Yushan Bicycles:

Learning to Ride Abroad

GROUP MEMBERS -
MOHIT KHANDELWAL

KM ASTHA GARG
SHAWON CHANDRA SAMADDER
SHUBHAM KUMAR
Introduction & Background of the Study
• “Yushan” Taiwan's no 7 bicycle manufacturing company.
• Established in 1985 by two semi professional cyclist.
• Known for their straight line design and compact size.
• Started producing E-cycle in 2007
Introduction & Background of the Study
• Problem started with Quarterly loss in Yushan Australia
• Yushan started international in 2006.
• First initial market was Singapore and Japan and then the Asian Region
• After success in Asia region it went the European market and Oceania market.
• Indonesia, Australia & NZ comes under the Oceania group.
• Major market for Yushan was Asia.
Introduction & Background of the Study
• YA was in a loss for some common technical and planning issue.
• Delivery delay for YA than Asia and Europe.
• Inner system problem for stock recording.
• Transfer pricing and currency fluctuation.
• Knowledge on Australian Market
Identification Of Problems

• How to develop sales and product strategy for Yushan Australia to grow profit
and capture market share.
• How Yushan Australia can overcome their losses which occurred in the year
2015.
• How to develop a better and on time supply chain system so there will be no
delay for the delivery of the product in the subsidiaries.
• How Hamilton can cultivate trust between him and the Head Quarters so he can
implement his own strategy and prove that his plan took time but was effective.
Challenges of Yushan

• Struggle to gain market share within Europe.

• Transfer price to the Australian subsidiary.
• It could not raise local price to match transfer cost.
• Lack of trust in Australian subsidiary from Taiwan’s head management.
• Lack of communication among the different subsidiaries.
• Currency fluctuation 15% loss on Australian dollar compare to new Taiwan
dollar.
Solution and Recommendation
• For Hamilton(General Manager, Yushan Australia)
• They could have given various offers like discounts,gift vouchers to attract the
customers.
• Price must be reduced upto certain limits for those models which people are not
liking to purchase.
• The transfer price conflicts had occurred because of the failure of Hamilton to
account for a possible increase in transfer prices during negotiations.
• He needs to work on developing the accurate forecasts and operate to achieve a
breakeven.
Solution and Recommendation
• For Chih-hao Zonghan(Director, Sales & Operations)
• He must suggest Hamilton to incorporate the possibility of transfer price
increase during the next negotiation.
• He should make efforts to train the staff of YA in terms of training them to
operate the ERP system, marketing the products, dealing with customer issues
and negotiating with the clients.
• He must share and discuss the problems with all the subsidiary managers.
• Hamilton and his team must get little bit more time for proving themselves.
For Yushan Headquarters

• There must be open communication between the employees(staffs) and the

managers for better understanding of market.
• New suggestions from anyone in the company whether he is a manager or any
employee at low level must be welcomed.
• IHRM is a vital component of implementing the global strategy of a firm.
• Companies goals and objectives must be clearly defined.
• They Should Concentrate on helpful Communication.
• They should draw attention on the efficient production.
DIFFERENT CONCEPT
• Motivation behind Yushan’s expansion abroad
• As China led the world in bicycle production. Taiwanese manufacturers wanted
to compete with China with their mid-range to high-end product of superior
quality. On the other hand, as the customers seeking bicycles at reasonable price
and willing to pay more for additional attributes and performance. Yushan is
capable to serve these products according to the customer demand.
DIFFERENT CONCEPT
• Organization Culture
• Zonghan & Hamilton both wanted to increase their sales production. Consumers of
all over the world are not same at their thinking. Every Country have their own
culture. The consumers of Europe are too conscious about the environment.
• Consumers perception
• The perception of consumer is a crucial tool for gaining massive market share.
Consumers of Australia are so health conscious & they used to sweating themselves.
DIFFERENT CONCEPT
• Controlling
• Yushan put the profitability of its Taiwan based operations ahead of that of offshore
subsidiaries which were carrying a burden of factory costs they could not control &
headquarters overhead from which they did not benefits.
• Company Performance
• Actions they should take to improve the performance of YA: According to the current
market condition & local consumer’s perception Hamilton’s penetration strategy is
perfect because penetrate the strategy the company will increase the sales volume for
low price which will help to capture the market share.
Conclusion
• Yushan need to maintain all his subsidiary autonomy and adapt the cultural
aspects for entering into the market. This company needs to hire a sales
manager and regional manager who is already having experience in the country.
So, they can managed easily. Company need to reorganise for reflecting similar
product and organisational culture of the country but price strategy does not
favoured to establish market and falling subsidiaries.
 Financial data of Yushan Bicycle in the year 2015

Asia Group Percentage Europe Group Percentage Oceania Group Percentage

Revenue 1,61,18,50,128 50,65,81,469 18,42,11,443

Cost of Goods Sold 98,32,28,578 61 28,36,85,623 56 11,97,37,438 65

Marketing and
Distribution 11,76,65,059 7 4,30,59,425 9 1,41,84,281 7.69999994
Warehouse and
Inventory
Management 4,83,55,504 3 1,87,43,514 4 58,94,766 3.1999999
Sales, General, and
Administrative 32,23,70,026 20 12,66,45,367 25 4,05,26,518 22.0000003
Operating Income
(Loss) 14,02,30,961 9 3,44,47,540 7 38,68,440 2.09999984
 Q. What do you think of James Hamilton’s objective for Yushan Australia? How well do they fit in Yushan’s
internationalization strategy?
Enterprises pursuing as international strategy have followed a similar development pattern as they expanded into foreign
market they tend to centralize product development functions such as Research & Development at home. However they also
tend to establish manufacturing and marketing functions in each major country or geographic region in which they do
business.
James Hamilton was the general member of the Yushan Australia and he took some objectives for Yushan Australia for the
future betterment of the company though he has some lacking about bicycle and sporting goods.
Yushan’s international strategy was manufacturing operations were centralized and operated as profit center as well as
functional department such as personnel, marketing were located in Tychung and were designated as cost centers. To evolve
international strategy Mr. Zonghan appointed 3 regional group members to oversee subsidiaries in Asia, Europe and Oceania to
manage the slope and complexity of the unfamiliar international operations.
We can relate Yushan internationalization strategy with the Hamilton operation strategy as well as local strategy. Hamilton
objective was building brand and product reputation by increasing sales after hiring staff, office space, creating relationship
with distributors, increasing service and creating brand image . On the other hand Yushan Australia’s internationalization
objectives are similar but Yushan’s strategy was to increase sales by expanding business into new subsidiaries through
gathering knowledge.
So, we can say that Hamilton objectives fit with the internationalization strategy very well.
 Q: How should Zonghan & Hamilton resolve their difference? What action should they take to improve YA’s
performance?
Zonghan & Hamilton both wanted to increase their sales production. . Consumers of all over the world are not same at their
thinking.Every Country have their own culture. The consumers of Europe are too conscious about the environment. On the other hand,
consumers of Australia are conscious about their health & they like to do hardwork. Consumers perception vary from one to another To
resolve the differences between Zonghan & Hamilton’s strategy, they have to draw attention on some strategies which has given
below:
Though they have 25,000 sqft sized factory facility, its getting short for the efficient production because of the contracts of large
volume production & expanding the sales internationally simultaneously. Which creates jam for the delivery all over the world.
The perception of consumer is a crucial tools for gaining massive market share. Consumers of Australia are so health conscious & they
used to sweating themselves. According to this, the market of Australia is not appropriate for e-bike. But there is a great probability of
conventional higher end cycles.
Yushan put the profitability of its Taiwan based operations ahead of that of offshore subsidiaries which were carrying a burden of
factory costs they could not control & headquarters overhead from which they did not benefits. When big contracts came up, some
subsidiaries had negotiated transfer prices that excluded overhead, thereby increasing the burden on other subsidiaries. On the other
hand, currency fluctuation creates another problem caused by the transfer prices were stated in NT$, the subsidiary bore the cost of
this weekening of the local currency which significantly increased actual product costs above their budgeted costs of goods.Actions
they should take to improve the performance of YA: According to the current market condition & local consumer’s perception
Hamilton’s penetration strategy is perfect because penetrate the strategy the company will increase the sales volume for low price
which will help to capture the market share.
Class Discussion
What do you think are the main issues which caused the growing tension between senior
management at Yushan Bicycles (Yushan) and the general manager of its Australian subsidiary?

Do you think entering Australian and New Zealand markets was a good decision for Yushan?

Do you think Yushan’s director of global sales operations, should consider exercising tighter control
over Yushan Australia? If so, why?

Why is IHRM a vital component of implementing the global startegy of a firm?

“Until we build our brand and product reputation, the specialty retailers won’t have any interest in
us.”

To what extent do you think this statement is true?

What are the risks associated with only prioritizing profits in a business?
Yushan Bicycles Learning to Ride Abroad
TWOS Matrix
•OpportunitiesNew South Asian and Asia
Pacific regions available for expansion –
emerging markets
•Acquisition of medium-sized similar
companies and shops in developing
countries
•ThreatsIncreased marketing from
competing players, which might affect sales
negatively
•An increasing number of independent
producers and marketers
•Increased and saturating competition
•StrengthsLeading premium company that
operates internationally
•Leading presence across countries
•Reasonable control over production and
distribution due to backward and forward
integration
•SO strategiesExpanding into Asia Pacific
region and stabilizing emerging markets by
opening new stores and developing new
products
•ST strategiesImproving the ambience of
service, focusing on augmented service
levels when providing products and adapting and pursue a moderate expansion strategy
to local culture.
•WeaknessMajor dependence on the
market as the country of origin market
•Despite being in operation for decades, has
standard procedures and regulations for all
portfolio items
•Imitability possible by competition
•WO StrategiesIncreasing more stores
outside the country of origin, and in other
parts of the world – especially emerging
markets such as India, China and Brazil
•WT strategiesIncrease budget for marketing
communications, and strategic promotions