6.2 Considering information from different sources
You will now read an article from the business section of a newspaper, which discusses Brompton Bicycle and its business environment.
Read the following article from The Daily Telegraph and highlight the strengths, weaknesses, opportunities and threats mentioned by the writer which match the one(s) you picked from the video in the previous activity. Note the different dates of the publication of the article (2008) and the recording of the video (2012). This difference may mean that some information in the text is not the same as that in the video.
Bike maker prepares to step up a gear: Brompton wants to keep up with the competition without its folding bicycles losing their uniqueness.
This year, Brompton Bicycle expects to sell 19,000 of its folding machines, generating revenues of £7m and a pre-tax profit of £925,000.
But new managing director Will Butler-Adams is aware that if the west London business is to remain a player in a rapidly expanding global market it has to see significant sales growth. ‘Last year one of our competitors made 350,000 bikes,’ said Butler-Adams. ‘The market potential is huge. Selling 19,000 is nothing.’
The problem is a mix of capacity – emphasised by a six-month lead time – and sluggish production methods. ‘In the past we have not been able to make enough bikes to meet demand,’ Butler-Adams said. ‘We have been losing market share. The market has been growing 20% to 25% a year and we haven't been growing at the same rate.’
Using a system of double shifts backed by slicker systems, he wants to boost production to 50,000 bikes a year. To reach that, Brompton Bicycle is half way through a £1m production revamp and has just had a change of management.
Yet Butler-Adams is well aware that the debt-free firm's investment could be undermined by a competitor that not only compares on quality but undercuts on price. ‘We are knee-deep in competitors,’ he said. ‘There is always the risk that someone could turn up with a bike just as good and compact as ours but for two thirds of the price.’ Brompton bikes sell in the UK for between £550 and £1,200. Sales to Europe, the US and Far East account for 70% of income.
‘I think we have the best folding bike but the competition is getting better all the time. If we don't take advantage of the opportunity in front of us, someone will come along and do a better job. They will be taking revenue and investing in research and development and will come up with something better. We have to move forward.
‘The Brompton is unique, but not that unique.’
There are other problems. Any patents Brompton had expired eight years ago, although the bike's design is still covered by copyright. Also, being based in a 22,000 sq ft site in London, it does not benefit from the low wage structure of Taiwan, where 80% of bikes are made.
In a country where traditional manufacturing skills are in short supply, Brompton has had to train many of its 85 staff in skills such as welding and brazing. It means that Brompton Bicycle – named after the area of London where the prototype was first developed – is unwilling to relocate.
In other cost areas, said Butler-Adams, it is more competitive. ‘Most bike manufacturers are perpetually changing their models and so never refine their manufacturing process,’ he said. ‘Our bikes have hardly changed in 20 years and we have been able to invest over time in the tooling. It’s a big upfront cost but it's an investment we have already made.’
Butler-Adams has further reduced costs by outsourcing non-core elements of the manufacture, retaining only the skilled machining and complex engineering at its Brentford base.
It is that engineering ethos that underpins Brompton. Butler-Adams said attention to detail – which started with the firm’s founder, inventor Andrew Ritchie, when he created the company 20 years ago – is Brompton’s main differentiator. ‘They are built to last,’ he said. ‘We have to make sure that we don’t become so obsessed by growing that we lose sight of that quality.
‘The Brompton is not a commodity product. We don't want to sell 250,000 a year as that would undermine the brand, making it so mainstream that it would lose its appeal. We are not interested in sales for sales' sake.’
The big sales push is focused overseas. Despite having just 10 outlets in the US – compared to 100 in the UK – America accounted for 5% of sales last year. ‘We need to grow our overseas sales.’
Brompton sells direct to bike shops in the UK and US, using distributors to sell in other parts of the world. As only Brompton makes the spares, the firm continues to benefit from a revenue stream generated by the shops’ after sales and servicing. It is that aftercare that precludes direct internet sales.
‘We had the chance to go into 15 new shops in the US but didn’t because we couldn't supply them,’ said Butler-Adams, a chartered engineer who joined Brompton five years ago and who took over at the top this month following Ritchie’s decision to step down and relinquish his majority shareholding.
Marketing so far has been by word of mouth: enthusiasts from its 150,000 worldwide users singing the praises of their Brompton. ‘The foundation of a brand is what people say to each other about it,’ he said. But to ramp up sales, Butler-Adams knows that the firm will need a more structured approach. ‘We are going to have to start from scratch with marketing. We need to decide what we are about and what we want to communicate. We have to get our distribution, routes to market and brand awareness right.’
The target market are urbanites, commuters and those with boats and caravans – anyone, in fact, who wants a bike that folds to the size of a suitcase. The good news for would-be customers is that the six-month waiting time is now down to three weeks. ‘I guess that’ll give us another challenge,’ said Butler-Adams. ‘Now we are fulfilling orders more quickly, how do we fill the lull in the winter months?’
You may have noted that although some of the SWOT points from the video are also mentioned in the newspaper text, there are some differences in the information presented by the different sources. There are differences in the number of bikes produced and the way the company is moving forward. One reason for these differences might be that the text was written in 2008 and the video made in 2012. Another reason for these differences could be that the sources were created for different purposes and different audiences. The video is for a general audience and has entertainment value, whereas the newspaper article is from the business section of a newspaper and is more targeted at those interested in the business environment. It is important to check for differences in source information and make sure you find out why there are differences. Always check the dates on the sources you use, as this is key to understanding the content and its context. Additionally, make sure you always date your SWOT analysis as it is a snapshot of a particular business at a particular time.