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Market Analysis

In preparation to the marketing strategy, it is important to analyze factors

including the market itself. This is partially based on DEPEST-factors, allowing for
a quick market scan.

The area and its relevance

The area of Papenburg has slightly under 37.000 inhabitants. Approximately 93%
of the local population is of German ethnicity, the other 7% being covered by
mostly Dutch and Eastern European ethnicities. However, none of the local
inhabitants are considered to be part of Papenbikes target group, as the service
is mostly aimed at tourists visiting Papenburg for a shorter time period. The size
of this particular group is estimated to be 250.000 persons a year.
Economically, the inhabitants of the Papenburg area are slightly below the
average German GDP per capita per year, estimated at 35.000 Euros. However,
once again, due to the fact that Papenbikes target group mostly consists of
tourists, and most of them are Germans, the national average is more relevant,
and is calculated at slightly over 46.000 Euros per year. It has also been growing
heavily between 2000 and 2010; as of recent years this growth has stagnated
somewhat. As of 2016, the number is estimated to nearly have reached 50.000
Euros annually. Compared to the rest of Europe this is high, even according to
Western-European standards.

Sources include: World Bank

Relevant branch
On a local scale, the relevant branch also known as Fahrradverleih in German
has strongly been linked to the amount of tourists coming to Papenburg every
year. Now that the Meyer Werft, a gigantic local shipyard for luxurious cruise
ships, has become a touristic attraction, tourists have been flocking to the

Papenburg area in ever larger numbers. It is unknown whether this growth will
The current amount of locally rented bikes annually is 25.000. With prices
averaging around 8 Euros, the annual market turnover is therefore 200.000 Euros
per year. This deliberately excludes indirectly competing goods and services,
such as car rentals, for example. These are not part of the relevant branch. Based
on the expectancy to gain market share as years pass, Papenbike expects to own
35% of the market after 5 years. Within 5 years, Papenbike expects to have
rented 34.000 bicycles, based on gradually increasing bicycles rented per year,
starting with a meager 4.000 in the first year.
Currently the markets competition consists solely of two companies, [] and
[], with a market share of 40 and 60%, respectively.

Trend-wise, consider the following DEPEST-factors, while considering the target
group to be tourists from Germany:

The population of Papenburg is severely aging at an alarming rate. People
are moving out of Papenburg. Tourists, however, remain a growing factor in
the increasingly deserted area of Papenburg. It is expected that the
relevant market will therefore remain more or less the same, as it is
intertwined with the success of the Meyer Werft, the worlds largest

As previously mentioned, while the German economy has skyrocketed
between 2000 and 2010, recent years have shown to be less spectacular.
The GDP per capita now lies slightly under 50.000 Euros per year, and is
assumed to remain more or less the same. Germanys GDP per capita is
relatively high, compared to the rest of Europe.

Germany, along with the rest of the European Unions members, has
hopped on the sustainability train, setting goals to be less reliant on
traditionally popular and polluting modes of transport. In turn, this affects
the usage of bicycles and e-bikes, as the Germans seek to be more
sustainable in the future. Slightly, anyway.

While partially also a technological development, the increasing popularity
of electric bikes, or E-Bikes, has shown to be a promising substitute good
for scooters and other such vehicles. As a result, CO2 emissions are
expected to drop.


According to Germans in Papenburg, cycling is becoming increasingly

popular among tourists in Papenburg. It is slowly being integrated into their
likely modes of transport.

Competitors have been charging between 7,50 and 8,00 per bicycle rented per
day, whereas Papenbikes are slightly more expensive, at 10,00 Euros. Due to the
lack of transparency related to knowledge of pricing among tourists, this will
probably not matter much. In addition to this, the price is higher because
Papenbike offers additional services, such as the deployment of bicycles and the
multiple drop-off spots scattered among the area.
Because we are dealing with a rental service, it is highly difficult to estimate the
yield, because the only variable costs are depreciation.

Competitive Analysis
In order to analyze the competition on a MESO level, Porters Five Forces is
frequently used to describe the forces correlated to the market environment.

Porters Five Forces

Threat of new entrants: in order

for a new player to enter the
market, a lot of starting capital is
required, along with the
distribution channels required to
purchase the materials.
Furthermore, starting a bike rental
in Germany requires a license.
Brand identity is not a very large
issue, because tourists are
generally less affected by brand
identities (single-use service). If a
new player were to enter the
market, however, it would
significantly cut into profits of
existing businesses, because
Papenburg would have four
instead of three businesses, an
increase of 33%.

Bargaining power of suppliers: due

to the nature of the service
Papenbike offers, the suppliers are
mainly of importance during the
startup phase of the company.
After that not so much. There are
no switching costs for any startup,
as no contracts have yet been
struck. As a result Papenbike has
lots of suppliers to choose from.
The impact of the supplier on the
overall (startup) cost structure is
huge, because of the capitalheavy nature of the business.
Backward integration is not an
option, due to the limited
operating budget. In total, the
suppliers have some bargaining

Threat of substitute goods or

services: first of all, non-rentable
modes of transport, such as buses,
trains, and metros, which require a
ticket rather than a renting
agreement, do not count as
substitute goods, because they
serve a different purpose entirely
(namely, getting from A to B just

Bargaining power of buyers: the

buyers, the tourists which visit
Papenburg, have few options to
choose from when it comes to bike
rentals. There are also few to none
substitute rentable goods which
serve the same purpose.
Furthermore, it helps Papenbikes
position they do not have to build

once). Secondly, there are few to

none substitute goods in the area.
The only substitute to be
considered here is car rentals,
which have a severe relative price
disadvantage compared to bike
rentals. Plus they require a drivers
license, and three years of driving

Rivalry among existing

competitors: the competitors
perform limited marketing
activities, and seem to be fine
with a 40-60 or 60-40 split
between the two. The impact of
the brand of either one barely
matters, nor does the
differentiation within price or
quality boundaries. The two
players in the market are hardly
clashing with each other, despite
consuming a large portion of each
others market share. The market
seems to be saturated, with
absolutely nothing binding
customers to either competitor.
The most important factors are
most likely geographical location
and to a lesser extent rental

a long-lasting relationship with

their customers, which makes it
easier. Price sensitivity is either of
great or little importance,
depending on whether tourists
actively browse online to find the
cheapest bike rental in town. The
assumption is most tourists
neglect to do so. All in all, the
buyers have some, limited
bargaining power.