Introduction
Recently, I purchased a 29er mountain bike from a retail mountain bikes Giant Company retailer in our locality. Giant is the world’s largest producer of high-quality bikes. Having started in 1972, the company has been actively engaged in improving cycling experience across the world by manufacturing high-quality bikes and making them available to the cycling lovers ("Welcome to the ultimate cycling experience. - Giant Bicycles | United States", 2018). It inspires the passion for cycling by creating quality products and making them readily available for the cyclists across the world through their stores or through online ("Welcome to the ultimate cycling experience. - Giant Bicycles | United States", 2018). The company has increased innovation in bikes resulting to the emergence of lighter, stronger and faster bikes that improve the riders’ experience ("Welcome to the ultimate cycling experience. - Giant Bicycles | United States", 2018). Their bikes are made for competitions and enjoyment purposes. The company’s tagline is Ride Life Ride Giant ("Welcome to the ultimate cycling experience. - Giant Bicycles | United States", 2018).
Initially, the bike was priced at $1,100. At the time of purchase, the bike was priced at $500. Before the price drop, it was evident that the bike sales were very minimal as compared to the new-price period. This presented a case of a price over quality tradeoff that the company embarked on to drive sales. Mountain manufacturing companies have increased rapidly, with an increased engagement in e-commerce which highly affects the pricing of the mountain bikes. This has seen companies make adjustments in their operations and supply chain to increase their competitiveness and market share. These adjustments include making trade-offs between quality, delivery reliability, speed, and product price. The most evident trade-off is the price-quality trade-off. Consumers are seen to respond positively to changes in price while maintaining the same quality as compared to changes in quality while maintaining the same price (Yoon et al., 2014). This is because consumers perceive that more value is obtained by a product drop while retaining the product’s quality.
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Operation Desirability in the Mountain Bike
Companies have four areas of focus in their supply chain i.e. product quality, delivery speed, delivery reliability and cost of the product. These items have an impact on the product’s performance in the marketplace (Li, 2007). However, it is difficult for companies to employ equal focus on all these items in their supply chain. More often, companies focus on improving one or two of the items. Depending on the areas of focus identified, product penetration is evidently higher than when a company focuses on improving the four items. One of the factors that guide their choice is competition (Li, 2007). Competition’s actions play a role in the choice of action that a company makes (Li, 2007).
I purchased the bike at %500, a price lower than the price quoted earlier for the same 29er mountain bike from the same retailer. There were no changes to the bike’s quality with regard to its performance or manufacturing characteristics. This means that the company had opted for a price over quality tradeoff to drive the sales of the bike (Yoon et al., 2014). The mountain bike was initially priced at $1,100, a price that way higher than what the company offered. My opinion is that this price tag was built on the company’s global reputation due to their extensive experience in producing high-quality bikes and existence in the bikes industry. However, despite being regarded as the best bikes producer, cyclists considered the price as expensive compared to what the competition was offering. For a similar 29er mountain bike, some companies had placed a price tag as low as %650 dollars, which worked against Giant’s bike performance in the market. As a result, the company preferred reducing the bikes cost to improving the bikes features and qualities. Research has seen price-over-quality trade-off to have a positive impact on the product’s performance as compared to higher-quality-promotion which focuses on increasing both product quality and price (Yoon et al., 2014). In the bike supply chain, the company (Giant) focused on lowering the product cost as compared to increasing the quality of the bike and its deliverability. As a result of the low production costs, the company was able to lower its price to match competition.
Cost is one of the major factors of production that has an impact on price. This includes the cost incurred in the delivery of the product to the customer. In determining the price, companies’ factor in all the costs incurred to deliver a complete product and allocates a price that provides a margin on the product. To match the prevailing market prices, the company concentrated on cutting its costs by more than half, which allowed the company to lower its price from $1,100 to 500. If the company focused on improving the performance of the bike and the cost of production, there is a possibility of a contra-effect on one of the areas of focus. Improving the product’s quality will definitely increase the product’s cost and thus will derail the desire to lower the price.
Conclusion
In managing operations and supply chain, a company focuses on product quality, the delivery and the cost of production. All these items help determine the price that the product is to be sold at (Li, 2007). Customers’ are considered to be more sensitive to changes in prices than the quality of the product (Yoon et al., 2014). Giant, understanding this client behavior, managed to lower its cost of production and subsequently lowering its price. A company cannot apply equal measure on all the four desirability measures in its operations. This is because these measures often have different impacts on each other and as such, the company has to choose between one or a pair that has similar impacts on the products according to the company’s goals.
References
Li, L. (2007). Supply Chain Management: Concepts, Techniques and Practises. New Jersey- London-Singapore-Beijing-Shanghai-Hong Kong- Taipei- Chennai: World Scientific Publishing Co. Pte. Ltd.
Welcome to the ultimate cycling experience. - Giant Bicycles | United States. (2018). Retrieved from https://www.giant-bicycles.com/us/about-us
Yoon, S., Oh, S., Song, S., Kim, K., & Kim, Y. (2014). Higher Quality or Lower Price? How Value-Increasing Promotions Affect Retailer Reputation via Perceived Value. Journal Of Business Research, 67. Retrieved from https://digitalcommons.bryant.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1033&context=mark_jou;Higher
