KTM is a company that designs and manufactures motocross, rally, and cross-country racing motorcycles and is based out of Mattighofen, Austria. They are a highly reputable company with exceedingly high growth rates. As a venture capitalist firm, they require high growth from their investors and generally demand more say in management decisions if growth expectations are not met. For this reason, KTM are pressured to maintain or increase their growth and continue this level of performance in the future. As the motorcycle industry was expected to grow to 5.3% in the next four years, KTM has realized its time to start investigating growth opportunities. KTM has several options; they can expand in the already existing European and North American market or they can expand their product line. Within these two options there are many alternatives KTM has to evaluate, these alternatives will be presented in the preceding sections of this report.
The key issues KTM are facing in regards to their decision making process are growth, barriers to entry/expansion into the North American market, and their current structure.
Growth: To meet growth expectations, KTM will need to measure several alternatives as to what the company’s next move will be in order to achieve the extraordinary growth the company needs.
Barriers to Entry/Expansion:
Extensive research and development: Which could cost upwards to €10 Million.
Suppliers: KTM would have to search for local suppliers for new parts.
Currency issues: Where KTM is a European company, currency issues would arise when expanding the North America.
Brand awareness: Intensive marketing efforts to raise awareness in North America where the KTM brand is not as recognized as it is in Europe.
Cost: The cost of expansion and product development would extensive, and a financial analysis would need to be weighed.
KTM’s Structure: Developing an outstanding reputation for sporty, adventurous bikes that are highly reliable and have the utmost superior quality surrounds KTM’s current structure. KTM’s current slogan is “ready to race”, with perfectly reflects their company image.
KTM has two possible opportunities for growth: to expand within the European market, or expand into North America.
KTM could expand production within Europe. With the expansion of the EU and a common set of regulatory standards, distribution of KTM products would be easier, faster and more cost effective. However, the European market is facing decline, as there has been a recent drop in sales.
Expanding in North America creates many opportunities for KTM, as their market is expanding. KTM has two options when expanding to the US. They can either export their products from Europe, or manufacture within North America.
ATVs: Sport vs. Utility
Producing sport ATVs would complement the image of producing high performance racing bikes. In North America, a small but growing market for sport ATVs exists. KTM is technologically inclined and has the know-how to produce and service high-end sport ATVs. There are disadvantages to consider as well, such as the potential market and existing competition.
Utility ATVs are best suited for activities such as agricultural, hunting, fishing and trail riding. KTM’s company logo is “ready to race” and their target audience is young adults that enjoy extreme experiences. As utility ATVs are inclined towards the leisure, trail riding individual, this type of machine does not suit the existing image of KTM.
In order to maintain growth and keep up with the constantly changing industry, KTM could introduce on-road motorcycles to its product line. Since the on-road segment of the motorcycle industry is growing at an increasing rate, it may be a wise choice to enter the market with these motorcycles.
There are three types of on-road bikes: touring, performance, and cruisers. A...