Dirt Bikes, USA Case Study
Option #1: Case Study Paper
You have two options for your portfolio project. The first option is to create a professionally-written paper of 10-15
pages. The second option is to create a 15-20 slide PowerPoint presentation with accompanying voiceover. Your
work should be written in proper APA format with appropriate citation of all outside sources and with a title page,
table of contents, and reference page. Note that you must submit either a paper or a presentation and build
to one of these options each week; you cannot do a mix of both.
Introduction to Dirt Bikes
Dirt Bikes USA is a small company headquartered in Carbondale Colorado that manufactures and sells its own brand
of off-road motorcycles. It was founded in 1994 to produce dirt bikes that could be customized for racing and offroad recreational riding—using the best quality components and parts from all over the world. The company has
continued to grow and now faces a new set of challenges and opportunities. You have been asked to serve as a
consultant to apply your information systems knowledge to help Dirt Bikes solve some of the problems it is
encountering.
Company History and Background
Dirt Bikes USA was founded in 1994 by Carl Schmidt and Steven McFadden, two young but experienced bikers with
engineering backgrounds who saw that dirt bikes were becoming very popular in the United States as both sporting
and racing motorcycles. They developed frames for dirt bikes that were more suited to off-road handling. They
started using these frames to build their own dirt bike models using motorcycle engines manufactured by other
companies, such as Honda and Rotax Motors of Austria. Riding on one of their customized dirt bikes, Steven finished
first in the famous Barstow to Las Vegas race. There was so much interest in Carl and Steve’s bikes that they decided
to open a production facility that could manufacture large numbers of their dirt bikes for the retail market. They
opened a small production facility in Carbondale which has since expanded to house 120 workers involved in
production, design, and engineering—and a corporate sales and administrative staff of close to 20 employees. Over
the years Dirt Bikes USA has enhanced and expanded its product line to include dirt bike models optimized for racing
and off-road recreational use. Its racing models have placed well, and often first, in the many dirt bike races staged
throughout the United States, including the Barstow-Las Vegas race and competitions at Daytona Bike Week.
Organization Chart and Employees
Dirt Bikes USA is still privately owned, with Carl serving as CEO and Steven as President and Chief Operating Officer.
About 120 employees work in design, engineering and production, including three full-time product designers and
three engineers. In addition to a four-person Parts Department, Dirt Bikes maintains a ten-person Service
Department to service warranties and customer problems with parts and motorcycle performance. Five employees
work in Dirt Bikes’ Shipping and Receiving Department. The sales staff consists of a marketing manager and five
representatives, two for the West coast and Western United States, one for the Midwest, one for the Northeast, and
one for the South. The corporate administrative staff has one controller, one accountant, one administrative
assistant, two human resources staff members, three secretaries, and two information systems specialists to support
systems servicing all of the business functional areas. The data file "Dirt Bikes USA Organization Chart" shows Dirt
Bikes’ organization chart.
The company maintains a friendly, family atmosphere which encourages teamwork, attention to detail and quality,
and continuous learning and innovation. Employees, distributors, and retail customers are urged to contribute ideas
on how to improve Dirt Bikes’ products and services.
Products and Services
Dirt Bikes’ founders and wanted to capitalize on their proximity to the dirt bikes racing circuit and market in the
United States. Carl and Steve hoped they could develop bikes that out-performed and looked better than the
competition by using the best custom parts available. Realizing that the most popular dirt bikes were foreign brands,
Dirt Bikes does not hesitate to use quality components from all over the world, such as Rotax engines from Austria
and tires are from Dunlop. But many of their parts, such as shock absorbers, front wheel forks, exhaust pipes, and
headlights are from the United States. The Company makes its own frames, shaping them in the unique, spirited
style for which Dirt Bikes is noted.
Manufacturing and selling dirt bikes is a complex business. Dirt bike racing has many different categories, including
races based on a variety of bike sizes and race length (with some lasting as long as six days). Enduro bikes are for
cross-country racing. Motocross bikes are specially designed for racing in an enclosed dirt course that can consist of a
variety of terrains; uphill, downhill, corners, jumps, and so forth. Dirt Bikes currently produces four models; the
Enduro 250, the Enduro 550, the Moto 300, and the Moto 450. The two Enduros are endurance racers, while the
Motos are for motocross racing. All four are very modern, incorporating technologies such as kick and electric
starters, steering stabilizers, and liquid cooling. The large majority of these bikes are sold in the United States and
cost between $3,250 and $9000 retail (the Enduro 250 retails for $3250, the Enduro 550 for $7600, the Moto 300 for
$4295 and the Moto 450 for $8995.) Dirt Bikes appeals primarily to serious trail and Enduro riders, although it is
making inroads into the motocross market.
Sales and Marketing
Dirt Bikes does not sell directly to retail customers. It relies on a network of 40 distributors concentrated in the
Western and Midwestern United States. A small percentage of Dirt Bikes are sold in Europe using independent
distributors that sell other brands of dirt bikes and motorcycles as well. Dirt Bikes’ motorcycles, parts, and service
(including warranty repairs) can be obtained only through an authorized Dirt Bikes dealer. All motorcycle and spare
parts sales, shipping, and set-up must be handled by a certified dealer. If a potential customer lives more than 50
miles from the nearest authorized Dirt Bikes dealer, the customer can purchase a Dirt Bike or Dirt Bike parts through
a certified independent motorcycle dealer. Retail customers can purchase spare parts directly from Dirt Bikes only by
verifying that they live more than 50 miles from an authorized Dirt Bikes dealer.
Dirt Bikes’ sales department works closely with Dirt Bikes’ distributors. One of its key responsibilities is to aggressively
promote Dirt Bikes at dirt bike racing and other events. Many Dirt Bikes employees are dirt bike racing enthusiasts
themselves. Several are official company racers representing the company in dirt bike racing competition. Dirt Bikes
recently established a Dirt Bikes USA Owners’ Group to promote stronger relationships with customers, and to make
it easier for them to share their Dirt Bikes USA experiences. Dirt Bikes also advertises in magazines devoted to
motorcycle racing and dirt bikes. It uses a small public relations firm to place articles about new company products or
racing victories in these magazines. Dirt Bikes also pays for ads in these publications.
Selected Financial Data
The data file Dirt Bikes Financial and Sales Data provides a spreadsheet with three worksheets containing Dirt Bikes
financial data for you to review:
Income statement and summary balance sheet data from 2012-2014
Annual sales (units sold) of each Dirt Bikes model between 2010 and 2014
Total domestic vs. international motorcycle sales (units sold) between 2010 and 2014
The income statement and balance sheet are the primary financial statements used by management to determine
how well a firm is performing. The income statement, also called an operating statement or profit and loss
statement, shows the income and expenses of a firm over a period of time, such as a year, a quarter, or a month.
The gross profit represents the difference between the firm’s revenue (or sales) and the cost of goods sold. The
gross margin is calculated by dividing gross profit by revenues (or sales). Net profit (or loss) is calculated by
subtracting all other expenses, including operating expenses and income taxes from gross profit. Operating expenses
are all business costs (such as expenditures for sales and marketing, general and administrative expenditures, and
depreciation) other than those included in the cost of goods sold. Net margins are calculated by dividing net profit (or
loss) by revenues (or sales).
A balance sheet provides a snapshot of a company’s financial assets and liabilities on a given date, usually the close
of an accounting period. It lists what material and intangible assets the business owns and what money the business
owes either to its creditors (liabilities) or to its owners (shareholders’ equity, also known as net worth). We have
included here only the most important pieces of balance sheet data for you to review. At any given time a business’s
assets equals the sum of its liabilities plus its net worth. Current assets include cash, securities, accounts receivable,
or other investments that are likely to be converted into cash within one year. Current liabilities are debts that are
due within one year. Long-term debt consists of liabilities that are not due until after a year or more. If too much
debt has been used to finance the firm’s operations, problems may arise in meeting future interest payments and
repaying outstanding loans.
By examining a series of financial statements one can identify and analyze trends in the financial strength of a
business. When examining Dirt Bikes’ income statement and balance sheet data, pay special attention to the
company’s three-year trends in revenue (sales), costs of goods sold, gross margins, operating expenses, and net
income (or loss). Pay attention to whether the company’s short and long-term liabilities are growing and whether
they exceed assets. If a company has more current assets than current liabilities, it is a sign that it probably has
enough working capital to fund investments in new equipment or information systems.
The two other spreadsheets present motorcycle unit sales data between 2010 and 2014, which can be used to gauge
motorcycle sales. When examining these spreadsheets, pay attention to the trends in sales. This includes the sales
trends for each product Dirt Bikes sells, overall sales trends, and the proportion of international to domestic sales.
Dirt Bikes Org
Chart.pdf
ISM501_Dirt_Bikes_
Financial_Data.xls
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