Cycles Devinci: Develop an Asia-Pacific

Internationalization Strategy
Group - 12

1. What is Devinci’s position within the industry? How does it benefit from that
position?

Devinci lied in the category of manufacturing bikes, which included buliders and assemblers.
Builders designed and manufactured their own frames. Assemblers subcontracted frame
production. Also, they designed and assembled the bikes. And henceforth, marketed the
bike under their own brand.
Cycles Devinci was owned by Gautheir, after it was given up by Ouellet and Maltais. Under
his leadership, the R&D was set up. During the mid-1990s, a period of strong growth and
doubling revenues were the major milestones achieved by the company.
As it got firmly established in Quebec, Devinci expanded its retail network throughout
Canada, US, and Europe. In 2018, it had 80 employees and a turnover rate of $20 million.
Also, Devinci was thriving in the Canadian market and several international markets of U.S.
and Europe.
Devinci products were distinguished by their aluminium frames. Also, Devinci added Carbon
bikes to its product range to enhance its competitiveness. Its products covered all price
points from low to medium to high. And its bikes were known to be safe and reliable. Its
praises were sung by U.S. and European publications.
Its R&D had been successful in achieving minimal air resistance and improving production
process, thereby enhancing its reputation. Their team also ensured quality and safety
through their tests meeting the company standards. They believed in constantly improving
their production processes leading to increased output maintaining quality standards.
Domestic production, ability to quality control, react quickly to consumer demand and
innovate efficiently were the key benefits that Devinci enjoyed. PBSC Urban Solution, the
distributor of BIXI-type bike- sharing system continued working with Devinci.
Devinci sold more than 20000 bikes in 2018, 4000 low end bikes and 16000 mid-range and
high-end bikes excluding the BIXI type bikes produced for PBSC Urban Solutions.
 Majority of their bikes were sold by a vast number of dealers and some of them were sold
on-line. Devinci had grown phenomenally for the several years. They were aiming to sell
1000 bikes in the Asia Pacific region within three years.

2. How would you rate Devinci’s international expansion efforts to date?

Devinci attempted to expand itself in the U.S. market in the early 2000. It tried selling their
full-suspension bikes in the U.S. However, it turned out to be failure where it had to suffer a
loss of $1.2 million. Fluctuating exchange rates and patent litigation prevented it from selling
their bikes.
However, they were successful in selling their BIXI type bikes. It brought them international
recognition. Sales in Washington, London, Melbourne, Minneapolis, New York, and Boston
through PBSC Urban Solutions brought them into a new growth phase and ensured them a
promising revenue source. Devinci’s new expansion project to the United States and in
Europe, between 2010 and 2018, was a huge success where company doubled its sales. By
Q1 2016, 55% of the company’s sales came from outside Canada: 30% from U.S. and 25%
from Europe.
Cycles Devinci focussed on a single segment in its expansion project that is, mountain bikes
and they implemented upon the philosophy of offering the fastest bikes, expertizing in
producing aluminium bikes. They showcased a transformational change in the promotion
strategy as it was seen in 2010 when they sponsored the Devinci Global Racing team in two
World Cup circuits. This sponsorship allowed them to acquire feedback and increase their
visibility and also improve upon their design.
Also, Devinci worked on its sales and distribution by creating its own network of
representatives and commercial agents in the United States. It worked with a logistics agent
in Grand Prairie, Texas where it rented a warehouse in order to coordinate inventory and
provide retailers with products.
Whereas in Europe, Cycles Devinci adopted a mixed distribution strategy. Some markets
were served by representatives and commercial agents while others were served by
distributors with which it had signed exclusivity agreements. And hence, Devinci’s sales force
jumped from 8 to 44, while the marketing team formed to support the brand’s international
development grew from 1 to 7. Asia Pacific region showed a demand in the mountain bike
and it was expected to grow by 14.4% annually. Asia Pacific expansion was more promising
than expanding into the U.S. and European markets
 3. Given Devinci’s position, is internationalization in the Asian market desirable?
Realistic?

Market size is very small for most APAC countries except for China and Australia. In China,
preference towards low price is more compared to mountain bikes. In Australia, there is a
heavy competition from other brands which make is more difficult to penetrate the market.

Median Income is too low to afford especially in countries like China, Philippines, Indonesia
and Malaysia and India which show promise in the demand.

Bad SEO performance in all the Asian markets which means the local populations is not
aware of this brand. And no information about the Chinese market because china’s primary
search engine is Baidu which no one has access to the search engine performance.

To enter the market means local marketing expense which includes forming a different team
for each country due to the difference in language and culture.

Devinci’s insistence towards Canadian manufacturing, which is responsible for the high
costs. If expansion takes place additional costs like transportation, import duties will dig in
the bottom line for the company.

If Devinci still wants to internationalize it is preferred that it sets up international

manufacturing facilities in Asia to be closer to the market and cut on costs like
transportation of parts and labour.

With the current strategy, it is preferred that Devinci should not go ahead with
internationalization.

4. Based on the data collected by Brodeur (presented at the end of the case), how
would you go about evaluating potential markets? In other words, how would you
choose the most promising markets?

Preferred Score for most promising markets

CAGE

Cultural

Cultural Distance

Power distance – High score, good for capitalistic approach

Individualism – High score , person has individual choice to opt for new technology

Masculine/Feminine – Low score, less competition so easy to capture market

Uncertainty avoidance – Low score, comfortable in ambiguous situations so customers are risk
takers
Long/Short term orientation – Low score,

Indulgence/ Restraint – High score, society open to value leisure

Google searches – top rank preferred

Official language – English preferred

Mountain Bike Races – High count

Administrative

Enforcing Contracts – Top rank preferred

Ease of Doing Business – Top rank

Trading across borders – Low score

Geographic

Population – High

Competitors present – Low numbers preferred

Number of Ski Resorts – High count

Number of trails – High count

Kilometres of trail – High count

Economic

Average income per capita – High

Median income per capita – High

Estimated Demand – High

Import tariff (%) – Low