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Drum roll ...

I'm only going to comment on what's different (or what stands out for me), and with that let's begin with the end in mind. At the end of the day, it really is about the capitalization of the firms. For a long while it was neck-and-neck between the regions, but in the last two rollovers things changed.

Now I need to preface that by saying that the revenue of the two regions was still pretty close; around $370m and $350m. Not a lot in it.



But the capitalization has really diverged. What's driving that!

The consumer surplus is about $200m different between the regions. But that's not the explanation.

Oh, here's snapshot of the EU (Look a the lost sales).

And of China

Those figures do show the margin, but other ways to see it. Without TLC from the management teams, both regions start to drift down. I wonder how the results would have been different if firms could have set things up so their profit continued to climb.

IndustryFirmProfitRevenueMargin
European UnionPsiclePath$13,549,679$40,080,57834%
ChinaSugma$25,305,799$88,530,86129%
European UnionJack It Up$15,581,220$74,646,02921%
European UnionRackk City Bikes$17,382,613$95,077,64418%
European UnionPedal$4,499,341$27,121,30817%
ChinaSigma$11,193,851$76,053,27115%
ChinaWheelin N Dealin$6,316,363$63,214,73510%
European UnionPeakPerformanceBros$7,855,817$90,000,6459%
ChinaE.N.T.E.R.T.A.I.N$5,503,543$70,111,6418%
ChinaRHO Inc.$1,240,726$43,447,3543%
European UnionMunchy Bikes$1,222,451$43,377,4393%
ChinaWheelie Cool Bikes-$1,424,252$8,434,637-17%

Anyway, back to the differences. Manufacturing is a bit different between the worlds.


And there were some pretty differences in how firms set their retailer margin.

But I know everyone is probably waiting to see how that played out.

Well the answer is like this. I've recalculated the SHVs to normalise out the changes that occurred from folk buying and selling shares.

Sugma, well done. You broke the $200 barrier ... and as a result of having the highest SHV you will all be getting a 5% bonus.

IndustryFirmSHV-NProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACash
ChinaSugma$203.12$25,305,799$88,530,86171,9532,000,000$12.65$285,842,016$406,240,414$15,493,889$16,909,213
European UnionRackk City Bikes$107.47$17,382,613$95,077,64465,9112,145,781$8.10$222,929,870$245,151,653$14,017,258$70,145,332
European UnionPsiclePath$101.01$13,549,679$40,080,57833,6432,000,000$6.77$164,181,358$202,013,856-$9,403,154$27,385,246
European UnionJack It Up$91.73$15,581,220$74,646,02949,2692,000,000$7.79$141,295,820$183,464,980$12,081,347$51,327,456
European UnionPeakPerformanceBros$88.85$7,855,817$90,000,64574,7732,000,000$3.93$117,221,342$177,690,415$4,808,090$25,583,496
ChinaWheelin N Dealin$63.39$6,316,363$63,214,73567,1161,535,300$4.11$61,406,303$74,779,312$4,926,446$13,668,998
ChinaSigma$57.39$11,193,851$76,053,27176,1951,968,255$5.69$80,154,852$111,188,260$2,640,676$30,573,295
ChinaE.N.T.E.R.T.A.I.N$43.46$5,503,543$70,111,64170,5432,000,000$2.75$63,611,490$86,912,628$4,067,486$12,718,342
ChinaRHO Inc.$13.81$1,240,726$43,447,35446,8982,000,000$0.62$17,692,456$27,619,288$70,378$8,258,320
European UnionPedal$8.22$4,499,341$27,121,30830,8762,000,000$2.25$16,445,360$16,445,360$3,520,096$16,174,574
European UnionMunchy Bikes$2.80$1,222,451$43,377,43950,7102,400,000$0.51$5,836,726$7,696,864$146,532$15,577,616
ChinaWheelie Cool Bikes$0.26-$1,424,252$8,434,63715,8022,800,000-$0.51$1,043,286$1,043,285-$1,882,906$3,921,096

Rackk City Bikes and Jack It up (and probably PeakPerformanceBros) are wondering how many more rollovers they would have needed to catch the leaders.

At the bottom, Wheelie Cool Bikes and Munchy Bikes have worked hard to stay in profit. That's so hard to do at the bottom of the pack.

I can imagine that PsiclePath are really happy with the timing of their purchase of PeakPerformanceBros. Without them, PsiclePath might be in the bottom third of firms. That said, Sugma are also really happy with the contribution that E.N.T.E.R.T.A.I.N made to their success. Indeed, all the owned firms made material differences to their parent firms.

In the middle, Wheelin N Dealin, Sigma, and E.N.T.E.R.TA.I.N have done solid performances.

RHO Inc, seemed to have lost their way somewhere ... they started so strong.

Pedal, managed to pull themselves out of insolvency. I they should be feeling proud of their achievement.


But let's look at the regions and what went on their.

This is EU. Rackk City Bikes really managed to turn things around after a rather shaky start. One has to wonder how many more rollovers it would have taken for the to catch up with Sugma. 

That said, clearly the four firms at the top were battling it out with one another.


And then there is China

The graph makes it clear how consistently Sugma improved every rollover. In my mind the key to their success wasn't not putting a foot wrong on the way. Most other firms made material 'mistakes' from which they then had to recover.

In this region, Wheelin N Dealin were making a late rush and were tracking well.


Once again, well done to all the teams. I suspect some of you will be still working on your summative learning journals, but I hope you find a little time to celebrate your success. Indeed, I hope the class rep has organised some kind of celebration for you all.

I'll do an announcement tomorrow on the timing of grades etc. It will take me a sometime to do the analysis. I'll ask SmartSims to turn on your access again, after the long weekend (I hope you get a break).



Anyway, I'm really interested to hear your comments on the results, so please leave a comment below.

IndustryFirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
ChinaSugma$170.06$30,352,667$87,979,14571,4022,000,000$15.18$260,853,550$340,124,822$16,902,805$26,073,732
European UnionRackk City Bikes$98.47$17,635,701$95,463,85965,1962,145,781$8.22$194,894,623$209,244,114$14,883,533$58,921,368
European UnionPsiclePath$97.06$25,687,108$43,013,79432,4042,000,000$12.84$168,820,686$194,122,958-$3,245,747$26,862,037
European UnionPeakPerformanceBros$82.09$7,183,506$87,655,05073,7562,000,000$3.59$124,112,124$164,189,424$2,538,944$33,399,754PsiclePath
European UnionJack It Up$73.64$14,177,240$71,729,15846,7642,000,000$7.09$117,136,204$147,289,986$11,130,830$43,856,411
ChinaSigma$48.37$9,578,805$74,535,21575,7281,968,255$4.87$78,734,863$95,226,987$3,518,167$30,592,194
ChinaWheelin N Dealin$38.67$6,485,177$63,426,70766,4991,535,300$4.22$52,861,306$59,435,679$4,809,757$12,951,921
ChinaE.N.T.E.R.T.A.I.N$35.45$3,955,320$65,614,19170,1822,000,000$1.98$56,252,218$70,897,637$2,077,053$13,475,797Sugma
ChinaRHO Inc.$12.77$3,470,477$45,645,18446,8562,000,000$1.74$20,161,648$25,549,676$2,253,712$12,582,332Sigma
European UnionPedal$4.93$3,800,672$26,306,02130,8392,000,000$1.90$9,865,436$9,865,436$3,156,902$11,533,516Rackk City Bikes
European UnionMunchy Bikes$2.99-$2,161,447$38,694,46945,4722,400,000-$0.90$5,149,291$6,840,327-$3,524,117$13,690,073Rackk City Bikes
ChinaWheelie Cool Bikes$0.01-$1,601,276$8,781,06515,5792,800,000-$0.57$28,000$28,000-$1,601,276$45,376

One more to go .... rolling now.

Taking stock

I'm starting to audit all the learning journals and the feedback that was given on them.

The class generated 2295 learning journals and comments. Actually, there were more, but a few folk dropped the class, so I haven't counted those.

Of those 2295, 170 we modified after a couple of hours had passed (there were nearly 1,000 that were modified within an hour of their creation — plain old editing I guess).


On average, each learning journal was 461 words; the maximum was 1327 words, and the minimum was 99 words (Hmmm, 10 learning journals were materially less than the required word count)

Comments were smaller; the average was 103 words, with the maximum and minimum being 684 and 3 words respectively. There were 23 sets of comments that were less than 23 words. Some of them, I'm sure, will turn out to be comments on comments rather than full blown feedback (which is fine).

Penultimate perturbations

Looking at the comments from the industry analysts, so much has changed since the new management teams took over their firms. Most notably, with two exceptions, every firm is rated as BUY or HOLD; one firm is rated as SELL (and it's not who you might think), and one firm is bankrupt. That's a huge change from those early days when most of the firms were rated as SELL or even DUMP.

There have been other levelling effects too. First, the sales revenue for both regions is converging, with total sales of around $350m

As a result the actual worth of each of the regions (the total capitalization of firms in each region) is pretty much the same. Unlike sales revenue, that has steadily tracked upwards, the capitalization journey (the thing that really underpins everyone's SHV) has had a more erratic path.

The consequences of this (well more like the cause) has been the wild swings in the profitability of each of the regions (and that of the firms in each region). It's interesting to me how the 'micro-level' effects have propagated upwards into industry capitalizations that are so close.

In detail the profit looks like this:

FirmProfitRevenueMargin
Sugma$21,153,606$91,865,53123%
Jack It Up$12,794,859$64,476,05120%
PeakPerformanceBros$16,150,355$91,125,91318%
Rackk City Bikes$14,539,566$91,547,17916%
Wheelin N Dealin$7,705,237$62,690,47312%
Sigma$8,200,852$72,815,69011%
PsiclePath$4,825,685$46,409,79910%
Pedal$2,341,528$23,407,27210%
E.N.T.E.R.T.A.I.N$4,786,178$59,098,8938%
RHO Inc.$1,866,719$45,381,0764%
Munchy Bikes$604,316$35,620,8242%
Wheelie Cool Bikes-$2,652,228$9,026,915-29%

That said, there is a material difference in the consumer surplus of China and the EU. This strongly suggests that China has a more opportunities for growth that the EU. But can they take advantage of that ... the trends would suggest not, but a lot can happen in a MikesBikes year.

This is particularly evidence when I look at the change in SHV of each of the firms. When I look at how much change is possible–especially vis-a-vis Rackk CIty Bikes–the top position is not a forgone conclusion.

Li

FirmChange In SHV
Wheelin N Dealin97%
Rackk City Bikes71%
Pedal48%
Sugma33%
Jack It Up27%
E.N.T.E.R.T.A.I.N25%
PsiclePath19%
RHO Inc.19%
PeakPerformanceBros16%
Sigma13%
Munchy Bikes-13%
Wheelie Cool Bikes-98%

We'll see more about the SHVs when we get to the leaderboard.

Another area where there is convergence is around advertising. With an average of about 22%,, the regions have not succumbed to advertising wars (which are often ruinous). 


Likewise, overall, quality seems to be much more regulated.

But there are differences between the regions. Retailer margins and COGs per SCU remain quite different between the regions, as does Idle Capacity (but not as much).

Another area of difference is Lost Sales. In China only E.N.T.E.R.A.I.N had lost sales. In the EU, the story is quite different with Munchy Bikes, PeakPerformanceBros and Jack It Up all having material lost sales (over $1m).

Most firms have their production under control, with typically 2-4 weeks of stock on the shelves.


And so to the big board.

FirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
Sugma$137.22$21,153,606$91,865,53182,8732,000,000$10.58$232,560,988$274,443,962$16,318,585$25,625,910
Rackk City Bikes$82.34$14,539,566$91,547,17963,8691,648,508$8.82$128,773,631$135,966,492$13,817,870$20,975,744
PsiclePath$60.86$4,825,685$46,409,79956,0812,000,000$2.41$107,804,602$121,715,759$12,842,415$10,782,224
Jack It Up$53.72$12,794,859$64,476,05143,1932,000,000$6.40$88,207,208$107,437,919$10,523,296$38,916,944
PeakPerformanceBros$48.57$16,150,355$91,125,91372,8692,000,000$8.08$83,804,200$97,147,201$12,921,513$56,133,051PsiclePath
Sigma$39.33$8,200,852$72,815,69068,9121,968,255$4.17$74,142,977$77,415,753$4,258,306$32,620,662
E.N.T.E.R.T.A.I.N$28.35$4,786,178$59,098,89358,7922,000,000$2.39$51,564,732$56,696,933$3,099,549$20,155,168Sugma
Wheelin N Dealin$21.48$7,705,237$62,690,47365,6641,696,614$4.54$36,069,444$36,463,236$6,512,873$15,992,690
RHO Inc.$7.32$1,866,719$45,381,07646,4992,000,000$0.93$13,368,378$14,630,222$725,930$11,931,505Sigma
Munchy Bikes$3.40$604,316$35,620,82439,1842,400,000$0.25$6,312,065$7,849,369-$213,252$9,589,013Rackk City Bikes
Pedal$1.90$2,341,528$23,407,27230,4532,000,000$1.17$3,790,648$3,790,648$1,902,284$7,626,520Rackk City Bikes
Wheelie Cool Bikes$0.01-$2,652,228$9,026,91515,3092,800,000-$0.95$28,000$28,000-$13,762,074$1,531,674

Oh, in case you didn't know, after the next rollover, the results won't be available until after my report.

On efficiency

As the markets slow (see how the revenue graph is flattening), its ever more important for firms to be efficient. That said, whilst sales revenue (across both regions) is about $660m, there is still a consumer surplus of about $1bn in each of the regions. There is still plenty of room to grow ... it's just harder to grow.

But as I say, efficiency is ever more important, and firms are definitely responding to that challenge.  Firstly, firms are getting their capacity under much better control. They are figuring out how to get more out of what they have, and how to better predict the capacity they need.

As  result idle time across the regions is down. However, too many firms still have a lot of slack ... being unsure/uncertain of the sales they might achieve, they are keeping idle capacity around in case their sales are (up to 20%) higher. That's a lot of excess capacity; just think, to use that extra capacity (of say, 20%) the estimates for every model bike a company makes would need to be out by 20%. Whilst one or two models might be that wrong, is the firm's forecasting so out on all the models. No, firms are better than that now.

Evenso, we see the cost of manufacturing come down. With a number of firms having costs of production below that of their starting costs; good on you Munchy Bikes, PeakPerformanceBros, Pedal, and Wheelie Cool Bikes who (in no particular order) have COGM per SCU of under $500. A big 'shout out' (do people do that), to Wheelie Cool Bikes who are the cheapest producers by a long way. All these firms have struggled with serious problems and so have put in a lot of effort to learn how to make bikes really efficiently. 

In other expenses, firms are getting a more of handle on advertising.  Well, the EU is starting to rein things in; China is still increasing its advertising in absolute dollars. But looking at the Advertising to Sales ratio, the picture is clearer; but there is still work to be done here. Everyone in the EU except PeakPerformanceBros are still spending too much, and in China only SUGMA and Wheelin N Dealing are really on top of their advertising.

There is a similar story to be told about quality. But in this regard, it is China who are still the big spenders. Analysts think that some firms—Rackk City Bikes, Jack It Up, Wheelie Cool Bikes, Wheelin N Dealin, and E.N.T.E.R.T.A.I.N—are over doing quality.

One of the ways firms are trying to boost their profit is by slashing the margin they give to retailers. This downward trend (that everyone seems to be pursuing), must be having negative consequences.  I wonder if their distribution reach has been sacrificed. 


The net effect of all of this is that the two regions are pretty much worth the same. But that shouldn't be taken as a good thing. As noted, there is a substantial consumer surplus, and even setting that aside some firms had lost wholesale sales (they could have sold more bikes).

FirmLost Wholesale Sales (millions)
E.N.T.E.R.T.A.I.N4.4
Munchy Bikes3.2
PsiclePath1.6
Pedal1.3
Sigma0.7

That would translate into some good profit ... just look at the margins of those firms.

FirmProfitRevenueMargin
Rackk City Bikes$16,689,151$88,504,24719%
Sugma$17,204,042$92,595,09519%
PeakPerformanceBros$12,849,655$85,828,60015%
Jack It Up$7,669,583$60,117,00513%
Sigma$6,216,014$61,981,05310%
PsiclePath$4,816,352$50,281,64410%
Wheelie Cool Bikes$938,125$10,108,1539%
RHO Inc.$3,941,611$47,189,8068%
E.N.T.E.R.T.A.I.N$3,863,063$55,311,1057%
Pedal$1,548,396$22,474,3397%
Munchy Bikes$2,161,888$34,859,0886%
Wheelin N Dealin$1,668,437$52,755,3713%

And so that takes the conversation to one of profit. Not only are the regions profitable, but every firm is now making a profit. Well done all. The challenge now is to keep doing that. 

But to return to the issue of efficiency, at the end of the day, in terms of SCU and Profit, the regions are getting better.

This is even more evident when we look at it on a firm-by-firm basis.

FirmProfitCapacityProfitPerSCU
Rackk City Bikes$16,689,15164,784$257.61
Sugma$17,204,04284,513$203.57
Jack It Up$7,669,58341,493$184.84
PeakPerformanceBros$12,849,65573,603$174.58
Sigma$6,216,01461,904$100.41
RHO Inc.$3,941,61145,671$86.30
E.N.T.E.R.T.A.I.N$3,863,06353,439$72.29
PsiclePath$4,816,35272,667$66.28
Munchy Bikes$2,161,88836,336$59.50
Wheelie Cool Bikes$938,12517,086$54.91
Pedal$1,548,39631,136$49.73
Wheelin N Dealin$1,668,43760,729$27.47

To refresh you memory, when you took the firms over they were doing $106 in profit per SCU. (But some firms have been 'in the wars' since then).





And so to the leaderboard.

IndustryFirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
ChinaSugma$103.39$17,204,042$92,595,09584,5132,000,000$8.60$183,246,436$206,776,413$14,308,435$25,519,273
European UnionPsiclePath$51.16$4,816,352$50,281,64472,6672,000,000$2.41$90,130,326$102,322,285$8,014,337$5,754,275
European UnionRackk City Bikes$48.03$16,689,151$88,504,24764,7841,821,637$9.16$85,463,699$87,506,733$16,554,398$32,641,916
European UnionJack It Up$42.39$7,669,583$60,117,00541,4932,000,000$3.83$70,925,290$84,771,391$5,716,178$26,769,636
European UnionPeakPerformanceBros$41.88$12,849,655$85,828,60073,6032,000,000$6.42$71,634,664$83,764,665$10,484,221$37,445,629PsiclePath
ChinaSigma$34.77$6,216,014$61,981,05361,9041,972,425$3.15$67,399,875$68,585,804$6,840,045$28,092,986RHO Inc
ChinaE.N.T.E.R.T.A.I.N$22.71$3,863,063$55,311,10553,4392,000,000$1.93$43,116,212$45,418,212$2,363,359$19,923,146Sugma
ChinaWheelin N Dealin$10.91$1,668,437$52,755,37160,7291,875,125$0.89$20,257,448$20,461,204$482,949$7,498,599
ChinaRHO Inc.$6.17$3,941,611$47,189,80645,6712,000,000$1.97$12,109,228$12,347,268$3,188,681$9,542,282
European UnionMunchy Bikes$3.89$2,161,888$34,859,08836,3362,000,000$1.08$6,372,834$7,770,384$1,488,456$10,960,388Rackk City Bikes
European UnionPedal$1.28$1,548,396$22,474,33931,1362,000,000$0.77$2,555,076$2,555,077$1,244,754$5,115,227
ChinaWheelie Cool Bikes$0.44$938,125$10,108,15317,0862,800,000$0.34$1,220,789$1,220,788$764,133$3,788,532** Sold **

What do you see happening here? Leave your comments below.

More take over activity

In a move that will probably surprise many observers, Sugma has done a friendly takeover of E.N.T.E.R.T.A.I.N. With the very solid increase in E.N.T.E.R.T.A.I.N.'s SHV (from $13.24 to $18.30), Sugma has recouped much of the premium it had to pay in order to do the takeover. Clearly this is a move that they hope will cement their position on the leaderboard (having topped the board last year).  So what do we see overall. Well there has been some movement on the board.


Now Sigma (not Sugma) may be concerned about dropping down two places, but let's look at the change in SHV of each firm.

IndustryFirmIncrease in SHV
European UnionPedal8500%
ChinaSigma121%
European UnionRackk City Bikes48%
ChinaE.N.T.E.R.T.A.I.N38%
European UnionPeakPerformanceBros30%
ChinaSugma29%
European UnionJack It Up28%
European UnionPsiclePath25%
ChinaWheelin N Dealin-4%
European UnionMunchy Bikes-23%
ChinaRHO Inc.-36%
ChinaWheelie Cool Bikes-73%

In this regard, PedalSigma, and Rackk City Bikes should be feeling good about the difference they've made to their SHV. Anyway, more about SHV when we get to the leaderboard later on in this report.

IndustryFirmChangeInPost
European UnionRackk City BikesUp 1 place
ChinaE.N.T.E.R.T.A.I.NUp 1 place
ChinaWheelie Cool BikesUp 1 place
ChinaSugmaNo movement
European UnionPsiclePathNo movement
European UnionPeakPerformanceBrosNo movement
European UnionJack It UpNo movement
ChinaWheelin N DealinNo movement
European UnionMunchy BikesNo movement
ChinaRHO Inc.No movement
ChinaSigmaDown 2 places
European UnionPedalDown 1 place

Revenue is always good place to start. In the EU it certainly looks like the growth in revenue is tapering off. That probably means that the markets aren't growing as much as they where, so competition for customers is probably going to get fierce. It won't be the case that firms can grow market share by 'winning' uncommitted customers. Instead, they are going to have to take customers away from their competitors.

No doubt China will also begin to top out in a similar way.

Nevertheless, both China and the EU are producing a similar level of profit overall (with China being more profitable in absolute terms and looking even better if one considers profit as percentage of sales).

At the level of individual firms, there is still quite a spread of profitability.

IndustryFirmProfitRevenueMargin
ChinaSigma$12,986,906$56,777,30123%
ChinaSugma$11,818,819$94,572,72512%
European UnionPeakPerformanceBros$9,902,611$84,263,23712%
European UnionRackk City Bikes$8,346,108$81,769,42410%
European UnionJack It Up$6,434,443$57,978,84811%
ChinaE.N.T.E.R.T.A.I.N$4,532,311$51,446,8949%
European UnionPsiclePath$2,634,866$52,739,2835%
ChinaRHO Inc.$2,315,730$45,356,5205%
ChinaWheelin N Dealin$2,046,567$45,584,4814%
European UnionMunchy Bikes$992,044$32,076,3843%
European UnionPedal-$1,671,352$20,819,838-8%
ChinaWheelie Cool Bikes-$3,985,044$12,114,653-33%

It's nice to see one firm (Sigma) over the 20% mark, with Sugma, PeakPerformanceBros, Rackk CIty Bikes, and Jack It Up all doing 10% or more. All the other firms will be generating less in profit than the interest rate at the bank.

Increasingly operational excellence is going to matter as customers (and revenue) become harder to acquire. So, it good to see that China isn't overspending (so much) on quality. Chine does have a rather short cycle time. I wonder if it is too short.

Overall, making bikes in China remains an expensive exercise compared to the EU.

That said, a big shout out to Pedal and RHO Inc; they are the lowest cost producers by far (and just a dollar or two different from one another).

At nearly three times the COGM per SCU of Pedal or RHO Inc, it costs Wheelie Cool Bikes over $1,300 to produce one SCU. The quality of the bikes they produce is 96%. Wow.


The other area that contributes to costs is, of course, ones capacity. Whilst the EU has been selling capacity it still has over 20% idle time. I wonder if anyone is brave enough to calculate the cost of all that idle time and post here.

Not only is the EU a big spender on capacity, it is also a big spender on advertising. Considering the revenue that the two regions generate, is the $15m extra spending (by the EU) worth it?

Both regions are spending 20% (or more) of their revenue on advertising. Hmmm.

But the good news (is it really good news) is that the consumer continues to grow. What will the regions do about that.

And so to the leaderboard. 

FirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
Sugma$75.39$11,818,819$94,572,72582,2142,000,000$5.91$134,838,110$150,774,452$12,778,106$19,898,868
PsiclePath$46.58$2,634,866$52,739,28371,3662,000,000$1.32$82,085,890$93,169,490$2,714,185-$1,308,456
PeakPerformanceBros$37.74$9,902,611$84,263,23777,4862,000,000$4.95$67,174,436$75,474,436$7,966,934$24,945,126Psicle Path
Jack It Up$35.18$6,434,443$57,978,84838,8072,000,000$3.22$61,407,144$70,358,144$4,934,142$22,692,214
Sigma$26.51$12,986,906$56,777,30146,5291,979,690$6.56$51,773,999$52,493,493$11,531,873$30,732,644
Rackk City Bikes$19.89$8,346,108$81,769,42475,9082,012,695$4.15$39,830,691$40,031,960$7,063,594$18,515,508
E.N.T.E.R.T.A.I.N$18.30$4,532,311$51,446,89452,6932,000,000$2.27$35,780,698$36,600,698$3,374,638$17,156,023Sugma
Wheelin N Dealin$11.46$2,046,567$45,584,48149,1802,000,000$1.02$22,822,792$22,922,791$1,021,600$11,859,184
Munchy Bikes$4.20$992,044$32,076,38440,4032,000,000$0.50$7,138,170$8,408,670$400,060$6,606,833Rackk City Bikes
RHO Inc.$2.68$2,315,730$45,356,52044,0342,000,000$1.16$5,139,330$5,355,731-$3,322,844$7,278,606
Pedal$0.86-$1,671,352$20,819,83830,5622,000,000-$0.84$1,722,144$1,722,144-$1,671,352$3,218,150
Wheelie Cool Bikes$0.26-$3,985,044$12,114,65329,2412,800,000-$1.42$737,744$737,743-$4,842,469$2,287,387Rho Inc

GIven everything that's been said so far, it will be no surprise that Sugma is at the top of the board. Look at their sales ... $94m. Tidy. BUT, that didn't produce the top profit. That honour goes to Sigma. One of my rules of thumb is "Where profit goes, so goes SHV", so I'm really curious to see how much Sigma can increase its SHV, and how high up the leaderboard it can go. Clearly, they can overtake  Jack It up, but could they also catch PeakPerformanceBros? Sigma will need to really grow their sales to do that.

Returning to Sugma, when I look at their key figures (or at least what I think of key figures), it's interest to see that that most of them are in the medium zone; they're running a very balanced bike.

On the other hand, the number two firm,  PsiclePath is less balanced, and like all the firms in the EU they are spending big on advertising. That's also true for their subsidary PeakPerformanceBros who are the biggest spenders on advertising of any firm in any region. I wonder where on the 'curve' they think they are. Without the contribution of PeakPerformanceBros to PsiclePath's SHV (about 37 of their $46 dollars), it's hard to know where they would lie on the table. That said, both will need to sprint hard to catch Sugma.

Jack It Up, having sold Pedal have kept their place on the leaderboard. Given the tidy turn around by Pedal, do they regret that sale? Pedal seem to have things under control and are turning their bike around. Good on them, I say. As an aside, to Pedal, nice quality rating ... but I wonder if you are spending too much on quality.

Jack It Up are being tailed by Sigma. I'm still smiling over the $12m profit they made. Yes, they've gone a little crazy in their marketing, but in many ways they a doing the same as Sugma in as much as all their other key figures are in the medium zone.

Rack City Bikes remains in the middle of the pack. Maybe that's because their quality is high, their advertising is high, their promotion is high, and their cost of production is high. Maybe they need some of the cost discipline that Pedal have learnt. Again, this firm is benefiting from the effects of owning Munch Bikes, without whom they would probably have slid down the table.

Wheelin N Dealin seems stuck. There's been no real movement in their share price for 4 or 5 years. What will it take for them to turn in a more respectable profit than the 4% they are currently achieving. 

Have RHO Inc lost their way? Once the darlings of the leaderboard, they've seen a collapse in their share price. They're be some angst over that. 

At the bottom of the leaderboard is Wheelie Cool Bikes. They too seem a bit stuck, and slowly drifting towards insolvency ... owned by RHO Inc, once could buy both companies for about $11m. That doesn't seem too much, but could they then be turned around.





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
Takeover mania

The headline new has to be the three takeovers that occured. In China, RHO Inc are the new owners of Wheelie Cool Bikes. In the EU, Jack It Up has taken over Pedal. Both of these firms were at the bottom of the scoreboard, and if they can be turned around, they'll generate a handy boost to their parents' shareholder value. But, perhaps the biggest surprise was PsiclePath taking over PeakPerformanceBros—that's one way to eliminate the competition.  Of course, the immediate results are rather indeterminate; RHO Inc, Jack It Up, and PsiclePath have had to sacrifice a lot of profit (and even taken on debt) to make their moves. It will be in subsequent years that we see the real benefit of these takeovers (and whether the parent firms can add value to their subsidiaries).  As always, the question is one of quality of execution.

Seeing the takeovers, I was left wondering how many were friendly takeovers, and how many were hostile. Either way, I expect their will be a lot of talk taking place within and between boardrooms over the next couple of days.

So let's have a look at what's going on in a little more detail. The revenue both regions continues to increase, with firms in the EU extracting a lot more sales than their Chinese counterparts.

However, the situation is reversed when we look at the profit for each of the regions.  But we shouldn't be fooled by the performance of the EU in this regard; they've incurred bigger costs from their two takeovers (versus China's sole takeover).

One consequence of this is that the margins that each firm has generated (and particularly for RHO Inc, Jack It Up, and PsiclePath) are rather skewed.

L

IndustryFirmProfitRevenueMargin
ChinaSugma$6,252,586$67,867,3839%
European UnionPeakPerformanceBros$5,270,460$74,978,3577%
ChinaSigma$4,169,397$34,720,66312%
European UnionRackk City Bikes$2,317,151$70,210,9743%
European UnionMunchy Bikes$1,668,911$26,597,6286%
ChinaWheelin N Dealin$1,335,836$34,218,9004%
European UnionJack It Up$888,753$42,177,0302%
ChinaWheelie Cool Bikes-$888,722$19,993,533-4%
ChinaE.N.T.E.R.T.A.I.N-$930,060$33,714,721-3%
European UnionPedal-$4,921,957$26,906,164-18%
ChinaRHO Inc.-$5,300,229$52,391,267-10%
European UnionPsiclePath-$12,675,487$54,260,941-23%

Looking at the performance of PeakPerformanceBros, PsiclePath are probably concerned that subsidiary isn't returning enough (yet) to cover the interest on any loans they took out; but time is on their side.

Sigma and Sugma are likely to be smiling with the margins they are generating. That rivalry is like to run and run.

Whilst we might expect Pedal and Wheelie Cool Bikes to still be in turnaround mode, it's a surprise to see  E.N.T.E.R.T.A.I.N. drifting into a loss.

In the middle of the pack, Rack City Bikes, Munchy Bikes, and Wheelin N Dealin may be relieved not to be part of the flurry of takeover activity.

Out of interest I took the revenue of each of the firms that are owned and added it to their parents to see what their combined revenue looks like. And here it is:

IndustryFirmRevenue
European UnionPsiclePath$129,239,298
ChinaRHO Inc.$72,384,800
European UnionRackk City Bikes$70,210,974
European UnionJack It Up$69,083,194
ChinaSugma$67,867,383
ChinaSigma$34,720,663
ChinaWheelin N Dealin$34,218,900
ChinaE.N.T.E.R.T.A.I.N$33,714,721
European UnionMunchy Bikes$26,597,628

It's be interesting to see how, in the coming years, that translates into SHV. 

Firms should really be focusing on the quality of their execution. One area where we can clearly see this is when the consider the Cost of Goods (or COGs as I call them). Here we see that the EU is a much more cost effective producer, and that probably goes a long way to support the rather tidy gross margins that firms in the EU enjoy.


BTW, Wheelie Cool Bikes needs to get is manufacturing costs under control. they could learn a lot from PsiclePath (if they were owned by them).

Firms, in general, have continued to increase production; and give the level of sales, it makes sense that the EU would have the largest capacity.

But is all that capacity needed? Maybe not. 

In both regions there is too much capacity. Well actually the capacity needs to be redistributed; firms like Wheelin N Dealin need the extra capacity that someone like Sigma has.

Another area of inefficiency is the average cycle time; the larger the cycle time, the larger the costs incurred in manufacturing bikes.

So whilst China is incurring lower costs re cycle time, when one looks at the average quality of bikes being produced, China is spending too much on driving quality up. With the exception of RHO Inc, all the firms in China are producing HIGH or VERY HIGH quality bikes. Is that too high, I wonder.

In the EU, the story is reversed; only Racck City Bikes and Jack It up are doing high quality bikes; all the other firms are either LOW or MEDIUM when it comes to quality. Some are definitely too low.

At least the advertising to sales ratio seems sensible (and pretty even between regions). No advertising wars here. Yay!

One way firms in the EU get a bit of extra profit is by not passing on so much margin to their retailers. This is a double-edged sword. Cutting the margin can drive down ones distribution channels. I wonder what's the difference in that regard for China and the EU.

How good are firms at extracting money from the market .... hmmm. The markets have grown, and both regions have left over $700m on the table. There is still a lot of room to make money in both regions.

And so to the big board.

First, it's good to see that the firms at the bottom of the board seem to have stabilized their situation. They aren't quite out of the woods yet, but they are doing a lot of the right things.

At the top of the board we have Sugma who are getting close to $40 SHV. Then there is Jack It Up, PsiclePath, and Rackk City Cycles, all with SHVs over $20. If Jack It Up can actually jack up the price of Pedal, then they will be a forced to be reckoned with; that's also true for Psicle Path. 

PeakPerformanceBros could be a bit miffed at being permanently stuck (well for now anyway)  behind PsiclePath.

IndustryFirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
ChinaSugma$37.22$6,252,586$67,867,38353,2872,000,000$3.13$70,023,260$74,433,460$4,974,250$17,204,266
European UnionJack It Up$28.77$888,753$42,177,03047,7452,000,000$0.44$54,439,970$57,539,969-$5,822,560$7,949,155
European UnionPsiclePath$24.11-$12,675,487$54,260,94167,3002,000,000-$6.34$39,058,222$48,218,223-$12,613,920-$6,490,125
European UnionRackk City Bikes$20.94$2,317,151$70,210,97467,6272,251,579$1.03$47,140,305$47,140,306$1,120,267$7,175,790
European UnionPeakPerformanceBros$17.28$5,270,460$74,978,35776,7882,000,000$2.64$34,559,854$34,559,855$4,414,749$10,240,347Psicle Path
ChinaRHO Inc.$15.99-$5,300,229$52,391,26764,2252,000,000-$2.65$31,944,306$31,984,306-$7,659,890-$1,421,585
ChinaSigma$13.40$4,169,397$34,720,66335,9392,000,000$2.08$26,460,894$26,791,895$3,260,677$13,848,490
ChinaWheelin N Dealin$11.65$1,335,836$34,218,90037,2102,000,000$0.67$23,308,400$23,308,400$563,215$5,675,070
ChinaE.N.T.E.R.T.A.I.N$9.41-$930,060$33,714,72147,9392,000,000-$0.47$18,822,520$18,822,520-$1,865,313$6,258,694
European UnionMunchy Bikes$5.69$1,668,911$26,597,62832,5002,000,000$0.83$10,322,798$11,372,798$1,276,651$2,101,712
ChinaWheelie Cool Bikes$1.39-$888,722$19,993,53329,9432,500,000-$0.36$3,486,982$3,486,984-$888,722$6,388,661Rho Inc
European UnionPedal$1.05-$4,921,957$26,906,16435,0022,000,000-$2.46$2,098,436$2,098,436-$5,097,536$1,666,288Jack It Up
Spend, spend, spend!

There has been a lot of spending going on. And, as we will see, some firms are spending too much in comparison to the revenue they are generating. It's time for some firms to start cutting their coat to suit the cloth.


Let's start by looking at the revenue side of the equation. Both regions continue to track each other, and the gap isn't really changing. However, when we look at individual firms, we see a different picture.

IndustryFirmRevenue
ChinaRHO Inc.$56,058,395
European UnionRackk City Bikes$54,043,189
European UnionPsiclePath$50,540,929
European UnionPeakPerformanceBros$50,153,000
ChinaSugma$48,515,111
European UnionJack It Up$38,890,667
ChinaE.N.T.E.R.T.A.I.N$30,308,013
ChinaSigma$29,795,243
ChinaWheelin N Dealin$29,281,461
European UnionMunchy Bikes$25,805,999
ChinaWheelie Cool Bikes$23,180,711
European UnionPedal$21,748,067

The top of the table is dominated by the EU with 4 out of the 6 top slots. That's exactly the opposite of the bottom, where 4 out of bottom 6 slots are held by Chinese firms. 

When it comes to profit there has been some significant changes, The EU's profit has crashed from over  $22m to under $4m. That said, China's profit has also moved down. The firm-by-firm picture is rather different.

IndustryFirmProfitRevenueMargin
European UnionPsiclePath$7,564,089$50,540,92915%
European UnionJack It Up$5,130,534$38,890,66713%
ChinaRHO Inc.$4,741,598$56,058,3958%
ChinaSugma$4,400,413$48,515,1119%
ChinaWheelin N Dealin$1,526,905$29,281,4615%
ChinaSigma$1,099,806$29,795,2434%
European UnionRackk City Bikes$834,357$54,043,1892%
ChinaE.N.T.E.R.T.A.I.N$773,715$30,308,0133%
European UnionPeakPerformanceBros-$2,685,594$50,153,000-5%
European UnionMunchy Bikes-$3,528,010$25,805,999-14%
European UnionPedal-$3,641,414$21,748,067-17%
ChinaWheelie Cool Bikes-$5,004,467$23,180,711-22%

The super-normal profits of yesteryear are gone. No firm is returning anything like 20%, and only two firms PsiclePath and Jack It Up are over 10%. What is really surprising is PeakPerformanceBros; they generated a really tidy amount of revenue but still made a 5% loss.

Yes, there's been a lot of spending going on.

Part of that spending is on capacity. 

Europe has surged ahead building plant. The question, of course, is "Is there too much?"

Looking at the idle time, the answer seems to be "Yes", for the China, and "maybe" for EU.


China seems to have one factory to many (at least). There is going to be some mighty strong competition to try and fill all that spare capacity 

Our analysts would say that Munchy Bikes, Rackk CIty Bikes, PsiclePath and RHO Inc, all have too little capacity. Only PeakPerformanceBros, Kack It Up, and Wheelin N Dealin seem to have the right amount for their actual sales.

IndustryFirmProfitRevenueCapacity
European UnionPeakPerformanceBros-$2,685,594$50,153,00060,245
European UnionPsiclePath$7,564,089$50,540,92954,904
European UnionRackk City Bikes$834,357$54,043,18954,587
ChinaSugma$4,400,413$48,515,11147,960
ChinaE.N.T.E.R.T.A.I.N$773,715$30,308,01342,434
ChinaRHO Inc.$4,741,598$56,058,39541,720
European UnionJack It Up$5,130,534$38,890,66740,154
European UnionPedal-$3,641,414$21,748,06739,306
ChinaSigma$1,099,806$29,795,24336,666
ChinaWheelin N Dealin$1,526,905$29,281,46135,756
European UnionMunchy Bikes-$3,528,010$25,805,99931,137
ChinaWheelie Cool Bikes-$5,004,467$23,180,71129,267

The regions are pretty comparable in terms of the number of products; but there are differences. Some worlds have more 'lower cost' bikes and so they've not had to spend so much on R&D.

As an aside, I had forgotten that SmartSims had changed the rules and you can now only develop a couple of bikes at a time. It used to be you could develop as many as you could afford.


Somewhere in China ... someone is spending big on quality (you know who you are Wheelie Cool Bikes and Sugma). That really pulls the average up. Not even Jack It Up in the EU comes close to those levels of quality. Is it really paying off the extra investment?

The European Union seems to be spending about $20m more than China. But, because of the higher Chinese sales revenue, the advertising to sales ratio is, nevertheless, pretty similar across the two regions. That said, firms are spending a lot on advertising; I wonder where 'on the curve' they think they are.

.... and look at that cost of manufacturing. European bikes are about $100 cheaper than Chinese bikes (that's weird). In percentage terms, Chinese bikes are about 20% more expensive to produce. There is some differences in cycle time, but is that material ... (no pun intended)

What does matter is that the cost of manufacturing for Sugma and Wheelie Cool Bikes is really high. As already noted, manufacturing in China is really expensive (for all those firms). In the EU, most firms are okay, but a big shout-out goes to Munchy Bikes, who not only have the lowest manufacturing costs of any firm, but also gets classified as actually being a low-cost producer by our analysts.

One way firms are trying to compensate for big spending, is by cutting retailer margins. This is particularly true in the EU. I wish I knew the long-term consequences of that.

So, let's have a look at the the markets. Competition seems pretty fierce. PeakPerformanceBros have been spending big because they've now successfully launched five bikes. No doubt they are hoping to capitalize on that in the year to come.  

Look at all those European racing bikes. Did anyone say "Tour de France"? With 8 models in the segment, sales are over 127,000 bikes. In contrast, in China, there are seven models and sales of 136,000 bikes. It would have been more if RHO Inc had been able to produce another 4,000 or so bikes.

Hmmm, commuters. Psicle might be worried about their lost sales! The could have had much most ...

So how saturated is are the various segments? Good question. So remember, revenue in both regions are about $230m.

The consumer surplus for both worlds is over $600m ... and growing.  That's pretty big, and suggests there is a lot of room for growth. Firms could be 3 times larger than they are. And, given the way people are throwing money at advertising, I don't see the trend in the increase in consumer surplus slowing anytime soon.



Anyway, let's move to the big board. At the top we have PscilePath, JackItUp and RHO Inc

The are three things of note, and they all relate to takeovers. (you did realise you can do takeovers — that's been allowed since 2018)


First, except for PeakPerformanceBros there hasn't been much movement. The plunge in their SHV, has seen many firms move up the rankings by one. So, in many ways, there's not a lot of change.

Secondly,  But look at the revenue generated by PeakPerformanceBros! If I had the money, (PsiclePath, Jack It Up, maybe Rackk City Bikes), I'd be seriously considering buying PeakPeformanceBros; yes, they've some problems but how hard would it be to turn them around?  I doubt they will ever be cheaper.

RankIndustryFirmSHVSHV-ChangeProfitRevenueCapacitySharesEVACash
Up 1European UnionPsiclePath$36.0645%$7,564,089$50,540,92954,9042,000,000$6,208,494$15,956,336
Up 2European UnionJack It Up$28.9827%$5,130,534$38,890,66740,1542,000,000$3,885,992$16,033,155
No changeChinaRHO Inc.$28.3624%$4,741,598$56,058,39541,7202,000,000$3,738,541$15,327,579
Up 1ChinaSugma$26.3429%$4,400,413$48,515,11147,9602,000,000$3,458,676$13,663,924
Up 1European UnionRackk City Bikes$17.867%$834,357$54,043,18954,5872,251,579$47,512$9,293,850
Up 2ChinaSigma$14.47-11%$1,099,806$29,795,24336,6662,000,000$270,690$6,920,634
No changeChinaE.N.T.E.R.T.A.I.N$13.92-15%$773,715$30,308,01342,4342,000,000-$86,392$8,638,381
Down 7European UnionPeakPerformanceBros$12.61-54%-$2,685,594$50,153,00060,2452,000,000-$4,158,849-$9,339,226
No changeChinaWheelin N Dealin$11.84-5%$1,526,905$29,281,46135,7562,000,000$881,833$6,231,350
No changeEuropean UnionMunchy Bikes$6.03-45%-$3,528,010$25,805,99931,1372,000,000-$4,421,910$3,007,780
Up 1European UnionPedal$0.49-94%-$3,641,414$21,748,06739,3062,000,000-$4,814,605-$3,528,300
Down 1ChinaWheelie Cool Bikes$0.01-100%-$5,004,467$23,180,71129,2672,000,000-$21,080,310-$2,477,011

Thirdly, at the bottom of the table are Pedal (EU) and Wheelie Cool Bikes (China).  For those who know what they are doing, either firm could be a good purchase. They'll take a little more effort to turnaround than, say, PeakPerformanceBros, but the upside could be huge (and the management teams seem like good people with whom to work). 

Overall, it looks like firms need to get on top of their spending ... or at least get their spending inline with the revenue they are bringing in.

It's been an interesting rollover. The worlds remain pretty even, but where there are differences, the seem to be largely a function of people entering into new markets and having (or not having) competition in those markets. But before we dive into that, let's look at the big picture



So, in terms of sales, China and EU remain pretty close to one another; there's only about 10% difference in the revenue each region is generating. That suggest that, over all, the firms face pretty similar opportunities.



Having the same sort of revenue generating capacity, the picture is strikingly difference when it comes to profit; China—for whatever reason—seems to be nearly twice as profitable as the European Union.

That's kind of surprising because the actually COGS in China is noticeably higher than that in the EU. Yes, both regions are making in-roads into reducing their production costs, but the EU seems to be doing a much better job of that. So where are these extra costs coming from? 

Well part of it must be the spending that China has done on new capacity, where there is about a 10% difference in capacity between the two regions.

Nevertheless, China doesn't have a  lot of idle capacity (certainly not 10% more that the EU), so they must be producing a lot more bikes (well, technically SCU, I suppose). I'll leave to folk in the individual regions to comment on that.



What China is spending a good chunk of money on is Quality.  The quality-gap between the two regions is distinct, and is a function of—I think—the different (aggregate) strategies the regions are pursuing. More on that later.

The difference sure ain't in the advertising. The costs are pretty much in-line with the sales in each region.

Another thing that is different is that the EU is more stingy with its retailers. 

Let's take a little look at that revenue again, and the difference in the strategies of the regions. First, the EU has a couple of big 'revenue generating firm'.  And whilst both regions have the same number of products, they are concentrated quite differently. 

IndustryFirmRevenue#Products
European Union
PeakPerformanceBros
$46,271,364
** 3 **
European Union
PsiclePath
$41,716,668
   2
China
RHO Inc.
$38,926,707
** 3 **
European Union
Rackk City Bikes
$35,584,256
** 3 **
European Union
Jack It Up
$34,804,758
   2
China
E.N.T.E.R.T.A.I.N
$31,612,702
   2
China
Sugma
$31,390,389
   2
China
Sigma
$27,121,751
   2
China
Wheelie Cool Bikes
$25,397,696
   2
China
Wheelin N Dealin
$24,416,639
   2
European Union
Munchy Bikes
$22,110,661
   2
European Union
Pedal
$15,113,560
-- 1 --

The difference is even more stark when you look at the perceptual maps of the two regions. Firms in the EU have gone into more markets than those in China ... and when they have gone into markets, they've not face any real competition. This gives them the opportunity to 'cream it'. And some are definitely doing that.

It's kind of surprising to me, that Pedal didn't launch a new bike (or more). I wonder what's going on there.

As an aside, Munchy Bikes seems to have a good strategy (in many ways), but it's not clear if they are executing well. (Mind you, they are still rated HOLD). 

That's probably true for PeakPerformanceBros who didn't have enough stock.  I wonder whats going on with Adv3.




Any how, let's see how that translates into cold hard numbers.

There's a lot to like about PsiclePath and JackItUp. Look at that margin. Very nice. If the grow their sales/capacity/etc they will be unstoppable. Again, it's down to execution. I do like their profit too.

RHO Inc, and PeakPerformanceBros have a reasonable margin in the 10-19% range. 

At the bottom is Pedal and Wheelie Cool Bikes who are both spending more than they are earning. They'll need to cut their cloth to fit.

IndustryFirmProfitRevenueMargin
European UnionPsiclePath$9,473,251$41,716,66823%
European UnionJack It Up$7,140,056$34,804,75821%
ChinaRHO Inc.$5,191,912$38,926,70713%
European UnionPeakPerformanceBros$4,896,132$46,271,36411%
ChinaSugma$4,466,902$31,390,38914%
ChinaE.N.T.E.R.T.A.I.N$3,408,687$31,612,70211%
ChinaSigma$1,758,176$27,121,7516%
European UnionMunchy Bikes$1,406,673$22,110,6616%
European UnionRackk City Bikes$1,145,632$35,584,2563%
ChinaWheelin N Dealin$641,601$24,416,6393%
European UnionPedal-$984,841$15,113,560-7%
ChinaWheelie Cool Bikes-$2,603,071$25,397,696-10%

Turning to how much capacity firms have, Sugma has the largest factory. I wonder what their idle time looks like.

IndustryFirmProfitRevenueCapacity
ChinaSugma$4,466,902$31,390,38943,758
European UnionRackk City Bikes$1,145,632$35,584,25641,384
ChinaE.N.T.E.R.T.A.I.N$3,408,687$31,612,70239,092
ChinaSigma$1,758,176$27,121,75138,841
European UnionPsiclePath$9,473,251$41,716,66838,810
European UnionPeakPerformanceBros$4,896,132$46,271,36438,316
ChinaRHO Inc.$5,191,912$38,926,70738,192
ChinaWheelin N Dealin$641,601$24,416,63935,191
European UnionMunchy Bikes$1,406,673$22,110,66132,066
European UnionPedal-$984,841$15,113,56031,208
European UnionJack It Up$7,140,056$34,804,75830,717
ChinaWheelie Cool Bikes-$2,603,071$25,397,69630,208

And so to the big board, and at the top is PeakPerformanceBros If they'd had a margin as good as Jack it up, they'd be hard to stop. But there is a pack close behind them of PsiclePath, RHO Inc, Jack It Up, and Sugma Interestingly, as I dig into the data, RHO Inc is the firm were everything looks pretty reasonable and solid; all the other firms have some area (or areas) where things are out of wack. RHO Inc just needs to do more.

Rackk City BikesE.N.T.E.R.T.A.I.N, and Sigma are in the middle really. For E.N.T.E.R.T.A.I.N, this represents something of a move upward, but I suspect Sigma and Rackk City Bikes are a little disappointed in their performance.

Of the four firms at the bottom, I'm curious to see how they turn things around ... it's not desperate yet, but they are in danger of getting too far behind.

IndustryFirmSHVProfitRevenueCapacityCash
European UnionPeakPerformanceBros$27.25$4,896,132$46,271,36438,316$9,737,184
European UnionPsiclePath$24.88$9,473,251$41,716,66838,810$20,320,174
ChinaRHO Inc.$22.87$5,191,912$38,926,70738,192$10,613,206
European UnionJack It Up$22.85$7,140,056$34,804,75830,717$14,828,472
ChinaSugma$20.40$4,466,902$31,390,38943,758$7,529,844
European UnionRackk City Bikes$16.74$1,145,632$35,584,25641,384$6,818,033
ChinaE.N.T.E.R.T.A.I.N$16.32$3,408,687$31,612,70239,092$9,017,640
ChinaSigma$16.22$1,758,176$27,121,75138,841$4,616,435
ChinaWheelin N Dealin$12.47$641,601$24,416,63935,191$3,183,291
European UnionMunchy Bikes$11.02$1,406,673$22,110,66132,066$7,373,266
ChinaWheelie Cool Bikes$9.53-$2,603,071$25,397,69630,208$1,511,575
European UnionPedal$8.69-$984,841$15,113,56031,208$3,012,881

Digging into the results, is Sugma copying Simga too much. They both Sigma and Sugma have ended up with too much unsold product. But that's normally easy to fix. 

So, no-one is really in the commuter business; with the continuing rise of e-bikes (and e-scooters), I wonder if that's a good thing ... or is it just a thing. 

Meanwhile, back in the EU, there seems to be a lot of lost sales for most folk. Is that a consequence of being lucky or unlucky (or good). I'll leave that to you to decide.


It's neck and neck

With the first rollover completed it's neck and neck with China inching ahead of the European Union.  This situation is kind of replicated if we look at individual firms–The European Union's Rackk City Bikes just taking first place, very closely followed by China's Sigma. Any way, more on that later.

What I find interesting is that when we look just a revenue, Rackk City Bikes are third behind  Sigma and PeakPerformanceBros (Nice work!)

IndustryFirmRevenue
ChinaSigma$22,648,405
European UnionPeakPerformanceBros$22,065,676
European UnionRackk City Bikes$21,918,513
ChinaWheelin N Dealin$19,926,825
European UnionPsiclePath$19,636,737
ChinaE.N.T.E.R.T.A.I.N$19,223,699
European UnionJack It Up$18,819,599
ChinaSugma$18,265,486
ChinaRHO Inc.$17,935,661
European UnionPedal$15,792,873
ChinaWheelie Cool Bikes$15,050,040
European UnionMunchy Bikes$12,790,229


The difference between China and the European Union, starts to look more distinct when we turn our attention to profit. Despite having higher revenue, China has lower profit ... the question has to be, "What are they spending all their money on?"

Looking at profit (and also margin) at the the level of the firm, Rackk City Bikes bubbles to the top with a healthy 10% margin, whereas PeakPerformanceBros slide to fourth position. Again, I wonder where the money went.

IndustryFirmProfitRevenueMargin
European UnionRackk City Bikes$2,285,455$21,918,51310.4%
ChinaSigma$1,975,098$22,648,4058.7%
European UnionJack It Up$1,393,711$18,819,5997.4%
European UnionPeakPerformanceBros$1,315,959$22,065,6766.0%
ChinaSugma$1,132,669$18,265,4866.2%
European UnionMunchy Bikes$1,035,221$12,790,2298.1%
European UnionPedal$1,021,756$15,792,8736.5%
ChinaWheelin N Dealin$930,984$19,926,8254.7%
European UnionPsiclePath$711,991$19,636,7373.6%
ChinaE.N.T.E.R.T.A.I.N$579,157$19,223,6993.0%
ChinaWheelie Cool Bikes$561,999$15,050,0403.7%
ChinaRHO Inc.$129,893$17,935,6610.7%

As I look at the profit, I notice that Chinese firms have 4 of the bottom five places; even though some of those firms have pretty respectable sales revenue.

Is MunchyBikes the quite sleeper here? Their sales don't look so hot, but their margin is very respectable (by margin, they rank third). If they sort out their sales they'll be chasing (and possibly overtaking Sigma).  If anyone in the EU dig's into the figures, I bet they find that Munchy Bikes is pretty efficient at most of what it does.

One thing that most folk are spending money on is advertising. No surprises there, and it's interesting to see that both the EU and China have doubled their spending on advertising (compared to their level of sales). I've said to a few teams, it's interesting to think what is the "right" amount to spend on advertising (as opposed to how much can be spent). 

Taking a bit of a deep dive into the numbers, our analysts rate every firm in the EU (in regards to advertising) as LOW (as they do with Sigma and Sugma in China). The other Chinese firms, I'd rate as MEDIUM for advertising. (As an exercise, for those with time on their hands ... how do you interpret what the analysts say ... is LOW good/bad/indifferent/or just a thing; likewise, is MEDIUM good/bad/indifferent/or just a thing?).

When it comes to every firms' Corporate Brand Rating, I say it was definitely LOW. I know most Marketing Director's feel the have a lot on their plate, and it may be hard to find time to dig into that (and maybe you have bigger fish to fry). 

I'm dwelling on advertising a bit, as it is often the first thing that goes a bit out of control for most firms. Hence, my slight obsession with what is the right number for advertising.

As an aside, I won't say anything about 'lost sales' that tends to be pretty obvious to most folk/teams.

::cough:: At this point I accidentally published the page before I finished .... oops

Anyhow, carrying on. I have never seen a graph like this one for the average retailer margin. The decimal points are a total surprise to me. Overall, the industries are so close to one another, that decimals are needed to distinguish between them.  I wonder if that's generally true of the firms (I won't peak).


COGs (dollars) per SCU. Pretty much everyone is going up. It's getting more expensive to make bikes. That follows as people start to spend on things like setup time reduction, maintenance, and quality (huh? ... what about that great book 'Quality is Free', was it wrong),  Hopefully, the slew of new bikes that are likely to be released next year will have materially (pun intended) lower prime costs that will make a dent in these numbers.

Yeah, quality is on its way up. How high will it go?

FYI our analysts say that Wheelie Cool Bikes (China) has the lowest quality ... I wonder if that fits with their strategy. If so, no worries.

One number which is pretty challenging is that for the average cycle time. Here the difference is small but significant. It suggests that China a more efficient producer ... which is odd considering the COGs graph we looked at earlier. Well actually, it signals they are trying to be more efficient (and the COGs might be accounted for by their slightly higher quality). The number for cycle time looks solid at the moment, but the challenge will come in the years to come as firms start to spread into new markets and are producing an ever wider variety of bikes. Keeping the cycle time low is relatively straightforward with one bike, but it gets increasingly difficult with each additional type of bike being produced. Ops Directors will earn their money with this. 

So here we are at the end of my take on what is happening. There is a lot I'm not sure of at the moment; which firms know what they are doing, which firms are lucky–it'll be a mystery to me for a few years/rollovers yet.  

And so, to the big board. As an exercise, try and look at the numbers and decide which of these firms you would BUY, HOLD, or SELL if you were an investor.

PeriodIndustryFirmSHVProfitRevenueCapacitySharesEPSEPSCapitalizationTotalSHVEVACash
2019European UnionRackk City Bikes$15.56$2,285,455$21,918,51324,1042,000,000$1.14$15.56$31,110,806$31,110,805$1,783,249$5,624,879
2019ChinaSigma$15.42$1,975,098$22,648,40529,3752,000,000$0.99$15.42$30,836,132$30,836,132$1,471,634$5,793,610
2019European UnionJack It Up$14.48$1,393,711$18,819,59923,1672,000,000$0.70$14.48$28,952,284$28,952,284$894,336$6,418,972
2019ChinaWheelin N Dealin$14.00$930,984$19,926,82529,3232,000,000$0.47$14.00$27,994,998$27,994,998$422,377$4,933,766
2019ChinaSugma$13.96$1,132,669$18,265,48623,6332,000,000$0.57$13.86$27,725,202$27,925,201$624,073$4,200,985
2019ChinaRHO Inc.$13.17$129,893$17,935,66125,1132,000,000$0.06$13.17$26,334,524$26,334,524-$383,977$3,031,215
2019European UnionPedal$13.09$1,021,756$15,792,87322,5962,000,000$0.51$13.09$26,174,086$26,174,086$515,451$4,534,093
2019European UnionMunchy Bikes$12.94$1,035,221$12,790,22923,2242,000,000$0.52$12.94$25,887,586$25,887,586$529,185$2,554,244
2019ChinaWheelie Cool Bikes$12.67$561,999$15,050,04023,3732,000,000$0.28$12.67$25,332,198$25,332,197$51,145$4,794,656
2019ChinaE.N.T.E.R.T.A.I.N$12.28$579,157$19,223,69926,3572,000,000$0.29$12.28$24,557,846$24,557,846$69,480$5,514,452
2019European UnionPeakPerformanceBros$10.21$1,315,959$22,065,67629,1292,000,000$0.66$10.21$20,422,838$20,422,838$678,094$10,176,020
2019European UnionPsiclePath$9.60$711,991$19,636,73731,4082,000,000$0.36$9.60$19,196,072$19,196,072$76,526$7,933,866

For me, I'm really curious about PeakPerformanceBros and their $10m in cash; that gives them a type of flexibility that other firms don't have right now. The tension there, is that other firms have probably already invested in "their future".  That is a real tension, and either approach can be successful (once again, it's down to how well people excecute on things.

So the top three firms are Rackk City Bikes, Sigma, and Jack It up. But honestly, none of the leaders are that far ahead of the rest of the firms.  For example, most of the firms have revenues north of $15m. At this stage, a single year/rollover could see any of them topping the table. For Munchy Bikes, it will probably take them two years/rollovers to get into contention. 

Overall, China and the EU seem pretty evenly balanced; the markets in each world are developing at pretty at the same pace. It really makes it hard to make predictions.

Reading the news, globally commuter bikes seem to displaced by electric bikes; it's happening everywhere—just look about town—and none our firms in the EU or China have access to the technology to play in that market. Matt Ensor, one of the best transportation engineers I know (even though he calls himself a sociologist) is very bullish about the future of electric bikes and their impact on the design of cities. I wonder how many of you have an e-bike, or an e-scooter (or do you rent them by the hour).

Finally, our analysts say HOLD Rackk City Bikes, Sigma, and PeakPerformance Bros. Did that match your thoughts?

The end of the begin

With the second rollover done, we are moving towards the end of the beginning of the course. One of the interesting things I'm seeing as I wander around the labs and talk to people is the general level of sophistication that people are bringing to bear to running their companies. It's also interesting the wide variety of approaches people are using, and hence the different issues that are 'up' for each of the teams. Where I can, I try and help each team with what it seems to need as they pursue their strategies.  But one common thing I seem to have talked to most teams is the issue of debt. Consequently, this graph of debt was a surprise to me.

Why are some many firms intent on paying off debt? I don't understand it. Yes, as a individual it is a good thing to have little or no debt; but that's because much of the time the debt is used for non-productive resources. For firms–who can use the borrowed money to generate more money–debt isn't a bad thing. Of course, even in a firm debt can get out of hand, but for where most companies are right now debt (at a 20% or even 40% level) isn't a bad thing. 

Some firms are generating some big margins (details later) and all but the least performing of those firms would be better off if they had kept or even increased their debt ratio ... maybe they aren't increasing it as quickly as their equity is increasing (I haven't checked).

Anyway, it will be interesting to see if that changes when we get to the main event next week.

So what am I seeing and what am I thinking about as I look at the results. First, the worlds are diverging. Some definitely seem to be better places to be in than others. Let's start by looking at Sales Revenue. Wellington is certainly moving ahead of Christchurch and Dunedin in terms of sales. But does that convert into profit.

Well actually it does. But the striking thing here is how close together are Wellington and Christchurch and how (after last year's fall) Dunedin is struggling to catch-up. 

Meanwhile. I'm always curious about advertising, and I'm not surprised to see all three regions increasing their spending in this area. Of course, the question underneath this is, "How much is enough?". When we compare the ratio of sales to advertising a somewhat different picture appears.

But it makes sense as Dunedin isn't hitting the same levels of revenue as the other regions.

I'm also interested in the efficiency of each of the regions. And here there is a very distinct difference between the regions, with Wellington appearing to be much more efficient in generating revenue from each SCU it has. As an aside, I also start to think about the capacity of each region.

So, Dunedin has been a little more conservative in growing its manufacturing capacity.

And yet, only Wellington has actually reduced its idle time.

But let's turn now to some numbers.

IndustryFirmSalesCash
WellingtonSigma$61,407,408$23,869,237
WellingtonTau$39,368,754$15,413,986
ChristchurchIndigo$38,550,316$19,867,954
ChristchurchWheelin N Dealin$36,756,722$10,193,230
ChristchurchEpsilon$33,294,315$18,984,984
DunedinE.N.T.E.R.T.A.I.N$32,071,218$15,050,966
DunedinRho$31,609,602$5,563,968
WellingtonUpsilon$28,105,883$3,414,183
DunedinPsicle Path$24,315,952$194,020
DunedinPeakPerformance Bros$23,595,108$8,216,462
ChristchurchWheelie Cool Bikes$19,994,709$5,126,699
Wellingtonswerve.$14,857,970$7,526,785

The largest firms are in Wellington and Christchurch ... true, but its worth noting the 'pack' of companies in the middle–Wheelin N Dealin, Epsilon, E.N.T.E.R.A.I.N, Rho, Upsilon–that is a tight pack and there could be a great deal of movement there. So the leaders (Sigma and Tau) shouldn't be feeling too comfortable about their lead. 


So, how does that play out in terms of profit?

IndustryFirmProfitSalesCash
WellingtonSigma$19,594,145$61,407,408$23,869,237
ChristchurchEpsilon$12,065,184$33,294,315$18,984,984
ChristchurchIndigo$8,006,857$38,550,316$19,867,954
WellingtonTau$7,717,348$39,368,754$15,413,986
ChristchurchWheelin N Dealin$7,439,724$36,756,722$10,193,230
DunedinE.N.T.E.R.T.A.I.N$5,711,546$32,071,218$15,050,966
WellingtonUpsilon$2,984,347$28,105,883$3,414,183
DunedinPeakPerformance Bros$2,261,051$23,595,108$8,216,462
Wellingtonswerve.$1,850,645$14,857,970$7,526,785
DunedinPsicle Path$1,759,188$24,315,952$194,020
ChristchurchWheelie Cool Bikes$1,217,442$19,994,709$5,126,699
DunedinRho$815,992$31,609,60236,823

The challenge with just looking at profit is that it is hard to see how much people are spending to 'invest in the future' and that, of course, can cut deep into profit. No-one this year invested in developing new bikes (no surprises there), but some were definitely spending as if the practice rounds were going to continue ... they were definitely practicing for the future.

Returning to the issue of efficiency. Let's look at the margin that each firms produces (Profit/Sales). The cut line is the interest rate being paid by the bank. If investors can make more money leaving on deposit at the bank then .....

IndustryFirmProfitSalesCapacityMarginProfit/SCU
WellingtonSigma$19,594,145$61,407,40849,48832%$395.94
ChristchurchEpsilon$12,065,184$33,294,31529,14236%$414.01
ChristchurchIndigo$8,006,857$38,550,31639,36821%$203.38
WellingtonTau$7,717,348$39,368,75437,29820%$206.91
ChristchurchWheelin N Dealin$7,439,724$36,756,72246,22120%$160.96
DunedinE.N.T.E.R.T.A.I.N$5,711,546$32,071,21829,95418%$190.68
WellingtonUpsilon$2,984,347$28,105,88336,12311%$82.62
DunedinPeakPerformance Bros$2,261,051$23,595,10832,93310%$68.66
DunedinPsicle Path$1,759,188$24,315,95229,1217%$60.41
Wellingtonswerve.$1,850,645$14,857,97023,20012%$79.77
ChristchurchWheelie Cool Bikes$1,217,442$19,994,70937,6116%$32.37
DunedinRho$815,992$31,609,60236,8233%

$22.16

Margins in MikesBikes over 10% are generally, solid, over 20% are good, and over 30% are exceptional.

It's really nice to see how much profit Epsilon can generate per SCU. That's a tidy number!

Anyway, on to the 'big board'.

IndustryFirmSHVSharePriceProfitSalesCapacitySharesEPSCapitalizationTotalSHVEVACash
WellingtonSigma$48.11$46.48$19,594,145$61,407,40849,4881,810,120$10.82$84,130,636$87,081,132$18,844,132$23,869,237
ChristchurchEpsilon$29.75$29.75$12,065,184$33,294,31529,1422,000,000$6.03$59,504,482$59,504,483$11,473,284$18,984,984
ChristchurchWheelin N Dealin$25.42$25.42$7,439,724$36,756,72246,2212,000,000$3.72$50,846,206$50,846,206$6,702,280$10,193,230
ChristchurchIndigo$24.32$24.32$8,006,857$38,550,31639,3682,035,591$3.93$49,497,522$49,497,522$7,321,964$19,867,954
WellingtonTau$23.80$23.50$7,717,348$39,368,75437,2982,000,000$3.86$46,996,316$47,596,315$7,119,816$15,413,986
DunedinE.N.T.E.R.T.A.I.N$22.49$21.99$5,711,546$32,071,21829,9542,000,000$2.86$43,987,714$44,987,714$4,890,402$15,050,966
WellingtonUpsilon$18.64$18.14$2,984,347$28,105,88336,1231,809,843$1.65$32,824,245$33,729,166$2,371,374$3,414,183
DunedinPsicle Path$17.34$15.42$1,759,188$24,315,95229,1212,000,000$0.88$30,840,376$34,688,376$1,172,269$194,020
Wellingtonswerve.$15.57$15.07$1,850,645$14,857,97023,2002,000,000$0.93$30,134,360$31,134,360$1,099,796$7,526,785
ChristchurchWheelie Cool Bikes$14.36$14.36$1,217,442$19,994,70937,6111,987,529$0.61$28,541,348$28,541,347$497,478$5,126,699
DunedinRho$14.31$14.28$815,992$31,609,60236,8232,076,817$0.39$29,658,693$29,720,998$111,878$5,563,968
DunedinPeakPerformance Bros$12.65$12.65$2,261,051$23,595,10832,9332,093,052$1.08$26,480,779$26,480,780$1,744,610$8,216,462

At the end of the practice round, Sigma held it's place as the top ranked firm, following by a tight pack of firms with SHV in the $20 range. Only Dunedin's PeakPerformance Bros have materially moved backwards from their opening position.

I guess the gloves come off now as we move into the main event (so many sporting analogies).  I know some firms have been testing things out during the practice rounds (i.e., just practicing) whereas other firms have been practicing being the best they can be. It's going to be exciting as these firms move to really compete with one another.

It's going to be interesting to see which teams change their names next week, and which ones keep their brand. If it were me—no matter where I was on the scoreboard—I'd be changing my name. 



Game on

And so it begins. The first rollover has occurred. The results are in. But what to make of those results? 

I'm going to start by looking at the relative position of the the three 'worlds' of Christchurch, Dunedin, and Wellington. That might seem like an odd starting point; why not look at the performance of each of the firms? The reason is that individual firm performance is constrained by how 'good' is the world in which the firm operates. There are a number of ways to think about this. First, it is hard to be an outstanding firm (i.e., the one with the best SHV in the long run) if, for example, the world is locked into some kind of price war. Such an event can drive down everyone's profits (and hence SHV). Secondly, it is hard for any firm (no matter how good they are) to increase the demand for bikes (as a whole) by themselves–if you bankrupt all the other firms and have all the markets to yourselves its nigh on impossible to grow those markets as fast as occurs in a good world. You need other firms creating demand. In other words, to be really successful you want to be in a world with healthy competition, rather than destructive competition. If you're goal is to obliterate the competition, then you are unlikely to be firm with the highest SHV across all the worlds. That said, you still want to out compete them.

And so to some results.


Let's start by looking at the industry sales revenue.

So, Dunedin is well in the lead for industry sales.

My mantra is often, "Where sales go, profit should go; Where profit goes, SHV goes". The rub, is the should between sales and profit. So let's see if that is true.

Whoa! Everyone's profit has gone down. And the world with the biggest sales has seen the largest drop in profits. I wonder what they are spending all that money on?

Well everyone seems to have boosted their capacity (by about the same amount), so it's not that.

Looking at the Advertising Ratio is seems Dunedin has really spent big on advertising. That's not surprising. One of the easiest ways to get ahead in SoloMike is to go wild on advertising. But that doesn't pay off too well if the increase in advertising doesn't (eventually) lead to an even greater increase in profit. One thing that such high-levels of spending can result is advertising wars, which can really drive all the profit out of a world. 

I wonder what the 'correct' level of advertising is—rather than, how much can be spent on advertising?

As a bit of an aside, let's look at the Cost of Goods Manufactured, compared to the cost of each SCU. It looks like, in all the worlds, the cost of manufacturing has become more expensive, with Christchurch being the most expensive.

Hmm, until now I'd expect (because of the profit) for Christchurch to be doing the best, but with such an increase in costs, I'm not sure.

And then we notice that Wellington has cut it's retailer margin. Okay, let's cut to the chase here.

Overall, the world with the highest capitalization is Wellington, so I would kind of bet, that it is the best performing firm. Let's turn to the scoreboard and see.

Looking first at revenue, Sigma in Wellington is top of the table. (I wonder why more firms didn't change their names).

IndustryFirmRevenue
WellingtonSigma$22,058,804
ChristchurchWheelin N Dealin$22,055,200
DunedinE.N.T.E.R.T.A.I.N$21,823,634
DunedinRho$20,537,244
DunedinPsicle Path$19,147,709
WellingtonUpsilon$18,462,350
ChristchurchIndigo$17,133,296
DunedinPeakPerformance Bros$16,758,087
WellingtonTau$16,673,835
ChristchurchEpsilon$16,037,565
Wellingtonswerve.$15,674,528
ChristchurchWheelie Cool Bikes$15,050,711

But Sigma doesn't quite manage to translate that into profit. That honour falls to Dunedin's E.N.T.E.R.A.I.N It was close, and I don't expect Sigma to let E.N.T.E.R.A.I.N get away with that in the next rollover.

IndustryFirmProfitRevenue
DunedinE.N.T.E.R.T.A.I.N$3,731,943$21,823,634
WellingtonSigma$3,169,265$22,058,804
ChristchurchWheelin N Dealin$3,025,873$22,055,200
Wellingtonswerve.$2,885,540$15,674,528
ChristchurchWheelie Cool Bikes$2,556,514$15,050,711
DunedinPsicle Path$2,343,128$19,147,709
ChristchurchIndigo$2,197,727$17,133,296
ChristchurchEpsilon$1,365,516$16,037,565
WellingtonTau$1,250,306$16,673,835
WellingtonUpsilon$1,064,237$18,462,350
DunedinRho$961,209$20,537,244
DunedinPeakPerformance Bros$198,406$16,758,087

And so to the big board who is top of the list?

IndustryFirmSHVSharePriceProfitRevenueCapacitySharesMarketCapCash
WellingtonSigma$18.16$18.16$3,169,265$22,058,80428,6502,000,000$36,322,756$7,409,994
DunedinE.N.T.E.R.T.A.I.N$17.03$17.03$3,731,943$21,823,63425,5422,000,000$34,050,360$9,033,564
ChristchurchWheelin N Dealin$16.64$16.64$3,025,873$22,055,20029,6652,000,000$33,287,080$7,978,397
DunedinPsicle Path$16.47$15.63$2,343,128$19,147,70924,8852,000,000$31,262,342$5,036,362
Wellingtonswerve.$15.44$15.44$2,885,540$15,674,52822,5962,000,000$30,885,484$9,415,660
ChristchurchWheelie Cool Bikes$15.23$15.23$2,556,514$15,050,71125,2912,000,000$30,469,828$5,301,723
ChristchurchIndigo$14.79$14.79$2,197,727$17,133,29624,9232,000,000$29,575,984$8,805,896
WellingtonUpsilon$13.79$13.79$1,064,237$18,462,35025,6182,000,000$27,577,128$6,376,647
WellingtonTau$13.61$13.61$1,250,306$16,673,83526,8812,000,000$27,224,682$4,827,417
ChristchurchEpsilon$13.57$13.57$1,365,516$16,037,56523,9322,000,000$27,145,274$6,975,509
DunedinRho$13.32$13.32$961,209$20,537,24426,0102,076,817$27,653,551$5,557,634
DunedinPeakPerformance Bros$11.31$11.31$198,406$16,758,08727,2972,000,000$22,624,756$4,507,471

At the end of the first rollover, Sigma is in the lead with a SHV %$18.16.  Although more than half their firms have improved there SHV, a few haven't experienced any real movements, and PeakPerformance Bros have actually slid back from their starting position to $11.31. 

It's interesting to see that Rho has been tinkering with issuing shares (which has some pros and cons). 

Oh well, it will be fun to see what happens next time.


There a lots of ways to do that. Most of the time, people are interested in my blog posts (like this) or the comments I make on peoples learning journals. My weapon of choice when looking for content is the wiki's search function. Click on search at the top of the screen then fill in some stuff (as shown).

The search box (top circle is empty). If it says something like "ancestorIds:52015618" then the search is only searching some sub-set of the wiki (from wherever you started the search). I only put words in their if I'm looking for something in particular.

Next there is CONTRIBUTOR. I've put me in their (by using my UPI, which is psmi045). That only finds postings by me.

The IN SPACE box limits the search to our space on the wiki (i.e., MGMT 300 stuff).

Finally, the custom box means I'm only searching for comments.

You can see the results of the search (right now) in the image I've posted.

Forming teams ...

... isn't easy. The students who volunteer to do it, always struggle to do a good job, so I really appreciate the work they do.


In this iteration of MikesBikes the students were particularly thoughtful as they tried to create the most balanced teams they could (so they would all have a chance at winning the final competition (and get the 5% bonus). They sent me through some notes, that I think you will find interesting

The challenges of forming teams

In forming teams, we intended to give every team a range of different personalities and skill sets that work well together, while also aiming to match up aspirations and goals for the course. We also tried to give everyone a role with which they would be comfortable. However this was hard to accomplish, as there were too many people applying for the same role (e.g. Marketing) and not enough people for other roles (e.g. R&D). Therefore, some people got assigned to roles that they did not apply for, but we did our best to ensure that their team would be able to support them and that their assigned roles would still suit their skill sets.

Beyond that, we were aiming at balancing out the shareholder values that people have achieved so far. That is why we tried to create teams with a similar average SHVs, in order to give every team an equal opportunity to succeed. It should be noted that there was a large disparity in achieved SHVs among all students.

The volunteers spent nearly three hours (the longest time every for this task) trying to do the right thing by everyone in the class. Double thanks to them.

Looking at NetMike, I notice there are three days or so until the first practice rollover. Two of the most useful things you can do before then are:

  1. Work out how you will work together; what process, rules, standards do you agree to, and
  2. How much control do you really have over the simulation; can you, for example, correctly predict how many bikes you will make, or how many bikes you will sell. In SoloMike, many folk were just trying to have an impact; now you need to get on top of controlling your impact.

For now you can still rollover and rollback whilst you are offline. That won't always be possible, so you need to learn the effect of your decisions.

But most importantly, you are no longer playing against a dumb computerised opponent; now you are competing against people who are as smart as you and who will be trying as hard as you to out think their competitors.