Ducati Motorcycles Essay

Published: 2020-04-22 15:24:05
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Category: Motorcycle

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In the summer of 1996 Frederico Minoli was appointed as the CEO of Ducati in order to lead the company into a new era of profitability and to establish Ducati as a brand to contend in the sports motorcycle segment. Minoli was faced with a company which, despite having a team of top engineers, had gained a reputation for average quality as a result of inefficient production and poor management.

It was Minoli whom later described Ducatis top management as operating in a structured chaos, as he believed that by incorporating certain basic structural changes and by redefining companys strategic goals, it could be turned into a profitable brand-driven company. Ducatis turnaround focused on brand building, which was supported by the reconfiguration of a number of activities, ranging from increased efficiency in the production process to broadening its customer base. Having almost doubled its market share in 2001, Minoli wanted to find new sources of growth.

Among others he considered the cruiser market, currently dominated by Harley Davidson. His goal was to compete directly with Harley Davidson in Europe by introducing a cruiser that combined Ducatis high performance engine with its own unique design. To compete directly, Ducati invested heavily in R&D and its distribution chain to enable more flexibility within its supply chain. Ducati implemented strict selection procedures for suppliers of components, which enabled them to reduce their total suppliers.

Once the suppliers were reduced, two (2) potential suppliers were selected for every component to allow for flexibility, bargaining power and increasing competition among suppliers to improve quality. This type of approach to the production of components resulted in an increased accountability of the main component supplier who was responsible for sub-component suppliers. By 2001, over 87% of Ducatis production had been outsourced. This allowed Ducati to standardize the production of cylinder heads and crank shafts to allow for increased efficiency.

Ducatis high level of outsourcing its components has allowed the company to allocate more resources towards building and enforcing its competitive advantages. During the turnaround, Minoli succeeded in bringing in a new management team that was innovative and creative in driving change. Compared to its competitors, Ducati has shown that it has a positive attitude towards change, and the fact that the turnaround program was successful has probably made the company more willing to adopt new strategies.

The fact that Japanese manufacturers do not manage to achieve the same level of customer loyalty provides Ducati with a clear opportunity to obtain market share from its customers. However, the evenly distributed nature of the European market suggests that no single firm has been able to gain a significant advantage over the others. This market is shared more or less evenly between Harley, the Japanese manufacturers, BMW and Triumph. This suggests that a threat from a new entrant who addresses the needs of the European consumers for performance and style poses a credible threat to the incumbent firms.

The cruiser market is typically characterized by older, wealthier consumers. Some of these consumers may choose to substitute motorcycles for cars to meet the needs of their growing families. However, given the high average income of a cruiser owner it is quite likely that he/she already owns a car in addition to a motorcycle, and thus the threat of substitution by products from different industries is quite low. There is also the small possibility of substitution by other segments of the motorcycle industry.

In order to establish Ducati as a global brand, a marketing strategy was introduced. One of the ways that a more aggressive marketing strategy was fostered was through advertising on the Ducati web site. The Ducati website was available in Italian and English and by March 2000, it received on average more than 500,000 hits a month. Furthermore, co-marketing is carried out with other major international brands such as Sothebys (the international auction house), DKNY (the American fashion company), and Harrods of London.

Ducati motorcycles were also featured in several films and British television series. The strength of Harley Davidsons brand globally implies that cruiser buyers possess significant bargaining power. This is reinforced by the fact that a number of Japanese motorcycle manufacturers have introduced cruisers that are technologically superior to Harley Davidson, but have not been able to sway Harley Davidsons customers. The concentrated nature of the market suggests that suppliers have relatively low bargaining power with companies that they are already supplying.

On the other hand, suppliers have very high bargaining power with potential entrants to the market due to the cost of switching. For instance, Harley Davidsons suppliers have customized their manufacturing processes to meet Harley Davidsons requirements and a switch would require considerable cost to the supplier. Given the high barriers to entry of the industry, and the high bargaining power of suppliers, one might conclude that it would be difficult for new entrants to penetrate the market.

However, a company that is already established in the motorcycle industry may be able to harness its ownership advantages to facilitate entry into the cruiser market at a relatively lower cost than an entirely new firm, as it would already have elements of the infrastructure and knowledge capital needed to facilitate its entry into the cruiser market. Ducati has an opportunity to increase sales by diversifying into new segments of the market. Furthermore, as the case study has demonstrated, the apparent dissatisfaction of European customers with Harley Davidsons cruisers could provide Ducati with the impetus for entering the cruiser market.

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