CYCLOTRON BIKES, INC.*
Cyclotron Bikes, Inc. was established in 1959 by a passionateentrepreneur that wanted people to enjoy the nature as well as tostay healthy by making use of the bike. The founder of the company,Byron Funmaker, manufactured these bicycles in a small garage inrural Wisconsin. After manufacturing these bicycles, he used tohaul them to a rented shop in a town close by, to sell. Gradually,the reputation of the Cyclotron Bikes rose due to the attention toquality and details Byron paid to this small scale operation.Simultaneously, there were interesting developments occurring inthe U.S. to help Byron fuel his passion in manufacturing bicycles.In the 60s, the President’s Council of Physical Fitness promotedbicycle for recreation and fitness. This gave a major fillip tobicycle industry in general, and to Cyclotron Bikes, inparticular.
Year | Quarter | Actual | Year | Quarter | Actual |
| | Revenue | | | Revenue |
| | Generated | | | Generated |
| | (in $million) | | | (in $million) |
2013 | Q1 (Jan.-March) | $29.00 | 2016 | Q1 (Jan.-March) | $25.80 |
| Q2 (Apr. - June) | $35.00 | | Q2 (Apr.-June) | $31.40 |
| Q3 (July-Sept.) | $25.20 | | Q3 (July—Sept.) | $29.00 |
| Q4 (Oct.-Dec.) | $21.60 | | Q4 (Oct.-Dec.) | $25.95 |
2014 | Q1 (Jan.-March) | $27.60 | 2017 | Q1 (Jan.-March) | $30.00 |
| Q2 (Apr. - June) | $36.20 | | Q2 (Apr.-June) | $37.00 |
| Q3 (July-Sept.) | $30.60 | | Q3 (July-Sept.) | $38.60 |
| Q4 (Oct.-Dec.) | $24.20 | | Q4 (Oct.-Dec.) | $21.20 |
2015 | Q1 (Jan.-March) | $31.60 | 2018 | Q1 (Jan.-March) | $31.50 |
| Q2 (Apr. - June) | $32.80 | | Q2 (Apr.-June) | $39.00 |
| Q3 (July-Sept.) | $26.60 | | Q3 (July-Sept.) | $30.00 |
| Q4 (Oct.-Dec.) | $20.00 | Estimate | Q4 (Oct.-Dec.) | $25.20 |
The hobby of bicycle riding that was dominated by male untilthat time got a major boost and proliferated to female riders afterAudrey McElmury won the Road Cycling Championship in Brno,Czechoslovakia. This opened the door for the American women to takebicycle as a serious hobby to stay fit and enjoy outdoors. The oilembargo of 1970s coupled with the increasing awareness ofconserving environment encouraged bicycle commuting in the U.S.
While all the above interesting events were unfolding, CyclotronBikes, Inc. was transitioning from a job order shop to a massproduction environment to cater to the demand placed on it. Byron’stwo children, Beth and Bart, joined the Bike Company aftercompleting their business degrees. With them, they brought theacumen to take Cyclotron Bikes to the next level because they sawimmense future in the bicycle industries worldwide.
In order to bring their ambition to fruition, they have hired aconsulting company, i.e., your group, and have provided the company(you) with the data for the past 6 years, 2012-2017. As you can seefrom the data, the financial year of Cyclotron Bikes corresponds toJanuary through December.
Cyclotron Bikes’ management has asked your group (consultingcompany) to provide you the following as part of the managementreport.
(1) Introduction: Compare similar businessesworldwide and give an outlook of the bike market and future thatawaits Cyclotron. (10 points)
(2) Analysis:
(a) Based upon Cyclotron’s data on page #1, compute 4, 5, 6quarter moving averages and find which moving average will be usedif Cyclotron has to forecast for Q1 (April-June) of 2018. Make sureto provide your rationale by using the forecasting errorcalculation such as MAD, MSE, MAPE, and Tracking Signal. (15points)
(b) If you have the option of using only the single exponentialsmoothing method to project for Q1 of 2018, which value of ? willbe appropriate based upon your calculation of MAD, MSE, MAPE?(15 points)
(c) Calculate the forecast for the next 2 years (8 consecutivequarters) using the Classical Decomposition Method. If Cyclotron iscontemplating investing $9m in facility upgrades now and would liketo have the Payback period of this new investmentas 2 years, do you think this threshold of Paybackperiod can be met if Cyclotron uses 2017 revenue as its baseline?(50 points)
(3) Recommendation:
Based upon your analysis in (2) and your study of bike market ingeneral, provide recommendations for Cyclotron on or beforeNovember 21 in terms of theoperations/manufacturing tasks the company should undertake toemerge as a market leader in the manufacturing and selling ofquality bikes. (10 points)
