Case: Devinci Cycles: Why Foray Into The Asia-Pacific? FSA Analysis

CASE: DEVINCI CYCLES
 Why foray into the Asia-Pacific?
FSA Analysis
 Feasibility analysis
 Sales - $5bn, 36% of global demand

 Mountain bike sales [email protected]% p.a. from $13.8bn in 2017
to (e)$16bn, bn 2023, about 24% of total market!
- Large number of races in the region indicate interest in the sport
 Online sales show high WTP; interest from distributors in China,

Hong Kong, Japan, NZ show demand exists!
 Many key markets like Australia, NZ, India, Hong Kong, Singapore
are English speaking, so psychic distance low!
 Increased cost of personnel, travel, promotion materials,
translations will be incurred
Prima facie, Asia Pacific appears to be feasible
 Suitability analysis
 Objective to sell 1000 mountain bikes annually; grow @20%p.a. till
2021-> needs new markets since it is well established in USA, EU
 the current export-led model is suitable to Asia
 COO of Canada high in Asia - Pacific
Asia-Pacific market is suitable for Devinci

 Acceptability Analysis
 There don’t appear to be any barriers, tariff or non-tariff

 Export led model will not entail big resource commitments
 Gauthier’s resource constraint and risk taking ability is unknown!!
Prima facie, the option appears to be acceptable to the company
 Which data to use? select specific, general, growth related

criteria
 specific: demand elasticity of product category
 general: GDP, urbanization, EODB
 growth: industry revenue, potential!!
 Can use Ghemavat’s CAGE Framework, McKinsey’s MECE
From the case, which criteria are selected? why?

 estimated demand per country: footnote 1, ex.5-includes pop, median
per cap income, no. of retailers - key to determine whether there is
market potential
 EODB index: footnote 2, pg.13- includes trading across borders,
enforcement of contracts- key to Devinci’s export led model and
protection of its proprietary tech!!
 tariff on bikes imported from Canada- will impact retail price, demand
elasticity is key to this as prices may increase 2x with tariff increase!!
 cultural distance- English is not the language in many countries,

will incur costs of translation, avoid errors as diff class of
languages, promo materials need to be translated
 problem with technical solutions in HQ in case of a problem, as
Saguenay is a non-urban town with no multi-lingual specialists
 You may also consider number of races as an indicator of interest in
mountain bikes in a country!!
which criteria are rejected? why?

 av. per cap income, pop – incorporated in estimated demand, will
result in double counting , skew the index!!
 trading across borders, enforcement of contracts: included in EODB
as above
 presence of competitors: present in all markets, no meaning;
competitor price/p.lines: almost same, not a measure of market
demand/potential
 no. of kms of trials: many may be unlisted, esp in countries with

poor infra, only indicates whether this sport exists there!!
 no. of ski resorts: irrelevant, no need for this sport
 google search trends: countries like china, vietnam don't have
google; may not be ubiquitous
 need to develop an index to compare countries
establish a basis for comparison since each criterion has diff measures
like pop(nos), per cap income ($) etc.
use intervals- max vale-min value/5, highest 5, min=1
e.g. for estd demand only china, india will be 5, all others are =1. bias
results, so go for revised interval, give china, india =5, others bet 1-4
by taking 2nd largest value.
revised interval= 2nd largest value-min/4. avoids data skew.
CASE: revised interval method
Interval Estd Tariff Eodb Cult. Distance= 50% (sum
calculation demand on (interval hofstede/6) + 50%
(revised bikes method) (eng=100, no eng=0)
interval (inter (interval method)
method) val)
Min value 21.94 0% 113 21

Max value 807.93 30% 1 78
Cal. interval 196.49 6% 22.4 11.4
Round off 200.00 6% 22 11
Final scale Estd Tariff Eodb Cultural Distance
demand on
bikes
1 0-200 24.1+ 89+ 21-32
2 201-400 18.1-24 67-88 33-44
3 401-600 12.1-18 45-66 45-56
4 601-800 6.1-12 23-44 57-68
5 801+ 0-6% 0-22 69+
FINAL INDEX CALCULATED
Country Estd Tariff on Eodb Cultural
demand bikes from distance
canada
China 5 3 2 1
S.Korea 2 3 5 1
Hong Kong 1 5 5 5
India 5 1 1 5
Indonesia 2 5 2 1
Japan 4 5 4 2
Malaysia 1 5 4 1
Philippines 1 3 1 5
Country Estd Tariff on Eodb Cultural
demand bikes from distance
canada
Singapore 1 5 5 5
Taiwan 1 4 5 1
Thailand 1 5 4 1
Vietnam 1 5 2 1
Country Simple Final Weighted Final score

Score = sum Weights = Estd demand 50%,
of index/4 tariff 20%, EODB 20%,
cultural distance 10%
China 2.75 3.60
S.Korea 2.75 2.70
Hong Kong 4.00 3.00
India 3.00 3.40
Indonesia 2.50 2.50
Japan 3.75 4.00
Malaysia 2.75 2.40
Country Simple Final Weighted Final score

Score = sum Weights = Estd demand 50%,
of index/4 tariff 20%, EODB 20%,
cultural distance 10%
Philippines 2.50 1.80
Singapore 4.00 3.00
Taiwan 2.75 2.40
Thailand 2.75 2.40
Vietnam 2.75 2.00
taking a cut-off of 3.00 as a conservative estimate, given
Devinci’s low risk profile, the countries in order of preference
are:
Japan
China
India
Hong Kong
Singapore
Australia and NZ will qualify
other factors
existing distribution agreements in countries
no. of mountain bike races may be considered as measure
of interest in the sport
morphology of asians shorter, height of frames need to be
adjusted for them, may not be a problem for Australia and
NZ!!
India / China may have lower WTP or very few with WTP

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CASE: DEVINCI CYCLES

 Why foray into the Asia-Pacific?

 Sales - $5bn, 36% of global demand

 Online sales show high WTP; interest from distributors in China,

Asia-Pacific market is suitable for Devinci

 There don’t appear to be any barriers, tariff or non-tariff

 Which data to use? select specific, general, growth related

From the case, which criteria are selected? why?

 cultural distance- English is not the language in many countries,

which criteria are rejected? why?

 no. of kms of trials: many may be unlisted, esp in countries with

 need to develop an index to compare countries

Min value 21.94 0% 113 21

Country Simple Final Weighted Final score

Country Simple Final Weighted Final score

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