Management Help

Running Case Study – Dirt Bike USA 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 1993 to product dirt bikes

that could be customized for racing and off-road 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.

There is an assignment awaiting you to accompany each chapter of the Laudon and Laudon

Management Information Systems text. In order to complete the assignment, you should

review the corresponding text chapter and any information provided by your instructor related

to the topic you are investigating. You can complete each project individually or in teams,

depending on your instructor’s requirements. To develop solutions, you may need to do Web

research and to use spreadsheet, database, or Web browser software tools, and you will need

to use a word processor to write up your findings. Many projects recommend you use

electronic presentation software, if possible, to summarize your findings for management.

Each assignment will list the software tools that you will need to use and the questions you

will need to answer.

In order to complete your assignments, you should familiarize yourself with Dirt Bikes. To

learn more about the company and how it works, click on each of these topics:

Company History and Background

Organization Chart and Employees

Products and Services

Sales and Marketing

Selected Financial Data

The following is a list of Dirt Bikes projects for each chapter and the page(s) on which each

can be found in at the end of each chapter of your Management Information Systems 10/e

text book. Some of these assignments feature hands-on software work and this list includes

links to the data files for these assignments.

Chapter 1 Assignment: Understanding Information System Requirements (page 29) Dirt Bikes

Organization Chart

Chapter 2 Assignment: Analyzing Financial Performance (page 71) Dirt Bikes Financial Data

Chapter 3 Assignment: Analyzing Competitive Strategy (page 115)

Chapter 4 Assignment: Developing a Web Site Privacy Policy (pages 157)

Chapter 5 Assignment: Improving Decision Making: Making the Rent vs. Buy Decision for

Hardware and Software (page 212)

Chapter 6 Assignment: Improving Decision Making: Redesigning the Customer Database

(pages 250-251) Customer Database

Chapter 7 Assignment: Achieving Operational Excellence: Using Internet Tools to Increase

Efficiency and Productivity (page 302)

Chapter 8 Assignment: Achieving Operational Excellence: Developing a Disaster Recovery Plan

(page 343)

Chapter 9 Assignment: Achieving Operational Excellence: Identifying Supply Chain

Management Solutions (page 380)

Chapter 10 Assignment: Achieving Operational Excellence: Developing an E-Commerce

Strategy (pages 418-419)

Chapter 11 Assignment: Achieving Operational Excellence: Identifying Opportunities for

Knowledge Management (pages 461-462)

Chapter 12 Assignment: Assignment: Improving Decision Making: Analyzing the Impact of

Component Price Changes (pages 499-500) Bill of Materials

Chapter 13 Assignment: Achieving Operational Excellence: Designing an Employee Training

and Skills Tracking System and Database (pages 542-543) Employee Database

Chapter 14 Assignment: Improving Decision Making: Using Spreadsheet Software to Analyze

the Return on a New System Investment (page 584)

Chapter 15 Assignment: Achieving Operational Excellence: Expanding International Sales

(pages 617 and 620)

Company History and Background

Dirt Bikes USA was founded in 1993 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 and 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 for off-road recreational use. Its racing models have placed

well-and often placed first-- in the many dirt bike races staged throughout the United States,

including the Barstow-Las Vegas race and competitions at Daytona Bike Week.

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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 3 full-time product designers and 3 engineers. In addition to a 4-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. Dirt Bikes’ sales staff consists of a marketing manager and

5 sales 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

consists of a 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. Click here to see Dirt Bikes’ organization chart.

The company maintains a very friendly family atmosphere, encouraging teamwork, attention

to detail and quality, and continual learning and innovation. Employees, distributors, and retail

customers are urged to contribute ideas on how to improve Dirt Bikes’ products and service.

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Products and Services

Dirt Bikes’ founders realized that the most popular dirt bikes were foreign brands 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 performed and looked better than the

competition by using the best custom parts available. Dirt Bikes does not hesitate to use

quality components from all over the world. The engines for Dirt Bikes are 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. Dirt Bikes makes its

own frames, shaping them to give them the unique spirited style for which the company is

noted. The company’s parts and service business accounts for about 15% of its total revenue.

Manufacturing and selling dirt bikes is a complex business. Dirt bike racing has many forms,

including racing specifically for different size bikes, for short distances, long distance, and

even for up to six days. Enduro bikes are for cross-country racing and 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, with such

technology as both kick and electric starters, steering stabilizers, and liquid cooling. The large

majority of these bikes are sold in the United States for between $3,250 and $9000 retail.

(The Enduro 250 retails for $3250, the Enduro 550 retails for $7600, the Moto 300 retails for

$4295 and the Moto 450 retails for $8995.) Dirt Bikes has appealed primarily to serious trail

and Enduro riders, although it is making inroads into the motocross market.

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Sales and Marketing

Dirt Bikes does not sell directly to retail customers, relying 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 as Dirt Bikes. Dirt Bikes’ motorcycles, parts, and service, including

warranty repairs, can only be obtained 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.

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Selected Financial Data

We have provided a spreadsheet with three worksheets containing Dirt Bikes financial data for

you to review:

Income statement and summary balance sheet data from 2004-2006 Annual sales of each Dirt Bikes model between 2002 and 2006

Total domestic vs. international motorcycle sales between 2002 and 2006

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 are 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 shipment data between 2002 and 2006, 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.

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Chapter 1 Running Case Assignment: Understanding Information System

Requirements

Software skills: Presentation software

Business skills: Management analysis and information system recommendations

How do you know what information systems are really needed by a business and which

are the most important? How should a company’s structure or culture affect the building

and use of information systems?

Dirt Bikes’s management has asked you to prepare a management analysis of the

company to help it assess the firm’s current situation and future plans. Review Dirt

Bikes’s company history, organization chart, products and services, and sales and

marketing in the Introduction to Dirt Bikes. Then prepare a report that addresses these

questions:

What are the company’s goals and culture?

What products and services does Dirt Bikes U.S.A. provide? How many types of products and services are available to customers? How does Dirt Bikes sell

its products?

How many employees are managers, production workers, or knowledge or information workers? Are there levels of management?

What kinds of information systems and technologies would be the most important for a company such as Dirt Bikes?

(Optional) Use electronic presentation software to summarize for management your analysis of Dirt Bikes’s performance.

Chapter 2 Runing Case Assignment: Analyzing Financial Performance

Software skills: Spreadsheet charts and formulas

Business skills: Financial statement analysis

As part of your analysis of the company for management, you have been asked to analyze

data on Dirt Bikes’s financial performance. Review Dirt Bikes’s selected financial data in

the Introduction to Dirt Bikes, which can be found at the Laudon Web site. There you

will find Dirt Bikes’s income statement and summary balance sheet data from 2005 to

2007, annual sales of Dirt Bikes models between 2003 and 2007, and total domestic

versus international sales between 2003 and 2007.

Use your spreadsheet software to create graphs of Dirt Bikes’s sales history from

2003 to 2007 and its domestic versus international sales from 2003 to 2007. Select the

type of graph that is most appropriate for presenting the data you are analyzing.

Use the instructions at the Laudon Web site and your spreadsheet software to

calculate the gross and net margins in Dirt Bikes’s income statements from 2005 to 2007.

You can also create graphs showing trends in selected pieces of Dirt Bikes’s income

statement and balance sheet data if you wish. (You may want to rearrange the historical

ordering of the data if you decide to do this.)

Prepare an addition to your management report that answers these questions:

What are Dirt Bikes’s best- and worst-performing products? What is the proportion of domestic to international sales? Have international sales grown

relative to domestic sales?

Are sales (revenues) growing steadily, and, if so, at what rate? What is the cost of goods sold compared to revenues? Is it increasing or decreasing? Are the firm’s

gross and net margins increasing or decreasing? Are the firm’s operating expenses

increasing or decreasing? Is the firm heavily in debt? Does it have assets to pay

for expenses and to finance the development of new products and information

systems?

(Optional) Use electronic presentation software to summarize your analysis of Dirt Bikes’s performance for management.

Chapter 3 Running Case Assignment: Improving Decision Making: Analyzing

Competitive Strategy

Software skills: Web browser software and presentation software

Business skills: Value chain and competitive forces analysis, business strategy

formulation

This project provides an opportunity for you to develop the competitive strategy for a

real-world business. You’ll use the Web to identify Dirt Bikes’s competitors and the

competitive forces in its industry. You’ll use value chain analysis to determine what

kinds of information systems will provide the company with a competitive advantage.

Dirt Bikes’s management wants to be sure it is pursuing the right competitive strategy.

You have been asked to perform a competitive analysis of the company using the Web to

find the information you need. Prepare a report that analyzes Dirt Bikes using the value

chain and competitive forces models. You report should include the following:

Which activities at Dirt Bikes create the most value?

How does Dirt Bikes provide value to its customers?

What other companies are Dirt Bikes’s major competitors? How do their products compare in price to those of Dirt Bikes? What are some of the product features they

emphasize?

What are the competitive forces that can affect the industry?

What competitive strategy should Dirt Bikes pursue?

What information systems best support that strategy?

(Optional) Use electronic presentation software to summarize your findings for management.