Instructions:
Use the Case Study presented here to answer
the questions below. Your answers should
be long enough to answer each question fully and completely. Quality vs. quantity counts
– be specific enough to address the questions but do not include lengthy
paragraphs.
Each question can be answered in no more than 3 paragraphs. Your answers should demonstrate an
understanding of the concept(s), should apply critical thinking, and should
provide analysis of the Case Study in light of the concepts(s). You should not just re-iterate what has been
presented in class but integrate the information and relate it to the Case
Study. Proper APA style must be used for
any citations and references that you use.
Your Exam will be graded on the completeness and accuracy of your
responses and whether you have appropriately tied your responses to the Case
Study. Responses that do not mention the
Case Study will receive very few points, if any. Each question is worth 10 points.
OLD DOMINION TRAIL BIKES
Case Study
In 1985 Ted Thomas took
$6,000 of his savings, borrowed another $4,000 from his best friend, and opened
a bike rental business in Vienna, VA, adjacent to the Washington & Old
Dominion Trail (W&OD) that goes from Purcellville to Old Town Alexandria
(45 Miles) and connects to the Mt Vernon Trail (18 Miles) and ends at George
Washington’s Mt Vernon Estate. He rented
a location, bought 10 bikes and opened his first store in Vienna near an
entrance to the W&OD Trail, where there is also parking, and near the
historic Vienna Inn and a number of food and drink establishments. He has since opened stores in Old Town
Alexandria and Reston, VA, where he sells, rents and repairs bicycles. The Vienna store is now his anchor store, and
at 5,000 square feet, it is three to five times larger than his other
stores. Ted estimates he sells around
3,000 new bikes a year. Because of the high use of the W&OD trail,
especially on weekends, he also provides tune up and maintenance services at
all of his stores for the many riders from up and down the trail.
In 2012, Ted leased a
store in the heart of D.C., near the Smithsonian Museums and other tourist
attractions. He uses this store to rent
bikes to tourists and residents of the city and does some repairs to his rental
bicycle inventory in the back of the shop.
Although he has always
made money, or he would not be in business, Ted has seen a decline in bikes
sales of about 20 percent since 2008. He
attributes this to the downturn in the economy and the growth in Internet sales. However, his rental, tune up, and repair
business has increased dramatically. Over
the past few years, he realized that he must be more aware of expenses and
decrease them wherever practical in order to preserve profits.
Ted has learned that the
one of the most important factors is the weather. On rainy days, there are few customers in the
stores, while on sunny weekends all of his locations are extremely busy. From spring through fall, Ted keeps all his
stores open seven days a week, while in the winter months he opens his stores on
the weekend when the weather is good for riding. Through observation, Ted figures his highest
sales occur in May, and that June and September are his best months for
rentals. He also sells many bikes during
the holiday season in December, but in January and February, he often wonders
if he should close shop and go to Florida for a couple of months.
Old Dominion Trail Bikes
grosses between $5 and $8 million annually and earns Ted a comfortable
six-figure income. Each year, he leaves
a considerable amount of cash in the business so that he does not have to
borrow money. He sells a wide variety of
bikes (from tricycles for toddlers to sophisticated racing bikes) and
accessories such as helmets, speedometers, bike racks, repair kits, and
clothing. Bicycle sales have decreased
to account for 25 percent of revenues. Accessories
such as helmets, bike racks, gloves, and locks amount to another 5 percent. Rentals make up about 35 percent, and repairs
make up the remaining 35 percent.
In recent years, he has
noted that customers are less likely to purchase the high-end road and
triathlon bikes and are purchasing bikes in the range of $400 to $1,000. The lower priced bikes are also easier to
sell and to keep the cash flow moving.
Most of the rental
business is concentrated in the D.C. store in downtown and the Alexandria store,
due to the tourists and university students located near those stores. Ted is excited about rentals, as they have a
huge profit margin. He can charge as
much as $50 a day, which means the bikes pay for themselves after just a few
rentals.
Ted’s expenses include the
cost of goods such as new bikes and accessories, rent and payroll. He negotiates leases for all his locations
except the Alexandria store, which he owns outright. Ted has 15 full-time employees and usually
hires another 15 part-time employees during the busy months and weekends.
Until two years ago, he
was spending about $30,000 a year on advertising in local papers. Now he uses a simple website and has links on
many of the local biking trail sites to provide information about his various
locations, and his advertising budget is close to zero.
In the late 1990s, Ted over-expanded
to six stores, including a store in Purcellville, VA, and one in Bethesda, MD. The expansion necessitated a warehouse in
Springfield, VA, the hiring of a general manager and considerable overhead
expenses. In a subsequent cost-reduction
effort, Ted closed the Bethesda store, gave up the warehouse and moved his
inventory to the Vienna store, and let the general manager go. Now, he handles all the general management tasks
himself, which affects the time that he has available to plan and develop strategies.
Ted further reduces his
expenses by working in the Vienna store two days a week. Since he has only one staff person in some of
his stores, he has to make special arrangements if that person does not come to
work, or takes a day (or week) off.
He is trying to expand
the bicycle repair work, especially on the weekends, so he will be able to
increase revenue from this profitable aspect of his business. He needs to have repair capability at each
store to maintain the rentals, prepare the new bikes for sale, and perform the
periodic maintenance for the bikes that he has sold, as well as provide the
breakdown repairs and adjustments for the riders on the Trail.
In an effort to increase
profits, Ted tries to get good deals from his suppliers so he can realize a good
margin on bike and accessory sales and repairs.
He looks for situations where suppliers have more bikes in a line than
they need and buys those bikes at a discount for rentals and low-end sales,
while maintaining a rapport with high end suppliers so that he can offer his
customers the best at reasonable prices.
By doing so, he can sell bikes at a lower retail price with on-the-spot
delivery while still realizing a nice profit.
Ted has no bank debt and
has long since repaid the $4,000 he borrowed from his friend to start the
business. He feels that, because he has
a diverse business strategy that addresses the many different aspects of the
local bike business, he will do well in the many different economic climates as
long as he is able to manage his varied business. He also feels that he is insulated from competition
from Internet sales, due to the rental and repair aspects of his business.
Questions:
- List 3
strategic goals for Ted’s business and provide an explanation of each.
- Identify 5specific
types or categories of information that Ted needs to run his business and explainwhy they are important to
him.
- Identify and explain
three business processes that
Ted likely uses in his business and
explain how a technology solution could help each one of them.
- Ted
has a website with information about his stores. Identify
and explain two additional
ways Ted could use the internet in his business. Tie
each use to a specific e-commerce business model and explain how that model applies.
- Explain
to Ted what a supply chain
management (SCM) system could do for his business and how it might improve his operations. Be sure to cover the full range of SCM functionality as
it applies to Old Dominion Trail Bikes.
- How
could Ted combine the information he gets from in-store customers with
those who purchase via the website into a single Customer Relationship
Management (CRM) system and what
three benefits would he gain from doing so?
- Ted
would like to increase repair work and rentals as they are the highest
profit aspects of his business and the Internet is not a competitor. What are three specific ways he could use technology to accomplish
this?
- Ted
is not sure if he should implement an Enterprise Resource Planning (ERP)
solution. Identify and explain three
benefits to an ERP for Old Dominion Trail Bikes. Identify
and explain two important considerations in implementing an ERP.
- If
Ted implements an ERP for Old Dominion Trail Bikes, he will need to know
whether the project was a success. List and explain three metrics (or measures) he can
use to determine whether the project was a success.
- Since
neither Ted nor anyone on his staff has any experience with information
technology, list and explain five things he should consider or
address as he proceeds with his IT projects.
