Ducati Products Problems Faced by essay
- Length: 9 pages
- Subject: Business
- Type: essay
- Paper: #92644729
Excerpt from essay :
Competitors exposed to lower costs
The main competitors to the company share certain costs like transportation
Economies of scale
The company's competitor do enjoy huge economies of scale.This gives them an increased bargaining power.
Porter's 5-forces analysis of Ducati cruiser market
The cruiser motorcycle market segment is the fastest growing market segment in the industry. However, Ducati has never been able to expand its market share in the period (2000-2003) as pointed out by Grant (2004).They unsuccessfully tried to capture a new market share comprising of older customers by the introduction of Sport touring model. This is a strong suggestion that Ducati must take into account the need of entering into new market segments like the cruiser market so as to take care of the relatively wealthier customer base. The porters five forces cam effectively be used in the analysis of the cruiser market segment since it is relatively unfamiliar to Ducati. This is mainly attributed to the difference in customer tastes and preferences, competition factors among others.
Threat of New Entrants
An examination of the cruiser market reveals that Harley Davidson is the market leader in most regions of the global market (Grant, 2004). Harley Davidson lacks technological superiority as well as advantages attributed to the economies of scale. The success of Harley Davidson is associated to its strong brand name as pointed out by Bruce (2004). This is indicative of the fact that companies that corporations that need to enter into this market segment would need to prepare for competition based on a strong bang brand name. A high cost of entry also exists. According to Gavetti (2004), Ducati needs an estimated € 43 million for the development as well as the production of cruisers. A review of the European market indicates that no motorcycle manufacturer can gain a competitive advantage over the other easily. This is because the market is somehow shared and evenly distributed between the motorcycle firms; Harley Davidson, Japanese firms, Triumph as well as BMW. This is indicative of the possibility that threats from new entrants in the European cruiser market to march their performance requirements and style are high as pointed out by Grant (2004).
Threats of substitutes
A review of the cruiser market indicates that most of the customers are old and wealthier. Most of them may feel the need to use cars as substitutes for the motorcycles so as to meet the need of their ever expanding families. Due to the high level of average income among the owners of the cruisers, it is most likely that they already own a car. The threat of substitution by products manufactured by other industries is relatively very low. A smaller possibility of substitution by certain segments of the motorcycle manufacturing sector also exists.
The bargaining power of buyers
A review of the global motorcycle brands reveals that Harley Davidson is the strongest. This is evident from the high level of brand loyalty. This makes the cruiser buyers to have a high level of bargaining power. This is further evident from the fact that most of the motorcycle manufacturers have also introduced cruisers that are better in technological aspects than Harley Davidson and without much success in swaying the loyalty of the Harley Davidson customers. This is attributed to the perceived high switching costs. The buyers of cruisers are thereby most likely influenced by the brand strength as compared to other product attributes. Cookey (2005) pointed out that new entrants would face restrictions as a result of the dealers who are already locked with their contacts and the companies that they deal with such as Harley Davidson.
Bargaining Power of Suppliers
The cruiser market is concentrated and this is indicative of the possibility that the suppliers possess a low bargaining power. The concentrated nature of the market suggests that suppliers have relatively low bargaining power with companies that they are already supplying. On the other hand, suppliers have very high bargaining power with potential entrants to the market due to the cost of switching. For instance, Harley Davidson's suppliers have customized their manufacturing processes to meet Harley's requirements and a switch would require considerable cost to the supplier (Bruce, 2004).
A review of the motorcycle market reveals that Harley Davidson has a command of approximately 48.1% of the United States market share. It has another 25.8% of the japans and Australian market. In Europe, it has 8.1% of the heavyweight motorcycles. In the U.S., Harley Davidson rules the market. In Europe, the competition is matched evenly as pointed out by Grant (2004). It has been indicated that most cruiser manufacturers imitate the style of Harley Davidson as a result of its dominance.
Business Strategy Diamond
Ducati has location based advantages over its competitors. It outsources about 83% of its productions since 2001.
The company has invested in R & D. that has helped it produced unique products. As an example their products possess Desmodronic distribution system, tubular trestle frame, unique sound, and L-twin engine and is Italian as pointed out by Gavetti (2004).
The company has partnered with powerful strategic partners like Maseratti and Ferrari who helps it in improving its efficiency a well as in the promotion of good policies.
Staging and pacing
The company initiated slow paced but important strategic moves such as the partnering with strategic partners and the targeting of the older but wealthier market base
The company has low economies of scale. It has a premium pricing regime for its products.
The company's brand has high value
Some of the company's products are limited edition
Ducati has very low rate of immitigability due to the uniqueness of their build
Non-substitutability and exploitability
The Ducati has a low non-substitutability rate due to the fact that the cruiser owners are old and wealthier. This suggests that they already own cars.
Bohl, O (2008) Virtual Organizations. University of Kassel
Bruce, R.A. (2004), "A Case Study of Harley Davidson's Business Practices"
Cooney, J. (2005), "Freedom Ride," License, vol. 8, Issue 7 (Aug 2005), pp. 20-23
Gavetti, G., (2004). Case 16: "Ducati. In strategy: process,…