Giant Manufacturing Company, Ltd.

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Giant Manufacturing Company, Ltd.

19 Shun-Farn Road
Tachia
Taichung,
Taiwan
Telephone: (+886-4) 2681-4771
Fax: (886-4) 2681-0280
Web site: http://www.giant-bicycles.com

Public Company
Founded: 1972
Employees: 6,550
Sales: $850 million (2006 est.)
Stock Exchanges: Taiwan
Ticker Symbol: GIANT
NAIC: 336991 Motorcycle, Bicycle, and Parts Manufacturing; 339220 Sporting and Athletic Goods Manufacturing

Giant Manufacturing Company, Ltd., is an international powerhouse in the specialty bike market with revenues approaching $850 million. Giant began as an original equipment manufacturer for well-known American bike company Schwinn and gambled on creating its own brand in the late 1980s. Within a few years Giant was recognized worldwide by cycling enthusiasts and their suppliers. While baby boomers grew up with Schwinn and Huffy bicycles, today's generation is far more familiar with Giant, Specialized, Trek, and Cannondale, creators of high-end mountain and road bikes for cyclists of all ages and skill levels.

IN THE BEGINNING

Giant was founded in 1972 in Taiwan by entrepreneur King Liu. At the time, the bicycle industry was dominated by such American brands as Schwinn and Huffy, based in the Midwest. Schwinn Bicycle Company of Chicago, Illinois, played a pivotal role in Giant's future. In the early 1970s Schwinn ruled the market with its ten-speed bikes, but falling sales and rising costs pushed the company to outsource production. Schwinn turned to two Asian firms: Giant in Taiwan and the China Bicycle Company (later Shenzhen China Bicycle Company Ltd.) in China. Both were hired as OEMs (original equipment manufacturers) on a contract basis, and so began a tumultuous business relationship.

The 1980s marked a crucial change in the bicycle industry and for American icon Schwinn. Although the company had thrived in the Midwest for eight decades, Schwinn lost its footing when faced with a strike at its Chicago plant in 1981. Rather than settle the dispute, Schwinn closed its Chicago factory and moved all production to Giant in Taiwan. While the deal allowed Schwinn to keep costs low and maintain its production numbers, the shift gave Giant a huge boost in productivity and technical expertise.

Not only was Giant soon responsible for nearly three-quarters of Schwinn's annual output, but its design team was able to gain all the knowledge necessary to build and market specialty bikes of its own. Although it would be years before Giant became an internationally recognized name, the company began experimenting with its own branded bike designs in 1981.

Over the next several years, as the relationship between Giant and Schwinn began to crumble, Schwinn failed to respond to the changing bicycle market. The perennially popular ten-speeds gave way to sturdy mountain bikes and ultra-lightweight carbon fiber road bikes for cycling enthusiasts, bikes Giant had the technology and low-cost labor to build. When Giant's founder and Chairman King Liu announced it would begin building and marketing its own brand bikes, Schwinn was outraged. There was little, however, the American firm could do other than move part of its business to the China Bicycle Company in Shenzhen.

FORGING A NEW IDENTITY: 1986–92

Challenged with the loss of most Schwinn business (though Giant did continue to build for the U.S.-based company), Giant began selling bikes emblazoned with its own name to European dealers in 1986 through a sales office and manufacturing facility in the Netherlands. The region's consumers tended towards two groups: racers who bought technologically advanced road bikes, and commuters or leisure riders who wanted attractive yet affordable bicycles. Giant was able to supply both, and quickly established itself as one of Europe's top importers.

In 1987 Giant set about conquering the United States, under the watchful eye of King Liu and Giant President Antony Lo. Although much of its market overlapped with Schwinn and other U.S.-based bike firms, Giant sold its branded, high quality products for less and quickly gained market share. Within a year of selling its own branded bikes in the United States, Giant went from about 500 U.S. dealers to more than 1,500. The company had opened a U.S. subsidiary in Newbury Park, California, and staked its claim to the West Coast. California proved a boon for Giant, with a health- and fitness-crazed population, terrific weather, and miles upon miles of Pacific coastline for riding.

In the early 1990s the People's Republic of China began touting Taiwan's manufacturing as equal to that of the West in quality and price. Taiwan had long been considered the home of cheaply made, inferior goods yet the country had undergone an industrial and economic transformation. Giant was a perfect example of this rebirth, having emerged from serving as an American supplier to an original manufacturer besting U.S. firms in terms of quality, design, and cost.

With the launch of its Ready to Ride program in 1991, which supplied U.S. dealers with preassembled bikes, Giant cemented its reputation within the American bike industry. Dealers did not have to spend hours putting bikes together, and customers found an increasing array of sophisticated well-built road and mountain bikes. Another market coup came with the introduction of its Cadex line, which revolutionized racing bikes with a supremely lightweight yet durable frame constructed from carbon fiber.

As Giant gained a stronger foothold in Europe and North America, Schwinn struggled in Chapter 11 bankruptcy. Lo paid tribute to Schwinn in Forbes magazine (December 21, 1992), commenting, "Without Schwinn, we never would have grown to where we are today. We learned many basic things from them: quality, value, service." These lessons Giant skillfully used to become one of the world's largest bike exporters. The result, though, was that Giant and the China Bicycle Company became the target of blame for the demise of American bike interests, including Schwinn. Giant chuckled all the way to the bank with no regrets, as 1992 revenues reached $230 million. The company sold 1.35 million bikes during the year, more than two-thirds of which sold under the "Giant" brand name.

COMPANY PERSPECTIVES

Across seven continents and fifty-odd countries, underneath thirty-two of the world's brightest professional cyclists, in over ten thousand retail outlets, and throughout the streets of the world's most populous nations, you'll find bicycles designed and built by Giant, The Global Bicycle Company.

As Giant continued to produce more of its own bikes, its research and development department (later dubbed the Techno Center) began to take center stage. Giant was one of the first to come out with carbon-based "composite" bike frames. The "formulaOne" frame, which was one of Giant's best-selling frames ever, began with thin carbon threads layered into specially shaped tubes, which were fused together with even more layers of carbon. Giant's designers believed three major components determined the success of a bicycle frame: stiffness, weight, and ride quality. Too much of one and a shortage of another spelled disaster, and the formula-One proved to be the perfect combination. Lightweight, sleek, fast, and strong, formulaOne became a legend in the competitive cycling marketplace.

INTERNATIONAL EXPANSION: 1993–99

In early 1993 as offers were made for the assets of bankrupt Schwinn, Giant did not join the fray as expected. Instead, Giant concentrated on its own future and had completed construction on a megaplant in Kunshan within the Jiangsu Province to service the burgeoning Chinese market. The Chinese were willing to pay top dollar for mountain bikes, made popular in the United States, and Giant had a billion potential customers to consider.

By 1995 Giant was exploring its options within North America, trying to entice the top three U.S. retailers—Wal-Mart, Kmart, and Sears—into buying imports. These three sold only domestically produced bikes, an endeavor the United States' three largest bike brands (Huffy, Murray, and Roadmaster) wanted to maintain. Unfortunately, China was seeking the same opportunities and was accused by the U.S. Department of Commerce of "dumping" its bikes at very low prices to steal away U.S. market share.

For Giant, however, two other major U.S. retailers, Toys 'R' Us and Target, were receptive to both domestic and imported specialty bikes. Combined with the independent, specialty retailers—Giant's real bread and butter—imported bikes accounted for about 35 percent of the U.S. market. Giant got a boost in July 1995 when U.S.-based investment firm Goldman Sachs & Company spent $12.5 million to buy a reported 9 percent stake in the firm. The infusion of cash not only drove research and development but Giant's affiliation with Goldman Sachs gave it needed credibility.

What ultimately separated Giant from the Asian pack was its technology and ingenuity. In 1995 the firm unveiled its Compact Road Design, an engineering marvel that shortened frame tubes by altering the angles at which they met one another. Reducing the tubes not only meant less weight, but less "flex" and a more aerodynamic ride. The Compact Road Design revolutionized the cycling industry and virtually every bike manufacturer adopted Giant's concept of "compact" geometry.

For the second half of the decade, mountain bike sales fell as road bikes and BMX trick bikes took center stage, until the high-end bicycle market began to decline. Many American manufacturers felt the heat of Taiwanese, Chinese, and Korean bike companies and began closing their U.S. plants in favor of facilities in Mexico and Asia. To keep its brand in the news, Giant not only poured millions into its Techno Center, but formed joint ventures with a variety of well-known companies, including French automaker Renault and American sporting goods clothier Eddie Bauer, to produce co-branded products. Giant also opened a new manufacturing plant in the Netherlands to serve its growing European customers.

From a technological standpoint, Giant's primary American competitor was Trek Bicycle Corporation, headquartered in Waterloo, Wisconsin. Trek had been around since the late 1970s and had gained a reputation for its specialty bikes as did the aptly named Specialized Bicycle Components, based in California near Giant's U.S. subsidiary. Another American competitor gaining popularity was the Georgetown, Connecticut-based Cannondale Corporation, known for its uniquely crafted high-end bikes. While all three firms bristled at Giant selling its own brand alongside theirs (especially Trek and Specialized, since many of their models were built by Giant), they had little recourse but to hope the market was big enough to support them all.

KEY DATES

1972:: Giant Manufacturing Company, Ltd., is founded in Taiwan.
1981:: Schwinn Bicycle Company takes its operations to Giant to avoid a U.S. strike.
1986:: Giant begins selling bicycles under its own name outside Taiwan.
1987:: Giant forms a U.S. subsidiary (Giant Bicycl Inc.) located in California.
1992:: A new manufacturing plant is built in China.
1995:: Goldman Sachs & Company buys a stake in Giant.
1996:: A new manufacturing facility in the Netherlands is completed.
2002:: Giant sponsors its first Tour de France cycling team and gets its carbon fiber bikes in the race.
2003:: Giant and other Taiwanese bike manufacturers form the A-Team Alliance.
2007:: Giant rolls out its Alliance frame technology, mixing composite and aluminum materials.

THE NEW MILLENNIUM: 2000–04

By the 21st century Giant's domination of the bicycle market was solid, with its once formidable rival, Shenzhen China Bicycle Company, reorganizing after major financial woes. Giant had become the world's top bike exporter and shops selling its products, all around the globe, had become the norm rather than the exception. Older brands Schwinn (now owned by Wisconsin's Pacific Cycle, Inc.) and Huffy still served the all-purpose market, but Giant, Trek, Cannondale, and Specialized had become increasingly well known to bike enthusiasts willing to spend up to several thousand dollars for hightech, well-built bikes.

In 2000 Giant produced around four million bikes, with production divided between its newer facility in China and the original plant in Taiwan. Revenues for 2001 reached $430 million as the company tweaked its international profile by sponsoring athletes and elite cycling teams. Several top mountain bikers including Myles Rockwell, the world champion in downhill, signed to ride for Giant in the 2001 and 2002 seasons. In addition, Giant began sponsoring cycling teams in the Tour de France in 2002 and became the first Asian firm to have its carbon fiber-based bike frames ridden in a race dominated by European bike designers.

Giant was producing between four million and six million bikes annually in the early 2000s and had become the top brand in China and Taiwan, the second most popular high-end specialty bike brand in North America (after Trek, which sponsored Tour de France seven-time champion Lance Armstrong), the third largest seller in Europe, and was instrumental in making Panasonic the top selling brand in Japan (since most of Panasonic's bikes were built by Giant).

To ensure its future and to promote the quality of Taiwanese manufacturing, Giant and a dozen other bike companies (including its top rival, Merida Industry Company, Ltd., which had bought a stake in the U.S.based Specialized) announced the formation of the "A-Team Alliance" in 2003. The group hoped to eliminate much of the region's fierce pricing wars and to better compete with Chinese and American manufacturers by adopting a management approach pioneered by car producer Toyota. Further, Giant announced the construction of a second production facility in mainland China (near Shanghai), in preparation for the 2008 Olympic Games in Beijing.

SETTING A COURSE FOR THE FUTURE, 2005 AND BEYOND

By the mid-first decade of the 2000s Giant was producing about six million bikes annually and had divided its business into six separate units, each showcasing a particular type of biking: mountain (ruggedly built for trails and offroad adventures), road (lightweight and built for speed, for racing enthusiasts), lifestyle (all purpose, made for health/fitness and recreational rides), women's (with specially designed frames for racing or club riding), BMX (tough, smaller bikes for tricks and races), and kids (sized for children of all ages). Revenues reached almost $813 million for 2005 and Liu and Lo had big plans for the rest of the decade. Brand identity and promotion were key endeavors; a step in the right direction was Giant's new four-year agreement (signed in 2006) to sponsor the T-Mobile racing team, made up of many of the world's most elite cyclists.

Giant remained at the forefront of the high-end bicycle industry, producing a wide array of bikes for every kind of enthusiast, including the debut of a new electric bike called "Revive." New strides in frame materials, including its well known composite technology, took another step forward with the launch of the "Alliance" blend. Alliance, introduced in 2007, combined the best of formulaOne's composite frame, its near-weightlessness and shock absorption, and added the rigidity of aluminum on the bottom half of the bike. The new frame building technology offered the best of both worlds to competitive and club cyclists and even Italy's Colnago, the Lamborghini of road bike makers, began placing orders with Giant for its frames. As an international leader, Giant continued to give customers what they wanted: bikes of the utmost quality, built for performance but always with an unerring sense of value and style

Nelson Rhodes

PRINCIPAL SUBSIDIARIES

Giant Bicycle Inc. (U.S.A.).

PRINCIPAL COMPETITORS

Cannondale Corporation; Merida Industry Company, Ltd.; Pacific Cycle, Inc.; Shenzhen China Bicycle Company Ltd.; Shimano Inc.; Specialized Bicycle Components Inc.; Trek Bicycle Corporation.