St Marys University Weaker Pound on Brompton Bicycles Presentation

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Markets and Economies Case Study Presentation
Project Description
For your Case Study Presentation, you will create a slideshow and record a 5-10 minute
presentation in response to a case study about ?Brompton Bicycles?. You must submit the
response as a video recording, with your face clearly visible, so that staff can verify
your identity. This project is to be completed ?individually?. You must respond to
one? of the following three questions:
1. Following Brexit, in 2021 and beyond, should Brompton ?reduce? the price of its
core product in the U.K. market? Discuss the likely price elasticity of demand for a
Brompton bike, and support your answer using theory, the case study materials,
and your own research.
2. How do you think the weakening of the British pound in 2020 affected
Brompton’s production costs and revenues? What profit maximizing strategies
would you recommend if sterling continues to weaken?
3. What can the government do to mitigate the impact to the U.K’s bicycle industry
as a result of the removal of the E.U. tariff on Chinese bicycles? What are the pros
and cons of such actions? Justify your answer using theory, the case study
materials, and your own research.
Learning Outcomes
When completed successfully, this project will enable you to:
? Apply your economic knowledge to a real-world situation.
? Deliver an engaging, clear, and organized oral response.
Assignment Requirements
? The presentation should be submitted via a recording where you are present and
visible on-screen AND your presentation is recorded on your screen
(“Screen+Cam”). Please follow the guidelines under Submissions and Grading to
record and submit a video through Loom.
? The response should last around 5-10 minutes and respond to ?one? of the
questions provided.
? You must create a slideshow supporting your arguments, and the final slide ?must
include a list of references. You may use Powerpoint, Keynote, or Google Slides to
build your presentation.
? You may assume that the audience is familiar with the case study materials; avoid
explicit summaries of large portions of the case study materials.
? In your presentation, you ?must?:
? Present a government-issued ID to the camera so your name and picture
are clearly visible and legible.
? State your name.
? Cite specific facts and examples from the case study, as well as any outside
sources you may have used to support your analysis.
Tips & Resources
? Refer to ?The Art of Presentation c? ourse for specific guidance on outlining your
response and presenting it with confidence.
? Use the following guides on ?Powerpoint?, ?Keynote?, and ?Google Slides? to familiarize
yourself with the presentation program of your choosing.
? For more information on how to read and respond to a case study effectively, we
recommend ?The Case Study Handbook? by William Ellet.
Submission and Grading
We recommend using ?Loom for Education? to record and share your presentation—be
sure to use your students email address to sign up in order to access the full
range of features available. We’ve created ?step-by-step instructions? on how to use both
the Loom desktop app and the Chrome extension.
See the rubric at the end of this document for details on how you will be graded.
Markets and Economies Presentation Rubric
Scores 2 and above are considered passing. Students who receive a 1 or 0 will not
receive credit for the assignment, and must revise and resubmit to receive a passing
grade.
Score
Description
5
? Provides thorough, well-reasoned, and highly persuasive answers to the
case study questions.
? Organizes response within a clear, logical, and compelling structure.
? Supports answers with numerous pieces of evidence and specific examples
from the case study materials.
? Skillfully applies relevant economic theory and concepts to the analysis of
case study materials.
? The student is clearly visible and audible during the presentation.
? The presentation is between 5?–?10 minutes.
? The reference list is comprehensive, and includes high quality sources.
4
? Provides thorough and well-reasoned answers to the case study questions.
? Organizes the response in a clear and logical manner.
? Supports all answers with at least some relevant evidence or examples from
the case study materials.
? Identifies relevant economic theory and concepts and applies them to the
analysis of case study materials in a generally reasonable manner.
? The student is clearly visible and audible during the presentation.
? The presentation is between 5?–?10 minutes.
? The reference list is comprehensive, and includes high quality sources.
3
? Provides reasonable, albeit simplistic, answers to the case study questions.
? Organizes the response in an acceptable manner, though transitions and
connections between ideas may be absent or incomplete.
? Occasionally supports answers with relevant evidence and examples from
the case study materials.
? Identifies relevant economic theory and concepts, though their application to
the case study may be simplistic or incomplete.
? The student is clearly visible and audible during the presentation.
? The presentation is outside the time requirement.
? The reference list is included.
2
? Addresses most of the case study questions, but some portions of the
response may be incomplete, poorly reasoned, or inconsistent.
? May fail to organize the response in a clear or logical manner.
? Rarely supports answers with relevant evidence and specific examples from
the case study materials.
? May fail to identify relevant economic theory and concepts and apply them
to the case study.
? The student is clearly visible and audible during the presentation.
? The presentation is outside the time requirement.
? The reference list is missing or incomplete.
1
? Either does not address the case study questions, or answers are
significantly flawed in their logic.
? Fails to organize the response in a logical manner. The listener may have
difficulty following the argument.
? Rarely or never supports answers with relevant evidence and specific
examples from the case study materials.
? Either fails to identify relevant economic theory or concepts or demonstrates
serious misunderstandings of these concepts.
? The student is clearly visible and audible during the presentation.
? The presentation is outside the time requirement.
? The reference list is missing.
0
? The student did not complete the assignment, plagiarized all or part of the
assignment, or is not recorded on video and audio during the presentation.
Brompton Bicycles
A Wheelie Unique Company
Brompton Bicycles (“Brompton”) is a quintessentially British firm. The firm’s hero product
is the Brompton—a light and durable bicycle that can be folded conveniently and neatly
into the size of a briefcase for easy storage and transportation. Engineer Andrew Ritchie
first developed the revolutionary design (Figure 1) in his South Kensington flat in 1975,
naming the bicycle after the Brompton Oratory which he could see from his window. Full
time production of the bike began under some railway arches in Bollo Lane, Brentford in
1988, and it soon became a cult classic. As demand grew, the company first expanded to
a 22,000 square foot factory in Brentford, and then in 2015, to an 86,000 square foot
facility a short pedal away in Greenford, West London.
Source: Landry’s Bicycles. Retrieved from
https://www.landrys.com/about/brompton-folding-bikes-pg484.htm
It is the enduring popularity of the Brompton bike that has driven the firm’s remarkable
growth. The firm even experienced strong growth during and following the late 2000s
“credit crunch” and recession: average annual growth in the period since 2008 has been
a remarkable 20 per cen?t. ?The company sold around 45,000 folding bikes in 2015,
generating revenues of some £21 million and a profit of £3.4 million (London Stock
1
3/20/21 ?
Exchange Group 2015). In 2021, the aim is to produce and sell 100,000 bikes
—representing more than a doubling of output in just over five years (Rankin 2015). In
spite of these remarkable figures, the company is still relatively small, employing just 500
members of staff.
A Design Classic in an Expanding Market
The bicycle market is a mature one with a global presence, and of course, bicycles are
popular everywhere and among a wide demographic. The global market for bicycles was
estimated to be worth US$29.2 billion in the year 2020, and is projected to grow by 2.4%
CAGR to 2027. Growth projections differ depending on geographic region, with China
forecast to grow by 4.7% CAGR to 2027, and lower forecasts expected in Germany (1.1%
CAGR), Japan (0.5% CAGR) and Canada (1.8% CAGR) (Global Industry Analysts 2020).
Hybrid bicycles are expected to grow by 3.1% CAGR over the same period, and around
130 million electric bicycles are expected to be sold between 2020 and 2023 (Wagner
2020). Even taking into account the economic impact of the COVID-19 crisis, sales of
road bikes are expected to grow by 1.7% annually (Global Industry Analysts 2020). In
spite of the pandemic, demand for folding bicycles is increasing due to the growth in the
number of people that are opting to use cycling for commuting, including those that use
public transportation for part of the journey, looking to solve the Last Mile Problem.1
Folding bikes are enjoying a surge in demand from younger people in some of the
worlds largest urban areas. Brompton’s Chief Executive Officer (CEO) Will Butler Adams
remarks, “We’ve seen this explosion of younger users who care about the environment,
who care about their health, want to have fun, want to personalise…there’s been a
tremendous surge in a great range of people—architects, designers—who sort of get
what we want to achieve. So there’s been a real shift.” (Stolarz 2009). Over the past
decade, the average age of the rider of a folding bike has dropped from over 50 to
under 40 (Technavio 2019). The growth in the younger population in many of the world’s
regions, especially in the developing world, coupled with considerable traffic congestion
in such areas, is thus a source of globalization of the market.
The Brompton bike folds up to a third of its size, and weighs on average just 11kg (around
24 lbs).? ?Brompton bikes are not just foldable—they are also customizable, and customers
can choose to personalize elements such as the riding position, height and inclusion of
1
The Last Mile Problem is a common problem in cities and means that public transport rarely takes users
exactly where they want to go, leaving them to find alternative ways to travel the last mile.
2
3/20/21 ?
eclectic-assist and mudguards. There are three core products: the popular Brompton, the
Brompton Electric, and the Brompton SuperLight, which is made with titanium and built
for speed. Each bike shares the same fundamental modular design, which has been
virtually unchanged since it was first developed by Andrew Ritchie in the late 1970s. The
core of the bike is a curved frame, which comprises a hinged handlebar stem, a hinged
tube and pivoting fork and rear triangle. The stem and the main tube are made of steel,
while in the SuperLight, the fork and the rear triangle are made of titanium. The
handlebars and auxiliary elements are made of aluminium. An innovative method, known
as brazing, is used to conjoin the key elements. In total, it takes 18 months for a
Brompton brazer to become sufficiently skilled to build the bike, and as a symbol of their
pride, they stamp their initials onto each completed bike. Brompton are so proud of their
production process that their regular factory tours are usually sold out.
Figure 1: The Brompton Bike
Source: Brompton Bicycles. Retrieved from https://www.brompton.com/bikes/build-quality
Figure 2: The Patent for the Brompton Bike
Source: Patent EP0026800. Retrieved from https://patents.google.com/patent/EP0026800A1/tr
In a personal communication, Will Butler Adams stated that the U.K. bicycle sector is
virtually a perfectly competitive market in which all manufacturers are price takers. This
results in retailers making a loss on every bike sold. The folding bike market is a
relatively small subset of that industry, and market forces are different. Key competitors
include Montague, Citizen Bike, Compass and Viking which manufacture folding bikes to
different specifications but also offer standard versions. Of these, the Brompton bike is
4
probably priced the least competitively. The starting price for a custom Brompton bike is
currently £770; an off-the-peg equivalent from Viking is less than £200. However, the cult
appeal of the Brompton bike has enabled it to attract loyal customers and to stave off the
competition. Owners of a Brompton bicycle don’t consider themselves as merely owning
a bike, but as having bought into a British design that’s both innovative and classic. As a
profile in ?Bloomberg Businessweek? noted, “It’s the Brompton-as-religion that
distinguishes the bike from its competitors. There are Brompton clubs in at least 10 cities.
[For instance], in New York, a group of Brompton-owning foodies has organized a
bimonthly event called Brommie Yummie: Ride, fold, eat, unfold, ride.” (Greeley 2014).
“UK engineering and design is respected all over the world. Like
Dyson, Mclaren, Dualit and Rolls Royce—Brompton is a global
exemplar of design excellence. But we are not finished yet, we
have a large in-house team who are constantly improving the bike,
accessories and the production processes. Using a range of
leading technologies from rapid prototyping using 3D printers to
ensuring precision using automotive industry CAM machines.”
– ?Will Butler Adams, Brompton Bicycles
Going Global
The country-of-origin is an integral aspect of the company’s marketing and branding
activities, and is a key driver of the company’s success both in its domestic market and
overseas. As an article in ?Deutsche Welle ?(Stolarz 2009) notes, “The Brompton bicycle is
admired the world round as a feat of British engineering.” According to the company’s
marketing materials, “London is a city of icons and a Brompton bike is one of them. Its
unique profile sets it apart from other bikes. A Brompton is as London as a double decker
bus, the London Underground Big Ben and The LondonEye—all innovative, excellent and
enduring.” For this reason, it is seen as vital to the company’s culture and the reputation
of its products that the bicycle is made in London. This stands in stark contrast to the
strategies employed by many of it European competitors in both the small wheel
segment and the broader market, who import finished products from manufacturers in
China and elsewhere in Asia.
5
The standard Brompton bike contains 1200 different components, and while 75% of
those are designed and made in the Greenford facility, some of the primary inputs (such
as rubber, steel and titanium) required to build the folding bike must be imported from
overseas markets. Despite this, the CEO has long been clear that production will always
take place in London: “At the moment, people can buy our product, they can try and
copy it but they don’t understand the processes, the methodology, the jigs and fixes that
we use to make it…if we would outsource it, we would be giving away our precious
knowledge and suddenly the copies that exist, which are currently terrible, would
become rather better2” (Stolarz 2009).
“In order to reach our output targets we have had to modernise
the whole production process. Over the next few years the plan is
that we will double our output, meaning that we have had to go
through a complete change in our manufacturing.”
– ?Greg Smith, Technical Support Manager, Brompton Bicycles
Despite the CEO’s assertions, the company has not always taken this strategic approach.
In 1992, Brompton established Neobike International, a joint venture enterprise with the
Taiwanese company Euro Tai SA (Norman 2010). The company’s remit was to
manufacture licensed copies of the Brompton bike exclusively for sale in the Japanese
and Far East Asian markets. Brompton provided Neobike with specialist tooling and
design plans to facilitate production in exchange for royalties on sales (Norman 2010).
However, after the expiry of the agreement, Neobike refused to return the specialist
tools to Brompton and began to sell unlicensed copies of the bike in a number of
European markets. A resulting litigation case brought by Brompton resulted in the
decision by the courts that Neobike had indeed infringed copyright.
The consequence of the firm’s British-centric attitudes and its negative experience with
the joint venture agreement is that only around 25% of Brompton Bicycles’ componentry
is sourced from overseas.
At the other end of the value chain, the vast majority of Brompton’s sales are outside of
the U.K., prompting the Queen to award the company an Award for International Trade in
2
In fact, the patent for the folding bike expired in 1999. In 2020, The Tribunal de l’entreprise de Liège
(Belgium) heard a dispute between ?Brompton ?and one of its competitors, the Korean firm
Chedech/Get2Get?, which introduced to the Belgian market a very similar bike.
6
2010.3 Although the company operates 14 overseas retail stores (“Brompton Junction”) in
commuter cities such as Milan, Melbourne, Singapore, Tokyo, and New York, it relies on
its vast network of licensed dealers to help reach its target sales. 1450 dealers are
supplied with a demonstration bike, and licensed to place customized orders on behalf of
customers through an online tool. Dealers also help customers with maintenance,
servicing and upgrades, giving them the opportunity to access the London-based
company in their own towns. Today, Brompton bicycles are sold in 47 markets across the
world.
Pedaling Towards the Future
On January 1st 2021, the United Kingdom officially left membership of the 27-nation bloc
of the European Union (“Brexit”). In June 2016, when the U.K. first voted to leave the
European Union, the pound plunged against the euro and the dollar, and it has been
volatile ever since (Figure 3). Bleak prospects for the country’s economic future have
been compounded by the COVID-19 pandemic as well as uncertainty surrounding Brexit.
Nevertheless, Brompton has weathered many previous recessions, and is planning to
hire 200 additional members of staff in the coming months, and to push sales in
bicycle-loving Germany (Lawless 2020).
Nevertheless, Butler-Adams has expressed concern that one of the U.K. governments
first post-Brexit policies will involve the abolishment of an E.U. anti-dumping tariff of
48.5% imposed on Chinese imported bicycles. Brompton believes that removal of the tax
will lead to the U.K. market being flooded with cheap bikes subsidized by the Chinese
government. “We can’t compete. That is not a level playing field,” Butler-Adams told ABC
News. For their part, the British government said it had consulted with bike-makers like
Brompton, but believe removing the tariff is important to keep prices low for consumers.
“We recognize the challenges that the industry faces, however British consumers will
bear the brunt of higher prices if anti-dumping measures were retained or carried across
from the E.U.,” it said in a statement.
3
Brompton is also the recipient of the Queen’s Awards for Innovation, the Prince Philip Designers Award
and the BikeBiz Brand of the Year award.
7
Figure 3: Euro to British Pound, 2016-2020
Source: Macrotrends. Retrieved from
https://www.macrotrends.net/2553/euro-british-pound-exchange-rate-historical-chart
8
References:
Brompton Bicycles. 2020. “How a Brompton is made.” Accessed March 20, 2021.
https://www.brompton.com/bikes/build-quality?.
DEA Global. 2011. “Case Study Brompton Bicycle – London. Automated inspection for the
commuter’s choice in personal transport.” Accessed March 20, 2021.
https://www.hexagonmi.com/-/media/Hexagon%20MI%20Legacy/hxmt/DEA/general/case
%20studies/CS_Brompton_Bicycle_London_en.ashx?.
Global Industry Analysts. 2020. “Global Folding Bikes Industry.” Accessed March 20,
2021. ?https://www.reportlinker.com/p05900626/Global-Folding-Bikes-Industry.html?.
Greeley, B. 2014. “The Cult of Brompton Folding Bikes.” ?Bloomberg Businessweek?, April
3, 2014.
http://www.bloomberg.com/news/articles/2014-04-03/the-cult-of-brompton-folding-bikes?.
Lawless, J. 2020. “British bike maker pedals on, with Brexit deal up in the air.” ?The
Associated Press?, November 27, 2020.
https://apnews.com/article/brexit-global-trade-coronavirus-pandemic-london-china-25ab
08a597a834ca2bd395f0863b55a2?.
London Stock Exchange Group. 2015. “Brompton.” ?1000 Companies to Inspire 2015?.
Accessed March 20, 2020.
https://www.lseg.com/resources/1000-companies-inspire-britain/2015/manufacturing-eng
ineering/brompton?.
Macrotrends. 2021. “Euro British Pound Exchange Rate (EUR GBP) – Historical Chart.”
Accessed March 20, 2021.
https://www.macrotrends.net/2553/euro-british-pound-exchange-rate-historical-chart?.
Mintel. 2020. “Hold onto your saddle: UK bike sales set to top £1 billion by 2023.” ?Mintel
Blog, J? une 19, 2020.
https://www.mintel.com/press-centre/leisure/hold-onto-your-saddle-uk-bike-sales-set-to-t
op-1-billion-by-2023?.
Norman, J. 2010. “?Brompton Wins IP Case.” ?Bicycle Retailer,? June 23, 2010.
https://www.bicycleretailer.com/north-america/2010/06/23/brompton-wins-ip-case?.
Rankin, J. 2015. “Brompton Bicycle gears up for growth with bigger factory.” ?The
Guardian?, August 17, 2015.
https://www.theguardian.com/business/2015/aug/17/brompton-bicycle-factory-expansio?n.
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Stolarz, S. 2009. “Brompton Bicycles: No danger of folding.” ?Deutsche Welle, ?December
25, 2009. ?https://www.dw.com/en/brompton-bicycles-no-danger-of-folding/a-5029879?.
Technavio. 2019. “Global Folding Electric Bicycle Market 2019-2023.” Accessed March
20, 2021.
https://www.technavio.com/report/global-folding-electric-bicycle-market-industry-analysis
.
Wagner, I. 2020 “Size of the global market for electric bicycles in 2019 and 2023.”
Statista,? September 10, 2020.
https://www.statista.com/statistics/674381/size-global-market-electric-bicycles/?.
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