IFSM 300 Final Assessment Exam
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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 and typed the individual question. Use as much space as is needed. 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 and 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 thinks that the one of the most important factors is the weather, but has no data to support that thinking. 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 “substitutes” from the Electronic world, 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.
According to the passage the first strategy Ted has for his business is choosing appropriate locations for his businesses. The first location he chose to establish his bikes rental was a place in Vienna near the entrance to the Washington and Old Dominion Trail, which is highly used during the weekends. The place is also known to have parking, located adjacent to the historic Vienna Inn and has a couple of food and drink outlets. In addition to that, in 2012 he rented a store in the core of D.C next to the Smithsonian Museums and other tourist attraction sites. This means that he gets to rent his bikes to many tourists and university students near the stores. Secondly, Ted diversified his services and he has a wide variety of goods, which he has in his stores. Since he opened stores in Old Town Alexandria and Reston he ventured into selling, renting and repairing bicycles. He sells a wide variety of bikes ranging from tricycles for toddlers to sophisticated racing bikes. Additionally, he sells accessories such as helmets, bike racks, gloves and locks. Diversifying his business helps him realize good profits. Third, Ted enjoys economies of scale; he gets suitable deals from his suppliers, which enable him, realize good profits from the bikes, accessory sales and repairs. He buys goods from them in bulk, such that he is given discount; this enables him to offer his customers, bikes and accessories at the best prices. By so doing he is able to sell bikes at lower retail price and still realizing good profits.
Identify 5 specific types or categories of information that Ted needs to run his business and explain why they are important to him.
The categories of information that Ted needs to run his business include; the information that is obtained through the Internet, business profile entailing the kind of information that is readily available within the company. Industry and economic analysis sheds some light about the national economy, it enables Ted to know whether to hike or reduce the price of his bikes. Market research is another category it is an effort to gather information regarding target markets or customers. (Mort. D, 2012). Ted also needs to track weather information; during the spring and fall there was a lot of traffic in the bike shop. People seemed to like biking during those seasons so he kept his bike shop open for longer hours so that he could maximize his profits. In addition, the frequency of customers is essential. Ted opens up shops in areas that are frequented by bikers. This allows him to market to bikers and increases his profit potential. Lastly, supplier information is important. Ted strives to obtain good deals from his suppliers; he researches bike lines to determine the bikes that are not selling so he buys these bikes at discounted prices and sells the bikes to customers and still makes out with a decent profit. He also keeps a good relationship with suppliers of high-end bikes so that they sell him bikes great prices.
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.
There are three type’s business processes that Ted uses in his business including; management processes, operational processes and supporting processes. Management processes entail the processes that oversee the running of his business; Ted being the manager of his business can apply some technological ways to make this more effective. For instance, in his website he can provide a place where customers can ask questions and get answers from others and using e-mails which helps improve customer service and respond to their needs more quickly (Atkinson C. Et al, 2010). Second, includes the operational processes, it constitutes the main business and creates the primary business stream like taking orders from customers. In Ted’s business, it could be possible that customers want to make orders for bikes to be taken at a later date. Efficiency of the operational processes can be solved by making use of software like customer relationship management software, which facilitates better management of customer needs and implementing data management and analytics, which entails making use of data collected from customers to analyze their tastes and preferences. In this case, it would be easier for Ted to know that people prefer cheaper bikes to expensive bikes. Third are the supporting processes, which support the core operations of the business. They may include accounting, technical support and call center. In Ted’s business, the people he has employed to help him run his several stores are the ones in this category. The technological solution in this situation is creating a company intranet. Such that when employees log in, the default page in this case is the company’s intranet. This way things work out more easily and communication becomes more efficient. Ted’s employees can get updates from fellow employees, read company updates and company’s calendar of events. From the intranet, if an employee wants a day off, can send a message automatically to the boss for approval without necessarily having to make phone calls (Schonthaler, F Et al, 2012).
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.
In addition to providing information about his stores in his website, Ted can use Internet in his business to purchase goods from his suppliers. He can also use Internet to sell bikes and accessories to his clients. Ted purchasing goods from his suppliers is a Business-to-Business Model (B2B). This entails larger companies that supplying a merchandise or service to other businesses. When Ted uses Internet to market his goods to customers this is termed as Business to Consumer Model (B2C). Any business that sells goods directly to its customers online falls under this category (Watson, D. 2013).
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.
Supply chain management refers to the management of the flow of cash, flow of merchandise and flow of information externally and internally of a group or companies that share the same value chain. It majorly entails the movement and storage of materials in their raw form, finished goods from their point of origin to the point of consumption and information that facilitates these activities like orders or picking lists. In the case of Old Dominion Trail Bikes, the supply chain is short since Ted gets his goods directly from his suppliers. This shortens the procurement process since there are no intermediaries hence minimizing the cost. Moreover, it is possible to get direct feedback from his customers thus knowing what he should improve (Luther, K. 2010).
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?
The Customer Relationship Management is a means by which organizations are able to open up communications channels between the company and its customers, both current and future. It is a way of getting feedback from the customers and a way of giving information to the customers. Ted can compile the feedback he gets from his in-store customers and the ones who shop online and put it in a single Customer Relationship Management (CRM). First, compiling the views of his customers will have some benefits like helping Ted manage his business by enabling him to identify his target audience and aids in channeling marketing efforts consequently reducing cost of acquiring customers. CRM will enable Ted as the manager to analyze customer service satisfaction. It will provide Ted with information to take into consideration his customers tastes and preferences when making business decisions. CRM will provide Old Dominion Trail Bikes with competitive advantage, since the firm can operate more efficiently and draw more customer insight (Baran, R. J Et al, 2010). It can also be used as an evaluation of sales to pinpoint the products that are being sold fast.
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 can use technology to make a remarkable increase in his repair work and rentals profits; to start with Ted can make use of accounting software, which is important since it will allow Ted to see his profits and losses at a glance. It can also help Ted maintain a budget for his business. Old Dominion Trail Bikes can also adopt a time tracking software that will enable Ted as the manager to know what tasks result in reasonable profits and the ones that do not. It will help him decide what tasks need to be improved and what needs to be phased out. Finally, utilizing social media to increase marketing of the repair work and products offered is a good practice. Facebook, twitter and Instagram would be great platforms since a lot of college student and tourists use social media.
Monitor customer preventive maintenance and repair work and offer special maintenance programs and rates to previous customers. 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.
Benefits for the implementation of Enterprise Resource Planning (ERP) in Old Dominion Trail Bikes include helping collect, distribute and manage information across the several stores owned by Ted. This result into high productivity and low costs that will help improve customer service, increase sales and lead to realization of good profits. Second, analysis and simulation abilities can help Ted plan in a better way, react faster and with effectiveness to changes in demand and competition actions. In this case having an ERP will enable Ted to know that cheaper bikes draw more income than the expensive bikes. Moreover, modern ERP systems enable users to have improved tracking of incoming merchandise and the sales made, to make visibility and control manageable. In accordance to this, it is easy for Ted to keep records of what was bought and sold. When implementing the ERP strategy, Ted must consider several factors including implementation costs and process efficiency. Considering the implementation costs and time taken for implementation, it should be relatively cheap and not time consuming. Ted should choose an industry-specific preconfigured type of solution. Since the customization hassle is catered for like specific components are already pre-build. Further, bringing into light the process efficiency, effective business processes, based on an industry’s practice, it is of vital importance to ensure that process efficiencies are achieved so as to get the positive result for implementing ERP (Hossain, L. Et al, 2012).
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.
In order for Ted to determine whether the project is a failure or a success there are some metrics that are used for determination. This includes; product success, its main purpose is to measure the success of delivering the product in full accordance with the project’s plan that includes scope, performance requirements, and functionality. If the feedback from the end users, which is the customers, is positive and they enjoy the services provided then the ERP was a success.
Also, the project management success should be evaluated. This determines if the project was successfully managed in harmony with the project management plan. The staff is the user of the ERP, so if they have accepted and adapted to the ERP it means that the training and implementation was right. Finally the objective outcome is a dimension that is specific to evaluate if the project’s outcome resulted in delivering the expected benefits, which were developed and geared the launch of the project. Employees need to report that the workload has not yet reduced but has made it easier to perform the functions of their job.
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.
When evolving technologically, Old Dominion Trail Bikes should consider some factors like cost, effectiveness, timeline and deadlines, available technological resources and level of maintenance costs. First, Ted should consider hiring an IT contractor to help with the implementation of the project since neither he nor any of his staff has any IT experience. Ted should consider the resources that the projects are taking up. The benefit of applying any project should outweigh the cost of implementing the project. They must be cost friendly and worth the while. Considering timelines and deadlines in Ted’s case, he may decide that he wants everything done by the time summer comes around to help him in his operations. Staff and customers should be able to easily understand this project and work with it. Availability of technological resources like databases, servers and hosting is a consideration too; when the mentioned are already present it makes it easy to make use of technology. The level of support needed after launch is a worry. Maintenance costs should be as little as possible (Kendrick, T. 2009). Lastly, the projects should comply with any local laws to make sure that there are no potential problems that may cause delays.
References
Atkinson, C., & Draheim, D. (2010). Business process technology: A unified view on business processes, Workflows and enterprise applications. : Springer Science & Business Media.
Baran, R. J., Galka, R. J., &Strunk, D. P. (2010). Principles of customer relationship management, Australia, Cengage Learning
Hossain, L., Patrick, J. D., & Rashid, M. A. (2012). Enterprise resource planning: Global opportunities and challenges, IGI Global.
Kendrick, T. (2009). Identifying and managing project risk: Essential tools for Failure-Proofing your project New York,: AMACOM Division American Management Assn.
Luther, K. (2010). Supply chain management: Issues in the new era of collaboration and competition. , IGI Global.
Mort, D. (2012). Business information handbook 2012, Berlin: Walter De Gruyter
Schonthaler, F., Vossen, G., Oberweis, A., & Karle, T. (2012). Business processes for business communities: Modeling languages, methods, tools: Springer Science & Business Media.
Watson, D. (2013). Business models: Investing in companies and sectors with strong competitive advantage: Harriman House Limited.
