Table of Contents

Introduction...........................................................................................................................................2

External analysis....................................................................................................................................3

Industry analysis....................................................................................................................................4

Company analysis..................................................................................................................................5

Financial Performance.......................................................................................................................5

Market Performance.........................................................................................................................7

Business Strategies............................................................................................................................8

Operation..........................................................................................................................................8

Marketing Strategies.........................................................................................................................9

Porter generic strategies.....................................................................................................................10

SWOT Analysis.....................................................................................................................................11

Critical success factor..........................................................................................................................12

Recommendation................................................................................................................................13

Short term.......................................................................................................................................13

E-commerce.................................................................................................................................13

Expanding Distribution Network..................................................................................................15

Medium-term..................................................................................................................................15

Customization of Bike..................................................................................................................15

Female market.............................................................................................................................16

Long-term........................................................................................................................................17

Green Technology........................................................................................................................17

Conclusion...........................................................................................................................................18

References...........................................................................................................................................19

Appendix.............................................................................................................................................21
Introduction

Ducati was acquired by Cagiva Group in 1983. The firm focused on the Sports bike segment
under new management team. Then, a golden age of Ducati sports bike came with the effort
of their strong R&D group. Although Cagiva found a way to solve its financial problems by
unveiling a motorcycle that shocked the world-the Ducati Monster in 1993, which did work.
Ducati have insufficient enough working capital for its payment to some major suppliers due
to the liquidity problems in the mid 90s, which caused the delay in the production

Cagiva sold Ducati to the Texas Pacific Group in 1996, when Ducati was just one step from
going bankrupt. Ducati’s R&D group is still strong, so based on the help of large amount of
funding from new owner and the strategies form new management which was led by Federico
Minoli, Ducati revived and had made significant growth after a turnaround program from
1996-2000.

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External analysis
Political  Tariff protection could be an advantage in domestic market,
but also a disadvantage to compete with local firms in foreign
markets
 Indian Government regulation which cause the import of
foreign motorcycle to become high cost
Analysis: Government regulations and trade barriers cause Ducati
more problems when they tried to venture into foreign markets.
Economy  1998 Asian Financial Crisis: affects Asian markets in terms of
levels of consumption and reduce the sales of automobile in
most countries.
 Crisis: results in reduced consumer spending and confidence
 Economic crisis aggravates the decline on the sales of motor
industry
Analysis: By the year 2000, most of Asian economy had recovered
from the financial crisis in the 1998 which open the market even more
to global trade and the European market are more open.
Social  Increasing in the culture of using recreational motorcycle.
 Forming of groups such as Ducati owner clubs and Harley
Owner group in most country
 More female population interested in the recreational and sports
motorcycles.
Analysis: The increase in using motorcycles for recreational purpose
and motorcycle are no longer a form of transportation only. Emerging
female markets shows the opportunity for a new market.
Technology  More powerful engines, more fashion designs. Technology is
developing fast to achieve higher speed, safety and comfort
 Internet become a new platform for marketing and brings
people together.
 Japanese motorcycle is producing more fuel efficient engines
compared to Ducati & Harley Davidson
Analysis: Ducati must stay ahead of the competitors in term of
technology advancement if the company would to success in the
market.
Legal  Gentleman’s Agreement between motorcycle manufacturers
which limit the top speed and horsepower of the motorcycles.
 Increase in state regulations concerning public land use,
allowable amounts of noise, age and other restrictions
 Deregulations and abolition of exchange control strengthen the

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 global economy
Analysis: Increasing regulation for public land vehicle will cause
disadvantage to Ducati if there is a law limiting the speed of the
motorcycles which is part of the competitive advantage for Ducati.
Source: Coffman & Odlyzko, 1998., Forbes, 1989.

Survey: the World Economy,1997

Crook, 1997., De Wit & Meyer, 2004.

Industry analysis

Sources: Quelch & Bartlett, 2006.

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Company analysis

Financial Performance

Ducati’s financial performance has a great improvement from 1997 to 2001. It has a rapidly revenue

growth from 196 million in 1997 to 422 million in 2001 (Figure 1-2). It also has kept EBITDA

margin around 20% from 1997 to 2001 (Figure 3).

Ducati Total Revenues (Euro millions)

500
422.1
379.5
400
294.5
300 240.05
195.63
200

100

0
1997 1998 1999 2000 2001

Figure 1 Ducati total revenues: 1997-2001 (source: De Wit & Meyer 2004)

Ducati Sales Growth (%)

35
29
30
25 23 23
20
15 11
10
5
0
1998 1999 2000 2001

Figure 2 Ducati sales growth: 1998-2001 (source: De Wit & Meyer 2004)

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Figure 3 Ducati EBITDA margin: 1997-2001 (source: De Wit & Meyer 2004)

There were three factors that increased Ducati’s total revenues:

I. Ducati entered the Sport-Touring segment, which targeted the new customer base, and

introduced new models into each category;

II. Ducati started the business in accessories; and

III. The brand reputation and the brand loyalty of Ducati’s customers increased due the

advertising and events (De Wit & Meyer 2004).

On 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 (De Wit & Meyer 2004). Hence it was able to maintain EBITDA margin around

20%.

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 Market Performance
Although the Ducati relevant market, sport niche, was dominated by the Japanese companies,

Ducati’s 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 (Figure 4).

Ducati's Market Share in its Relevant

Market (%)
8
6.7 7
7 6.2 6.5 6
6.4
6 5.1 5.2
5 4.3
3.9
4 World
3
Europe
2
1
0
1996 1997 1998 1999 2000

Figure 4 Ducati’s market share in its relevant market: 1996-2000 (source: De Wit & Meyer 2004)

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 manufacturers (Ducati Motor

Holding 2009).

Figure 5 Ducati’s competitive positioning in reference market (Ducati Motor Holding 2009; Hostetler 2002)

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 Business Strategies
The turnaround program was aimed to increase Ducati’s sales and profitability at the beginning (De

Wit & Meyer 2004). In order to attain these goals, Ducati broadened its product portfolio, restructured

and strengthened its distribution network, focused on developing the brand name, and tried to raise

production efficiency (Bohl 2008).

The program also aimed to fulfill customers’ demands and to strengthen the brand name (De Wit &

Meyer 2004). To attain these goals, Ducati’s motorcycle features were critical in distinguishing

Ducati from other products, and hence attracted customers and built loyalty. Besides introducing new

models, Ducati kept upgrading its existing motorcycles through design and technical innovations

(Bohl 2008).

In order to maximizing retail sales and getting closer to the customers, Ducati products were selling

worldwide via independent privately owned dealers as a global brand. Ducati stores were exclusive

Ducati outlets that selling motorcycles, spare parts, accessories, and apparel. They offered a

customized retail environment with an increased level of service and technical support. If the market

is not big enough to justify setting up an exclusive Ducati store, a Ducati corner would be set up in a

large multi-branded dealer outlet (Bohl 2008).

Operation
Most of the motorcycle company will invest heavily to automated their production lines and worked

with the supplies to improve the quality of the parts and the efficiency of their supply chain. However,

Ducati outsource most of their production lines which is 80% in the year 1996 and increase to 87% in

the year 2001. Ducati only keep the important activities of the production lines which is the core

competency of the company such as the R&D, design, quality control and building their own crank

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cases and cylinder head. Ducati keeps a web of small and medium specialized manufacturer for their

motorcycles which reduces the cost of inventory and enable the use of the Just-in-Time inventory

system. The suppliers are granted with short term contracts which enable the company to have more

control over the quality of the parts they received from their suppliers. Ducati also had a joint venture

with company such as Ferrari and Maserati in the Engine Technology District (ETD) for the R&D,

purchasing, suppliers’ quality control and employees training.

Marketing Strategies

To strengthen its brand name, Ducati created the core branding strategy called ‘The World of Ducati’

(Figure 6). The motorcycles, accessories, and apparel were the center of this system which

complemented by six categories (De Wit & Meyer 2004). Each category contains several sub-

categories. Each category was interconnected and was part of other categories. For example, racing

was a category on its own but also acted as part of advertising (Bohl 2008).

Figure 6 Ducati core branding strategy: The World of Ducati (source: De Wit & Meyer 2004)

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Except the ‘physical’ marketing strategies, Ducati also introduced the ‘virtual’ marketing strategies.

Ducati.com was using the internet to promote and to sell only limited editions of its motorbikes rather

than all of its product lines (De Wit & Meyer 2004). However, the Ducati.com was not aiming at

taking business away from the dealers, but rather at attracting new customers and helping bring more

business to the dealers (Bohl 2008).

Porter generic strategies

Based on the porter’s generic strategy, Ducati and Harley Davidson are using differentiation strategy

where the price of the product is not much of the concern to the marketer. Ducati is emphasis on the

technology advancement on their product and selling their brand name rather than selling their

product at a lower price for competitive advantage. Same goes for Harley Davidson which emphasis

on the product quality and the culture of riding Harley Davidson Bike (Richard et.al, 1998).

In the segment both Ducati and Harley choose and attributes that many buyers perceive as important,

and uniquely positions it to meet those needs (de Wit & Meyer 2004).

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SWOT Analysis
Ducati Swot Analysis

Source: De Wit & Meyer (2004)

Harley Davidson SWOT Analysis

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Source: Hopkins. H.D (1999)

Critical success factor

 Technology and R&D

 Efficient Production Lines and Supply chain

 Strong Brand Image

Critical success factor is the term for an element which is necessary for an organization or

project to achieve its mission. These factors are the critical factors or activities required for

ensuring the success of the business (Cooper et al, 1995)

For Ducati, the company’s main critical success factor (CSF) is the strong brand image from

their racing team. As a champion for many years, the customers’ perception is that Ducati

motorcycle is up to quality as a racing motorcycle. Customers will tend to think that Ducati’s

product as a racing associated motorcycle which will then choose to buy a Ducati. Ducati

used the brand name as the vehicle to deliver a corporate image to its audience which will

then help the corporation to success in their selling of product to the customers (Hartley, 1998)

Beside brand, the Ducati’s effort in the technology research and development also works as

one of their CSF. By investing heavily on the R&D, Ducati will be able to exploit the

distinctive elements of the motorcycles and ahead of their competitor in term of technological

levels, style and performances for their motor cycles (De Wit & Meyer, 2004). The

development of the networking capital through an improvement of the suppliers’ relationship

management and the creation of a new distribution channels - the Ducati Stores had bring a

drastic improvement in the efficiency of the Ducati’s supply chain and their distribution

network (Wacker, 2007) These had increase the flow of the product to the customers and

reduce the cost of operations (Coughlan et. al., 2005)

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Recommendation

Short term

E-commerce

It is recommended that Ducati should hire extra staffs such as e-commerce and internet

professionals to strengthen the e-commence business by improving Ducati.com. Ducati should

enhance the three categories, B-2-C, B-2-B, and C-2-C, of its e-commerce applications (Laudon

& Traver 2001; Leenen 2000).

B-2-C

Ducati should aim at selling services, accessories, apparel, and spare parts through the

internet. Products sold online should be different from those offered at dealer outlets, in

order to avoid competition. Other services may include selling race tickets, betting races,

booking tours in Ducati museum, and booking courses in Ducati’s school (Laudon &

Traver 2001; Leenen 2000).

B-2-B

Similar to B-2-C, website provides services including the sales of motorcycles, spare parts,

accessories, and merchandising. Financial services in the form of investment aids will be

offered to the retail system. (Laudon & Traver 2001; Leenen 2000).

C-2-C

The website will consist of selling memorabilia and trading second-hand items such as

used motorcycles, spare parts, apparel, and merchandising (Laudon & Traver 2001; Leenen

2000).

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Figure 7 Ducati recommended website structure

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Expanding Distribution Network

Currently Ducati’s distribution network is more concentrated on the US and the European market.

Ducati should expand their distribution network and the market target towards Asian market. Ducati

should expand their market share in their current market as well as expanding their market to Asian

market such as Japan, China, India and others.

Asia had large population countries such as China and India which indicated that there is a large

market potential there for Ducati. By establishing Ducati stores there, Ducati will be able to capture

more market share in the Asian market which will increase the sales of Ducati rather than depending

on the US and the European market which had a lot of competitors such as Harley Davidson.

Medium-term

Customization of Bike

One of the recommendations for Ducati is that the company should start on proving a customization

service for the bike the company sell.

By leveraging the company’s website Ducati.com, the company can add a new feature into their

website which allows the customers to customize the bike that they wanted to buy (MacQuarrie,

2005). As Ducati had a good relationship with the suppliers it is possible for the company to allow the

customer to customize their bike online. By providing a customization features to the customers,

Ducati will be able to venture into a new market where the customer prefer to set or customize the

motorcycle based on what the customer needs and wants on their motorcycle.

For example, Ducati can sell a bike with basic accessories which allows the customers to change the

parts that they want such as changing the brakes of the motorcycle from the standard Brembo brakes

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to ceramic brakes for better braking for the motorcycle. The customers also can change the

appearance of their motorcycle such as colour, and other accessories available for the motorcycle.

By providing such service to the customers, Ducati will be able to attract new customers and also

differentiate themselves from the competitors. There will be also more value added into the product

because the customers are directly involved in making their product (Aaker et.al, 2005). This a

medium recommendation because time is required to set up proper facilities to comply to the demand

and also to set up a more extensive distribution channel to deliver the motorcycle to the customers

Female market

Ducati should create and shape female market segment and hence managing to attract additional

demand.

Ducati may set up or sponsor a women’s driving school, whose courses are designed for

different female riders. For beginners, the course may introduce the basics of motorcycles and

riding technique. For advanced riders, the course may provide students the chance to try

different types of motorcycle and meet Ducati World Superbike riders and celebrities (Hostetler

2002).

Ducati may start new female production lines, such as smaller bikes and apparel, due to the

difficultly for female riders to find bikes, jackets, pants, or even gloves for riding in sizes that fit

(Kresnak 2008). Most manufacturers only produce male protective gear and apparel, but even

the smallest male sizes are too big for female (Hostetler 2002).

Ducati may add a female rider forum in its website where female riders can meet other female

riders in the world to discuss their bikes, riding experience, and technical issues (Kresnak 2008;

Thompson 2000). This would encourage more female riders and hence increase the sales.

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Long-term

Green Technology

Due to the climate change and global warming, the public environmental consciousness is

raising rapidly (Joos et al 2001). Ducati should start researches on green technology in

motorcycle and decrease exhaust emission. This makes Ducati an environmental friendly

company. It will advance Ducati’s brand image and reputation, and even attract more ‘green

customers’ (Davis 1993).

Conclusion

Analysis of external environment suggests that economic and technological key factors to be

critical to motorcycle industry, due to the potentially negative effects to Ducati’s future

profitability. Industry analysis reveals that it is an attractive industry for Ducati; however

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increasing competition can become a challenge. Corporate and business strategy analysis

shows that setting up a global brand is critical for Ducati to increase its sales and profitability

while SWOT analysis on Ducati and Harley Davison provides a clue to why these two firms

use differentiation strategy for marketing.

To sustain the increasing growth of Ducati in future, Ducati should further strengthen the e-

commence business by improving Ducati.com as well as other physical distribution channel.

Ducati should also start providing a customization service for the bike to the customers. In

addition, female market is another critical target segment which has high potential for

growth. As there increasing concern on environmental protection, Ducati should start researching

on green technology and fuel efficient engine should be adopted into Ducati’s long term plan.

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Forbes, P.M. (1997), ‘Consumer Trends of the 1990’s (Marketing Management)’, NP News,
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Gentlemen's agreement < http://www.statemaster.com/encyclopedia/Gentlemen%27s-

agreement> Assessed on 22nd September 2009

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effect”, Business Horizons, Vol.42, No. 2, pp. 52-60

Hostetler, JS (2002),” Women and Motorcycles: A study of social and ergonomic

characteristics of the female motorcyclist and the relationship with company and market
performance”, University of Colorado, Boulder

Joos, F, Prentice, IC, Sitch, S, Meyer, R, Hooss, G, Plattner, GK, Gerber, S & Hasselmann, K
(200), “Global warming feedbacks on terrestrial carbon uptake under the Intergovernmental

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Panel on Climate Change emission scenarios”, Global Biogeochemiccal Cycles, Vol. 15, No.
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Kresnak, B (2008), Motorcycling for Dummies, Wiley Publishing, Inc., Canada.

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Wesley Longman Publishing Co., Inc., Boston.

Leenen, S (2000), “Ducati Motorcycle (Italy): Riding traditional business channels or racing
through the internet”, INSEAD, Fontainebleau, France.

MacQuarrie.M, (2005), “Content Ducati: An investigation of the space of interface and the
design of the user experience”, New School University, New York,

Quelch, J. and Bartlett, C. 2006, Global Marketing Management: A Casebook, 5th Ed., Thomsom
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Appendix

LOW

HIGH
HIGH

LOW

LOW

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