Student ID – S01468705
Industry Analysis:
The case presents facts, data and business performance trends of the industry - manufacturing
units of sports segment of motorbikes. The motorbikes in this segment generally have engines
with displacement volume greater than 500 cc. Detailed below are the five forces that
positively/ negatively affect the profitability in the industry with a special reference to the
markets of United States, Europe and Japan during the years 1996 through 2001.
1) Threat of Entry – To the industries that are existing in the market of producing sports
motorbikes, the threat of new entrants (that want to enter the market with their entire new setup) is a weak force i.e., the barriers are strong. This is primarily due to the very nature of the
firms being capital intensive and having established brand identities. Due to this the consumer
preferences are existing towards certain brands and specific models of those motorbikes which
are not easy to dwindle. Therefore, this makes the industry profitable.
2) Bargaining Power of Buyers – The entire framework of selling the motorbikes works
through wholesale distributorships. Hence, these distributors are buyers for the firms in the
industry. The bargaining power of these buyers is less/ weak making the industry profitable.
This is primarily due to the contractual obligations and existence of existing/ preferred brands.
Additionally, there is no backward integration possible to buy from the suppliers to the firms.
3) Threat of Substitutes – The substitutes to the sports motorbikes are the motorbikes/ twowheelers with lesser engine displacement. Although, the switching cost to the end consumer
is not high but due to the performance limitations of these non-sports options, their forces are
weak making the industry business profitable.
4) Bargaining power of Suppliers – The suppliers to this industry are the ancillary industries/
small vendors that provide either the raw material or the finished parts that are later assembled
on the vehicle in the manufacturing units of the firms. Since, these vendors are producing
specific items pertinent to specific models of the motorbikes being produced by the firms and
have would need good amount of capital to switch over to a new variety of that product, their
bargaining power is less. Additionally, suppliers’ having no scope for forward integration and
obligations to fulfil the contract makes their forces weak and the industry profitable.
5) Rivalry among existing competitors – However, there is an increase in the demand of the
sports motorbikes over the period and customers prefer to stay with their choice of brands and
models having specific performance features and propriety differentiation, and there is
sustenance of brand loyalties, but there is also a fierce competition between multiple firms in
the industry which are prevalent in different capacities/ having varied market shares making
the industry competitive and moderately profitable.
Based on the inferences drawn from each of the key forces, it can be said that the industry is
profitable, and the following are the key success factors for any firm:
1) Product Differentiation – Innovative and Performance-driven designs, R&D
2) Brand Value of the firm
3) Quality and strength of the distribution network
4) Sustenance of preference by the end consumers - Achievable by advertising/ social outreach.
5) Efficiency of the manufacturing process - Standardisation of various input materials/
products to the motorbike.
Strategy and Competitive Position of Ducati:
The underlying approach to the strategy adopted by Ducati during the years 1996 through 2001
was to make Ducati not just a motorcycle company but to penetrate deep into the emotions and
styles of the end consumers. This value and brand image creation process was pronounced as
“The World of Ducati”.
To achieve the abovesaid target, they followed the following approaches:
1) They introduced new models in the sports motorbike segment during the years 1996
through 2000 but each model retained its unique sound and desmodromic distribution
system, and targeted end consumers across gender, age, and marital status.
2) They increased their outsourcing activities and increased standardisation of the parts to
affect their overall costs and making the process more streamlined.
3) They moved towards strengthening their distribution network by establishing totallyowned sales and marketing subsidiaries, decreasing the number of distributors and
resorting to stringent criteria to improve the quality of the distributorships. They also
created a chain of “Ducati Stores”, as they could through these stores, establish,
improve and sustain their relationship with the end consumers. Additionally,
establishing an online portal called Ducati.com was a positive addition to their selling
model.
4) They considerably increased their expenditure on the product development and research
activities. By this way they leveraged their expert, skilled and reputed team of engineers
towards design and technological innovation.
5) They, through various advertising activities such as increasing their prevalence in the
Racing tournaments, advertising through specialized magazines (called
“Ducati/People”), co-marketing initiatives and establishing a museum considerably
increased an outreach to people’s emotional attachment and their loyalty to the brand.
Establishing and strengthening relationships with the Ducati Owners Clubs by
organising large-scale events further deepened this process.
Thus, Ducati earned a competitive advantage through the said period by channelising its unique
feature in its various new models, targeting variable groups of end consumers through an
improved (strength and quality) distribution network and increasing its outreach and presence
in the minds of the end consumers by way of extensive and focussed advertising. It also,
through its focussed approach on technological improvement and innovation by spending more
on R&D and increasing outsourcing activities by standardising certain products could make
the process more efficient. All these efforts were in sync with the key success areas where a
firm in the said industry needs to work upon and thus, they could leverage this strategy to
increase their performance through these 5 years. Increase in EBITDA from 33.4 Euro Millions
to 69.9 Euro Millions is a testimony to this fact.
To achieve the above-mentioned competitive advantage, various resources and competencies
employed by Ducati during the said period were – Skilled & Reputed Engineers, Product
development and R&D activities, Efficiency of the process, distribution-network strength and
quality, and social outreach efforts. Following is an analysis of these competencies using a
VRINE (Valuable, rare, Inimitable, Non-substitutable, Exploitable) framework:
1) Skilled & Reputed Engineers – These are valuable and well exploited by Ducati, but
are not rare, imitable and substitutable.
2) Product development and R&D activities – This competency is valuable, well
exploited, rare, but is imitable and substitutable.
3) Efficiency of the Process – This is valuable, exploited, but is not rare and can easily be
imitated by competitors.
4) Distribution-network strength and quality – It is valuable, well utilised, rare, nonsubstitutable but can be imitated by others in due course.
5) Social outreach efforts – It is valuable, rare, non-substitutable but has more scope of
exploitation and can also be imitated by the competitors.
It can be seen from the above analysis that although the competencies deployed by Ducati
bundled together to give a competitive advantage to it for the said period, but there is a
vulnerability to these competencies as they can be imitated by other firms in the industry and
thus, they can lose their competitive advantage in the future. Therefore, following are some
threats that can possibly impact its competitive position negatively in the long-run and
recommendations thereof:
A) The skilled engineers of Ducati are not bound to their job, thus they can be hired by
another firm in the future, therefore some compensation and contract mechanism should
be devised that sticks them to the team and Ducati doesn’t lose its critical resource.
B) Ducati has although developed its models with specific inclination towards
performance and uniqueness, but these as well can be imitated. Hence, it should work
on getting its designs patented as that would rule out the possibility of other firms
copying the design that would yield same performance to the end consumer.
C) Ducati focuses only on production of sports motorbikes for now. However, in vogue as
the other firms which are diversified in other segments and thus have higher revenue,
can be threat to Ducati in long run as it won’t be able to expand its business due to
shortage of capital. Therefore, it should also diversify into other segments of the
motorbike industry to increase on its revenue.
D) Even though the distribution network model as employed by Ducati is unique and
strong but in future other firms could also use the same kind of network and can provide
intense competition to Ducati. Hence, Ducati should make more efforts and diversify
its social outreach efforts such as social media presence, organize extensive and
recurrent events to involve end-consumers, strengthen customer relationship by giving
away freebies, free tickets to attend racing events and through multiple other means.
Declaration:
“ On my honor, I have neither given nor received any unauthorized aid on this exam”
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S01468705