Topics: Ducati, Motorcycle, Brand Pages: 6 (1787 words) Published: March 30, 2013

Subject: Ducati: In Pursuit of Magic (A)
Date: Feb. 19th 2013

Ducati is one of the premium motorcycle producers specializing in sport segment superbike from Italy. The company experienced booming in sales and reputation in 1996-2001. This boost had attracted Texas Pacific Group to pursue controlling interest in the company for higher expected future return. The economic boom somehow masked the mistakes made by Ducati during the period. When sales started to decline during 2002-2005, three major problems started to become more obvious among the management team: * Product discontinuity.

* Cost disadvantage compared to Japanese producer.
* Decline in sales in U.S. market.
Ducati needed to addresses these problems to put the company back on track. Before offering solutions to any of the problems mentioned above, we would like to dig into details about the industrial background, company strategic positions, and competitive advantages and disadvantages about the company. These analyses are especially beneficial to help identify potential opportunities and threats of the motorcycle industry and its sport segment. Five forces analysis are supplemented to our analysis. * Threats:

* Rivalry: rivalry among industry and the sports segment came from United States and Japanese motorcycle makers. There are intense competitions among brands for entire industry as well the sport segment. A major competitor for cruiser is Harley-Davidson, and Honda and other Japanese motorcycle producers constitute major competitors for the sport segment. * Currency fluctuation: exchange rate posted issues for international operations. Ducati and fellow motorcycle companies engaged in operations all over the world, exchange rate fluctuation generated uncertainty for the company. This is for both the industry and for the sport segment. * Substitutes: there is a high incentive for alternative transportations for the US market. This hurt the industry as well as sport segment. * Government regulation: Chinese government posted regulations that prohibited motorcycle usage domestically for various reasons. This makes it hard the entire industry as well as the sport segment. * Entrant barriers for industry: low entry barrier due to three reasons. First, people with knowledge can build motorcycle easily. Second, low capital requirement for entrants. Last, there are low switching costs for customers. * Opportunities:

* Entrant barriers: high for the sport segment due to technology advancement, better design and engineer work, high capital requirement for entrants and distinctive incumbency advantages for established brand. * Buyer’s power: low. This is caused by the brand power and the brand loyalty. People want to pay premium for the bike to feel cool and different. There is a huge demand for motorcycle. * Higher buying power in BRIC. Consumers in those countries are more likely to spend on motorcycle. This is beneficial to the industry, especially the sport segment. * More diversified riders lead to market growth. There are more women riders than ever before. This is beneficial to the industry and to the sport segment. The following part included company analysis and analysis of company’s strategic position. * Value drivers and competitive advantages:

* Use a unique Desmodrimic valve control system to increase the engine performance * Use a engine that were built in a L-twin design to improve aerodynamics and weighted lighter * Special motorcycles had a low-hum sound.

* Frame gave greater rigidity, handling power, and enhanced speed. It offered more compact design architecture. * Superb in-house design and external design team teams.
* Related field that increase value: Ducati Corse racing, apparel, local Ducati clubs, Ducati museum, Ducati riding experience training course, Ducati.com and Ducati’s multi-franchise distribution...
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