Problems Confronted By Cyclermate Commerce Essay

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The two men who planned to open their own company after being superfluous due to the shutting down of the steel plants in their town of South Wales were Dai Armstrong and Lewis Llewellyn. They both were the part of the local club of cycle touring and because of that, they both became good friends and as a result decided to start Cyclermate which was a bicycle manufacturing company that was laid down in the year 1988. In the initial year Cyclermate possessed a great influence over the share of the market. The whole lot appeared to function with no problems and difficulties up to the year 2010, the time when the company confronted lots of consequences with respect to operation human resource and finance. Specifically, demand by the purchasers fell continua sally even though the prices were cut down by the company; the distinguishing attributes of the goods were not up to the quality as they were earlier. The rising complaints from the customers regarding degrading quality and faults in the product and the concern by the bank manager regarding the overdraft could cause trouble if the problems are not solved as soon as possible. (Johnson, 1993)

The report is with regard to the financial problems and various other problems confronted by Cyclermate. The chief function of this report is to examine how the company could get out of the crisis and get back to the lost market share.

This report takes into account an elaborated examination of the difficulties confronted by Cyclermate and the possible solution for the problems. PEST and SWOT examines the areas that are required to be looked upon. Finally, the report has some recommendations and conclusion of the whole scenario. (Cooper, 2000)

PEST Analysis

PEST analysis is associated with the chief external environmental that influence or control shrewdly a business strategy. PEST is an acronym for Political, Economic, Social and Technological matters that can affect the business. Recognizing PEST persuades it in a utile manner of summarizing the external environment. Nevertheless, it shall be adopted by considerateness of how an establishment should react to these factors. (Johnson, 1993)

Political Factors

A powerful impact is exerted by the Political Factors by ways of trade restriction, labor law, income tax and lots other. Cyclermate did not employ adequate employees in order to achieve the set objectives/targets and workers were considered likely or probable to work overtime with the same nominal wages. Applying a conventional technique might damage health of the workers and diminish the productiveness too. New bike lanes, congestion charges, new government schemes and budget cuts also add up to this factor.

Economical factor

It has an influential effect on an organization; Cyclermate had purchased a larger storehouse for goods, which indeed was essential to them but did not suffice their requirements. Purchasing a warehouse, which fulfilled the needs of the company, could have saved a lot of money and that same money could have used in new or currently in existence projects. They have put into action the untrained employees and did not train them once they started working as a result of that productivity reduced. High petrol prices, lower borrowing costs and value of markets add up to this factor. (Tuckwell, 2007)

Social factor

It has a commanding effect on the conduct of human beings; the company had lots of orders but due to the lack of sufficient workforce they were unable utilizing the opportunity both effectively and efficiently. The workers were enforced with overtime in order to complete the orders. As per certain theories, workers are expected to take a break during the day and work on only specific days of a week. A large workforce would have helped Cyclermate to achieve these targets more easily. Healthy living trend and fitness group is also a part of this factor. (Cooper, 2000)

Technological factor

It has a dominant effect on the manufacturing region of an organization. Cyclermate has determined to utilize a labor-intensive technique for the manufacturing of cycles; any kind of machinery was not used for manufacturing cycles. Capital intensive i.e. Use of machinery over the labor intensive mode of technology would have been more efficient and have raised the productivity for Cyclermate. Frieda schlock did most of the administration work without any professional help; availability of proper resources could have raised her efficiency. New technology for painting, improved range of products and better material for producing cycles.


It is a methodical technique that is utilized to categorize and identify substantial external (Opportunities and Threats) and internal (Strengths and Weaknesses) factors confronted with a specific area. (Johnson, 1993)

It renders data which are useful in corresponding the capabilities and resources to the spiritual atmosphere in which it functions and hence is a significant addition to the planning and marketing procedure. (Pearce, 2005)


Direct channels of sales - Cyclermate has direct channels of sales with the direct sales and direct shops, hence intermediaries cost is largely eliminated. Reducing the cost of manufacturing could unquestionably help Cyclermate achieve a huge share of the market. As direct channels are in direct contact with the providers, thus, it could help in increasing in quantity or value of the sales and it provides a good opportunity to the providers to empathize the clients and could make required changes are per the requirement of the customers. (Jan, 2002)

De-motivated workforce - The employees at the Cyclermate are extremely pioneering and are can fully utilize and achieve any given objective or alterations in the company but they are inhibited by the administration as a result they are unable to express their views freely. The employees could have a crucial role in the company for its overall growth and development.

Possession of buildings and land- Unlike Cyclermate most of the companies don't possess either building or land and hence have to pay the heavy rents which adds to the cost but cyclermate can make any changes in the buildings and could capitalize in whichever way they wish to as they own it, which reduces the overall cost. (Tuckwell, 2007)


Unmotivated staff - The very fact that the employees and the staff are never allowed to put forward their creative and self-ideas due to the policies of the management, as a result of this the motivation in the staff is lost. Sales are decreasing in amount or degree and there is piling up of stocks in the warehouses which generates a feeling among the staff that they are not under a good management and as this feeling flourishes they lose hopes from the company and it has a very bad impact on their morale. (Tuckwell, 2007)

Unhappy investors - Due to the low returns on the capital invested by the investors, they are unhappy with the performance of the company and are losing faith in it. In addition, the very fact that the shareholders were not paid any interest last year, it may result in the withdrawal of their money from the company.

Quality concerns -Due to the lack the power to be effective of the staff to keep up to the measures of the goods and the quality of raw material utilized is leading to degraded quality of the goods eventually.


Fresh commodities- The Company could come out with some fresh commodity for instance; e-bikes or installing electrical motors in the existing cycles could be good option.

Outsourcing - Cyclermate could opt to outsource the process of manufacturing due to high costs of production, signing a legal contract with a firm, which could provide cycles at a lower cost would certainly be beneficial.

Introduction of Robotic machines -Cyclermate could bring in new robotic machinery in the production process that will lead to speedy output and a superior quality of goods.


Huge retail Merchants - Retail Merchants like Argos and Halfords are captivating the market eventually and it might happen that Cyclermate may lose the market share completely.

Reputation -The consumers don't opt for the products of cyclermate due to its poor quality goods and hence its reputation is going down.

Overseas companies - As a result of the growth to a global or worldwide scale, many companies from across the globe have entered the market with products of low price and high quality, which certainly is a threat for Cyclermate as it supplies good with high cost and of lower quality.


Present fiscal condition of Cyclermate (Accounting ratios)

The acid / liquid ratio of Cyclermate is 0.76:1, which depicts Cyclermate is incapable to satisfy indebtednesses of shorter term, which mean that it would not be competent to satisfy fiscal difficulty which may happen in the time to come.

The Asset turnover ratio for Cyclermate is 2.06:1. As the ratio is excessively high, this means that profit margins are very low. The pricing strategy of Cyclermate is ineffective and because of that low profit.

Return on capital employed -Cyclermate has far too less returns on the capital employed, just a mere 0.11 or 11%.

Debtor days -It would take Cyclermate 115 days to get back the money from debtors.

Creditor days - Cyclermate has to pay back in 24 days to its debtors with a cash balance of 675£.

The financial statement of Cyclermate shows that it has non-current assets which is of worth £210,800.Any request regarding a loan from the bank will be refused as it has a mere cash balance of £675. It may get a loan based on the position of its non-current assets. In place of the above-discussed alternative, it can sell its freehold land, which is worth £160,000, and use the proceeds from the sale in the business.

Cyclermate could acquire funds if they pursue its trade debtors to pay off soon. Debtors worth £200,571 are to be recovered and the funds would be acquired soon if the debtors do not default and pay in full. Once it has sufficient fund, Cyclermate could apply for the bank loan.

Machinery worth £185,790 needs to be sold off at a price that is lower than what Cyclermate is expecting to get because it cannot sell the machine at a break even point and the sale price expected by Cyclermate is higher than the market price for the machines. Thus, if it reduces the prices it may sell off the machinery and get better revenues.


Cyclermate must purchase stock only when it is totally and definitely necessary. Purchasing stock before its requirement will certainly affect the financial position of Cyclermate, as raw material does not embrace to its worth and may lose its market value. The company maintains raw material worth £102,300, which left unused, will have no worth but once sold at a fair price in the market, could generate revenues for the company.

It is essential to have a fresh department for packaging that would solely focus on the cycles' packing. Separating each department and providing separate staff of each department will help in the production and thus leading to raised productivity or output over an unspecified period of time. Giving priority to the production of popular products and selling them at a premium could be one of the strategies that the company could apply in a manner consistent with its purpose. (Cooper, 2000)

Application of modern technology in the production of cycles is another option, as it will raise the process of production and its efficiency. Application of painting machines for painting the cycles will reduce human labor and will be more effective with less error. For instance 7 frames of a cycle are produced each day with labor but if new technology is implemented then 25 or more frames would be produced each day. Increased production will result in low manufacturing cost and this low cost would reflect on the selling price. Due to low selling price, more and more cycles would sell in the market and thus generating high revenues. (Cooper, 2000)


Recruitment of the few but completely trained workers by Cyclermate, training the current employees by professionals will aid the employees to work more effectively, and efficiently once, they trained. Introduction of incentive based programs in which incentives would be provided if the job by an employee were finished in a specified deadline. Given discount for purchases done by the employees. (Jan, 2002)

Thus creating a more motivated workforce and a motivated workforce automatically increases the production. Employees could be provided a certain task each day and their role will be specified in the company. Division of responsibilities among the workforce. Conducting interview every month in order to review the performance of each worker and discussing any concerns or issues. Providing some useful and proper suggestions after each interview may change the attitude and performance of the employees. Extra wages for overtime and providing all kinds of necessary resources for the completion of a task and sanctioning the employee if the targets are not met. (Jan, 2002)


Cyclermate could use marketing as an absolutely necessary tool for making it popular and known among the public. Publishing more and more advertisements in both newspapers and magazines so that individuals know about the products of the Cyclermate and this could only happen if the company has sufficient funds.

Utilizing every available marketing resource, which is available, that would help the potential customers and investors to know more about the company. Using newspapers, radio, and internet to advertise its product worldwide. Launching its own website that will contain all the relevant information about the products and from the perspective of an investor. Also introducing the option of online trading where one can see the price and detail of a particular product online and then can order it simultaneously. This will have a positive impact on the sales. (Pearce, 2005)

Cyclermate has the customer group of high-class people or upper middle class and middle class. In addition, the prices are very high as compared to the existing competitors. Once the manufacturing cost is lowered then automatically, the prices will fall down and better products would be available at a low price. An addition of a cycle which every individual could afford, this introduction will be cost effective. (Jan, 2002)

Cyclermate can plan to go take a leap and open stores across a region and raising the possibility of sales. A marketing team dedicated to keeping track of the movements by its competitor and recording it and presenting it before the management. (Tuckwell, 2007)


In order to make the quality of the product better the company Cyclermate must take up and practice proper and good techniques for the management of the quality of the goods that would perhaps facilitate in improving the quality of the product and reduction in the cost. Products of inferior or low quality should not be introduced in the market as it hampers the image of the company and once the reputation is hampered, it is very difficult to regain it.

The company must sign up correct individual as per the requirement of the position. Currently the management is interfering in the process of production and is unable to focus of the activities they should be concerned.

The financial hardships through which Cyclermate is going through at present could be resolved by selling the unused stock that is piled up in the warehouse.

In order to generate revenues and funds to invest in other arena of the company, Cyclermate must sell its freehold land that would certainly generate high revenue.

In order to achieve higher output and productivity, modern technology should be applied in the production process.

Installing a computer database through which the management could look into all the important and relevant data as and when required.

Cyclermate should launch its website, which provides complete detail and range of the products available with them.

Reducing both direct sales prices so as to sell the current stock and trade debtors. Employing young and trained workforce that is fit for the position.

In order to keep up to the competitor's standards Cyclermate has to manufacture products of high quality and with low prices. For this, the company has to go through the budget once again and take essential quality management measures and cost cutting methods. There must be appropriate allocation of budget to every department of the company.


The products of Cyclermate are not generally accepted in the market due to its high price and poor quality issue that have been from the recent years. The issue of staffing is immense as no appropriate individual is at the required position. The business organization in this case that is Cyclermate if operated with a little different methods then it has a very bright future in the near future. Its products were popular because of its price and quality and if it continues to supply, the same then it could hold up to the market share and its reputation. Nevertheless, certain alterations have to be made if new rules and regulations are implemented in the organization. It would create an immense prospect for them to function in the market with the competitors. Cyclermate is left with a cash balance of £657 is experiencing financial crisis due to which it cannot execute its functions effectively.

With the movement of new threats into the marketplace the present systematic plan of action of Cyclermate is continuously below the acceptable level in its performance due to the fact that the new firms and the existing organizations are coming up with improved quality of products at a cheaper price. (Cooper, 2000)

Due to the lack of co-ordination among the various departments of the company, it has to suffer losses, as proper data is unavailable to the production department and without the data, they continue to manufacture products that ultimately results in stock piling in the warehouses.

Even the sales and the inventory department fail in their functioning due to these reasons. Thus if certain stringent and improved methods are implemented then Cyclermate can go a long way ahead in the coming future. (Tuckwell, 2007)