Essay On International Expansion Plan For Moto Direct Holdings

Based in Derbyshire, Moto Direct Holdings has more than 40 years of experience. The  company is a leading manufacturer and distributor of technical clothing and protective gear in the Autosport and motorcycle industries. In addition, Motor Direct offers helmets, motorcycle apparel, and lubricants for off-road and on-road users, as well as professional riders to support their driving and riding needs in the UK (Moto-direct 2022). In short, the company is a one-stop shop for every riding prospect. In 2020, the company reported a turnover of £25M, a 5.22% decrease year-on-year (Global Database. 2022). As a result, Moto Direct Holdings has decided to expand its business operations in the United States. The company aims to reach a 24% market share within two years. Therefore, Moto Direct can upsurge its revenue margin by 12%. The United States is the largest motorcycle apparel market due to increased disposable income and the growing number of motorbike sales. These aspects increase demand for motorbike riding gear, like helmets, jackets, shoes, etc. This is attributed to be the core success factor for the growth of Moto Direct Holdings in the US market (Kim et al. 2018).

 

The motorcycle apparel market is anticipated to witness growth during the forecast period of 2022 to 2027. The riding gear market was valued at USD 11.4 billion in 2021 and is expected to reach USD 16.9 billion by 2027, registering growth at a CAGR of approximately 6.84% in the forecast period (MarketWatch. 2022). In addition, the launch of new technologies and continuous innovation in motorcycle apparel design is expected to create  growth opportunities in the long term. The following factors collectively led to the growth of the motorcycle apparel market, which significantly influenced the internationalization process of Moto Direct Holdings.

 

The preference of end users and awareness toward improved comfort and safety offered by premium helmets are the major factors driving the market growth. The demand for riding gear is high in the United States due to the high demand for motorcycles, growth in bike racing events, increasing traffic congestion, and growth in recreational riding. Then again, the increase in road accidents, reckless racing of bicycles on the roads, and reckless motorbike riding caused accidents on the streets, which ultimately increased the demand for motorcycle equipment (Bulathsinghala et al. 2021).

 

In the US, deaths among motorcyclists and passengers increased by 11% from 2019 to 2020, whereas the rate per 100 million vehicle miles travelled increased by 23%. Over the past ten years, the death rate has increased by 20%, whereas the death rate has increased by 27%. Additionally, the current number of motorcycle fatalities is 5,579. The rate is 31.64 per 100 million vehicle miles. Also, motorcycle riders involved in fatal crashes in 2020 had a higher proportion of alcohol impairment than drivers of other types of motor vehicles (NSC. 2022).

 

Fig: The rate of motorcyclist death in the US

Instead, use trends or motorcycle exposure have been mixed from 2007 to 2020. While the number of registered motorcycles had risen by 17% from 2007 to 2020, the number of vehicle miles travelled had reduced by 18% from 2007 to 2020. Thus, the number of registered motorcycles has also declined (5% from 2017). Also, the decline in miles travelled represents that the fatality rate per 100 million vehicle miles is increasing faster than the number of deaths (NSC 2022).

 

Fig: Registered motorbikes and miles traveled

The increasing number of road accidents in the United States, especially for motorbikes, has forced governments to enforce strict road safety laws to protect riders in the event of an accident. As a result, in the United States, the government has made it compulsory for motorbike riders to wear helmets for safety. Furthermore, the government also established a new rule that all helmets should comply with the Bureau of American Standards regulations and the weight of a helmet should not exceed 1.2 kg. Therefore, new government regulations are anticipated to drive the growth of the motorbike clothing and helmet market (Solah et al. 2019).

 

Then again, the high disposable personal income in the area makes customers more active in leisure activities that revolve around traditional scooters and motorcycles, such as motorbike stunts, off-road activities, and racing. This will also increase the demand for motorbike accessories in the region.

 

The motorcycle gear industry is projected to grow significantly in developed countries during 2020-2024 because of the increasing demand for motorbike accessories, such as shoes, helmets, and jackets. Additionally, the high demand for motorbike gears drives the marketplace upward at a fast pace. Furthermore, the rising use of new technological applications will create more prospects for the motorbike apparel industry in the forecast year. According to MarketWatch (2022), the expansion of motorcycle apparel in 2022 will be very diverse from the previous year. According to the modest prediction of the worldwide motorcycle clothing industry, annual revenue will grow in 2022 by 20%. In terms of revenue, motorcycle equipment will grow at an annual rate of 3.8% over the next three years. According to the WHO, wearing a helmet decreases the risk of death by 40 percent and the chance of serious injury by 70 percent. As a result, it will provide excellent scope for Moto Direct Holdings to expand in the US motorcycle gear industry, especially the helmet market (Grandviewresearch. 2022).

 

The growing enthusiasm for bike racing among youngsters and attractive offerings of gloves, helmets, and outerwear as additional supplies from motorcycle manufacturers are enhancing the riding gear industry in the United States. Then again, social media plays a vital role in increasing the brand recognition of different bike riding gear brands. Many people are involved in online forums in which online influencers share their knowledge about different riding gear. Moreover, the affordability of bicycle tour programs provided by many travel companies is another significant motivator (Kim et al. 2018).

 

The use of new technological applications will also create more prospects for the motorbike apparel industry in the forecast year. In other words, advancements in smart technology and changing consumer preferences are driving the demand for smart technology in motorbike protective devices. It has forced motorbike gear manufacturers to innovate and develop new products according to buyer demand. For example, some of the features of smart technology in helmets include ambient audio capability, Bluetooth, advanced noise control, navigation, audio multitasking, proper padding with ventilation, and built-in microphones and speakers. The helmet is also comfortable to wear, customizable, and easily portable in line with the customer's preference. Thus, new technological factors are likely to drive the growth of the motorbike gear market in the United States (Klier and Rubenstein 2020).

 

The trend of purchasing motorbike accessories from online platforms is increasing as these accessories are available at discounted rates and on offer. However, this is a significant challenge in front of the sales channel of authorized stores and showroom vendors. Furthermore, the increasing number of major market players in e-commerce is strengthening the market. The growing number of racing championships, motorcycle training schools, and equipment manufacturers are expected to make the US market very profitable by 2031 (Kim et al. 2018).

 

The riding gear market is fragmented because of the presence of a massive number of regional and small local players around the world. However, the motorbike apparel market is dominated by Ruroc Motorcycle Helmets, Dainese, AGV, Alpinestars, Fox Racing Inc., FLY Racing Jackets, HKM Sports Equipment GmbH, Spartan Pro Gear Rynox Gears, and Joe Rocket Jackets. The industry has seen a lot of collaboration and innovation in recent years (MarketWatch 2022). Some innovations include HUD visors, Bluetooth connectivity, airbag jackets and vests. Furthermore, multiple start-ups are arising in developed countries, which are committed to offering high-quality motorbike gear at reasonable costs. Motorcycle manufacturers like Royal Enfield have launched a new window on their website to allow customers to customize their gear. Additionally, several motorbike gear organizations are increasing their global presence and introducing new products to reach more consumers and improve their competitive position within the market (Rahman et al. 2020).

 

While offline channels represent the majority of motorcycle gear sales, e-commerce channels are gaining noteworthy traction globally. Online retailers accounted for 10.0% of the US market in 2018. This share of online retailers was higher than in any other nation. Because of the growing internet penetration in the country, online sales channels have experienced significant growth in the previous few years. Additionally, online retailers like MotoSport.com and Amazon include this category as a key focus area. Online retail channels are generally used in developed nations like the United States. However, numerous small online retailers are entering the market due to the growing number of motorbike riding enthusiasts (Arif, Rajanikanth and Prasad 2019).

The applicable entry mode options for Moto Direct Holdings in the US market are:

The partnership is almost a necessity when entering foreign markets. This can take many forms, from simple co-marketing arrangements to sophisticated strategic alliances for manufacturing. This is an advantageous strategy in those markets where the business culture and society are very different since local partners bring local market knowledge, customers, and contacts. In addition, a strategic alliance benefits small organizations that may be too small to make the necessary investments to enter new markets (Nisar, Boateng and Wu 2018).

 

Direct exports use resources to sell directly to the selected market. Once established sales programs, many organizations work closely with distributors and agents to better represent them in the marketplace. The main benefit of working with a local distributor is access to a current customer base. Also, they have experience in the local market and will be able to share their insights with companies. But the downside is that the company will depend highly on local distributors. The company will have less control over its sales (Schellenberg, Harker and Jafari 2018).

 

Direct investment is generally called foreign direct investment. It is the direct ownership of facilities in the target country. This includes transferring assets, like technology, personnel, and capital. This strategy can be made by acquiring existing entities or establishing a new organization. However, this needs high resources and high commitment. Therefore, the legal and regulatory burdens of the potential target market would be a factor in the due diligence process at the outset. However, this is undoubtedly the most expensive and has the highest risk. Still, some markets may involve costs and risks due to transportation costs, government regulations, and the ability to access skilled labor or technology (Tulung 2017).

 

The entry method for Moto Direct Holdings to move into the US market should be a strategic alliance. The company should form a strategic alliance with leading motorcycle brands in the United States to launch a range of helmets, riding jackets, gloves, T-shirts, shoes, and other accessories. By partnering with a local company, Motor Direct will be able to understand the local market, culture, and way of doing business. The strategic alliance between the two organizations will focus on meeting the increasing demand for motorbike gear for their target markets (Hollender, Zapkau and Schwens 2017). The company has expanded its significant product portfolio, including best-selling products and an ever-expanding collection of riding apparel. The company may tap into the existing niche in the high-end motor gear market by leveraging the combined strength of its product portfolio, manufacturing capabilities, and market expansion strategy. Moto Direct Holdings can reinforce its foothold in the fast-growing but competitive motorbike gear sector with this strategic alliance (Ahi et al. 2017).

 

Motor Direct Holdings should focus on capturing business opportunities from the road motorcycle apparel segment because it holds the largest market share in the base year. However, a large part of the market is still untapped as lower-middle-class customers cannot afford motorcycle apparel and helmets due to the rapid price rise. Thus, Motor Direct should provide motorcycle gear at an affordable cost. The company must focus on developing a long-term profitable revenue stream by successfully producing and selling various stylish, high-value, high-quality helmets, clothing, and accessories. By doing so, Motor Direct may reach out to new customers and grow in the industry. A niche marketing method is suitable for small organizations, especially motorcycle apparel businesses trying to build a large footprint in their target market segment. By following a niche strategy, Moto Direct Holdings can increase its ROI by channeling its resources to customers who are more expected to purchase its products. Since the online sales channel is gaining high traction in the motorbike gear industry, Motor Direct Holdings should implement the omnichannel marketing strategy. The convenience of choosing, shopping, and getting doorstep delivery tempts customers to online distribution channels. Also, the geographic barrier is virtually eradicated with increased online sales. This is expected to open new avenues for Motor Direct Holdings for further expansion in the future

 

Ahi, A., Baronchelli, G., Kuivalainen, O. and Piantoni, M., 2017. International market entry: how do small and medium-sized enterprises make decisions?. Journal of International Marketing, 25(1), pp.1-21.

 

 

Arif, Z., Rajanikanth, B.R. and Prasad, K., 2019. The role of helmet fastening in motorcycle road traffic accidents. Craniomaxillofacial Trauma & Reconstruction, 12(4), pp.284-290.

 

 

Bulathsinghala, R.L., Fernando, S., Jayawardana, T.S.S., Heenkenda, N., Jeyakumar, S., Packiyarasa, P., Hemamala, G. and Wijesena, D., 2021. An automatic air inflated tubeless safety jacket for motorbike riders. Research Journal of Textile and Apparel. 26(2), pp. 170-186.

 

 

Global Database. 2022. MOTO DIRECT LIMITED. Available at: https://uk.globaldatabase.com/company/moto-direct-limited

 

 

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Grandviewresearch. 2022. Motorbike Riding Gear Market Size, Share | Industry Report, 2019-2025. [online] Available at: <https://www.grandviewresearch.com/industry-analysis/motorbike-riding-gear-market> [Accessed 28 July 2022].

 

 

Hollender, L., Zapkau, F.B. and Schwens, C., 2017. SME foreign market entry mode choice and foreign venture performance: The moderating effect of international experience and product adaptation. International Business Review, 26(2), pp.250-263.

 

 

Kim, S., Ro, Y.S., Do Shin, S., Song, K.J., Hong, K.J. and Jeong, J., 2018. Preventive effects of motorcycle helmets on intracranial injury and mortality from severe road traffic injuries. The American Journal of Emergency Medicine, 36(2), pp.173-178.

 

 

Klier, T. and Rubenstein, J., 2020. Overview of the US Automobile Industry. In New Frontiers of the Automobile Industry (pp. 41-66). Palgrave Macmillan, Cham.

 

 

MarketWatch. 2022. Global Motorcycle Apparel Market Share 2022 Dynamics, Major Manufacturers, Future Trends, Drivers, Industry Size, Challenges and Forecast to 2026. [online] Available at: <https://www.marketwatch.com/press-release/global-motorcycle-apparel-market-share-2022-dynamics-major-manufacturers-future-trends-drivers-industry-size-challenges-and-forecast-to-2026-2022-06-14> [Accessed 28 July 2022].

 

 

Moto-direct, 2022. MOTO DIRECT Holding. Available at: <https://www.moto-direct.com/> [Accessed 28 July 2022].

 

 

Nisar, S., Boateng, A. and Wu, J., 2018. The entry mode strategy and performance of SMEs: Evidence from Norway. Research in International Business and Finance, 45, pp.323-333.

 

 

NSC. 2022. Motorcycles - Injury Facts. Available at: <https://injuryfacts.nsc.org/motor-vehicle/road-users/motorcycles/#:~:text=Over%20the%20last%2010%20years,per%20100%20million%20vehicle%20miles> [Accessed 28 July 2022].

 

 

Rahman, M.A., Ahsanuzzaman, S.M., Rahman, I., Ahmed, T. and Ahsan, A., 2020, June. IoT Based Smart Helmet and Accident Identification System. In 2020 IEEE Region 10 Symposium (TENSYMP) (pp. 14-17). IEEE.

 

 

Schellenberg, M., Harker, M.J. and Jafari, A., 2018. International market entry mode–a systematic literature review. Journal of Strategic Marketing, 26(7), pp.601-627.

 

 

Solah, M.S., Hamzah, A., Jawi, Z.M., Ariffin, A.H., Paiman, N.F., Isa, M.M. and Khalid, M.S., 2019. The requisite for motorcycle personal protective clothing: Malaysia's perspective. Journal of the Society of Automotive Engineers Malaysia, 3(1).

 

 

Tulung, J.E., 2017. Resource availability and firm’s international strategy as key determinants of entry mode choice. Jurnal Aplikasi Manajemen, 15(1), pp.160-168.