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1 Dominant characteristics of the mountain bike industry Many firms existence of close substitutes demand is elastic with respect to price Some significant barriers to entry and exit Product differentiation technological innovation Large capitol investment cost advantages2 There is a great deal of competition in this industry Cannondale is only involved in the high-performance segment of the industry In this particular industry the strongest of Porters five forces of competition is threat of substitutes between competitors If a Specialized bike is priced higher than a Mongoose with no apparent advantage a consumer will have no problem purchasing the Mongoose On the other end of the spectrum the weakest competitive force would be threat to entry Companies looking to enter into this industry would need a substantial capitol investment as well as access to worldwide distribution channels The industry has evolved since Cannondale entered where a garage type operation could prosper Now the demand for innovative products with a recognizable brand name is crucial for success making it very difficult for an unknown firm to capture any share of the market3 There are some driving forces that have the potential to change the attractiveness of the mountain bike industry The industry has changed from a low-cost mass produced bicycle market into one driven by innovation It has become a popular sport and hobby which forces Cannondale and its competition to focus on technologically advanced products The current health kick that our society seems to be in will also bode well for the industry4 The strategic group map reveals that Cannodale has differentiated itself through innovation and expenditures on RD The competition also imports most of their components from the Far East which also sets Cannondale apart because of their growing vertical integration Cannondale and Trek seem to have set themselves apart from the pack because of their domestic production facilities as well as their product lines although Trek leads Cannondale in that category
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