In the marketing area, due to the aforementioned corporate functions,
effectiveness in responding to market trends and launching new products was
immediate. For sales and distribution Ducati took control by establishing
owned sales, improving the quality of dealers and by creating a chain of Ducati
Stores as a single franchise distributor in certain markets and cities around the
world. The stores were also marketing tools conveying a sense of the Ducati
personality through its retail environment.
Honda has become the world’s largest motorcycle and automobile
manufacturer. With production facilities in Japan, worldwide manufacturing
operations and a global network of subsidiaries, the company can account a
multi billion capital and thriving financial operations. Honda retains its core
competence in engines and competes in all segments.
The company creates original technology and the Honda CB750 represented a
major shift in the motorcycle industry. Reputation among customers is strong
and the brand evokes reliability and technical excellence.
Among Honda’s capabilities is the launching of new models and innovative
technology, raising quality and quick responding to market needs.
Distribution involves maximising penetration in world wide markets
while simultaneously raising efficiency and improving the quality of customer
relations.
Comparing Ducati and Honda it could be assessed that Honda appeals to customers of all market segments and generations. Quality is important, however equally important is mass production and quantity distribution which is achieved through maximising the size of network sales and the degree of penetration into markets. This global expansion and world wide market penetration has enhanced the company’s brand popularity.
On the other hand Ducati has placed more importance on the quality of
suppliers and dealers, by establishing single franchising agreements,
controlling prices and brand positioning. Ducati reinforces the brand by
advertising only in the sector press and aims at the sport segment and its sub
segments. Through an established design, style and technology the Ducati
brand evokes more of being part of a performance lifestyle and experiencing a
rich motorcycle history.
- Explain the success of Ducati using the competitive advantage analysis (value proposition, segmentation, value chain).
Value Chain Analysis for DUCATi
Ducati’s technical superiority and design excellence stirred its attempts to appeal to a performance and sport segment customer group. In 1997 the company entered the Sport-Touring segment. Market segmentation of these customers was based on the variables of age, income, education and gender. The median age for the Sport segment was 25-35 years old customers while the Sport-Touring segment aimed at an older customer base. Women were also an important target group accounting for 8% of its motorcycle sales. The company communicated the product to its market through specialized magazines, by participating in racing events and by displaying motorcycles through a series of events and activities (auctioning at Sotheby’s, window displays at Harrods, cooperating with clothing designers, etc). The company also made a limited edition of motorcycles and offered custom made bikes with components to increase the performance and individuality of the motorcycle. Moreover, a museum was built to celebrate Ducati’s technical achievements and racing tradition.
The company’s infrastructure is heavily dependent on new technology product development and design excellence while maintaining a strong outsourcing policy in other areas and rationalizing the network of suppliers. By adopting quality dealership support and strict supplier selection procedures through having only short term contracts with its suppliers, ultimately led to an increase in the quality and reliability of the Ducati Brand.
The R&D department consists of highly skilled engineers and designers while it cooperates with the racing and marketing divisions.
Price control and brand positioning of Ducati’s products in its independent and selected geographical located retail stores have played an important part in increasing the products value to appeal to targeted customers. In particular, the process involves maintaining competent sales forces, good technical assistance and adequate space for product display, while the customized retail environment visually communicates images of Ducati’s racing heritage in conjunction with selling brand accessories and apparel. Also, dealers are encouraged to support and coordinate the activities of the Ducati Owners Club while prior to the racing competitions, their members have the opportunity to remain in close contact with the racing team and participate in dinners or social events. Through Ducati’s website, visitors can feel as part of a community while regular on-line polls and market surveys provide feedback in order to meet complex customer needs and preference.
Ducati’s competitive advantage lays in its differentiation, the ability to separate from that of its competitors by selecting superior performance, engineering, style and a premium-priced product in the motorcycle industry. This strategy is implemented by infusing all the above activities into the identity and culture of the company and by embracing the totality of its relationship between the company and its customers.
The brand’s values package contains the Italian style ingredient, the history of the company, the young age of the riders and their sporty attitude. Considering that consumer purchase, beyond satisfying basic needs, mainly reflects values and a desire to identify with a group’s interest, the Ducati offerings can be perceived as different compared to its competitors. A message is conveyed that the motorcycle at Ducati is not only just a mechanical excellence, but also an overall amusement and the consumer is part of a legend and a heritage, making it a value-added experience.
- Analyze the current (case time) motorcycle industry (Porter’s 5 forces). What are the main changes in the motorcycle industry the last 30 years and how they have affected the 5 forces?
Porter’s Five Forces - Motorcycle Industry
Motorcycle industry analysis by Porter’s five forces involves examining parameters of the industry structure and its competitive environment. This dynamic, according to Porter, is driven by the existing competitive rivalry between suppliers, the threat of new market entrants, the bargaining power of buyers, the power of suppliers and the threat of substitute products.
Considering that the number of motorcycle manufacturers has decreased dramatically over the last century, industry rivalry involves one major American manufacturer, four Japanese and a few European. Competition among manufactures is fierce and can be viewed according to geographical regions and market segment.
Japanese manufactures are generalists competing in all segments from scooters to large capacity motorcycles while BMW and Triumph only manufacture motorcycles for various sub segments in the large capacity road market. The United States has low rivalry for heavy weight motorcycles; Harley Davidson dominates the market by focusing on a niche market, the cruiser segment, followed by Yamaha, Suzuki and Kawasaki. These Japanese companies also hold an important market share in the U.S. for small motorcycles. The BMW motorcycle division entered the U.S market in 1975 and in particular since 2001 has been competing in the touring, cruisers and performance bikes. In Europe competition is fairly high among BMW, Triumph, Ducati and other Japanese companies especially Suzuki fighting with Honda for top shares, while in Asia Kawasaki trailed only Harley and Honda.
Potential entry in the motorcycle industry could be viewed as fairly easy considering that common technology and existing costs are low to mid. However it is brand loyalty and a patented technology that makes it hard to succeed. Furthermore, forging alliances between major manufacturing companies or co-operation agreements among suppliers can lead to inventory reductions and potential delivery cost savings. Another factor is dealer loyalty to certain manufactures (e.g. Harley Davidson launched a ‘Genuine Deal’ campaign to build dealership loyalty) which enhances sales and provides a competitive edge by offering benefits to the dealership’s customers.
The motorcycle substitute element depends on the role of motorcycles in transportation or as part of a lifestyle image or part of a racing track objective. Considering that motorcycle use is a significant part of motorised traffic in certain countries, a possibly substitute could be small two seated vehicles (e.g SMART) offering safety, comfort and ecology, since accident propensity and noise by motorcycles in cities are issues often neglected.
Buyers of motorcycles vary according to their needs. If they are price sensitive and are mainly looking for a bike as a mean of commuting then the brand name may not be as significant. However, potential buyers whose purchase decisions are based on the motorcycle as a life style image or who seek a high performance motorcycle could be willing to pay a higher price according to brand value.
The supplier power of the motorcycle industry can be determined by the uniqueness of the suppliers product for a company compared to a commodity supplier. Another factor possibly enhancing supplier power is switching costs to another supplier as the cost to change to another supplier increases.
Environmenta Analysis (PEST) to
Motorcycle Industry Analysis the last 30 years
Political Government regulations
Trade restrictions
Environmental protection laws
Economic Impacts of Globalization
Economic growth, inflation and interest rates
E-Business (on line auction)
Levels of disposable income and income distribution
Socio-Cultural
Population growth rate and age profile
Population education, social mobility and attitudes to these
Demographics (women as potential motorcycle consumers)
Lifestyle & Fashion choices and attitudes to these
Emphasis on ecological issues and environmental awareness
Technological
Rate of technological change-emerging technologies
Material science innovation
Increased investing, activity and integrations of R & D
Impact of Internet in sales and marketing activities
Porter’s Five Forces model can be used to good analytical effect alongside the PEST analysis tool. A PEST analysis of an overall Environmental Analysis evaluates the impact of regulatory, economic, social and technological factors in the motorcycle market during the last 30 years. Through analyzing these factors an assessment can be made of the competitive landscape and the profit potential of existing companies such as Ducati, BMW, Honda etc. The main changes that have occurred are rapid technology development, automating manufacture, an extending export market, globalizing administration, an establishment of marketing channels, an improvement of operating efficiency and particularly a strengthening of R&D. Furthermore, lifestyle trends, consumer behavior, demographics, ecological awareness, have contributed to a changing motorcycle industry environment. Considering the above trends, the motorcycle global market possible faces challenges such as more fuel-efficient or hybrid motorcycles, a possible shift in gasoline-powered to electrically powered vehicles and a new entry by manufacturers of electric vehicles. Ultimately, these possible changes could lead to a redefinition of the riding experience.
