ducati

Topics: Porter generic strategies, Marketing, Strategic management Pages: 6 (1286 words) Published: July 6, 2014
Ducati Case Study
Jianqing Tan U16987621
Instructor: Vivek Marya
Competitive Strategies in Dynamic Environments
Due date: June 3, 2014
Introduction
Ducati is an Italian racing-motorcycle manufacturer whose products are characterized by unique engine features, innovative design, advanced engineering and overall technical excellence. In its 80 years of history, the company has won eleven of the last thirteen World Superbike Championship titles and many more individual victories. Ducati produces motorcycles in four market segments that vary in their technical and design features and intended customers: Superbike, Super-sport, Monster and Sport Touring. Despite its success in racing and products, the company went almost bankrupt in 1996 when it was taken over by Texas Pacific Group. The company experienced a very successful turnaround between 1996 and 2001 with the help of the new CEO Federico Minoli. Under his leadership, the company strengthened the brand (including the establishment of the Ducati Museum), boosted research and development, introduced new models and outsourced heavily. Today, Ducati is faced with another challenge that may bring fortune to the company if successfully managed. 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 Euros. Based on this huge capital requirement, should Ducati enter the new market segment or should Ducati just concentrate on its current segment? Industry Analysis

Company Analysis
Financial performance
Ducati has a good financial performance from 1997 to 2001. It has a rapidly revenue growth from 196 million in 1997 to 422 million in 2001 (Exhibit 1) and it also kept EBITDA margin around 20% from 1997 to 2001 (Exhibit 1), which meets the goals that sustain the explosive double-digit profit growth in the next decade and eventually reach Harley Davison’s profit level. Three factors contributed to the increased Ducati’s total revenue: firstly, Ducati entered the Sport-Touring segment, which targeted the new customer base, and introduced new models into each category. Secondly Ducati started the business in accessories and what’s more the brand reputation and the brand loyalty of Ducati’s customers increased due to the advertising and events. On the other hand, Ducati implemented an aggressive outsourcing policy to minimizing fixed asset investments and cost of goods sold. Ducati kept increasing the outsourcing rate since 1996. It even planned to push to 90%, which was much higher than the average outsourcing rate within the industry in 2001. Hence it was able to maintain EBITDA margin around 20%. Market performance

Although the Ducati relevant market was dominated by the Japanese companies, Ducati performed reasonably well Ducati’s market share was generally increasing from 3.9% in 1996 to 6.7% in 2000 worldwide and from 4.3% in 1996 to 7.0% in 2000 in Europe. What’s more, Ducati has established a unique position in the reference market due to the sporting vocation of the brand, against a background of clear product specialization by other manufactures. Strategies Analysis

Core Strategy
Ducati uses differentiation strategy as many other companies within the motorcycle industry. Therefore, all companies compete with each other by producing the best quality motorcycle. Ducati’s unique business model and core activities helped to produce Ducati’s way of quality motorcycles mainly focusing sport sector. One of Ducati’s core strategies is that Ducati heavily outsources its production compared to its competitors. By doing this, Ducati is able to reduce fixed asset investment, and mainly focus on product design, development and quality control. To ensure its product quality, Ducati collaborated with a number of the well-known firms such as Ferrari, Lombardini, Motori, etc, and...
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