. Appendix 1:

i. Chart 1:

ii. Chart 2:

2009 2010 2011 2012 2013 2014 2015 2016

Target $2.07 $3.87 $14.0 $13.8 $14.8 $4.50 $3.00 $8.50

Actual $2.87 $8.21 $8.70 $4.57 $2.95 $2.54 -$2.4 $11.4

Variance $0.80 $4.34 -$5.3 -$9.2 -$11. -$1.9 -$5.4 $2.95

-$15.00

-$10.00

-$5.00

$0.00

$5.00

$10.00

$15.00

$20.00

EPS

Target

Actual

Variance

2009 2010 2011 2012 2013 2014 2015 2016

Target 27,500 78000 1,43,0 1,15,7 1,89,1 3,44,4 3,80,6 2,46,5

Actual 25,312 76836 76,530 1,09,3 1,00,8 1,78,7 2,31,7 2,18,2

Variance -2,188 -1164. -66,47 -65,30 -88,36 -1,65, -1,48, -28,33

-2,00,000.00 -1,00,000.00

0.00 1,00,000.00 2,00,000.00 3,00,000.00 4,00,000.00 5,00,000.00

Sales Volume

Target Actual Variance

iii. Chart 3:

iv. Chart 4:

2009 2010 2011 2012 2013 2014 2015 2016

Target 100.0 33 293 550 532 600 700 750

Actual 66.00 96 216 532 455 721 766 490

Variance 34.00 -63.0 77.00 18.00 77.00 -121. -66.0 260.0

-200.00

-100.00

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00Warranty Claims


2009 2010 2011 2012 2013 2014 2015 2016

Target 0.74 0.80 0.71 0.72 0.72 0.63 0.55 0.65

Actual 0.75 0.58 0.71 0.63 0.63 0.49 0.59 0.69

Variance 0.01 -0.22 0.00 -0.09 -0.09 -0.14 0.04 0.04

-0.40-0.200.000.200.400.600.801.00

Quality System Index


v. Chart 5:

vi. Chart 6:

2009 2010 2011 2012 2013 2014 2015 2016

Target 0.61 0.82 0.86 0.87 0.87 0.89 0.90 0.90

Actual 0.72 0.83 0.86 0.87 0.89 0.90 0.90 0.89

Variance 0.11 0.01 0.00 0.00 0.02 0.01 0.00 -0.01

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

Supplier Relation Index


2009 2010 2011 2012 2013 2014 2015 2016

Target 0.57 0.57 0.62 0.64 0.68 0.73 0.74 0.70

Actual 0.55 0.58 0.62 0.68 0.73 0.74 0.74 0.69

Variance -0.02 0.01 0.00 0.4 0.05 0.01 0.00 -0.01

-0.100.000.100.200.300.400.500.600.700.80

Employee skill Index


vii. Chart 7:

viii. Chart 8:

2009 2010 2011 2012 2013 2014 2015 2016

Rock Hopper (Adv5) 2200 2600 2600 2100 1950 1950 1900

Rock Glider 2200 2150 2150 2000 1900

Active Champ (P) 600 600 400 400 400 380 300

ChampPlus 370 330

Speedz 4300 4100 3850

LeisureKing 440 440 420

JusRide 345 300 280

0500

10001500200025003000350040004500

Product Price

-$2,00,00,000

$0

$2,00,00,000

$4,00,00,000

$6,00,00,000

$8,00,00,000

$10,00,00,000

$12,00,00,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Income and Expenses

Sales Revenue Cost of goods Gross Margin Other Expences income

ix. Chart 9:

2008 2009 2010 2011 2012 2013 2014 2015 2016

SHV 10.58 23.07 46.01 71.75 86.48 72.62 69.41 34.82 40.52

0

10

20

30

40

50

60

70

80

90

100

SHV

Appendix 2:

Product Development Plan

Target

Segment

Product /

Year 2009 2010 2011 2012 2013 2014 2015 2016

Adventure

Rock

Hopper

2nd

year

3rd

year

4th

year

5th

year

6th

year

7th

year

8th

year *

Adventure

Rock

Glider

PD

1st

year

2nd

year

3rd

year

4th

year

5th

year

Kids

Active

Champ PD

1st

year

2nd

year

3rd

year

4th

year

5th

year

6th

year

7th

year

Kids

Active

Champ +

PD

1st

year

2nd

year

Racers Speedz

PD

1st

year

2nd

year

3rd

year

Leisure

LeisureKi

ng

PD

1st

year

2nd

year

3rd

year

Commuter JusRide

PD

1st

year

2nd

year

3rd

year

PD - Product Development

* Product Withdrawn (abandoned)

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