Ducati Business Analysis

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  • Topic: Ducati, Motorcycle, Grand Prix motorcycle racing
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Business analysis of Ducati Motor Holding S.p.A.

February 13, 2011
This analysis will focus on three famous motorcycle brands - Ducati, Honda and Yamaha which have been operating in the motorcycle business for decades. Competition in the industry is high and in order to succeed manufacturers have to manufacture premium quality motorcycles for the same target group. At first sight it might seem that the three brands are identical but a more detailed analysis indicates that there are significant differences in their strategies. All these differences shape each of the three brands and their customers’ preferences. Ducati

The company goes back to 1926 when three brothers Adriano, Marcello and Bruno Ducati established a company called “Societa Scientifica Radio Brevetti Ducati“ specializing in the production of radio components and electronic devices. The company was, however, destroyed by bombing in World War II which along with the precarious economic situation in post-war Italy led to a shift in the company’s business focus. The company started to operate in the transportation business and changed its name to Ducati Motor Holding. In 1946 the Ducati brothers manufactured their first engine. When the engine gained popularity talented researchers were hired to boost the company’s growth. Since then Ducati has developed significantly and it is now a very strong brand in the motorcycle industry and manufactures six different series of motorcycles. Ducati today operates worldwide and in 2009 made €360 million in sales (Reuters, 2010). As indicated in the chart, despite a decline in the motorcycle industry Ducati managed to increase its market share from 4.4% in 2005 (Edgar, 2010) to 5.3% in 2010 (Ducati News Today, 2010) as can be seen on the following chart.

(Powersportbusiness, 2010)
Honda
Honda Motor Company is a Japanese multinational company which manufactures motorcycles, cars and garden equipment. The company’s motorcycle department known as Honda Powersports has been the world’s biggest motorcycle producer since 1959. Honda produces all types of motorcycles, scooters and accessories and therefore serves all target groups in this industry. Honda motorcycles have gained international reputation for their quality and reliability and the brand is considered a strong competitor for Ducati. Yamaha

Yamaha was founded in 1890 as a piano manufacturer called Gakki Company limited. The economic situation after World War II increased the demand for transport and as a result Yamaha expanded into the motorcycle business. Today it manufactures all categories of motorcycles and scooters. According to research of Powersportbusiness Yamaha is second strongest company in this industry with market share of 22.8% (Powersportbusiness, 2010) Yamaha also competes very successfully in MotoGP and World Superbike Championship where it has achieved great results and therefore is the second strongest competitor.

(Powersportbusiness, 2010)
Motorcycle industry
According to WebBikeworld analysis on the market for motorcycles is experiencing a decline. During the three year period between 2007 and 2010 the motorcycle market dropped by 33% in Europe and halved in U.S.A. Even though few motorcycle manufacturers went bankrupt the market is still very competitive because it is being dominated by Japanese brands.

(Web Bike World, 2010)
Porter’s analysis of industry:
Threat of entry:| Low| High barriers of entry; motorcycle industry requires high level of capital and technology| | | Strong customer's loyalty to existing brands|
Bargaining power of suppliers:| Low| Market is fragmented: there is high rivalry between suppliers.| | | Ducati is in a strong position and can control the price.| | | Contracts with suppliers are based on short term agreements and exclusive contracts are not usual in this industry.| Bargaining power of buyers:| High| Customers are individuals| | | Low switching cost, since...
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