Ducati Essay

Topics: Brand management, Brand, Branding Pages: 7 (2426 words) Published: March 6, 2011
Questions to answer
1) How did Ducati become the second most profitable motorcycle maker in the world despite its small scale?

2) What is the fundamental economic logic of Minoli’s turnaround?

3) Can Ducati sustain its position in the sport segment? Can Honda and the other Japanese manufactures stop its growth in this segment?

4) What strategic alternatives are available to Minoli in 2001? Which alternatives would you recommend, why?

GMAN 512 Midterm
11 February 2010
Dave Reynolds
What are the global driving forces in this industry in terms of cost factors, markets and competitive factors?  
Ducati, Harley-Davidson (H-D), BMW, Triumph, Honda, Kawasaki, Suzuki and Yamaha together produced motorcycle models that were categorized into seven market segments: Off-Road, Cruiser, Touring, Hyper-Sport, Super-Sport, Sport-Touring and Naked. All four Japanese manufacturers have models in all seven market segments while the remaining competitors have models in select segments. The Japanese manufacturers and UK’s Triumph had average MSRP’s of less than $10,000, while BMW, Ducati and H-D had average prices above $10,000. This price boundary was the price elasticity of demand inflection point: price-sensitive consumers tended to select the less expensive bikes, while riders who made purchase decisions on factors other than price bought BMW’s, Harley’s and Ducati’s. As a result, the Japanese companies commanded 80% of the global market from 1996 – 2000. Honda, Yamaha, Suzuki and Kawasaki all made models that were comparable to each other in terms of pricing, design and technology. Their individual shares of the market across all segments do not vary appreciably from ’96 – ’00. That Honda and Yamaha agreed to share shipping costs in order to save 30% on delivery costs, with Kawasaki and Suzuki soon to ink a similar deal, tells us that these rivals were comfortable with the stasis of their relationships in the market. BMW, Ducati and H-D had more brand-loyal buyers. Each manufacturer had a unique brand identity that was tied to design, heritage, lifestyle and a specific experience during rides. Brand loyalty allowed these companies to charge higher prices for performance and brand features that weren’t available with the mass-market Japanese bikes. Consequently, buyers in the $10,000+ segments had less purchasing power than buyers of mass-market bikes. Ducati, BMW and H-D had much greater resistance to lost sales to substitutes than did the Japanese makers. The three niche players had product and brand characteristics that were not available in the mass-market bikes. Conversely, the Japanese firms lost and gained sales with each other on the basis of pricing and small feature advantages from one model year to the next because their products were effectively close substitutes of one another. Switching costs in terms of prestige and riding experience were high when moving from a niche bike to a mass-market bike but were low when moving from one mass-market bike to another. Though competition series’ like MotoGP and World Super Bike reinforced some brand loyalty, the data in exhibit 3 illustrates that the effect of “race on Sunday, sell on Monday” had limited effect on gaining market share for mass-market bikes. The case presents little detailed information on the barriers that would have been encountered by new entrants. However, the case does provide some hints as to whether a new entrant would be able to be successful. First, the fact that four Japanese manufacturers have achieved stasis with each other indicates that there is little profit-taking opportunity in the mass market. Even if a new entrant could rapidly scale to the size of the Japanese firms, it is questionable whether any profit they could take would justify the capital investment necessary to enter. This leaves niche segments that either currently exist or that could be created through an innovative design as the only profitable...
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