Applying the Blue Ocean Approach December 3, 2012 Problem Statement B-cycle charges an annual fee in range of $50-100 for membership thereby making its offering uncompetitive against mass bicycle merchandizers like Wal-Mart and Target who sell bikes at highly discounted and cheap prices. Analysis Plan/Data Used/Key Assumptions Analysis Plan: We will use the Blue Ocean Strategy Canvas & the Four Actions Framework to assess steps B-Cycle needs to take to stay ahead of its red ocean bike dealership competitor. Key Assumptions:
1. Purchasing a bicycle is a discretionary spend 2. There is a strong market for cheaper substitutes to owning a bicycle Data: 1. B-Cycle charges an annual fee in range of $50-100 (Source: B-Cycle website) for its membership while its usage fee is relatively cheaper in range of $5 for 24 hours to $15 for 7-day rental
2. Mass merchandizers like Wal-Mart & Target dominate Bicycle Dealership & Retail industry, which is a $6.1 billion industry, with 75% market share (Source: IBIS Industry Report)
3. A mass merchandizer like Wal-Mart sells a comfort & cruiser bike at a starting price of $69-88
4. B-cycle charges fees up to $1200 for loss and damage to its bike (Source: B-cycle website) Data Analysis & Conclusions B-cycle annual membership fee is at same price point as the retail price of a comfort or cruiser bike sold by WalMart which makes buying a bike a more tempting proposition as opposed to renting a bike.
B-Cycle does not offer liability protection for bike damage and customers could end up paying up to $1200 in damage fees which makes it very expensive proposition compared to owning one’s bike. In order for B-Cycle offering to compete effectively against mass merchandizing bicycle dealership like Wal-Mart, B-Cycle should make its price proposition more attractive for customers so they can rent a bike as opposed to buying a bike.
Recommendations to Management Eliminate Membership Fees. Create a loyalty program for its members that rewards members based on usage. Reduce customer liabilities against damage or loss of a bike by offering protection program. Increase locations across the country to gain footprint and market share in the bike rental segment.