INFORMATION SYSTEMS
Instructions:
Use the Case Study presented here to answer the
questions below. Your answers should be
long enough to answer each question fully and completely and typed the
individual question. Use as much space
as is needed. Your answers should
demonstrate an understanding of the concept(s) should apply critical thinking
and should provide analysis of the Case Study in light of the concepts(s). You should not just re-iterate what has been
presented in class, but integrate the information and relate it to the Case Study. Proper APA style must be used for any
citations and references that you use.
Your Exam will be graded on the completeness and accuracy of your
responses and whether you have appropriately tied your responses to the Case
Study. Responses that do not mention the
Case Study will receive very few points, if any. Each question is worth 10 points.
OLD DOMINION TRAIL BIKES
Case Study
In 1985 Ted Thomas took $6,000 of his savings,
borrowed another $4,000 from his best friend, and opened a bike rental business
in Vienna, VA, adjacent to the Washington & Old Dominion Trail (W&OD)
that goes from Purcellville to Old Town Alexandria (45 Miles) and connects to
the Mt Vernon Trail (18 Miles) and ends at George Washington’s Mt Vernon Estate.
He rented a location, bought 10 bikes and opened his first store in Vienna near
an entrance to the W&OD Trail, where there is also parking, and near the
historic Vienna Inn and a number of food and drink establishments. He has since opened stores in Old Town Alexandria
and Reston, VA, where he sells, rents and repairs bicycles. The Vienna store is now his anchor store, and
at 5,000 square feet, it is three to five times larger than his other stores. Ted estimates he sells around 3,000 new bikes
a year. Because of the high use of the W&OD trail, especially on weekends,
he also provides tune up and maintenance services at all of his stores for the
many riders from up and down the trail.
In 2012, Ted leased a store in the heart of D.C.,
near the Smithsonian Museums and other tourist attractions. He uses this store to rent bikes to tourists
and residents of the city, and does some repairs to his rental bicycle
inventory in the back of the shop.
Although he has always made money, or he would not
be in business, Ted has seen a decline in bikes sales of about 20 percent since
2008. He attributes this to the downturn
in the economy and the growth in Internet sales. However, his rental and tune up and repair
business has increased dramatically.
Over the past few years, he realized that he must be more aware of
expenses and decrease them wherever practical in order to preserve profits.
Ted has thinks that the one of the most important
factors is the weather, but has no data to support that thinking. On rainy days, there are few customers in the
stores, while on sunny weekends all of his locations are extremely busy. From spring through fall, Ted keeps all his
stores open seven days a week, while in the winter months he opens his stores
on the weekend when the weather is good for riding. Through observation, Ted figures his highest
sales occur in May, and that June and September are his best months for
rentals. He also sells many bikes during
the holiday season in December, but in January and February, he often wonders if
he should close shop and go to Florida for a couple of months.
Old Dominion Trail Bikes grosses between $5 and $8
million annually and earns Ted a comfortable six-figure income. Each year, he leaves a considerable amount of
cash in the business so that he does not have to borrow money. He sells a wide variety of bikes (from
tricycles for toddlers to sophisticated racing bikes) and accessories such as
helmets, speedometers, bike racks, repair kits, and clothing. Bicycle sales have decreased to account for
25 percent of revenues. Accessories such
as helmets, bike racks, gloves, and locks amount to another 5 percent. Rentals make up about 35 percent, and repairs
make up the remaining 35 percent.
In recent years, he has noted that customers are
less likely to purchase the high-end road and triathlon bikes, and are
purchasing bikes in the range of $400 to $1,000. The lower priced bikes are also easier to
sell and to keep the cash flow moving.
Most of the rental business is concentrated in the
D.C. store in downtown and the Alexandria store, due to the tourists and
university students located near those stores.
Ted is excited about rentals, as they have a huge profit margin. He can charge as much as $50 a day, which
means the bikes pay for themselves after just a few rentals.
Ted’s expenses include the cost of goods such as new
bikes and accessories, rent and payroll.
He negotiates leases for all his locations except the Alexandria store,
which he owns outright. Ted has 15
full-time employees and usually hires another 15 part-time employees during the
busy months and weekends.
Until two years ago, he was spending about $30,000 a
year on advertising in local papers. Now
he uses a simple website and has links on many of the local biking trail sites
to provide information about his various locations, and his advertising budget
is close to zero.
In the late 1990s, Ted over-expanded to six stores,
including a store in Purcellville, VA, and one in Bethesda, MD. The expansion necessitated a warehouse in
Springfield, VA, the hiring of a general manager and considerable overhead
expenses. In a subsequent cost-reduction
effort, Ted closed the Bethesda store, gave up the warehouse and moved his
inventory to the Vienna store, and let the general manager go. Now, he handles all the general management
tasks himself, which affects the time that he has available to plan and develop
strategies.
Ted further reduces his expenses by working in the
Vienna store two days a week. Since he
has only one staff person in some of his stores, he has to make special
arrangements if that person does not come to work, or takes a day (or week)
off.
He is trying to expand the bicycle repair work,
especially on the weekends, so he will be able to increase revenue from this
profitable aspect of his business. He
needs to have repair capability at each store to maintain the rentals, prepare
the newbikes for sale, and perform the periodic maintenance for the bikes that
he has sold, as well as provide the breakdown repairs and adjustments for the
riders on the Trail.
In an effort to increase profits, Ted tries to get
good deals from his suppliers so he can realize a good margin on bike and
accessory sales and repairs. He looks
for situations where suppliers have more bikes in a line than they need and
buys those bikes at a discount for rentals and low-end sales, while maintaining
a rapport with high end suppliers so that he can offer his customers the best
at reasonable prices. By doing so, he
can sell bikes at a lower retail price with on-the-spot delivery while still
realizing a nice profit.
Ted has no bank debt, and has long since repaid the
$4,000 he borrowed from his friend to start the business. He feels that, because he has a diverse
business strategy that addresses the many different aspects of the local bike
business, he will do well in the many different economic climates as long as he
is able to manage his varied business.
He also feels that he is insulated from “substitutes” from the Electronic
world, due to the rental and repair aspects of his business.
Questions:
1. List 3 strategic goals for Ted’s
business and provide an explanation of each.
2. Identify 5 specific types or categories
of information that Ted needs to run his business and explain why they are
important to him.
3. Identify and explain three business
processes that Ted likely uses in his business and explain how a technology
solution could help each one of them.
4. Ted has a website with information about
his stores. Identify and explain two
additional ways Ted could use the internet in his business. Tie each use to a specific e-commerce
business model and explain how that model applies.
5. Explain to Ted what a supply chain
management (SCM) system could do for his business and how it might improve his
operations. Be sure to cover the full
range of SCM functionality as it applies to Old Dominion TrailBikes.
6. How
could Ted combine the information he gets from in-store customers with those
who purchase via the website into a single Customer Relationship Management
(CRM) system and what three benefits would he gain from doing so?
7. Ted
would like to increase repair work and rentals as they are the highest profit
aspects of his business and the Internet is not a competitor. What are three specific ways he could use
technology to accomplish this?
8. Monitor customer preventive maintenance
and repair work and offer special maintenance programs and rates to previous
customers. Ted is not sure if he should implement an Enterprise Resource
Planning (ERP) solution. Identify and explain three benefits to an ERP for Old
Dominion Trail Bikes. Identify and
explain two important considerations in implementing an ERP.
9. If
Ted implements an ERP for Old Dominion Trail Bikes, he will need to know
whether the project was a success. List and explain three metrics (or measures)
he can use to determine whether the project was a success.
10. Since
neither Ted nor anyone on his staff has any experience with information
technology, list and explain five things he should consider or address as he
proceeds with his IT projects.
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