Topic: BusinessIndustry

Last updated: February 5, 2019

HED Cycling was created by Steven Hed in the mid 1980s.

HED Cycling specializes in creating innovative bicycle parts that professional and amature riders can enjoy. The company primarily specializes in high-speed wheels for professional bikes. Steve Hed wanted to create an affordable wheel as good as the leading professional bike company Cerevelo. One pair of Cerevelo wheels cost up to 6,000 a pair, and a bike frame can be 15,000. In 1984 Steve Hed was further motivated to create his own company when he witnessed Francesco Moser break the hour record that Eddie Merkcx set in 1972. During an interview with Forbes Steven Hed’s wife Anne Hed said, ” Steve saw the world record get broken by Francesco Moser With this $6,000 wheel on the back of his bike, and said, “I think I can make that” (“Forbes. Nov 10Anne Hed). Hed studied the professional wheel and bike frame in attempt to create his own more affordable and original design.

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In the mid 1980s, Steven Hed engineered the first disk wheel and aerodynamic spoke wheel. Every wheel is designed and manufactured at the company’s headquarters in Minnesota. The company used to send some of their designs to be manufactured in Asia; however, they realized that overall the labor was not cheaper and the quality of in state manufacturing was better. HED Cycling is a major contributor to many charity organizations including: I Can Shine Bike Camp for Down Syndrome Association of Minnesota, FB4K (Free Bikes for Kids), UHCCF Children’s Foundation Century Ride, Greg Lemond CEO Ride for Special Olympics, Parenting With a Purpose, NPH USA 5K for an orphanage in Honduras, Pablove Foundation for Children’s Cancer, Bicycle Art Exhibition Benefit at Spye, Minnesota Lyme Association, Concordia Academy School in Roseville for school expansion, Breakaway Kids Triathlon in Lake Elmo. It is essential for any business to give back a small portion of their earnings to those who are in need.

Scripture tells us, “And do not forget to do good and to share with others, for with such sacrifices God is pleased” (Hebrews 13:16). HED Cycling shows the example that with determination and perseverance anyone can achieve their dream. HED Cycling generates roughly 10 million in income every year and has progressed greatly. Since HED Cycling is privately owned by its founder, the company does not sell stocks to the public.

Due to the company’s popularity amongst professional cyclists, many wear and promote HED Cycling while they are competing. One of the most prominent figures that helped promote Hed Cycling was Lance Armstrong. In the late 1980’s 16 year old Lance Armstrong called the company seeking to try one of their newly developed wheels.

The company sent him their strongest carbon based wheel and within a couple of weeks Armstrong reached out to tell them one of the spokes had broken. The owners were shocked to know that their own carbon wheels could not withstand Armstrong’s strength. Armstrong later would be known as a professional road cyclist who won nine years in the Olympics consecutively.

As one of Armstrong’s sponsors, Hed cycling was advertised by the professional cyclist and displayed world-wide. After Armstrong won many races using the company’s products, Hed cycling gained popularity amongst all professional cyclists. One of the companies biggest competition is the Alchemy Bicycle located in Denver, Colorado. Alchemy Bicycle was created in 2008 by Ryan Cannizzaro who later became the co-owner with Matthew Maczuzak. Although his dream was to work with carbon, Ryan Cannizzaro began working on his bike frames with a welder using primarily steel and titanium. When he met the engineer Mathew Maczuzak, they both began to work using carbon without manufacturing anything in China. For the company to start out and continue manufacturing their carbon frames and wheels in the United States was a major accomplishment in the bicycle industry.

The success of the privately owned Alchemy Bicycle company has grown and now generates 2.9 million dollars in revenue each year. When questioned about his goal for the company Cannizzaro responded by saying, “We’re constantly thinking about how we can make it different in this industry, and I think that’s what Matt and I always talk about. We’re going to do it, we’re just not going to make a product that’s already been out there and been done.

We want to make a product we feel is better and will actually make a difference throughout the industry”( Ryan Cannizzaro). Though Alchemy Bicycle has become an extremely successful privately owned company who also specializes in carbon-based bikes, Hed Cycling has been in business for over thirty years and has gained popularity world-wide. A new business tactic Hed Cycling has enacted is the Map Policy which stands for the minimum advertised price. This policy places a strict minimum price on all products sold at a discounted rate which may furthermore enable the company to set a standard for their customers. One primary reason this policy is enforced is to allow resellers to sell the company’s product at a reasonably profitable price for both the reseller and the manufacturer. Paul Ellis, Hed Cycling’s director of sales and marketing, said, “We’re very pleased to have an official MAP policy in place. It should enable IBDs compete fairly in the marketplace, and minimize any complaints or problems for them in regards to online advertising. We know that this will be in the best long-term interest of both our dealers and Hed Cycling”( Paul Ellis).

Steven Hed’s small bike shop in St. Paul, Minnesota grew to become the successful small business it is today. Unfortunately, in 2014 Steven Hed died abruptly and his wife Anne Hed took on the business. Today HED Cycling has 48 employees and its headquarters is located in Roseville Minnesota where they recently bought a 25,000 square foot manufacturing building. Anne Hed has been able to keep up with the ever growing business and doesn’t want to stop the advancement of HED cycling.

Anne Hed said, We miss him every day, but we want to continue the legacy, so I had to put myself out there more than I would have. We want people to know that we’re still being innovative, we still have patents we’re working on, and we still have this amazing product”(Anne Hed). The free market system is essential to the life of a small business. Without the free market small businesses would cease to exist due to governmental regulation. Because of the free market system HED Cycling is able to interact with its buyers and sellers with very few regulations. HED Cycling was creating their products both in the United States and in Asia with much freedom.

The company had a great advantage in partnering with Asia due to their cheaper labor. Because the United States can have strict regulations in regards to manufacturing, many American companies choose to partner with foreign countries. One of the reasons American manufacturing costs more than foreign manufacturing is due to the cost of labor. Although it may be cheaper for countries to manufacture a portion of their product in a foreign country, delays and extra costs may occur. HED Cycling decided to end their Asian manufacturing relations because of major delays in the past, and uncertain costs that can add up.

One of the most important principles of the free market is subsidiarity. This principle emphasizes the government’s responsibility to interfere as little as possible in privately owned businesses. Milton Friedman, One of the leading economists that emphasized the importance of the free market system stated, “There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud” (Milton Friedman). Another important factor that the free market system helps promote is competition. With government interference, companies are unable to work hard and compete with other companies.

Businesses can be negatively impacted without the ability to compete with other companies because competition springs forth incentive. The idea of incentives has historically proven success in labor and in business. Competition enables companies to work harder in order to produce a product much greater than one that is already on the market. Henry Ford, a successful innovator and businessman once said, There is one rule for the industrialist and that is: make the best quality goods possible at the lowest cost possible, paying the highest wages possible. The free market system also influences companies in the area of innovation.

Without people who create new and innovative products, our world and economy would not advance. Hed Cycling has grown substantially over the span of thirty years and their success has been evident. One way the company can grow is through professional advice.

The company is small with only about 48 employees and one building where design and manufacture occurs. The company does not tend to reach out and seek advice from other companies or professionals because they enjoy the family aspect of their business; however, Hed Cycling should branch out. Hed Cycling can generate more customers and innovative ideas by collaborating with another small business. Many companies collaborate with others in order to gain customers and spread their ideas. Expansion is another way to grow and improve the company. The headquarters and manufacturing location is in Minnesota, but in order to reach out to more people, the company should open more stores in other states.

Companies can gain customers by having physical locations where buyers are able to interact with the employees and have a personal connection with them. Because Hed Cycling products are of high quality, they also come with a high price. In order to serve the needs of all customers, a line of less expensive products can accommodate those who are on a budget. Amature riders would all love to enjoy the quality and workmanship of Hed Cycling and to find a medium where they can purchase items that are desired to advance their cycling skills, the company should definitely generate more cost effective products. There are many products cyclists need when riding, and unfortunately Hed cycling is limited.

It would be extremely beneficial to the company is they produced a wider range of products, specifically personal products. Cyclists need clothing, shoes, water bottles, helmets, sunglasses and backpack when riding. Hed Cycling only provides products that relate to the bike but does not provide any personal products.

Though there is much more competition with personal cyclist products, the company can expand their brand though the addition of personal items. Hed Cycling can also create new products for other brands. In the beginning of the company’s venture, the well known company Cervelo requested Hed Cycling to create a special bike frame. Hed Cycling created a bike frame that thousands of people enjoyed and it was a success. Although Hed Cycling has made a product for another company once, they should partner with another international company today.

A final recommendation I have for the company is to provide scholarship and giveaways for teens who enjoy cycling and have dreamed of owning a professional bike. Contributing to the lives of teens and fulfilling their dreams will impact their lives forever. Hed Cycling is a successful company that began with Steve Hed in the mid 80s with only a few thousand dollars and a dream. With only 48 employees and only one manufacturing location, the company has been an example for all small .

Without extreme government regulation, small businesses have proven to be able to grow strong. Although the government desires the economy to grow, it can essentially limit the freedom of small businesses. It is very difficult for small businesses to succeed in the midst of big companies, but with hard work and innovation any business has the chance to prosper. Anne Hed has continued to keep Steve Hed’s legacy alive creating an innovative bike and wheel at a time.


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