Bat Out Of Hell Bikes

Alex Smith Liya George QingTao (Bruce) Li Dongchen Yang Amanda Psyhojos

Part 1: Executive Summary Bat out of Hill Bikes is one of the premier bicycle companies in the industry today. Our unending commitment to both our products and our customers has allowed our company to grow significantly over the last few years. Smart financial decisions and careful analysis of our production and marketing strategies has made our company one of the top three companies in the bicycle segment of the transportation industry. This summary will give you an idea of our past strategies and objectives that have made us successful, while also applying those ideas to our plans for the future. First and foremost, Bat out of Hell Bikes designs, produces, distributes, and sells the best products on the market. Our product mix leads the industry in its ability to offer a product for all of our potential customers from children to athletes. Our popular youth bike, the Bat Bike, has seen strong sales and is an excellent way for youth to have a fun and cool way to get exercise. Our mountain bike has also seen industry-leading sales, and has recently undergone major updates, making it the most cutting-edge mountain bike on the market. And our road bike, named after one of our company founders, the Bruce Bike, has been steadily increasing in sales each year. Bat out of Hell Bikes is also a unique company in the industry, in that we not only produce the best products on the market, but we also lead many of our competitors with regard to our strong financial results. Thanks to our careful financial management, our company has seen steadily increasing profit, sales revenue, and thus significant increases in both share price and shareholder value. Our strong financial results, detailed later in this report, have attracted many investors to our company, and make Bat out of Hell Bikes a worthy and a relatively low-risk investment. The numbers do not lie: over 6.5 million dollars in profit and cash on hand of over 11 million dollars are just two figures that demonstrate our unmistakably sound finances. Bat out of Hell Bikes is a company like no other: employing revolutionary strategies as a means to meeting our goals and objectives has allowed us to become one of the largest players in the bicycle industry. Our commitment to our customers, our products, our employees and our investors has never been greater. We look forward to continued growth thanks to our loyal customers who buy our world-class products for their high quality, speed, capability, and reliability; and our outstanding financial picture.

Part 2: Mission Statement The mission of Bat out of Hell Bikes is to provide our customers with the fastest, safest, highest quality, and affordable youth, road, and mountain bikes so that we can fill the need for people to have reliable transportation, a fun way to exercise, and a means in which they can experience the outdoors. It is imperative that we product the best products possible, so that our customers, employees, suppliers, and investors needs are properly met. Part 3: Situation Analysis
Competitive forces Our company is facing multiple competitions in the bicycle market now. Three competitive forces our company faces in the domestic and global market places include operational barriers, the domestic competition and new market competitors. We have a large market share, because we spent a large amount of money on advertisement and public relations to open the market at the first two years. As the result, our sales income was great even the only one product. However, we did not earn a lot net income due to the large spending on advertisement and public relationship. Hence, we changed our selling strategy to increase the net income. We would face the situation of raise net income and maintain market share. Also, there are many domestic bicycle companies in the market, such as Two Wheels 500, Air bikes, Bike United and Carbon cycles. It is a big challenge to our company, and being a more global company is our new market strategy. There are many potential resources and customers in global market. At the same time, there are potential competitors in the global market. We will be competitive by having reasonably-priced products that outperform our competition. In sum, three major competitions are operational barriers, domestic market competitive, and new market competitors.

Economic forces Our company started our Mikes Bikes brands in a time of American economic recession that was caused by the subprime mortgage crisis of 2007. The economic recession would decrease the disposable income. Hence, the consumption of American falls. The American economy is better than five years ago, thus, the customer would willing to purchase more bikes then five years ago. Secondly, the inflation rate is also a economic forces which influence bicycle industry. The inflation rate of 2012 was 1.7% that was lower than the inflation rate of 2011, 3.0%. The inflation rate falls could also increase consumption in American. The reduction in inflation rate is a good sign for our company because we might sell more bikes in a better economy condition. At last, the net export of 2012 is around $550 million dollars, which means the local firm would be harmed by too many imports. It is also has huge influence to bicycle industry, because import bicycle could be cheaper than the bicycle produce locally.

Legal and Regulatory forces Safety, quality and warranty are three factors regulated by law or regulation. Safety is important for customers and our company should provide a safe bicycle. Our company has a strong ethical Product responsibility, so we have to provide safety bicycle to customers. Our quality index is 0.68, which is not super high quality. However, our quality is fair by compare with our price. The best way to keep customers is provide best value, hence, our company produce good quality bicycle to reach higher performance. Our company also provides customers both express warranties and implied warranties. The warranty of our product is full warranty because it can help us keep customers and build a strong ethic code.

Technological forces Our company divides the technological forces into two different aspects. One side is advertising technology and another is bicycle technology. Nowadays, newspaper and TV advertising are not the major advertising strategy. There are more and more social media, such as Facebook, MSN or Twitter. Our company will spent more money on new social media. Selling product online could also gather potential customers, not only facing new competitions. Bicycle technology is the core of a bicycle company. In one hand, our company should develop a better product to fit customers need. In other hand, we have to develop new bicycle technology competitive with our domestic and global competitors such as other students in Europe and Japan. The bicycle market is also well developed in Europe and Japanese. Thus, our company must develop better product to create a strong competitive power in global market.

Socio-cultural forces Socio-culture is also an important aspect to a successful firm. First at all, there are different types of bicycles that we produce. Each type of bicycle has a certain range of customers. We produce mountain bikes, road bikes and kids bikes. Our company designed different strategy aim at different groups because bicycle buyers have certain group of people have the same culture. Second, different countries have different bike cultures. Road bike is for professional cyclists, it could be different in between counties. Finally, the company culture is also a part of socio-cultural forces. A good standard company culture could retain outstanding employees and attract new employees.

Strengths
1. So far we have the highest profit and highest sales, which is an external factor 2. Our effective advertising campaign led to Brand Awareness 3. We aim to produce quality safe bikes that will in return produce wholesome memories for the rider.

Weaknesses
1. Bad Credit because we are a little

over $1 million in debt 2. For the first rollover, we were unprepared and therefore did not set the correct amount for advertising and Public Relations, which was an internal conflict for us. 3. No variety of bikes for the first 3 years

Opportunities
1. With the addition of our kids bike we have greatly increased revenue, which is an external factor. 2. Going Global, we plan our expanding our business overseas in the future, which is an external factor. 3. New Products will increase our customer base and keep us growing in the future, which is also an external factor as well.

Threats
1. All our competitors, who we only see as a minor threat. 2. The climate, because not everywhere in our market lives in a bike friendly climate. 3. If the economy goes into another recession then people will stop buying our products, and we would eventually go bankrupt.

Part 5
Human resource experience and expertise:

For operating a company like our Bat of Hell Bike, we divide the whole work into parts. Liya George: Arranged the meeting time and place. Recorded the meeting and contacted each group member. (CHO) Amanda Psyhojos: Analyzed the market information and responsible for deciding how much we spent on Advertising, PR and Branding. (CIO) Alexander Smith: Decided the strategy for our each product and kept watching on our funds. (CEO) DongChen Yang: He is a capacity planner, works on distribution, production plan, quality and efficiency. (CQO) QingTao (Bruce) Li: Decided the debt and equity and chose how much our dividend is. Provided the meeting place. (CFO)

Financial resources: Our financial resources have grown to make our company one of the leading companies in the bicycle industry. For period 2018, we have seen our finances get even better, beginning with our shareholder value, which is now over $50, at $51.48. This has resulted in a cumulative change in SHV of 367%. By having over $11 million in cash on hand, we are able to afford a dividend of $3.52, and we have also been able to use some of our retained earnings to pay down most of our debt. While we used debt financing early on to finance the release of new products and the respective costs associated with those, our company was also able to issue equity without a major impact upon our shareholders as a way to increase our financial resources. As a result of these strategies, we have been able to put our company on very solid financial ground, with plenty of cash on hand to implement product updates, maintain advertising and PR budgets, produce quality products, and continuously fund efficiency initiatives. When the company began, we had less than a million in cash, and over $1 million in debt. We are now in a much better financial position, with over $11 million in cash, and, after this year, no debt. We will continue to employ our successful financial management strategies in order to continue to increase our cash, profits, and shareholder value.

Part 6- Business Strategy Placement within Industry: Our placement with in the bicycle industry varies depending upon the product segment. For example, our mountain bike product has a medium price, medium volume strategy. This concurs with the product dimension sensitivities given to us in the simulation. We also know that this pricing/volume strategy is the most effective from our experiences in the single player mode. Our newest product, the Bat Bike, introduced for the youth segment, also follows the product dimension sensitivities of high price, low volume, and another strategy tested in single player mode, with above satisfactory results. In the future, when we have the funds and ability, we plan on adding a third product to our product line, a road bike. The road bike will also follow the product dimension sensitivities by featuring a low price, high volume placement strategy. We believe that varying the product placement by its respective segment is the most efficient and effective way to maximize both profit and sales. By having different strategies for each product and segment, our company will see higher sales than companies who choose to have the same overall product placement strategy for each product. Our plan allows us to produce the proper amount of bikes, without over or under producing, thus helping to control production expenses. And, our plan also ensures that our bikes will be priced at price points that are acceptable to their respective segments, therefore increasing our sales. We should also note that our products are priced using psychological pricing, which helps our buyers believe they are getting the best deal possible.

Objective #1: Sales & Products

Successfully launch cycles in both the road and youth bike segments and meet sales forecasts for them within 3 years of availability.

Our company plans on meeting this goal utilizing our ability to plan for the future and by drawing upon past experience in the bicycle industry. There are many benefits to having a complete product line of all three segments of the industry, including extremely high market share. This market share in turn will translate into a higher shareholder value, higher revenues and a greater chance for high profitability. Having a product portfolio of diversified products that meet the needs of their individual segments will be a valuable asset to our sales and bottom line. Given this, we have already begun to employ strategies

that will allow us to produce cycles in each market segment without causing our company to suffer financially. One of our strengths so far has been an accurate forecasting of sales, this past fiscal year we met our sales forecast for our mountain bike at a 93% accuracy rate. We will continue to build upon this accuracy, in order to meet and exceed our sales forecasts by carefully surveying the market conditions and analyzing our companys sales performance against others in the industry. Our company has also made use of an aggressive advertising and marketing strategy that has led us to have the highest sales two years in a row. This strategy includes careful attention to the media viewership trends of each segment (i.e. television is the most effective media type to reach the youth segment), as well as the public relations influence. Analysis of these figures has allowed us to spend money where it is most effective and appropriate, while ensuring our advertising and PR dollars are not being wasted. This strategy has been vastly important in making sure our sales numbers are strong, and we will continue to use it due to its early success. Given our employment of successful advertising, marketing, and financial planning that we have done thus far, we firmly believe in our objective of introducing a product in each segment of the bicycle market. We are confident that we can meet our sales forecasts for each respective product within three years of its introduction to the market, thanks to the strengths of our company outlined above.

Objective #2: Debt and Finances

Maintain a debt to equity ratio of .10 or lower within 2 years.

An important objective for our company is to conduct our business without incurring such a large amount of debt that our company is losing significant amounts of money trying to pay down the debt and maintain payments on the interest we incur. Instead of using debt as a way to finance our activities and new products, we plan on using our retained earnings, and careful monitoring of our overall financial health as a way to ensure as little debt as possible. Our company will continue to monitor expenses very closely, in order to make sure that we are spending money where it is most effective in continuing to bring in high sales figures. Areas we currently spend most of our money on are Advertising, Product

Development, and Distribution & Branding. By focusing our spending on these areas, we do not waste any of our funds, and are therefore sitting on over $8 million dollars in cash. Also, spending money in these areas is important because they are the areas that have a direct effect on our customers. Through our careful spending tactics, we will be able to build up a significant amount of equity in our company. Currently, our debt to equity ratio sits at 0.12, a respectable figure, on par with many of our competitors. Despite this, we would like to see a lower figure that would reflect more careful expense control, and increased equity. Much of the lack of equity we have is due to overspending in our first year of business, and we are actively managing our funds in order to ensure that we continue building equity in our company. Our reasoning behind maintaining a low debt to equity ratio is because we want company growth to come not from financing, but from producing the highest quality products that sell more than our competitors, and achieving our growth through high sales figures. We believe that often times the cost of growth that is a result of financing our decisions can end up decreasing shareholder value and bankrupting our company- a road that we do not want to travel upon. Therefore, as outlined above, we plan on maintaining a low debt to equity ratio, due to company growth coming from our products sales, as opposed to debt financing.

Objective #3: Shareholder Value

Increase shareholder value by at least 20% each year, with a shareholder value of $20.00 within 1 year.

As stated in objective #2, our company has set a firm goal of wanting to achieve growth through our products and shareholder equity. This strategy we believe will allow us to increase our shareholder value at a rate that would not be possible with debt financing and poor financial management. Our current shareholder values ranks us 5th amongst our competitors, a figure that we would like to see increase significantly over the next few years of business. Our current shareholder value, at $17.08 is strong, but we have set a goal of having the highest shareholder value of all companies in the bicycle industry. One of the main ways in which we plan to achieve this is through continuing to have the highest sales figures of all of our competitors. The shareholder value increase we saw

last year was approximately a $4 increase, thanks to going from having average sales to having the most sales in the entire industry. Our companys strong sales are a result of our aggressive advertising campaign strategies outlined in Objective 1. By continuing these successful strategies, we believe our sales figures will continue to be the strongest in the industry, thus increasing our shareholder value. Another way we plan on increasing shareholder value is through the use of a generous dividend to our shareholders, whom we value greatly. From experience, we know that providing a dividend significantly increases the value of our stock to the shareholders, and therefore we have instituted a dividend of 50 cents per share for this upcoming fiscal year. We believe that a high dividend such as this one will allow us to increase our shareholder value by at least 20% each year as we continue to build upon our successful sales figures and spending strategies. We also plan to be judicious in our number of shares issued, in order to maintain a high shareholder value. We do not plan to significantly increase the number of shares or shareholders because this would result in a lower value for each shareholder. A combination of both the high dividend, careful issuance of stock, and our high sales and profits will ensure that we will meet our goal of achieving a shareholder value of over $20.00 by the next fiscal year, and will allow us to continue building our shareholder value and equity at a high rate.

Objective #4: Profit, Revenues and Expenses

Continue to increase profits to over $5 million within 3 years, and continue to make a profit each year for the next eight years.

Our company is already the most profitable firm in the bicycle industry, and we intend to continue building upon that foundation by continuing strategies that have brought us to that point, as well as utilizing new strategies as the market dictates. As stated above, our company has seen very strong sales numbers, which has translated into the highest profit in the industry, of more than $2.2 million after taxes, a remarkable figure considering the short period of time we have been in business. This figure is a testament to the strengths of our company and its upper-level management for implementing the strategies that have brought us to that point.

We intend to continue to build upon that success, employing those successful strategies even more aggressively in order to increase our profits to over $5 million within three years. We believe this figure can be achieved through our continued use of a thorough advertising mix that puts our funds in the markets where our potential customers will be most likely to view our advertisements, thus ensuring that we continue to achieve the highest sales possible. Using the strong sales figures we have, we will combine our industry leading income with a strict and careful spending strategy that prevents us from wasting our capital. By spending on areas that help our bottom line, we can insure that our company will continue to increase revenues. With those revenue increases, our deliberate control over expenses will combine to create a profit that will surpass our competitors. This in turn will translate into increased shareholder value, thus helping us to achieve our 3rd objective. Given that we have already achieved high profitability, we firmly believe that through our diligent implementation of our advertising and expenditure strategies, that we can attain a profit of over $5 million dollars within the next three years. Additionally, thanks to our successful products and spending, we believe that our company will continue to be profitable, as we are able to adapt well to the changing market conditions. Building upon our past experiences and success, Bat out of Hell Bikes will remain one of, if not the most profitable company in the bicycle industry.

Part 7: Financial Projections and Budgets

Chart Title y = 4E+06e0.1568x R = 0.834

Cost of Goods Sold Expon. (Cost of Goods Sold)

Chart Title y = 7E+06e0.1851x R = 0.9147

sales Expon. (sales)

We made these two graphs from the data of our sales and cost for goods sold from last rollover, as a prediction for our company. The blue line is the real data, and we predict the future value by the slope of blue line. Thats where the black line comes. These two lines can provide some basic forecast. From the latest data, we can say that the operation of our company follows the graph of sales basically, and we have done better that our prediction. While the cost of goods sold is $13,990,276, which is higher than forecast. At that time we only had two products, now we have one more. So we can also say we have done very good at reducing the cost. The advantage we used to have was the highest market share, but now we are the second one the market. The mountain bike is still the main product make money, at the same time the youth bike becomes another product can make profit. For three different kinds of bikes, we have different strategies. For mountain bike, we are using middle volume and middle price. For youth bike, we think high volume and low price is best while we provide low volume and high price for road bike. Compare to all other companies, we have the second lowest prices for those three products.