How Giant's management should respond to Ofo/Mobike

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  • #7631
    George Mills
    Member

    The new industry entrants (Ofo, Mobike) are not necessarily direct competitors; they are operating an access business model as opposed to the ownership-driven nature of Giant. As a result of these differentiations, each have their own respective and non-conflicting skill-sets.

    Giant therefore needs to make the decision on whether they want to:
    1) Enter this new industry (either as a competing service provider or in some kind of partnership)
    2) Maintain focus on their existing core product competencies
    3) Take a “wait-and-see” approach

    Given the differences between Giant and Mobikes competencies; a move into the “bike sharing” segment would be a significant style-drift on the behalf of management, potentially outside of their expertise and comfort zones. A solution may therefore be to propose a partnership with 1 (or more, if feasible) of the new entrants such that Giant can develop and manufacture product on their behalf. Ideas would include:

    A) Leveraging Giant’s existing expertise to produce life-enhancing group sets (etc.) for bicycles designed to be left outside with minimal maintenance for extended periods of time (white-labelled in order to avoid brand dilution)

    B) The provision of higher quality bikes to potentially introduce a price-tiering system into Ofo/Mobike (e.g. modified bikes with more gears provided at a marginally higher cost, designed for extended travel times or for use across more complex terrain) (white labelled as above)

    It is unlikely that within Giant’s business model it can compete on convenience (i.e. distribution) or on price (without a subsequent loss of brand value). Unless material declines in sales volumes are observed as the nascent “bike-sharing industry” evolves, the new market entrants do not necessarily justify a significant style-shift by management other than via a tactical and opportunistic approach.

    #7726
    Jeff
    Participant

    Hey. Those are good points. And welcome to the class. You are literally the first person on the forum. 🙂

    There is a good BCG study showing that the likelihood of success of a project decreases dramatically as you move from your core competency. Are bike-sharing and bike-rentals really the same core competency at all? Is it about bicycles or about mobility as a service?

    #7741
    jtowson
    Keymaster

    My read on Giant was that they are unlikely to catch or beat Mobike at their own game. Especially given the amount of cash they were burning.

    However, this was not a winner-take-all market. Mobike didn’t have any real clear competitive advantages. So Giant had time to wait and see. That is different than with ecommerce or Facebook where they were moving fast and had powerful competitive advantages. You had to jump in.

    For Giant, I would have advise to wait. Let them burn their cash. And then jump in in a year. Possible by buying a failed competitor cheap.

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