DUCATI HBR Case Analysis

Motorcycle industry: Products

Off R

oad

Seg

men

t

•Comprise of off road and dual purpose bike•Japanese were the largest manufacturers

Touring

Seg

me

nt

•Motorcycles for longer rides and greater comfort•Major players: BMW, Harley Davidson & Honda

Cruise

rs

•More focus on styling over comfort and speed.•Major Players: Harley Davidson, BMW & Japanese companies

Sport bikes

•Focus on speed, acceleration over comfort

•Hyper sport, Super-sport, Naked, Sport touring

Motorcycle industry: Customers

Knee down

• Racing aficionados, sought extreme performance and functionality

Easy riders

• Associated the motorcycle with a particular lifecycle

Weekend riders & Highway lovers

• Interested in more balanced and versatile bike

Undecided bikers

• Preferred a more balanced and versatile bike

Women •New customer base for Hardley and Ducati•8% sale of Ducati’s Monster’s motorcycle

Motorcycle industry: Technology And R&D2-5% of revenue to be invested in R&D

Integration between technical and marketing team to understand customers

Optimizing engine performance

Reducing weight

Lower fuel consumption and toxic emission

Racing competitions: develop technical solutions and test materials

Motorcycle industry: Manufacturing

•Heavy investment on automation of production line

•Outsourcing of input•Greater flexibility

•Adopted Japanese production techniques•Optimize production level and improve quality

Motorcycle industry: Distribution

Major Markets

• US• Europe• Japan

Agents

• Wholesale: build and manage the network of retail dealers in a geographic area• Independent, Partly owned & Totally owned

• Retailers• Multi-franchise & Single-franchise

Competitors

Harley Davidson

Honda

BMW

Triumph

Harley Davidson

•>650 cc•Strong American focus•“lifestyle” company

Honda•5.4 mn bikes•Started the “superbike” boom•23 models of >500cc

BMW•Network of 160 retailers•Pioneer in technical innovations•60% revenues from automobiles

Triumph•30,000 bikes•Virtually unbreakable bikes•Applied Japanese production principles

CompetitionOligopoly, with Harley Davidson as

main threat (48.1% of US market share), particularly in terms of brand.

Other competitors areTriumph, Yamaha, Honda

(on price/technology)& BMW

Bargaining Power of BuyersPower is high due to branding and loyal customer base, so Harley buyers unlikely to switch, as costs are too high. New entrants unable to touch Harley’s licensees, as they are locked in dealer networks

Bargaining Power of SuppliersPower may be low within the market, due to Harley’s dominance. High power with regard to new entrants, due to high switching costs

Threat of Substitutes

Low threat fromCars, as consumer likely to have one

in addition. Low threat from other types of motorcycles, as for

different markets.

Threat from New Entrants

Dominance and strength of Harley brand suggests high entry barriers, so low threat from new entrants. No dominating brand

in Europe means here threat from new entrants higher in Europe

Porter’s Five Forces (1979), (1980), and (1985)in analysing the cruiser market

Figure 1.Porter’s Five Force Analysis

Ducati

• Contributed to 43% of total revenues from motorcyclesHyper-Sport

• Had been most popular Ducati on roadSuper-Sport• Recently introduced segment of motorcyclesSport-Touring

• Monster – the most popular Ducati nowNaked• MH 900 Evolution• 996RLimited editions

SWOT Analysis

SWOT

OppurtunitiesOther

segments in the market

Weakness

MarketingReliance on

suppliersReached peak of turnaround

StrengthsR&D

Technical superiority

L-Twin engineBrand loyalty

Ducati : Presence and involvement

EventsDucati

Owners Club

Museum Advertising Racing

Ducati: Distribution Strategy

Sales and marketin

g subsidiar

ies

Re-organizati

on of network

of dealers

Chain of

“Ducati Stores”

DUCATI: The Turn around program

Good product

Top notch engineers

A strong Brand

Ducati had 3 things to be highlighted

Double digit growth Equaling Harley Davidson’s profit level

Fredrico Minoli’s 2 goals

Objective :- To increase market share from 4% to 10%

Management’s Perspective :- Right strategy was to develop a global brand that could not only appeal to extreme riders but also to a broader spectrum of customers

Should Ducati Expand or Not ?

Pros

•Expansion of Segments•Increase in market share

Cons

•Heavy Capital Investment•Time consuming•Unpredictable economic conditions

EXPAND Don’t Expand

Pros

•Risk reduction•Better focus on existing customers•Sustain current brand name

Cons

•Losing the chance of possible expansion

Don’t Expand

Ducati may loose focus and hence brand loyalty

R&D efforts may not payoff for new interpretation of Cruiser bike

Harley Davidson’s own style of strategy and it’s brand loyalty will make it hard to penetrate cruiser market

Unexpected downturn and unreasonable amount of time may lead to failur.

Reasons Ducati should minimize risk by

not entering the cruiser segment

It should focus on brand loyalty for existing segments.

Enhance it’s own style of strategy in existing segment just

like Harley does in cruiser.