Reference no: EM133031593

Case Study: Hashtag Ltd

The number of people getting on their bike is growing. Though usage is tiny compared to the 1940s and 1950s, there were 3.8% more miles cycled this year compared with last year. Cycling is widely considered to be not only healthy but environmentally friendly. The risks of cycling are also falling with the number of accidents decreasing in recent years. The government put vast amounts of funding into cycle lanes to make cycling easier. And, of course, events such as the Tour de France made cycling more popular. The event is estimated to have increased of bike sales by 8%. The fact that train and bus fares keep rising beyond the rate of inflation also benefits the bike market.

Keen to capitalise on such favourable market conditions, Hashtag Ltd entered the bike market in 2018. As consumer income and confidence began to grow again after the recession, Hashtag specialised in top end bikes such as those with carbon fibre and titanium frames which are lighter than traditional steel frames, allowing the rider to go faster. Most of Hashtag's revenue comes from selling bikes with the remainder coming from servicing bikes and selling accessories such as helmets.

Since 2018 the cost of titanium and carbon fibre has fallen. Additionally technological advancements in the production of bicycles have made the production process more efficient. Many key components come from Thailand and the weakening in the Thai baht has also had cost implications.

Thanks in part to innovative designs and astute use of social media, Hashtag has a strong brand name and has seen growth in sales every year since the business began trading.

Exam-style questions

1. Construct a supply and demand diagram to illustrate the impact of the information from the case study on the market for Hashtag's bikes.
2. Assess the benefits of Hashtag selling top-end bikes.
3. Evaluate whether the market price for Hashtag bikes will rise or fall.