Twenty-three years ago, Swiss snowboard designer Benno Bnziger and his German business partner Jeano Erforth decided they wanted to make bike riding fun again. At the time, cruiser bikes were out of style and were in danger of disappearing. Bnziger and Erforth converted their T-shirt company in Vista, California, into a bicycle manufacturer called Electra Bikes. However, they did not want to manufacture just any type of cruiser bike. They wanted their bikes to look hip with a vintage style, based off rockabilly culture and resembling the look of muscle cars. The shop went from selling a few hundred the first year it was in business to becoming a global sensation. Electra eventually caught the attention of Trek Bicycle Corporation, which acquired the firm in 2014.

As Electra began to expand globally, it found that it had a comparative advantage its bigger competitors did not have. First of all, many bike enthusiasts worldwide appreciated the vintage look combined with the most up-to-date technology of Electra bicycles. One particular advantage Electra has is its patented Flat Foot Technology. This technology enables better leg extension, making the ride more comfortable. Because of its patent, Electra is currently the only company that can use the technology it developed. These advantages combined with its genuine Americana message proved to be a hit overseas.

Global expansion offered Electra the unique opportunity to reach new market niches of bicycle enthusiasts. It started slowly, expanding first into markets that were closer to the United States, including Canada and Australia. The company currently has distributors in 26 countries that sell its bikes. In addition to offices in the United States, Electra opened a European office that supports sales for 25 countries. Like many other firms, Electra outsources production to Taiwan and China. Using freight ships, the firm ships its products to markets such as Australia, the European Union, and the domestic American market. By outsourcing production, the firm is able to save more money than if it had the bikes produced in the United States.

Like most companies that expand globally, Electra is subject to import duties that can vary depending upon where the bicycles are manufactured. It is also subject to regulations that vary from country to country. Sometimes, Electra must have additional features due to safety laws. For instance, some bikes shipped to certain countries have front brakes, while others have lighting systems or fenders. While these different features add to costs, they ensure that Electra stays on the right side of the laws within the countries in which they do business.

Regulations can vary by type of product as well. Kevin Cox, president of Electra Bicycle, describes how Electra had to take this into consideration when designing a bicycle with a motor called the Townie Go. According to Cox, There are certain speed regulations that exist, and those regulations are different between Europe and [the] U.S. The company chose to adopt the stricter U.S. standard, although it meant a slower speed because it would give Electra one product platform that has global reach.

Electra also faces economic and geographical challenges as well. Currency fluctuation in Asia, thats a big one because that in and of itself can skew the cost of our bicycle, Cox says. Additionally, certain areas such as Europe and many parts of the United States have highly seasonal weather that limits bike riding to certain times of the year. These weather variations cause fluctuations in demand based upon the season. However, Cox also points out that having a global reach helps to balance out these fluctuations because while its winter in the U.S., Im enjoying a nice summer in Australia. In other words, there is a constant worldwide demand for bicycles year-round.

As Electra expanded globally, the infrastructure of operating a global network became more complex. This is why, in 2014, Electra made the decision to sell the company to Trek. The decision benefits Electra because it can now utilize Treks extensive network to reach new markets. At the same time, tapping into Treks distribution networks frees Electra to focus less on distribution concerns and more on its core competency: developing high-quality, durable, vintage bicycles.

Why did Electrawhich markets itself with a genuine Americana messagedecide to outsource production to Asia? Do you believe this is appropriate?

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Electra a bicycle manufacturer decided to outsource production to Asia primarily to save costs By ma... View the full answer