Target Market & Competition

Competition

Competitive Position

Seg and Cycle the City will be the only store to offer Segway and tandem tours as well as roller skates rental in Koblenz. Furthermore, it will be the first company to offer bike rentals targeted to students. Nevertheless, there are a variety of products and services provided by local companies that can be seen as trade-offs for the company’s products and are mainly considered budget or generic competitors.

Companies with competing products are:

· Retail bike stores who offer bikes for rental

· Retailer stores selling inline skates

· Segway-Koblenz who offers Segways for rental

· Walking and other sightseeing tours offered by the tourism board of Koblenz

· Burg and bike who offers bike rentals and mountain bike tours outside of Koblenz

· Other leisure activities such as cruise operators

· Koblenz old town express, a small train operating April to October to drive visitors around the old part of the city

Although offering similar product as Seg and cycle the city, the tourism board of Koblenz (Koblenz-Touristik) and Segway-Koblenz will not be viewed as direct competitors as both companies are expected to benefit from Seg and Cycle the City. For one, the company will enter a purchasing and leasing contract with Segway–Koblenz and provide a significant amount of revenue for the company. Furthermore, the company will benefit from the publicity gained for Segway. Concerning Koblenz-Touristik, the owner-operated tourism board of Koblenz, Seg and Cycle the City pursues common goals of improving the image of the city, attracting more visitors to Koblenz and make their stay a memorable one. Entering a strategic partnership will strengthen the relationship between Seg and Cycle the City and the Tourism board. In return for including the products in their promotional literature or packaged tours, Seg and Cycle the City will offer advertising space on Segways.

Currently, they have the advantage of being an established organization, associated with the city which provides a high amount of credibility.

Competitive Edge

Seg and Cycle the City’s comparative edge is recognizing a niche market that is unfulfilled at the moment and providing excellent customer service compared to most rental places that only go briefly over the features of the rental equipment. Seg and Cycle the City sees helping the customers with fitting bicycles and explaining different features as an opportunity to impress them and encourage repeated business.

The figure in the next sections shows that the tourism board of Koblenz currently serves less than a quarter of overnight tourists by their guided walking tours and theme tours. Seg and Cycle the City will capture the rest of visitors who consider walking tours as exhausting, too crowded and old fashioned, and bus or the old town express as impersonal with no room for individual questions. The company, on the other hand, combines a relaxing, fun and innovative transportation device and valuable information about the city with small group experience and a close relationship between customers and staff. Furthermore, independent-minded visitors have the option to rent a MP3 Audio-City guide delivering the same valuable information with the opportunity for customers to set their own schedule and time. The central location of the company’s retail store provides a comparative advantage over Segway Koblenz, who also offers rentals, but is more concentrated to selling and leasing the vehicle in the broader region.

Bike rentals are offered by only a few retail bike shops in Koblenz and one provider outside of Koblenz (Burg & Bike 4.5 miles away). However, only one retailer is currently mentioned on the homepage of the tourism board of Koblenz. Management recognizes the opportunity to gain market share and differentiate the company from the competition with targeted advertising efforts to tourists. Another advantage of the company is that rental equipment offered by retailers is usually limited. Seg and Cycle the City will win a competitive advantage by offering mountain bikes in addition to city and trekking bikes, as well as skates in different sizes and thereby attract a larger market segment. With at least five tandems, Seg and Cycle the City will also attract families and groups travelling to Koblenz, which retailers cannot serve.

Market Share Distribution

There is currently one bike store in the inner city of Koblenz who offers bike and tandem rentals, called “Zangmeister.” “Caravan Hire Koblenz” which is located in a district of Koblenz also offers a small amount of bikes to their customers which are different from the company’s target market as it targets hotel guests rather than campers. Furthermore, Burg & Bike which is located around 4.4 miles outside of Koblenz.

Segway Worms, which is about an hour and a half away from Koblenz, is currently the only company to offer Segway tours in Rhineland-Palatinate. This area is geographically located outside our potential target market and is therefore only to a small amount considered as competition. Seg and Cycle the City will benefit from Segway Worms’ publicity for Segways.

(Ohlwein)

(Ohlwein)

Future Competition and Barriers of Entry

As in Rhineland-Palatinate regulations require a special permit issued by the administrative district for operations of Segways on public roads, that are fairly expensive (100 Euro each) and take some time, potential competitors are hesitant to enter the market. For the bike industry, on the other hand, barriers of entry are fairly low. By establishing strong strategic partnerships with local tourism suppliers and by establishing the company’s brand among students, the market will appear unattractive for future competitors due to Seg and Cycle the City’s first mover advantage. Furthermore, the high start-up costs of 15,000 Euro and 700 Euro per month in addition to the high inventory costs for Segways will prevent small competitors to enter a tour franchise contracts with Mindways (one German Segway dealer), especially if there is already a tour guiding company established in the market. Nevertheless, Seg and Cycle the City has to take track of bike retailers in the region and other bike stores to offer cheap deals for students to purchase bikes, as well as the threat by retailers to enter the rental business. Furthermore, hotels might start offering bike rentals as a free service for their guests. This can be prevented by entering negotiation with hotel owners and offering packages or reduced rates to their customers.

Estimated share of Seg and Cycle the City of the total added value generated by overnight guests in Koblenz ($76,512,958 in 2007 (Forschungskreis Tourismus Management Trier e.V.)) is 0.15% for the first year.

Strategic Position & Risk Assessment

Seg and Cylcle the City’s objective is to become well-known in Koblenz, Germany and the surrounding communities for providing an exceptional city experience not only for those new to the city, but locals as well. The company will captilalize on the following core competencies to become the premier rental and tour provider for Koblenz:

· High quality information combined with entertainment

· Personalized Customer Service

· Innovative Products and Services

· Strategic Partnerships

· High flexibility in services

Seg and Cycle the City’s strategic position is based on evaluating the following factors:

A. Industry Trends and Opportunities

B. Customer Needs

C. The Competitive Environment

D. Our Strengths

E. Risks

Industry Trends and Opportunities

As a result of the emerging speciality tourism industry and increasing variety of products and services offered to provide unique experiences, tourists become more and more demanding for new and different services. Also, issues that are apparent in the development of the tourism industry provide opportunities of: eco-friendliness, healthy living, comfort and relaxation, increased historical and cultural interest, unique experiences and serice bundling.

The “new” tourist expects all this at the same time with the least involvement in the planning process. City tourism and short trips to explore one’s own country became more popular as a result of current economy conditions.

Customer Needs

The company’s target market is tourists, companies, and students. A survey conducted by “Qualitaetsmonitor” in 2007/2008 found that tourists in Germany are comprised of 84% Germans with only 15.1% from other countries. Furthermore, the survey revealed that relaxation, culture, activities, as well as city tourism are the most popular purposes to travel. Since tourists value being active while on vacation, but bringing their own bike is not very popular, Seg and Cycle the City meets their needs by offering short term rentals that are available on site. Moreover, the image of a city is among the most important factors for the decision-making. Seg and Cycle the City seeks to contribute to the image of the city by providing a way for people to enjoy the city tourism while being active. Related graphs are attached in the appendix.

Corporate entities need to find new ways to advertise themselves and create a favourable image among customers, the labour market, and business partners. Therefore, proving eco-friendliness and team building solutions for a better and more personal working environment are important in order to succeed in every field. The company will serve a need in the market that is comprised of; exchange students, faculty members as well as students who are from further away than the surrounding federal states, that are looking for a flexible and low-cost solution to commute within the city.

Competitive Environment

There is no comparable tour and rental business in Koblenz yet. Although, different companies provide bike rentals, walking city tours and Segway rentals, the business concept of Seg and Cycle the City is unique. As a first mover in a market with low barriers of entry, management will use the opportunity to build substantial relationships with the target market as well as building strategic partnerships with local providers and the University before an effective competitor enters the market.

Strengths

Compared to conventional walking and city bus tours, the company bundles a small group experience as well as high quality historical information with a new technology for transportation. As a small company, with the extensive local knowledge will enable the company to provide; flexibility for individual customer’s demands and needs, provide excellent customer service and attention in order to exceed customer’s expectations. Well trained employees who are able to share their passion for outdoor activities provide excellent people skills and ensure a successful, entertaining tour. The company meets the need of currently neglected independent-minded tourists who prefer to discover the city on their own but desire a more convenient way than reading a travel guide while walking. The goal is to increase and vary the company’s product line on a regular basis in order to achieve customer loyalty and encourage repeated business.

Risks

Segway tours have been implemented successfully in various bigger cities. Nevertheless, the Segway tours in Koblenz are a new market and provide risks. A potential risk is due to low barriers of entry, the threat of competition from various franchise opportunities offered by Segway companies. Furthermore, a successful bike rental model might encourage hotels or retailers to also offer bike rentals for customers. The uncertainty about the success of the National Garden Show in Koblenz provides the risk that sales do not transpire as anticipated or exceed all expectations which negatively affects the quality of customer service which is crucial for the success of the business.

Strategic Position

After assessing the risk, we realize that the biggest threat is unexpected demand due to the National Garden Show which is especially crucial in the introduction phase of a new business. Unexpected growth can also threaten the high quality and customer service standards of the company. Therefore, management needs automate operations in the first year to prepare for the expected growth in the second year. Prior to the start of the business management should have already developed new tour and entertainment concepts in order to be able to provide flexible services.

The ability to provide flexible and customized solutions for the needs of tourists and corporate entities, strong strategic partnerships, as well as being able to react quickly to changes in demand by adapting our rental equipment will reduce the risk of failure and help the company build a competitive advantage as a first mover in the market to make the market unattractive for future competition.

Results of the survey conducted by “Qualitaetsmonitor and a S.W.O.T Analysis are attached in the appendix.

Market share of Koblenz-Touristik - All visitors

guests participating in guided tours by Koblenz-Touristik individual tour or others 1.787905525679382E-2 0.9821209447432061 Market share of Koblenz-Touristik - All visitors guests participating in guided tours by Koblenz-Touristik individual tour or others 73332 4028227

Market share of Koblenz-Touristik – overnight guest

guests participating in guided tours by Koblenz-Touristik individual tour or others 0.25896536746088084 0.7410346325391195 Market share of Koblenz-Touristik – overnight guest guests participating in guided tours by Koblenz-Touristik individual tour or others 73332 209841

Estimated share of Seg and Cycle the City

of the total added value

Estimated share of Seg and Cycle the City of the total added value generated by overnight guests in Koblenz Sales Seg and Cycle the City Other tourist companies 1.5341976453191108E-3 0.99846580235468085