Issues/Challenges Today, Ducati is one of the most successful motorcycle companies in the world with a dramatic profit growth since 1996. Before its huge success, Ducati was one step away from facing bankruptcy. Ducati managed to overcome such an obstacle through strong innovation and culture. Today, Ducati is faced with another challenge that may bring fortune to the company if successfully managed. Ducati set a new goal, which is to sustain the explosive double-digit profit growth in the next decade and eventually reach Harley Davison’s profit level. Ducati is considering attacking Harley Davidson by entering the cruiser market, which is Harley Davidson’s niche product and also a very profitable market segment in the industry. To do this, Ducati must invest 17 million Euro and cost of 26 million Euro. Based on this huge capital requirement, should Ducati enter the new market segment or should Ducati just concentrate on its current segment? If Ducati chooses to enter the cruiser market, what are other requirements besides the capital? Does Ducati have what it takes to succeed in the new market segment? The purpose of this memo is to help the executives of Ducati to make the optimum decision for Ducati’s future success. This memo contains the industry analysis, as well as an internal strategic analysis, company performance, and solutions and recommendations. This industry is divided into 4 segments. Ducati’s dominating segment is the sport sector. Ducati managed to utilize its differentiation strategy by taking into account of the industry’s driving forces. The cruiser segment is one sector that Ducati is very interested in entering. Unfortunately, Bert’s consulting concluded that this is not the best option through the feasibility analysis. The analysis contains the advantages and disadvantages of both options and the result was that the disadvantages outweighed the advantages. Also, entering the cruiser market is not really necessary for Ducati based on its current performance level.
Industry analysis Although the number of motorcycle manufacturers has declined by a large number over the last century, competition exists among companies from different continents. Currently, all major manufacturers are from Japan, The U.S., and Europe. The motorcycle industry is segmented into four categories: off-road, cruisers, touring and sport bikes, each of them with different qualities and target customers. Industry forces Economic condition is one of the major factors that drive the industry. This is an important factor because depending on the condition of the economy buyers’ demand will change. For example, when the economy stays strong, more people will buy the product while less people will buy when there is an economic downturn. The reason for this is because motorcycles are products that are not really necessary to possess in life. In other words, they are luxury goods. During the economic downturns, people become price sensitive and they could simply choose not to buy the product or find a substitute such as public transportation or vehicles that can hold more passengers. Therefore, the threat of substitute is very high. Motorcycles, like any type of automobiles, are a source of transportation, except they are luxury products. Companies in this industry compete with differentiation strategy rather than low cost strategy, meaning that companies focus on the quality of the product rather than low price. As long as the economy stays healthy, high income consumers will always buy the product no matter how much it costs. Another key factor is to understand the target market. As mentioned earlier, the motorcycle industry can be segmented into 4 categories. “A wide variety of individuals, with
equally different tastes, bought and rode motorcycles” (Gavetti, pg 2). Each segment has certain qualities that attract different customers with different preferences. The riders can also be categorized into different types just as the...
Bibliography: E. Porter, Michael. “Understanding Industry Structure.” Harvard Business School. August 2007. Boston, MA: President and Fellows of Harvard College. Gavetti, Giovanni. “Ducati.” Harvard Business School. March 2002. Boston, MA: President and Fellows of Harvard Collage.
To: Federico Minoli, Chief Executive Officer, Ducati From: Albert Bon Young Koo, Section 3, Senior Consultant, Bert Consulting Date: May 4, 2009 Re: Focusing on Existing Sport Market Segment
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