EMBA 2014 – 2016
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EMBA 2014 – 2016 BUS Group Booetes
Introduction (How did Ducati become the second most profitable motorcycle maker in the world despite its small scale?) 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 with in the sports motorcycle segment. He believed that by incorporating certain basic structural changes and by redefining company’s strategic goals, it could be turned into a profitable branddriven company. Ducati’s turnaround focused on brand building and to follow a clear differentiation strategy allowing the company to charge premium prices. Moreover Ducati became very cost efficient through the highest outsourcing ratio in the industry, being the most efficient manufacturer through standardization and rationalization as well as quality control of the supplier network. As a result, the company was able to invest into R&D as well as brand building and simultaneously become the second most profitable motorcycle maker in the world despite its small scale. This strategy design was embedded in clearly defined objectives and supported by organizational arrangements. Moreover, Federico appointed a talented and passionate management team, stimulated creative decision making and set following clear objectives:
Double-digit growth and equalling Harley-Davidson´s profit level Increase market share from 4% to 10% (sport sub-segment>500cc; Ducati market). The above approach showed following impressive results:
CAGR of EBIT grew from 1997 – 2001 by 22.61%
Share of Market in the Ducati relevant market (Sport Niche) grew from 5.1% to 6.7% (1997 – 2001, global market) - whereas most competitors are losing market shares; only Yamaha won shares as well and Harley shares transferred to Buell Ducati developed the category: Ducati relevant market with growth from 1996 – 2000 (+3.5%p), whereas all other categories were losing share.
Framework to Success (Can Ducati sustain its position in the sport segment?) Hambrick and Frederickson (“Are you sure you have a strategy?”) presented a framework for strategy design outlining five elements which provide answers to five questions which we will use for further examine Ducati’s success.
1. Arenas: where will be active?
Ducati clearly focused on the sports bike market staying true to their heritage and needs of its core target group. Sport bikes had lighter frames, a more forward seated position, and emphasized speed, acceleration and minimal comfort – the characteristics which are in Ducati’s DNA. Looking at the competitive environment, Harley Davidson and BMW dominated the touring and cruiser segment with highest brand (Harley) and product (BMW) perception. The main competitors in the sports bike segment were the Japanese companies (Honda, Yamaha, Suzuki, Kawasaki) that were active not only in every motorcycle market segment but also in other segments like cars, boats etc. Moreover, they mainly competed on technological innovation and price, reached through economies of scale and cost leadership.
Ducati’s focus on the sports bike segment makes sense both from the fit to the company’s DNA and the competitive environment in other segments perspective. To fully capitalize the sports bike segment Ducati focused on 2 main areas:
a) Brand Identification - Ducati always had unique and beautiful performance motorcycles driven by its excellent designers and engineers who were all knee-down riders just like Page # 2
EMBA 2014 – 2016 BUS Group Booetes
its core target group. Both groups fully identifying with speed, performance and innovation.
b) Widening current and building new customer base - Minoli’s idea was to develop a global brand to reach a broader spectrum of...
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