Business Life Cycle - The Ace Bicycle Company (ABC) Case Study - Business Assignment Help

Assignment Task:

Learning Outcomes: Knowledge and understanding tested in this assignment:
Students are expected to:
1. Integrate the diverse knowledge and skills obtained from the financial, management and finance aspects of their syllabus and apply these to a business case study;
2. Evaluate the role and function & interrelationships of the accounting & finance member of the team within the management structure;
3. Analyze the relationships between company actions and accounting, finance and strategic theories;

Learning Outcomes: Skills and Attributes tested in this assignment
4. Communicate in a clear and concise manner that meets the needs of the users of the information;
5. Investigate and search for information on companies using the university online sources and other appropriate data that is publicly available and appropriately use these in their work.

Task
You are required to answer ALL of the questions below and write a report based on the following CASE STUDY.

The Ace Bicycle Company

Introduction
The Ace Bicycle Company (ABC) is a private UK company, based within the United Kingdom and managed by Colin Doncroft, the grandson of its founder. The shares are totally owned by the family, with Colin and his wife controlling just under half of the shares, the rest being held by other members of the family. The company was started a number of years ago, producing bicycles for the general market. These bicycles were targeted mainly at people who could not afford to buy motor vehicles (then a relative luxury) but who needed transportation to get them to work or for local travel. 
Initially, the company was a regional producer focusing on markets in Central England but over the next 70 years, ABC transformed itself into a national company. ABC took advantage of changes in fashion and periodically introduced new models focusing on different market segments. Its first diversification was into making racing bicycles, which still account for 20% of its volume output. Most of these bicycles are very expensive to produce. They are made of specialist light-weight metals and are often custom-built for specific riders, most of the sales being made on a direct basis. Members of amateur cycling clubs contact the company directly with their orders and this minimizes distribution costs, so making these machines more affordable to the customers. ABC's reputation has been enhanced by this highly profitable product. The company has seen no reason to change its branding policy and these products are still sold under the 'ABC' brand name. 

Product areas
30 years ago the company responded to the demand for more sporty leisure machines. Mountain bikes had become the fashion and ABC designed and produced some models which appealed to the cheaper end of the market. These products, although robust and stylish, were relatively cheap and were aimed at families with teenage children and who could not afford to spend large sums of money on the more sophisticated models. The company is currently selling nearly 30% of its output to this market segment. Most of the sales are through specialist bicycle shops, although about 25% of these mountain bikes sales are made through a national retail chain of bicycle and motor vehicle accessories stores. Apart from those sold via this retail network, under the retail brand name, the mountain bikes were also sold under the ABC brand. With the advent of fitness clubs, the company saw an opening for the provision of cycling machines for the health club and gymnasium market. These machines were sold at a premium price but they still accounted for less than 5% of total volume sales of the company. 
The main product group for the company was still its basic bicycle. The product is standardized, with few differentiating features, and as such can be produced relatively cheaply. About 75% of this segment is sold through the same national retail chain mentioned above with reference to mountain bike sales. These bicycles, in fact, are built for the retail chain and marketed under their brand name. This appears to be advantageous to ABC because it guarantees them a given level of business without their being responsible for either distribution or promotion. This segment, however, is now seeing increasing competition from cheaper overseas imports.

Financial situation
The company had historically made reasonable profits and most of these were re-invested in the company's production facilities, increasing capacity substantially. However, over the last 15 years, ABC has seen its market being eroded. Sales have fallen gradually, mainly because the total United Kingdom market for bicycles has been in decline, but also because of increased competition from foreign suppliers. The high value of sterling has encouraged imports. Surprisingly, during this period ABC actually increased its share of domestic output. This is due to the fact that it has been prepared to accept lower margins so as to maintain sales and, in addition, a few UK producers had decided to exit the market and move into other, more attractive product lines.
By early 2018 the company has seen its profits continue to fall. It now has a debt to the bank of £4m, having been unable to pay for all recent, new capital expenditure out of retained earnings. 

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