FINANCIAL ANALYSIS

Financial Analysis of Cyclermate





History & Environment of Cyclermate

Lewis Llewellyn and Dai Armstrong were made redundant in 1988, as a result of the closure of their town's steel works in south Wales. Lewis had worked his way up from apprentice to be chief mill engineer, and Dai had progressed from “office boy” to a senior marketing post. The men belonged to the local cycle touring club, and through this had become close friends. Both had been employed by the firm for more than 20 years (Puxty, 2002, 157).

As the prospects for continued local employment were poor, they decided to use their savings to set up a bicycle manufacturing business, an obvious choice, given their shared interest, and combined expertise. The product they selected was a “traditional” upright cycle, following a design typical of the 1940's and 1950's. They believed that there would be a strong “niche” market for such a product, given the upsurge in interest in cycling, and increasing consumer interest in “retro” styles. Working in Lewis's garage, they built their first prototype. Dai persuaded a local cycle shop to put this on show. Within week they had two orders, and the business was launched (Shim, 2000, 157).

By the end of 1990, the business had grown to such an extent that they were unable to meet demand. Taking advantage of the relatively low prices of commercial and industrial property, they purchased a disused 15,000 square feet warehouse with an included 2,000 square feet of office accommodation for £240,000. The buildings were big for their needs but they were optimistic about growth and expansion. The business was moved into this new space, and three employees were taken on to assist in production, packing, administration and selling.

Over the next fifteen years, the business continued to expand. Demand was strong, despite little marketing. Occasional small adverts placed in national newspapers stimulated mail order sales, and Dai continued to be successful in persuading small cycle shops in Wales and in England to take one or two machines for display, or at least to keep a stock of brochures. The high quality of the hand-made product, and word-of-mouth reputation seemed to be enough to maintain sales (Chapman, 2006, 44).

SWOT Analysis of Cyclermate

Strengths

Cycling is a simple, low-impact means of exercise, which people of all ages can enjoy

Sells a variety of cycles.

Provides excellent customer service including, assembling, Painting and packaging.

Manufacture a wide variety of bicycle accessories and parts

Located where there is sufficient foot traffic

Owners have extensive experience in retail sales

Bicycle industry

Weaknesses

Quality is relatively low.

Less staff

shortage of Capital

Opportunities

Increasing trend of active lifestyle

Area is experiencing population growth

State Government has budgeted significant money for the construction of bicycle-specific facilities such as bike paths and road improvements

Threats

Online bicycle sales as well as catalogue sales and service

Price pressure from mass merchants and large discount chains

Fluctuations in the economy that affect discretionary spending

PEST Analysis of Cyclermate

Political factors

Relax tax policy

Favourable employment laws

No trade restrictions

Working in a stable political ...