Classic Knitwear Classic Questions And Industry Analysis
Classic Knitwear Classic Questions And Industry Analysis
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Executive Summary
Company Description
Seg and Cycle the City is a Koblenz, Germany based company specializing in offering rentals for recreational vehicles (Segways, bikes, tandems and inline skates), guiding and informational services to mainly tourists, locals and their visitors, students or for event entertainment purposes. The company will begin operations in April, 2010, as a Limited Liability Company (Unternehmensgesellschaft). The company will take advantage of the increasing popularity of Segway scooters: two-wheeled, self-balancing electric vehicles invented by Dean Kamen in 2001, as a new, more exiting and relaxing alternative to walking tours for tourists to enjoy the sights and atmosphere of the city. Also, the company will provide high quality MP3 Audio-City Guides to capture the large number of visitors who are more independent-minded, not willing to participate in guiding services offered by the tourism board of Koblenz and thereby gain significant market share.
Mission Statement
“Seg and Cycle the City is a speciality tour operator committed to providing a unique, entertaining, memorable and educational experience of the city that meets the needs of both kinds of tourists: those who seek a guided experience and those who are more independent minded.
We will take pride in doing our best to present our city tour in a memorable way and leave our customers with the image that Koblenz is a place to go back to. We will achieve this by building strong personal relationships with our customers during our guided tours and by suggesting journeys for the individual exploration.
As an advocate for sustainability, we want to promote the use of environmentally friendly transportation devices and, thereby, improve the image of our beloved city. We will also fulfil this mission of sustainability by providing an affordable opportunity for college students to rent a bike.”
Industry Analysis & Trends
The services provided by Seg and Cycle the City as a player in the service industry are affected by the developments in the recreational and sports equipment rental trade and by developments in the city and bike tourism industry in Germany, Rhineland Palatinate and, specifically, Koblenz.
Size and Growth
The personal service industry in Germany generally shows a stable performance with relatively stable revenue regardless of the difficult economic situation. A high employment rate, increased wages, and a decreasing inflation rate have increased disposable income, which especially benefits the leisure industry (German Chamber of Commerce e.V).The following graph shows that the service industry (blue line), as the leading sector concerning economic added value in the Koblenz (including surrounding communities) underwent major growth compared to other main sectors from 1992 to 2005. Since 2004, growth rate appears to be stable and rather low, but remains in a leading position.
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Travel Germany, Rhineland-Palatinate and Koblenz
In 2006 the German travel market has proven again to be an engine of growth for the German economy, generating an added value of 94 billion Euros.
City tourism is an especially booming market in Germany, with a total of 2.2 million days of stay per year (including 1.51 million daytrips). Germany’s 82 cities with more than 100,000 inhabitants (Koblenz with 106,000 inhabitants belongs to them) achieved 4.4 % more overnight stays in 2008 (Deutschen Reise Verband). In 2006 tourism accounted for 8% of the Gross Domestic Product in Germany and ranks third in its economic significance.
A comparison of the number of day trips throughout the federal states shows that Rhineland- Palatinate is in fifth place with 175 million day trips. Concerning the intensity of Tourism (overnight stays per 1000 inhabitants) among the federal states, Rhineland-Palatinate ranks fifth (Graph #1 and #2 attached in Appendix). Travel expenses have increased per person and day by around 25% to 540 Euro per trip for domestic vacations. Travelling to Rhineland- Palatinate enjoys increasing popularity especially among foreign visitors from Belgium and the Netherlands, followed by Great Britain and the USA (Deutscher Tourismusverband e.V).
Seg and Cycle the City will benefit from the growing tourism industry in Koblenz that is anticipated as a result of urban reconstruction and the improvement of the city’s image during and after the National Garden show in 2011. The tourism sector in Koblenz already proves to be stable with an increasing tendency (Koblenz city council – statitics department).
Bike tourism
20.9 million Germans used their bikes in 2007 as leisure activity on holidays. 6.2 million people claimed to use their bike “frequently“ to “very frequently“ (Deutscher Tourismusverband e.V).In Rhineland-Palatinate, bike tourism accounts for 0.341 billion or 10.2% (includes expenses for lodging, food etc.) of the total economic added value of the tourism industry and contributes 341 Mio. Euro to the federal state‘s GDP. The federal state‘s government has endeavored to develop the network of bike routes and guiding systems in the state in order to encourage people to use bikes and more environmental friendly means of transportation in the city (Europaeisches Tourismus Institut an der Universitaet Trier GmbH). Seg and Cycle the City will take advantage of this development and contribute to the state’s efforts. The federal department of transport also initiated the projects www.skater-land.de (skater-country) and www.radwanderland.de (bicycle country) that provide detailed information about routes events and services for bikers and skaters in Rhineland-Palatinate.
Maturity and Trends
Recreational and leisure equipment rental
The lifecycle stage of recreational and sports equipment rental is mature but is unlikely to decline as result of an increased interest in physical activity and health. On the other hand, the fear of a deepening recession has caused discretionary spending to dry up in 2008 and 2009. Due to the increased acceptance of product rental among consumers during the 2003 to 2008 period, the industry experienced a considerable expansion.
Furthermore, the industry is anticipated to experience growth in the years ahead as a result of greater leisure time availability and new trends in fitness activities. Moreover, the oncoming retirement of the baby boomer generation, which will have more available leisure time has demonstrated a desire to continue to be active after leaving the workforce, representing an opportunity for Seg and Cycle the city to cater to this group. (Forecast for the Sports and Recreation Facilities in the US – includes tourist guide services-) (IBIS World).
The aging population is an advantage for Segway tours because the company provides the
older generation a more relaxing, strenuous alternative to walking tours. Statistics about
bike tourists in Rhineland-Palatinate revealed an average age of 53.5 which is 6 years older
than the average age of the whole population (46.9) and the age of the average tourist in
Rhineland-Palatinate(49.5) (Europaeisches Tourismus Institut an der Universitaet Trier
GmbH). Competition in this industry is described as being stiff and
increasing because they compete in several ways: price, product range and location. Seg and
Cycle the City will outstrip their competition by offering favorable financing arrangement for
students, an innovative product range, and a central location, which is the perfect starting
point for touring the city or region .
Economies of scope are another key success factor in the
industry. Firms that offer a wide range of rental products increase customer and revenue
numbers. Therefore, Seg and Cycle the City plans to invest additional capital each year to
expand the product variety and add for example a small number of skateboards, tricycles or
exotic tandems (for more than two people) and test its profitability before acquiring a large
amount of these products.
Climate Change and increasing awareness of environmental concerns are increasingly important for the image of a tourism destination as well as for individual lifestyles. Koblenz can benefit from the services provided by Seg and Cycle the City because they promote sustainability by offering environmentally friendly means of transportation, including the Segway, a vehicle that gives off zero-emissions thanks to its electric battery power source.
The growing awareness of the importance of healthy living will also benefit the business of
Seg and Cycle the City. During vacations the opportunity to be active is especially
restricted. For this purpose, Seg and Cycle the City will develop an ideal and customized
service that offers visitors the possibility to be active also during vacations.
An entertaining and fun outdoor experience while spending time with the family
and friends is of the company’s main concerns.
As a recent transportation invention Segway is not in its mature stage of the product lifecycle and should rather be considered as in its introduction stage, which provides an excellent entrepreneurial opportunity to take advantage of being the first company in the Middle Rhine region to offer Segway tours and achieve a large market share. Segways are well suited for rental because its purchasing price is significantly high enough that there is little incentive for clients to purchase one (IBIS World 2).
Vulnerability to Economic Factors
The services offered by the company can be categorized as leisure activity and are universally associated with luxury spending, which closely ties the industry’s revenues to the development of discretionary income and consumer confidence. Unemployment and economic recession negatively impacts the level of disposable income within a household, which determines the amount spent for leisure activities and travel. However, there is a counter cyclical trend in the travel industry, as reduced disposable income forces people to take short-distance trips and boosts city tourism in the own country (IBIS World 2).
Risk Analysis
In the long term, the industry faces the threat from retailers offering finance packages or low rates to increase sales. Financing packages are less likely to attract visitors in Koblenz as the majority of visitors stay only for a weekend or are passing through to explore the rest of the Rhine valley. Although, the company benefits from a low number of competititors that offer Segway, bike and tandem tours, they face the challenge to make customers comfortable and aware of their services, especially with the new transportation technology of Segways. The knowledge about and popularity of Segways, however, is spreading thanks to the recent movie” Paul Blart: Mall Cop“(2009), starring Kevin James, who plays a mall cop driving around the mall on his Segway through the mall.
Seasonal Factors
City tourism as well as recreational and outdoor activities are highly seasonal. Seg and Cycle the City’s business will be affected by preferred times for travel and outdoor activities in the spring and summer, and during holidays, such as Christmas and new years. Adverse weather conditions, such as excessive rain, long winters and cold temperatures reduce the demand for outdoor activities and guided city tours. Consequently, the company’s positive cash flow will occur during the warm season from April to October, when city travel and outdoor activities increase and special events in Koblenz capture tourists. In order to avoid cash shortages and operate effectively in the slow seasons, Seg and Cycle the City will use the winter seasons to promote its services of indoor corporate and private events, as well as to plan and market for the summer season. The following statistic shows the monthly fluctuation in the number of overnight stays over one year in Koblenz that will affect our business.
Number of city tours in its seasonal course and compared among the years (Koblenz city council – statitics department)
Barriers to Entry
High start-up costs due to the high capital that is necessary to acquire equipment (applies especially for Segways), restricts the number of new entrants to this market. Also, in contrast to most other federal states there is currently no standard to authorize Segways for use on public roads in Rhineland-Palatinate. The responsibility is delegated to the cities. Following the example set by the owner of Segway Worms (also located in Rhineland Palatinate) Seg and Cycle the City will make the effort and invest the time to receive a special authorization from the city, which will make it harder for competitors to enter the market. Nevertheless, few governmental regulations for leisure equipment rental, low running costs, and expertise required attracts a high number of competitors in the overall rental and bike industry (IBIS World 2).
Technological Factors
The bike industry constantly develops new products with added features, which
makes it difficult for Seg and Cycle the City to choose the right models the company will rent
out that best meet the needs of customers. The Internet is also an important technology for the
owners because travellers are increasingly researching vacation destinations and prefer to
reserve tours and other services online or via Email.
Regulatory Issues
Segways are accepted in Rhineland-Palatinate for the use on private property. In Rhineland- Palatinate regulations require a special permit issued by the administrative district for operations of Segways on public roads for which Seg and Cycle the City will be the first in Koblenz to file (Registration) (Works).
Supply and Distribution
Seg and Cycle the City will purchase and lease Segway scooters from the authorized Segway
dealer in Koblenz. Other equipment will be mainly bought in used condition from private owners or suppliers of Gottlieb-bikes and then refurbished.
Bibliography
- Deutschen Reise Verband. “Fakten und Zahlen zum deutschen Reisemarkt 2008.” 2009. Deutschen Reise Verband website. 19 April 2009 <www.wissen.dsft-berlin.de/Fakten_und_Zahlen_zum_deutschen_Reisemarkt_2008/Info-alle-1195-4-1.0.html – 16k>.
Numbers and facts of German tourism industry in 2008 by the German travel association.
- Deutscher Tourismusverband e.V. “Tourismus in Deutschland 2007.” May 2008. Germany the Travel Destination. 17 April 2009 <http://www.germany-tourism.de/>.
This source by the German National Tourist Board gave information about the German tourism industry in 2007.
- Email quote by Dierks, Mr. – Segway-Koblenz. Segway leasing Anne Schellenbach. 27 April 2009.
- Europaeisches Tourismus Institut an der Universitaet Trier GmbH. Regionalwirtschaftliche Effekte des Radtourismus in Rheinland Pfalz. Trier, June 2007.
This study by the European Tourism Institute gave information about bike tourism in Rhineland-Palatinate.
- Europaische Reiseversicherung AG und DTZ. Qualitaetsmonitor Deutschland-Tourismus Ergebnisse 2007/2008. 24 April 2009 <http://qualitaetsmonitor.dwif.de//index.php?option=com_content&task=view&id=6&Itemid=5>.
This survey among visitors in Germany was conducted by the European travle Insurance Group and the German National Tourist Board.
- Federal Statistical Office. “Statistical Yearbook 2008 – For the Federal Republic of Germany.” September 2008. Federal Statistical Office website. 25 April 2009 <http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/SharedContent/Oeffentlich/AI/IC/Publikationen/Jahrbuch/Einfuehrung,property=file.pdf>.
- Forschungskreis Tourismus Management Trier e.V. “Die Wertschöpfung des Tourismus in der Region Mittelrhein.” Juli 2008. IHK Koblenz. 17 April 2009 <http://www.ihk-koblenz.de/servicemarken/Branchen/anhaengsel/tourismus_gastgewerbe/regionen/wertschoepfungsstudien/ENDBERICHT_MITTELRHEIN_2007__korrigierte_Endfassung.pdf>
This source estimates the added value of the tourism industry in the Middle Rhine region.
- German Chamber of Commerce e.V. “German Chamber of Commerce e.V.” March 2009. IHK Koblenz website. 17 April 2009 <http://www.ihk-koblenz.de/produktmarken/standortpolitik/anhaengsel/zahlen_und_fakten/konjunkturberichte/dihk_deutschland/sonderauswertungen/Dienstleistungsreport_Fruehjahr_2009.pdf>.
- Telephone interview with Greulich, Dr. Bernd. Corporation taxes and UG Anne Schellenbach. 28 May 2009.
- Groundspeak Inc. Geocaching – The Official Global GPS Cache Hunt Site. 12 May 2009 <http://www.geocaching.com/>.
- Hans-Boeckler-Stiftung. 2009. 29 May 2009 <http://www.lohnspiegel.de/main/LohnundGehaltsCheck>.
This source states average salaries for around 250 professions.
- IBIS World 2. “53229 – Health Furniture, Party Supplies & Other Rental in the US – Industry Report.” 28 January 2009. IBIS World Website. 19 April 2009 <http://www.ibisworld.com/industry/default.aspx?indid=1371>.
- IBIS World. “71399 – Miscellaneous Sports & Recreation Facilities in the US – Industry Report.” 2 April 2009. IBIS World Website. 19 April 2009 <http://www.ibisworld.com/industry/default.aspx?indid=1657>.
- IHK Koblenz. “Umfrage Standortzufriedenheit IHK Koblenz.” 2008. IHK Koblenz website. 20 April 2009 <http://www.ihk-koblenz.de/produktmarken/standortpolitik/anhaengsel/zahlen_und_fakten/standortanalysen/umfrage/Umfrage_Standortzufriedenheit_IHK_Koblenz.pdf>.
Survey about satisfaction with location by the chamber of commerce in Koblenz.
