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 1994 to produce dirt bikes that could be customized for racing and off-road recreational ridingusing 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.

Company History and Background

Dirt Bikes USA was founded in 1994 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. They 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 Steves 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 engineeringand 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 off-road recreational use. Its racing models have placed well, and often first, in the many dirt bike races staged throughout the United States, including the Barstow-Las Vegas race and competitions at Daytona Bike Week.

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 three full-time product designers and three engineers. In addition to a four-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. The sales staff consists of a marketing manager and five 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 has one 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. The data file "Dirt Bikes USA Organization Chart" shows Dirt Bikes organization chart.

The company maintains a friendly, family atmosphere which encourages teamwork, attention to detail and quality, and continuous learning and innovation. Employees, distributors, and retail customers are urged to contribute ideas on how to improve Dirt Bikes products and services.

Products and Services

Dirt Bikes founders 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 out-performed and looked better than the competition by using the best custom parts available. Realizing that the most popular dirt bikes were foreign brands, Dirt Bikes does not hesitate to use quality components from all over the world, such as 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. The Company makes its own frames, shaping them in the unique, spirited style for which Dirt Bikes is noted. Manufacturing and selling dirt bikes is a complex business. Dirt bike racing has many different categories, including races based on a variety of bike sizes and race length (with some lasting as long as six days). Enduro bikes are for cross-country racing. 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, incorporating technologies such as kick and electric starters, steering stabilizers, and liquid cooling. The large majority of these bikes are sold in the United States and cost between $3,250 and $9000 retail (the Enduro 250 retails for $3250, the Enduro 550 for $7600, the Moto 300 for $4295 and the Moto 450 for $8995.) Dirt Bikes appeals primarily to serious trail and Enduro riders, although it is making inroads into the motocross market.

Sales and Marketing

Dirt Bikes does not sell directly to retail customers. It relies 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. Dirt Bikes motorcycles, parts, and service (including warranty repairs) can be obtained only 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.

Selected Financial Data

The data file Dirt Bikes Financial and Sales Data provides a spreadsheet with three worksheets containing Dirt Bikes financial data for you to review:

Income statement and summary balance sheet data from 2012-2014

Annual sales (units sold) of each Dirt Bikes model between 2010 and 2014

Total domestic vs. international motorcycle sales (units sold) between 2010 and 2014

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 firms 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 companys 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 only the most important pieces of balance sheet data for you to review. At any given time a businesss 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 firms 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 companys three-year trends in revenue (sales), costs of goods sold, gross margins, operating expenses, and net income (or loss). Pay attention to whether the companys 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 unit sales data between 2010 and 2014, 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.

Instructions: Combine all of the milestones you have already completed, incorporating your instructors comments, suggestions, and changes. Finally, create a conclusion which summarizes the various elements which you have analyzed throughout the course, and makes recommendations based on what you have learned.

The table of contents will include:

Assessing an Information System

Assessing Data vs. Knowledge

Recommend a Risk Management Policy for Dirt Bikes, USA

Compare ROI vs. Balanced Scorecard

Evaluate Purchase or Lease of Equipment

Assess Dirt Bike USAs critical systems and develop a DR plan

Conclusion

This worksheet shows number of Dirt Bikes' domestic vs. interational motorcycles sold between 2010-2014
Worksheet name: Domestic vs. International Sales
Amounts are in units sold
		Domestic vs. International Sales
	2010	2011	2012	2013	2014
Domestic	5723	6843	8254	8889	8530
International	528	640	911	889	762
TOTAL	6251	7483	9165	9778	9292
% International	8.4%	8.6%	9.9%	9.1%	8.2%