Wiki contents

Journals

2019 Learning journals
2018 Learning journals
2015 Learning journals
2014 Learning journals
2013 Learning journals

Smartsims Support Centre

Blog updates

Recently Updated

Recent updates

Recently Updated

All updates

Skip to end of metadata
Go to start of metadata

The differences between China and the EU are becoming very distinctive, and probably rather entrenched. However, this is one area where both regions are pretty much the same: Consumer Surplus. But regions have left a lot of 'money' on the table, so to speak. In other words, there is a lot of room for growth in both regions. Yes, there is a difference—$900m versus about $800m—but either way that is still a lot of potential growth.

First on the revenue side, the EU is generating about 10% extra in revenue. That has been a pattern that has existed for four years. Can China make up that difference. It's hard to know—yes there is a healthy consumer surplus, but how will the Chinese firms tap into it.

Turning to expenses, the differences between China and the EU remain, with China spending more on Advertising (is that why their revenue is higher). But when we look at the Adveristing to Sales ratio, they don't seem to be that different.

Nevertheless, China is spending a lot on quality; just look at their average quality index. I hope they aren't spending all their time making kids and commuter bikes.

The EU has also pushed up its manufacturing capacity. But they aren't that efficient. Look at the Cycle Time and the cost of Goods manufactured.

The EU is also more aggressive with their retailers; they are really cutting into their margin. I wonder how that is playing out in their distribution.

But let's think about individual firms for a moment. Generally, I say where profit goes, shareholder value will eventually go. The 20% margins that firms used to produce seem to be over. The best firms are doing above 10%. It's getting very competitive out there. But the most profitable firms are pretty much all Chinese firms. 

What is concerning is the number of firms turning is losses (and most of those are EU firms).  Is it possible to compete in the EU and still make money?


FirmProfitRevenueMargin
Sugma$13,549,867$83,042,49716%
PeakPerformanceBros$10,896,539$80,732,28713%
E.N.T.E.R.T.A.I.N$3,825,518$44,611,3829%
Sigma$2,464,648$38,065,9306%
Jack It Up$2,864,356$49,602,1686%
Wheelin N Dealin$1,753,545$42,077,1684%
Munchy Bikes$1,201,527$30,355,1364%
Rackk City Bikes-$714,870$79,998,325-1%
RHO Inc.-$2,895,781$52,055,674-6%
PsiclePath-$7,955,002$53,989,847-15%
Pedal-$4,035,884$23,737,544-17%
Wheelie Cool Bikes-$3,093,937$17,661,485-18%
FirmRevenueCapacityProfit/SCU
Sugma$13,549,86772,003$188.18
PeakPerformanceBros$10,896,53976,261$142.88
Jack It Up$2,864,35639,414$72.67
E.N.T.E.R.T.A.I.N$3,825,51853,335$71.73
Sigma$2,464,64836,683$67.19
Wheelin N Dealin$1,753,54544,410$39.49
Munchy Bikes$1,201,52738,487$31.22
Rackk City Bikes-$714,87085,601-$8.35
RHO Inc.-$2,895,78160,678-$47.72
Wheelie Cool Bikes-$3,093,93731,626-$97.83
PsiclePath-$7,955,00273,830-$107.75
Pedal-$4,035,88431,627-$127.61
Sugma$13,549,867$83,042,49716%
PeakPerformanceBros$10,896,539$80,732,28713%
E.N.T.E.R.T.A.I.N$3,825,518$44,611,3829%
Sigma$2,464,648$38,065,9306%
Jack It Up$2,864,356$49,602,1686%
Wheelin N Dealin$1,753,545$42,077,1684%
Munchy Bikes$1,201,527$30,355,1364%
Rackk City Bikes
$79,998,325-1%
RHO Inc.
$52,055,674-6%
PsiclePath
$53,989,847-15%
Pedal
$23,737,544-17%
Wheelie Cool Bikes
$17,661,485-18%

So let's turn the big board and see what is happening. 

Starting at the bottom of the leader board, Peadle has drifted back into insolvency. Athough they had sales of over $23m, they spent too much ($4m too much). Most of its 'settings' seem okay—except they are pretty generous on advertising—so if they can rain their spending in, they should be able to turn it around with a little help from their parent (jack It Up).

Just above them, but still solvent (just) is Wheelie Cool Bikes. They are notable because they have the highest quality of any firm anywhere. Yes, the Chinese firms seem to be big on quality, but does any bike need that amount of quality. I think not.

And so to Munchy Bikes. It may not be obvious to industry watchers, but there has been another takeover, with Rackk City Bikes now 'in the saddle'. Will the new owners be able to help their subsidiary move from a 4% return to something bigger? Time will tell if they can get the minor tweaking that is needed there, correct.

Moving to the middle of the pack is Wheelin N Dealin. This free spirit (not owned by anyone) likes to spend on quality and on advertising ... hey they are Chinese and that seems to the 'thing'  in that region. If they tempered their spending perhaps we'd see more profit and a bigger SHV.

Staying in China, we move to Sigma. Once the darlings of the stock exchange, they're firmly in the middle. But not when it comes to quality. Only Wheelie Cool Bikes has higher quality. One really has to wonder if those costs are really generating the benefits they should be ... and returnign 6% I be better off putting my money in the bank.

E.N.T.E.R.T.A.I.N. continues to be a solid firm in the middle of the middle. That can be a comfortable place to be. Part of their success has to be their low cost of production; the are the cheapest in China being nearly $200 cheaper per SCU than the most expensive manufacture in China. Indeed, they are the only firm in China that has manufacturing costs similar to many of the firms in the EU.

Having gone shopping, Rackk City Bikes has taken a bit of a hit in profitability, and slid backwards on the icy road of takeovers. Unlike the firm they own, Munchy Bikes, they have way too much capacity and are the most expensive manufactures in the EU.

Propping up the top of the pack,  Jack It Up has a steady SHV for the third straight year ($28.44, $28.77, $28.98). That's some kind of achievement, especially as they bought a firm. With strong sales, they are just spending too much (or in the wrong places).

Then there is PeakPerformanceBros, with some very strong sales revenue. Aside from spending too much on PR they seem to be doing a good job, Their owners PsiclePath must be pleased with the value they are generating. Indeed they have the second highest margin of any firm.

In second place is PsiclePath, who seem to have taken their eye of the ball, and have some problem with lost sales.

And at the top is Sugma. Their biggest problem seems to be a lack of capacity!

IndustryFirmSHVProfitRevenueCapacitySharesEPSCapitalization
ChinaSugma$58.51$13,549,867$83,042,49772,0032,000,000$6.77$106,176,278
European UnionPsiclePath$37.28-$7,955,002$53,989,84773,8302,000,000-$3.98$64,487,060
European UnionPeakPerformanceBros$29.07$10,896,539$80,732,28776,2612,000,000$5.45$55,133,594
European UnionJack It Up$27.44$2,864,356$49,602,16839,4142,000,000$1.43$49,472,374
European UnionRackk City Bikes$13.48-$714,870$79,998,32585,6012,251,579-$0.32$30,354,518
ChinaE.N.T.E.R.T.A.I.N$13.24$3,825,518$44,611,38253,3352,000,000$1.91$26,273,876
ChinaSigma$11.98$2,464,648$38,065,93036,6832,000,000$1.23$23,386,562
ChinaWheelin N Dealin$11.90$1,753,545$42,077,16844,4102,000,000$0.88$23,791,730
European UnionMunchy Bikes$5.49$1,201,527$30,355,13638,4872,000,000$0.60$9,827,748
ChinaRHO Inc.$4.17-$2,895,781$52,055,67460,6782,000,000-$1.45$8,212,712
ChinaWheelie Cool Bikes$0.97-$3,093,937$17,661,48531,6262,800,000-$1.10$2,706,166
European UnionPedal$0.01-$4,035,884$23,737,54431,6272,000,000-$2.02$20,000
  • No labels