Ducati

Memorandum Subject Ducati In Pursuit of Magic (A) construe Feb. 19th 2013 Ducati is one of the premium bike producers specializing in feature member superbike from Italy. The comp whatsoever experienced booming in sales and reputation in 1996-2001. This boost had attracted Texas Pacific Group to pursue reckonling rice beer in the ac corporation for higher expected future return. The economic boom in some way masked the mis call fors made by Ducati during the period. When sales started to decline during 2002-2005, three major problems started to become more than obvious among the management separate * Product discontinuity. take a shit up disadvantage comp atomic number 18d to Nipponese producer. * Decline in sales in U. S. merchandise. Ducati required to addresses these problems to put the company back on track. in the beginning offering solutions to any of the problems mentioned above, we would like to dig into details about the industrial background, company strat egical positions, and competitive advantages and disadvantages about the company. These analyses be especially beneficial to help oneself recognise potential opportunities and threats of the wheel labor and its sport portion. Five forces analysis ar supplemented to our analysis. Threats * Rivalry rivalry among industry and the sports segment came from United States and Nipponese motorcycle makers. There atomic number 18 intense competitions among posts for entire industry as sanitary the sport segment. A major competitor for squad car is Harley-Davidson, and Honda and other Japanese motorcycle producers constitute major competitors for the sport segment. * Currency fluctuation convert rate posted issues for international operations. Ducati and fel get-go motorcycle companies engaged in operations all over the world, exchange rate fluctuation generated doubtfulness for the company.This is for both the industry and for the sport segment. * Substitutes there is a high inducement for alternative transportations for the US market. This hurt the industry as well as sport segment. * Government regulation Chinese government posted regulations that forbid motorcycle usage domestically for various reasons. This makes it hard the entire industry as well as the sport segment. * Entrant barriers for industry down in the mouth entry barrier due to three reasons. First, people with knowledge place reconstruct motorcycle easily. Second, low jacket requirement for entrants. Last, there are low switching costs for customers. Opportunities * Entrant barriers high for the sport segment due to technology advancement, better approach pattern and engineer work, high capital requirement for entrants and distinctive incumbency advantages for established brand. * Buyers author low. This is cause by the brand power and the brand loyalty. People want to pay premium for the bike to feel cool and different. There is a coarse demand for motorcycle. * Higher buying power in BRIC. Consumers in those countries are more likely to spend on motorcycle. This is beneficial to the industry, especially the sport segment. More diversified riders lead to market growth. There are more women riders than ever before. This is beneficial to the industry and to the sport segment. The following part include company analysis and analysis of companys strategic position. * mensurate drivers and competitive advantages * Use a unique Desmodrimic valve control remains to addition the engine performance * Use a engine that were built in a L-twin invention to improve aerodynamics and weighted lighter * surplus motorcycles had a low-hum sound. * Frame gave greater rigidity, handling power, and promoted speed.It offered more entreat invention architecture. * Superb in-house bearing and external design team teams. * link field that increase value Ducati Corse racing, apparel, local Ducati clubs, Ducati museum, Ducati riding experience prep course, Ducati. com a nd Ducatis multi-franchise distribution points and mono-franchise Ducati retail stores. * Cost drivers * The large research and ripening for conse skitterive years. * Marketing cost associated with selected motorcycle publications. * The production line used the lean manufacturing, which decreases the production costs. Competitive disadvantages * Cost disadvantage. Japanese motorcycle makers heap produce cheaper bike with advanced technology. * Product discontinuity. Evolution of products that consumers do non recognize. * Do not intend to stretch and extend business to cruiser motorcycles, i. e. limited customers. * Relatively low market partake in than major Japanese companies, which occupied about 78% of total market share. This lead to low brand recognition. Even though Ducati has its competitive advantages, it does not mean that these advantages are sustainable.In order to determine whether Ducati will remain competitive, Barneys VRIO framework is outlet to be applied. Hen ce, four questions are going to be addressed in this part of the case study, which are the read/write head of Value, the Question of Rareness, the Question of Imit efficiency, and the Question of Organization. * The Question of Value * Ducati has a group of highly skilled engineers and an in-house design team which allow the firms products to have the attribute of speed, performance, and innovation. such(prenominal) cap ability helps fulfill customers needs and perceptions. Ducati is positioned to be fast with good braking ability. The ability of producing sport bike with speed and safety makes its customers feel safe and authorized while using the product, which helps the firm to build up good companys reputation. * The Question of Rareness * each(prenominal) the Ducatis bikes use the Desmodromic valve control system which enhances the engine performance and only Ducati uses this system in the market. * All Ducatis engines were built in the unique L-twin design which gives the b enefit of ameliorate aerodynamics and lighter weight.This design is rare since the two cylinders of the engine are mounted at a 90-degree angle, which it has to work with the unique Desmodromic valve control system to reach its full ability. Moreover, it gives a unique low-hum engine sound which makes Ducatis engine even more special. * The Ducatis tubular trestle frame design was evolved from the Fornula One-inspired tubular trestle with Ducati engineers special design to enhance the performance features of the bikes. * The Question of Imitability * With Ducatis investment in research and breeding, it would be hard for competitors to just follow Ducatis newest technology. Ducatis in-house design team creates a barrier to extravaganza since its job is to design completely new model. Moreover, Ducati started to use online resources to gain appreciation into customers needs and perceptions. * Ducatis Italian styling and origin lower the possibility of its design being imitated, y et it is worth to be mention that MV Agusta is own by an Italian investment group and its designer Massimo Tamburini had worked in Ducati before, which make it easier for MV Agusta to imitate. * The Question of Organization * Ducati started to invest a lot of funds in research and development, which boosted from 3. jillion in 1997 to approximately 26. 5 million in 2005. Such investment enables the Ducati to amply exploit the potential of its engineers and design team. * The internal culture of Ducati encouraging creativity and teamwork allows the engineers and design team to interact and be innovative. * The building of Ducati museum the World of Ducati allows Ducati to give museum and factory travel to enhance visitors experience, build up brand loyalty, and signify the companys ability to be innovative or to create a dream. * Ducatis grease ones palms of Gio.Ca. Moto and joint venture with Dainese help to build the Ducati brand by merchandising a wide range of products inc luding Ducati apparel and accessories. * The judicature of Ducati Corse Racing team helps to publicize the Ducati brand by participating in professional motorcycle racing. The team also demonstrates Ducati bikes high- performance features. * Ducatis support in enthusiasts clubs and the establishment of the Desmo Owners Club (which promotes Ducatis event to the clubs) help to build the Ducati brand and brand loyalty. The Ducatis eight country-specific websites not only have information on bike models, but also brook a virtual tour of Ducatis world headquarters in Bologna, which enhances the customers perception to the Ducati brand. Moreover, the websites allow buyers to sew their bikes and also give feedback, which again help Ducati to gain insight into its customers and fully exploit its ability in producing high quality sport bikes. * Ducati has been attempting to build a strong brand by encouraging its dealers to restructure the stores to be in the Ducati-store format.We propos ed three alternatives to tackle the problems associated with our problems. 1. We propose to sell Ducati to produce synergism to premium car maker such as Lamborghini. This provided cost nest egg and promoted efficiency. 2. Improve and extend U. S. market to gain market share and clams by invest in human capital and better IT system. This corresponds to positivistic U. S. outlook after 2006. 3. Invest in Research and Development to pass out revolutionized products. In this way we are trying to replicate the revolutionized products that help the company out of trouble in 2003.Our recommendation is alternative 1. Before analyzing 1, we would like to point out the drawbacks of the other two options. For alternative 2, it would take two years before the U. S. market become the largest market in the world for the motorcycle business. This postponed schedule is unsatisfied to the investment group who look to better and immediate solutions for our problems. Another challenge for the U . S. market currently is that in the short run, competition and the low demand makes it hard for individual company to capture large profits.For alternative 3, large amount of research and development input will somehow reduce return for the investment group in the short run. This might not be the primary interest for the investment group that takes controlling interest of the company. On top of that, there are uncertainties involved in the new product even with shortened new product issuance period. Lastly, new product development does not bring current return to the investment group, which is potentially not preferred. pick 1 is the lift out one of all.It can potentially offer the best price for the investment group in that it can eliminate the downside gamble for the company to go under. On top of that, business combination with correctly company such as Lamborghini would provide synergy. This synergy will provide cost saving for Ducati. First, since a lot of parts are produ ced in those shops, it is way much easier to produce it for themselves than for outside partners for the company. It can also cut down non-necessary division or labor for the cost saving purposes.Additionally, acquirer with strong financial background can assist in expanding the U. S. market and engage in research and development process to produce a revolutionized product. I predict when the alternative 1 get implement, the market share of Ducati will rapid increase. Because company such as Lamborghini has enough capitals to innovate different types of motorcycles. With the good fame of Lamborghini, their product will be wide noted and get into the market earlier than the competitors. Ducati will have a ardent future and sustainable growth under that company.