Motorcycle Industry

Topics: Motorcycle, Ducati, Sport bike Pages: 10 (3009 words) Published: March 18, 2013
Ducati, an Italian company, has designed and manufactured motorcycles since 1926. As time passed by, the owner has changed and new strategies have been adopted. Starting from a small company opened by three Ducati brothers, Ducati now has become an obbligato in the motorcycle industry. Their sports segment is especially well-known by motor-racers. So what are their essential strategies and what are they facing? 

Overview of global motorcycle industry
The global motorcycle industry includes four critical categories, motorcycles, scooters, mopeds and three wheelers. The total motorcycle market was worth about 48.3 billions in 2004. According to the report, the trend of worldwide revenues of motorcycle in past five years is optimistic and upward. There was about 2.5% compound annual sales growth and 3.3% units growth. The Asia-Pacific region, accounting for 56.1% of the global market’s value, is in the leading position of the global market. The U.S, holding 17.3% of the market, surpassed the European consumption which was approximately 16.4% in 2004. The motorcycles are playing two disparate roles in different regions. Industry observers pointed out the role of motorcycle in Asia-Pacific region was an affordable source of transportation that runs as good as cars. In contrast, North America and Western European treat motorcycle as a secondary recreational vehicle. As a result, it distinguishes global motorcycle market into high and low markets. An emerging segment in “BRIC” countries (Brazil, Russia, India and China) provides opportunities and a big stage for motorcycle industry, especially those higher-priced and higher-powered motorcycle producers, such as Harley-Davidson and Ducati. According to Exhibit 2, “BRIC” countries’ great amount of population and high growth rate of GDP provide a stable market to motorcycle industry. The reasonable age structure of BRIC countries and their relatively lower median ages were other positive factors that might contribute to motorcycle market. The Exhibit 2’s 2001-2005 sales summary of BRIC countries strongly supported our statement that the strong economic performance of BRIC countries improved their motorcycle industry. From that report, the sales revenue and units from 2001 to 2005 stayed in a good shape, especially sales in India and China approximately 400 million per year. The highly increasing female customer is another contributor to the increasing motorcycle industry.  

Although motorcycle industry is growing and expanding, they are facing various threats when we apply Porter’s Five Forces analysis.

Threat of entry
On a mature stage of life cycle, motorcycle industry is not so attractive for new competitors to come in. The threat of entry for motorcycle industry is low when incumbency advantage, capital requirements, customers’ switching cost and economies of scale are considered.

Firstly, in current motorcycle industry, there are several well-recognized brands, such as Honda, Yamaha, Harley-Davison and Ducati. Some of them are building loyalty of customers by organizing owners’ clubs and sponsoring frequent rallies. Costumers are more likely to stick with those recognized brands or at least the brands they had experience with. The so many established brands and cumulative experience make it difficult for new entrants to survive in this industry.

Secondly, the capital requirement of entering motorcycle is high. Most of the current motorcycle companies were founded by big automobile companies or private equity firms, such as BMW, Honda, and Suzuki. The expenses on product lines, marketing, research and development are too high that not everyone can bear.

Thirdly, the switching cost is relatively high for customers, as the cost of a motorcycle ranges from $4000 to $21000. People who are collectors or enthusiastic motorcycle fans treat their motorcycles as a long-term investment or a hobby.

Finally, all current motorcycle producers enjoy the benefit of...
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