7 Questions

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W20155

TREK BICYCLES: JUST A NAME OR A SUMMATION OF VALUES?1

Meeta Dasgupta wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective
or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to
protect confidentiality.

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In March 2019, Navneet Banka, country manager of Trek Bicycles (Trek), India, was delighted with the

sales trend of super-premium bicycles in the country. In the previous five years, the segment had witnessed

a compound annual growth rate (CAGR) of more than 20 per cent, and in the previous 10 years of its

business in India, Trek had grown from 3,000 units per year to 30,000 units per year. 2 Having 27,000 Trek

customers in India was a source of pride for the company,3 and Banka was sure the numbers would continue

to increase. Not only was disposable income growing, but also an increasing focus on fitness and a wish to

contribute toward the environment had encouraged more and more people to see cycling as an experience

they could spend money on.4 The company had partnerships with 41 dealers and planned to add

approximately 25 each year, with a goal of 100 dealers across India within three years. 5 States in India were

at different levels of income (see Exhibit 1). For Trek, the focus was not just on numbers, but on improving

the customer experience to the next level and promoting competitive cycling in the country.6 Which would

be the best markets to target in India, and how could Trek expand the retail network?

GLOBAL BICYCLE INDUSTRY

Increasing traffic congestion, rising fuel prices, growing health concerns in the population, and an

increasing acceptance of green transportation to reduce the carbon footprint were expected to play a focal

role in the growth of the global bicycle industry.7 Additionally, increased support from the government

encouraging the adoption of bicycles and the speedy development of an exclusive infrastructure for cycling,

both in developed and developing countries, were expected to drive bicycle sales in the coming years. In

1965, the production of cars and bicycles was the same at 20 million, but in 2003, the production of bicycles

had risen to 100 million per year compared to 42 million cars. 8 With a CAGR of 4.2 per cent, the global

market for bicycles was expected to reach a revenue of US$80 billion9 during 2018–2026. In 2017, the

market was valued at approximately $55 billion.10

Bicycles could be broadly categorized into road, mountain, and hybrid. In 2017, hybrid bicycles held a

major share of the market revenue at around $18.6 billion, followed by road bicycles.11 The trend was

shifting toward sports bicycles, primarily due to a higher adoption rate in North America, Europe, and

China. Through 2026, these three regional markets were expected to reach more than 75 per cent of the

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https://billion.10

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total revenue. 12 Another segment, electric bicycles, was increasing and expected to expand at a CAGR of 6

per cent over the forecast period of 2014–2025.13

More women were taking up bicycling as a means of commuting, and this segment was expected to show

a steady growth with a CAGR of 4 per cent over the period of 2014–2025. To accommodate this growing

segment, bicycle manufacturers were working toward simplifying the cycling mechanism and fitting

efficient gear systems and shock absorbers.14

BICYCLE INDUSTRY IN INDIA

India was one of the top five producers of bicycles—China, India, the European Union, Taiwan, and Japan

were responsible for 87 per cent of global production.15 But, surprisingly India ranked low with respect to

the global ownership of bicycles per capita. The global ownership of bicycles per capita was 1.1 in the

Netherlands, 0.83 in Denmark, 0.34 in France, 0.37 in China, and 0.09 in India.16

Cycling in India had come a long way from being a means of transportation or delivery for various vendors

and letter carriers to being a preferred choice for recreation and sports for urban Indians.17 In 2018, the

industry size was estimated to be around 15 to 16 million units, with the premium segment fixed at around

a third of the overall bicycle market. The super-premium segment commanded a market size of $25

million,18 and the demand for premium bicycles was expected to grow at a rate of 20–25 per cent per year.19

High net worth individuals, who were brand-conscious and willing to spend on the latest technology, were

driving the growth of this segment.20 According to Banka, the demand for super-premium bikes had seen a

jump from 2,000–3,000 bikes annually to the same number monthly within a decade.21

Bicycle sales ranked highest in the states of Uttar Pradesh, Madhya Pradesh, Bihar, Tamil Nadu, and

Maharashtra.22 Cycling was also popular in the cities of Pune and Chandigarh and the government was

introducing a bike-sharing program and dedicated cycling lanes in Bhopal, Central India.23

The Indian bicycle market consisted of both domestic and international companies. Some of the major

domestic competitors in the industry were Hero Cycles with 28 per cent market share, TI Cycles with 23 per

cent, Avon with 15 per cent, and Atlas with 13 per cent.24 Premium Indian brands such as Urban Trail, Firefox

Bikes (Firefox), Montra, and Mach City were sold by these companies (see Exhibit 2). Foreign brands such

as Giant, Scott, Specialized, Merida, Ghost, Focus, Fuji, Rockrider, and Btwin were also present in the

country.25 Most high-end bicycles were imported and distributed by sought-after international brands.26

Road bicycles occupied the maximum market share, followed by mountain and hybrid bicycles with 20 per

cent each. However, forecasts predicted that the segment of mountain bikes would grow remarkably to suit

the needs of millennials, who were opting for mountain bicycling as a means of adventure and leisure.27 An

increased interest in hybrids was also expected among corporate employees who wanted to use a bicycle

for fitness and for commuting to the office and market.28

The concept of e-bikes was also rising in India with Hero Cycles, one of the largest companies in the Indian

market, launching the throttle assisted e-cycle that gave the cyclist the choice of using the pedals or relying

on the battery-powered motor. Pankaj Munjal, chief managing director of Hero Cycles commented, “My
dream is that every bicycle should have a motor and move people efficiently without a fuel bill.” Hero
Cycles’ acquisition of Firefox a few years earlier had catapulted it to the premium segment category, while
its acquisition of the German brand MIFA gave it access to its superior electric bicycle technology. The

other major competitor, TI Cycles, owned its own premium brands and partnered with international brands

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https://production.15

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such as Cannondale, Bianchi, Schwinn, GT, Mongoose, Ducati, and Ridley. The company also used its

Track & Trail outlets to hold various events and workshops for cycling enthusiasts, which the company’s
president, K.R. Chandrasekaran, felt was an important way to spread awareness about after-sales service.29

Bicycle companies were driven to innovate to remain up to date with the growing trend of premium cycling.

Offering after-sales service of premium bicycles through state-of-the art bicycle workshops was gaining

prominence.30 According to I.K. Rohit, chief executive officer and founder of ChooseMyBicycle.com, India

was a price sensitive market, so the crux to survival was to drive innovation while considering price.31

TREK BICYCLES

Trek was a privately-owned company started in 1976 by Richard Burke.32 Burke believed that cycling was

the future and aspired to set up a nationwide chain of bicycle shops in university towns. The focus of most

of the manufacturers in the United States had been low-end bicycles; however, Burke was convinced of the

need to be different—a manufacturer of high-end premium quality bicycles.33

John Burke, son of Richard Burke and president of Trek, continued his father’s dream to manufacture
technologically advanced bicycles. His focus was not on numbers but on taking the product segment and

customer service to the next level. He wanted Trek to become “home to the happy customer” with
“customer” referring to both the retailer and the rider.34

Trek was among the world’s top recognized bicycle brands including Specialized, Santa Cruz, and GT

Bicycles from the United States; Giant and Merida Bicycles from Taiwan; and Cannondale from Canada.35

Trek had become the largest manufacturer of bicycles in the United States and was one of the most respected

and trusted brands in the world, with retailers in approximately 100 countries,36 approximately 600

employees, and estimated revenues of $237.27 million in 2019.37

Trek was present in all three segments of bicycles—road, mountain, and hybrid—but customized its

portfolio offering according to the demand country-wise and city-wise. In addition, to provide an end-to-

end solution for biking, the company offered riding gear including helmets, shoes, jackets, and gloves, and

accessories such as lights, seats, luggage carriers, and water bottles.38

Innovation at Trek: Challenging the Limits of a Bicycle’s Capability

Trek had an in-house research and development centre staffed with senior material engineers and rocket

scientists as designers. Its top-end performance bicycle technology was developed and tested in partnership

with professional racers who were part of the Trek Factory Racing team.39 The focus of the company was

continuous innovation, which was reflected in its efforts to ensure each model was designed differently

from the others in performance, comfort, and aesthetics40 (see Exhibit 3).

In 1992, Trek started making bicycles from carbon fibre, the lightest and strongest material available.

Carbon fibre frames offered the advantage of being moulded into unlimited shapes exhibiting different

strength, stiffness, and aerodynamic properties.41 Additionally, the alpha aluminium frames developed by

Trek enabled it to adjust the frames to be stiff where necessary and flexible where possible.42 The Invisible

Weld Technology on the aluminium frames devised by Trek engineers was a revolutionary process that

combined aesthetics with strength and lighter weight of the frames.43

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The company believed that the key to the effective performance of a bicycle was its weight. As the weight

was reduced, so was the energy spent in cycling. In 2018, Trek launched the lightest bicycle in the world,

a 740-gram bicycle, targeted at customers who appreciated performance cycling.44

Trek used Finite Element Analysis, an extensive software simulation toolkit that identified how different shapes

would react to different riders and riding surfaces. Computational fluid dynamics was used to explore the

aerodynamic properties of various designs. All bicycles had computer generated designs, which were applied in

a hands-on, ground-up process combining numerous moulds with a diverse range of carbon materials.45

Trek had numerous patents. The company patented the design of the Active Braking Pivot (ABP) that kept

the rear suspension working while braking, thus preventing accidental skidding. By changing the placement

of the rear suspension pivot, engineers created a system that prevented lock-up.46 The ABP turned out to be

Trek’s competitive advantage as it enabled Trek bikers to brake much later than their competitors, thus
improving braking efficiency.47

Trek’s RE:aktiv bicycle was developed in collaboration with Penske Racing Shocks—the designers of Formula
One racing cars—and FOX. The bicycle had a suspension similar to Formula One cars that allowed stability and

control on straight trails and corners, and the capability to instantaneously react to sudden bumps.48

The Full Floater system, a rear shock mount with two suspended contact points, developed by Trek’s
suspension engineers, allowed the shock to “float” through the entire range of motion, giving the rider the
experience of bottomless travel over any type of landscape.49

The concept of IsoSpeed was another one of Trek’s accomplishments. The frame was designed and

developed by Trek engineers in partnership with Fabian Cancellara—one of the world’s most successful
classic riders. IsoSpeed reduced seat vibrations, which led to less fatigue for the rider when cycling long

distances. It maintained the diamond shape of the frame but decoupled the seat tube from the top tube,

allowing the seat tube to bend with the forces of the road.50

As a company, Trek was focused on the safety of its riders and was the first company to manufacture

daytime production running lamps that enabled a rider to be visible during daylight hours.51

The technical team in the United States was working at devising and automating the quality assurance

processes for machining and carbon moulding, which led to saving time, resources, and money.52

Trek Bicycle’s Entry into India: The Start of a Journey

In 2007, Trek made an entry into India as a technologically advanced brand and was the first super-

premium brand in the country; the entry was made through a partnership with Firefox as its distributor.53

Firefox was a premium bike manufacturer that had been operating in India since 2004. It not only produced

its own premium quality bikes but also imported bicycles for sale in the country. The company had gone

through the tough journey of connecting with customers, who initially did not accept the idea of riding

premium and high-quality bicycles.54 Firefox was expected to understand Trek bicycles better than anyone

else in the country. The partnership gave it the rights to sell Trek bicycles in India and completed Firefox’s
line-up in the premium and super-premium segment.55 Its lineup included approximately 50 different

models of Firefox bicycles, with prices varying between $98 and $294, and 15 Trek models from $308 to

$1,120.56 In September 2015, Firefox was acquired by Hero Cycles as part of a strategy to consolidate its

position in the fast-expanding premium cycling segment in India.57

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May 2021.

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In 2017, Trek and Firefox mutually agreed to separate. Trek then proceeded to set up its subsidiary in

India—Trek Bicycle India Pvt Ltd—and created a larger commitment to the country. Firefox agreed to

continue to sell Trek products across its 150 retail outlets until the stock in the outlets was exhausted and

to give Trek time to set up its own retail operations.58 The plan was for Trek to set up its own corporate

office, including a technical training centre with tools and its own employee base.59

TREK’S APPROACH IN INDIA: STICKING TO THE SCRIPT

Bicycles were standardized global products.60 The level of experience that a consumer got in a Trek store

in India was at par with the experience in a Trek store anywhere across the world.61

Branding and Positioning

Communicating and positioning the Trek brand were uniform. In 2018, Jens Voigt and Gary Fisher,

globally renowned athletes and Trek’s brand ambassadors, visited India to launch Trek Ride Camp and
educate customers with respect to selecting the right bicycle and riding gear. 62

Prices ranged from $420 to $28,000, with the lighter bikes, about 6.5 kilograms (kg), being more expensive.63

The key differentiator for Trek was the geometrical design of the frames that had a lifetime warranty. Each

model had to go through considerable testing in Trek’s test labs and was built to last.64

Trek merchandise was sold globally under the Bontrager brand name and was associated with an

unconditional Bontrager guarantee65 that meant customers could walk into a Trek store, buy a jacket, use it

for 29 days, and return it on the 30th day if they were not satisfied. The unconditional Bontrager guarantee

covered Bontrager aftermarket components, clothing, and accessories. This unique program was not offered

by any other bicycle manufacturer.66 Trek’s Crash Replacement Guarantee provided the customer with a
free replacement helmet if it was involved in a crash within the first year of ownership.67

Sourcing

Trek had manufacturing plants in various countries including the United States, Europe, China, and Taiwan.

Trek models with disassembled handle and wheels were imported from these countries to the Mumbai

warehouse and sold in India. They were then shipped to the dealers who would assemble them in about 15

to 20 minutes.68 In India, the focus was more on expanding the network, training dealers, setting up Trek

operating standards, and creating the right customer experience.69

Globally, the company had more than 300 models. Thirty-four models were introduced in India based on

demand in the premium and super-premium segment. A high-end bicycle in the United States that sold for

$15,000 was not stocked in India but was sourced on special demand. 70

Trek bought the bicycles from the parent company. The market price was decided by the subsidiary after

considering the dollar conversion rate, import duties, and international goods and services tax.71 Retail

prices of bikes that were standard across India were listed on the company’s website. The price benefits
received as a subsidiary were passed on to the consumers. Trek, however, did not believe in the pricing

game; the emphasis was on experience.72

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https://expensive.63

https://products.60

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Distribution

As a Trek subsidiary in India, the company collaborated with multi-brand retailers across India for the

distribution of its products.73 Various dealerships were set up through the franchisee route,74 and the

company had a due diligence program for identifying the right partners. After filling out an online dealer

application form, the dealer was called to the Trek corporate office to ensure understanding of the

company’s vision for India. Dealers who had the same thought process as Trek and who were bike
enthusiasts themselves were preferred. According to Banka, the company had to turn down 150 retailers

who failed to meet the basic service standards laid down by Trek.75

A dedicated service area with service tools was essential at each retail store. Trek partnered with the tools

company Uninor Tools (Uninor), and all Trek dealers were mandated to procure a minimum number of

tools from Uninor. According to Banka, until and unless the dealers had the essential Uninor tools, Trek

did not sign the agreement with them.76 The set-up, look, and feel of the stores were required to meet Trek

standards, and stores needed to have trained technicians. The Trek team would initially visit the dealers

every week to take them to the next level of service standards. Most of the dealers had not been trained with

respect to how a bike had to be assembled. Banka felt that if a customer bought a $4,200 bike that had not

been correctly assembled at the Trek store, the customer would not enjoy the ride.77 In fact, Trek offered a

two-day technical training course at its office for all retail partner employees to be trained in best practices

to be followed for operating the stores. Trek defined all standard operating procedures with respect to how

֫ a dealer operated, from maintenance of the store façade, promotion of the brand, driving a customer’s
decision, and buying a bike to the number of sales and service people to be maintained at the store.78 In a

retail store selling Trek bicycles, the consultant had to understand the needs of the customer.79

The retail partners were mandated to follow the demo-bike program—a unique program not offered by any

other brand. The program required the retailers to keep a set of demo bicycles for a potential customer to

ride and experience, before making a decision to purchase.80 Customers could put in a request for a test ride

at their local retailers or in demo events across the country.81

Delhi, Mumbai, Chennai, Bengaluru, and Hyderabad contributed almost 55 per cent of overall sales.82 Trek

had retail partners in about 30 cities83 (see Exhibit 4).

The company had also partnered with Bajaj Finserv to launch a customer finance program offering zero

down payment and no-cost equated monthly instalments for customers buying Trek products from its

various authorized retail stores across the country. 84

Customer Connect

Trek’s emphasis was on connecting and communicating with customers about the technology and

innovation behind Trek bicycles. Emphasis was also on trying to educate customers with respect to the kind

of bicycle required for their needs. As Banka explained, customers needed to understand that bicycles with

suspensions and wider tires would not always serve their purpose. 85

The company held various consumer events to encourage customers to experience the brand. The 25-km.

Trek Founder’s Ride event was launched in cities where the company had partnerships with retail stores.
The monthly event involved inviting bicycle lovers for a 25-km. ride on a Sunday morning.86 According to

Banka, the purpose was to get Trek’s existing and potential consumers to ride together. The ride would
culminate with an interactive session with the riders. All Trek products would be displayed at the event, in

order to showcase amazing riders and the vast expanse of products the company had.87

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https://store.78

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Trek had also introduced Project1, which allowed customers to customize everything from the drive train

to the frame colour on performance bikes through its the US website. These bicycles were made to order

and cost between $11,900 and $14,700.88 The company had recently sold three such bicycles in India.89

DELIBERATING ON GROWTH AND SUSTAINABILITY

Trek believed that a bicycle was a simple solution to various complex problems like congestion on roads,

pollution due to vehicles, pressure of finding an eco-friendly way to commute, and lack of time to keep

fit.90 Trek had always been a front-runner with respect to focusing on creating an eco-system for promoting

cycling.91 According to Banka’s research, approximately 16.3 million bicycles were sold in India every

year. Of these, 32,000 were super-premium bicycles, but more than 13 international companies were

already present in that segment. The idea was to grow the segment to avoid stealing someone else’s
customers.92 The mission of Trek was to get more people cycling. The focus was to grow the community

that connected with the sport of cycling. But, how could this be done? Price was not important for some

customers who aspired to own great international products, but the price point mattered a great deal to other

customers. The bicycles had to be accessible to all consumers, so the challenge was to offer the right mix

of products to everyone—the best bicycles available as well as lower-cost products.93

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https://cycling.91

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EXHIBIT 1: PER CAPITA ANNUAL INCOME OF INDIAN STATES (IN $US)

Bihar

Uttar Pradesh

Manipur

Assam

Jharkhand

Madhya Pradesh

Odisha

Chattisgarh

Jammu and Kashmir

Rajhasthan

Meghalaya

Mizoram

Tripura

West Bengal

Nagaland

Karnataka

Arunachal Pradesh

Andhra Pradesh

Himachal Pradesh

Punjab

Kerala

Andaman and Nicobar Islands

Gujarat

Uttarakhand

Tamil Nadu

Maharashtra

Haryana

Puducherry

Sikkim

Chandigarh

Goa

Delhi 9,113

7,657

7,209

6,749

5,804

5,695

5,095

4,663

4,615

4,589

4,224

4,189

4,074

3,970

3,736

3,736

3,658

3,119

2,958

2,885

2,879

2,816

2,796

2,437

2,399

2,330

2,129

2,084

1,915

1,726

1,568

1,362

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Per Capita Income (in USD)

Source: “Per Capita Income: India and its States,” Indus: The Free Archival Encyclopaedia of South Asia that You Can Edit, last updated
December 11, 1019, accessed …