Case Study on Schwinn in 2008

I. Introduction

It is said that the earliest bicycle is the one that was invented by Baron Karl von Drais, in 1916, which he rode while collecting taxes from his tenants. This bicycle is said to have been a pushbike, which is powered by the rider, who pushes his feet against the ground. This idea evolved into a series of different models, each with increased improvements, to what we know today as the bicycle. Leading manufacturers of the early bicycle included Frank Bowden and Ignaz Schwinn, each who had a major influence on the world of bicycling.

Arnold, Schwinn & Company was founded in 1895 by partners Ignaz Schwinn and Adolph Arnold as the industry for bicycles was in a very competitive state. Within the first twenty years of its foundation, Arnold, Schwinn & Co. had become known as a leader of bicycle technology and quality within the industry. In the 1970’s, Arnold, Schwinn & Co became known as Schwinn Bicycle, after the company had achieved sales of over $20 million in the early 1960’s. Over the years, Schwinn has a developed number of bicycles, including but not limited to the “Phantom,” “Sting Ray,” and “Varsity” bicycles which have allowed the company to be the leader in revolutionizing cycling around the world. In 1992, Ignaz Schwinn’s great-grandson, Edward Schwinn, Jr led Schwinn into a major decline from 25% market share to 5%, entering the company into a bankruptcy, resulting in a sale of the company to a group of investors led by Sam Zell.

In 1896, one year after Arnold, Schwinn & Co entered the market, there were 300 bicycle companies in the US, 101 of which were based in Chicago, making the bicycle industry a somewhat difficult environment to be in. Bicycles ranged from $100-$125 and weighed 19-24 pounds. In 1892, a racing bicycle cost about $150, which would be about $27,450 today.

II. Synopsis / Summary

Two years ago in 2005, Schwinn nearly experienced bankruptcy, when it fell to 5% market share after being one of the US top brands at 25%. Schwinn is currently selling 400,000 bikes at a mere price of $200-$400, which is considered the lower end of the bicycle market. While the models that Schwinn are selling are becoming more popular, Schwinn won’t see financial success unless it can sway customers to purchase it’s bicycles at a higher rice. Currently, Schwinn falls in 4th place out of 10, holding 7% of the market share of manufacturers of bikes priced above $400.

Schwinn recently has found itself in a more difficult place because many modern cyclists associate Schwinn with their parents, and therefore prefer more popular bikes, such as mountain bikes. Since Schwinn ignored the mountain bike trend of the 1980’s and continued to produce road bikes, the company was lead to bankruptcy in 1992. Now, Schwinn has adapted itself to manufacture and sell bicycles ranging from $100 children’s bikes to $2500 mountain bikes. They are hoping that this adaptation will help them gain more market share.

Because the bicycle industry has evolved so much since it entered it in 1895, Schwinn finds itself fighting many of the marketing challenges that exist within the US market. While the company finally conformed to the US market demand of Mountain Bikes, Schwinn is now contemplating the purchase of US manufacturers in order to possess the major marketing feature of �Made in the US’ which Schwinn does not currently have, being that the majority of their bikes are made in Asia.

III. Problems

Schwinn is currently facing problems in that it is widely known as a road-bike company, while the most of the US is now into the fad of mountain biking. While Schwinn faced bankruptcy only two years ago, the company is not only attempting a complete turnaround to keep the company active, but it is also trying to be competitive within the industry and buy market share by providing the US Market with their demands.

IV. Recommendations / Solutions

It is very difficult to change the mindset of any market. Because many modern bicyclists associate Schwinn as a bicycle that their parents rode, it is important the Schwinn keep up with the current fads that Americans are screaming for. That being said, it is imperative that Schwinn stay on top of the latest crazes, and make attempts at producing some new models that other top companies, such as Trek, Cannondale and Spcialized may not already market.

Schwinn can try to further its position within the industry by doing a proper amount of market research to find out what exactly the customers are going to be looking for. This can be done in a number of different ways, including but not limited