Oasis Bicycle the Theoretical Company Research Proposal

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As the bicycle industry benefits from higher gas prices, it also suffers from low gas prices (NBDA, 2008), indicating a high inclination to substitute. There are low switching costs, as other means of transportation or exercise are all relatively affordable. The price-performance tradeoff is even throughout, and does not yield bicycles any particular competitive advantage.

The degree of rivalry in the industry is low. There is low industry concentration and few exit barriers. There are approximately 2000 firms and 100 brands in the U.S. (NBDA, 2008) and five firms in the mass market sector (NDBA, 2008). Industry growth is relatively slow, however, but high diversity among rivals allows for a relatively low degree of rivalry between them. There are, however, few product differences at the low end, and 99.53% of all bicycles in the U.S. are made in China or Taiwan (NDBA, 2008).

Overall, the industry is moderately favorable for Oasis' entry. The company's main concern is the high degree of buyer power in its segment. While these buyers can help Oasis drive very high volumes, the cost will be very low margins. Oasis will need to leverage the strength it has with its suppliers in order to retain profitability when dealing with these powerful mass market retailers.

The company benefits from an industry with low barriers to entry, as it will be able to gain access to distribution channels and will not face significant retaliation.

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The intensity of rivalry is in general low. However, Oasis lacks an established brand name and will therefore need to build that among consumers if they wish to outmuscle the industry rivals.

The U.S. market is not a difficult one to enter. The diversity of retailers means that Oasis can find the channel that best fits its needs. Given their size, they are able to compete in the mass market segment. While there are pitfalls in this segment, it is the easiest to enter for a firm with no established brand name and substantial manufacturing capacity.

Oasis should begin by approaching key mass market retailers directly. These retailers will want to study Oasis and understand its operations before entering into negotiations. However, once Oasis secures a contract, they will have national distribution and will be able to sell high volumes almost immediately. With distribution secured, Oasis will need to focus on building its brand name in the U.S. market. The market is a high risk -- high reward proposition, but having established a presence around the globe, it is time for Oasis to make this final step.

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