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.