Analysis of External Environment of Ducati (Answer of Q.

2) In classical strategy literature, competitive advantage of a company is generally attributed to the management‟s ability to position the company‟s assets against some external context (Mintzberg et al, 2005 & Juga, 1999). This external context is referred (Porter, 2004) as external environment for a particular company. According to Johnson et al (2008:54), the environment is what gives organisations their means of survival.” So, it is important to a great extent that most of companies be aware of the environment in which they are operating. In Author‟s view, Ducati was aware to a certain extent what is the external environment surrounding it. This answer will attempt to analyse the external environment as it appears to author from the analysis of case study (Wit & Meyer, 2004:854). This answer will look first macro environment of Ducati using PESTEL framework, then Industrial environment, and after that Competitors and Markets (Johnson et al, 2008) mainly using Porter‟s five forces model (Porter, 2004:6). Macro environment of Ducati Macro is remote environment of a company comprising economic, social, political, technological and ecological factors (Pearce & Robinson, 2005). One way of looking at remote environment is PESTEL framework (Johnson et al, 2008).

Political
Not clear from the case but most of countries like USA, UK, Japan, Italy, France, Germany is quite stable and company mainly operated in developed countries.

Economic
Not comes explicitly from the case but most of the economies that company was mainly operating in low growth mature markets and

open economies.

Legal Free markets, not much restriction from the governments except safety standards (In author’s view)

Technological
  Fuel efficient and high performance engines Improvement in Paint, Trim, Chrome, Exhaust pipe shaping (Wit & Meyer, 2004:857). Electronic Components CAD & CNC

 

Environmental   Not explicit in the case Green issues (in author’s view)

Social
 Women becoming oriented towards biking Different tastes and lifestyle , and changing at faster rate

856). Highway. 867) Mostly short term contracts except few long term suppliers of strategic importance (867) Industry Competitors :Harley.” The five forces framework allows a firm to see through the complexity and pinpoint those factors that are critical to competition in its industry. Harley Buell model was a threat. Fast. Suzuki. 858) Threat not significant as already many established players in the market and required a significant initial network. 2008). as well as to identify those strategic innovations that would most improve the industry’s and its own profitability. and Yamaha had substitutable products (figure 3.Industrial Environment PESTEL analysis helps a company analyse remote environment but more important is the immediate environment of the company or industry in which the company is operating in (Johnson et al. Knee down. Five forces framework is one of tools to analyse the immediate environment of a company.866) Two sources available for each part and alternative available (pp.” Applying five forces framework to Ducati Threat of New Entrants Number of motorcycles manufactures decreasing (pg. BMW. Kawasaki Handful of players but all quite well established and all vying for customers based on their capabilities Strong brand identity for Harley models Agreement between Honda and Yamaha about parts transport AgA Buyers Wide variety of individuals with equally different tastes and reasons for buying (pg. Weekend. 859) . Easy and Undecided riders. According to Porter (2004:7). BMW also competed in sport sub segment Naked (pg. Suzuki. gender Women new customer base BB Substitutes In sports sub segment Naked. Each buyer differed by age. Urban. 859) Japanese companies Honda. pg. Honda. resources and investment Suppliers Majority supplier belongs to Emilian District (pp. education. income. Yamaha. Kawasaki.

Ducati identified customers as knee down riders. 2004). beautiful and performance bikes though less efficient and reliable than Japanese bikes (Wit & Meyer. 2005) is analysis of external environmental and using this analysis as the main reference framework for strategy development. . a “competitive scope i. influencing the attractiveness of a segment for a particular firm.” Ducati did not try to go beyond motorcycle. Based on industry and market analysis and after that looking at firm‟s resources and skills. Function. Porter (2004:255) mentions that next question for companies are “where in the industry a firm should compete” and “how its strategy should reflect in this segment”. fast riders. It is a very much a step by step approach (Porter.e. 2004:857). Ducati and its competitor‟s position in the market can be represented on the following diagram. a broader conception of the scope of firm‟s activities encompassing industry segment coverage.” A firm‟s resources and skills. weekend cruisers. 2008:77). It seemed to have followed porter‟s definition (2004) what an industry is and identified which industry it operates in. 2004. It appears that Ducati identified “Users‟ needs and preferences for product characteristics” (Johnson et al. 2008:78) and differentiated these different users based on four broad categories i. reflected in its value chain. 2004:53) was decided by strategists at Ducati. market segmentation (Porter. 2004:36) was used at Ducati but in author‟s view it appears from the case that Minoli was quite aware of collection of activities that was being performed at Ducati to deliver the final product to its customers. will usually be better suited to some segments than others. easy riders and undecided bikers.” In author‟s view to a certain extent Ducati adopted this philosophy when it tried to position itself in the motorcycle industry during the turnaround period from 1996 to 2001 and further. Life Style. urban riders. In author‟s view. Vertical.” It was ascertained that Ducati has a good product. Ducati appears to have focused its attention under the leadership of Minoli on differences in customer needs i. related accessories and services as it comes out from the case.2004. this is what Porter (2004:14) refers to “Differentiation” generic strategy. highway lovers. geographic markets served and co-ordinated competition in related industries” (Porter. 2004:857).e. Competitive Scope has four dimensions namely “Segment.e. 2008) According to Porter (2004:231).Assessing the extent to which Strategy of Ducati was market driven: Approach of this school of strategy (Mintzberg et al. With a good understanding of industry and market Ducati is operating in. 2008) as depicted in the figure 2. Performance and Comfort. 2004:54).”an industry is an array of similar or closely related products and Buyers. Johnson et al. After industry segmentation. Geographical and Industry” (Porter. As Porter (2004:257) puts it. its products were unique. „fast‟ and „urban‟ bikers. Ducati saw these customers as strategic customers (Johnson et al. Though case study does not mention that Value-chain tool (Porter. “Crucial strategic questions facing a firm are where in an industry a firm competes and in what segments will focus strategies be sustainable. Strategy development is primarily seen as seeking attractive opportunities in the market (Johnson et al. Minoli and his team tried to identify unique features of Ducati. Ducati decided mainly to produced Sports bikes and serve the „knee down‟. map of market (Wit & Meyer. According to Porter (2004:233). to what extent it can be said that strategy of Ducati was Market Driven. Wit & Meyer. integration.

However.e. Second. Based on the above analysis from the perspective of market driven strategy. Role of capabilities played in the growth of Ducati and analysing the extent to which the strategy of Ducati is Resource Driven (Answer Q. author will look into role of capabilities played in the growth of Ducati and consider the extent to which Ducati‟s strategy was resource driven. in resource based view. First. 1991). Harley Davidson and Japanese Motorcycle companies. it is suggested that “organisations are not identical and at least some resources and . 2004:859). author will attempt to answer to what extent the strategy of Ducati turnaround was market driven. But. firms within an industry or a strategic group are identical in terms of strategic relevant sources they control and the strategies they pursue. before that. (This diagram does not represent any scale but only the positioning of Ducati.) It also appears from the case that Ducati was aware of its environment and Minoli and his team did value chain analysis to understand where in the companies lie value and try to match that value in a particular market segment. they can be bought or sold in factor markets (Barney. 1) According to Barney (1991) analysis of the impact of a firm’s environment on its competitive position or market driven strategy is based on two assumptions. these models assume that should resources heterogeneity develop in an industry or group will be very short lived because the resources that firms use to implement their strategies are highly mobile i.Differentiation and Positioning strategy of Ducati Performance Urban Riders Knee down Riders Riders Ducati Fast Riders Japanese Companies Function High way lovers Easy Riders Harley Comfort Davidson Life Style Source: Adapted from Figure 2 (Wit & Meyer. 2004:857) and Figure 3 (Wit & Meyer.

Stress on Asthetics Top Notch Engineering Purists Passion for speed. information. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness”. 2008:94 & Barney. Top management identified resources and culture of Ducati that was difficult for competitors to imitate. etc. Minoli and his team put a significant emphasis on identifying unique resources that have potential attributes for sustainable competitive advantage. 867) Coordination among R&D. For the analysis of the case and answering of this question. Events. sophisticated powerful bikes Culture supporting sports bike attributes In explicit and implicit knowledge Culture Passion for Races Unique Beautiful Performance Bikes. author would consider the Daft (1983) definition of firm resources. Resources. Product development. building culture and building competencies Museum building Ducati Stores. 'History Wall' (pp.com Source: Adapted from the case study . knowledge. performance. innovation Resources of Ducati Diagnosis of Resources Bench Marking Harley Davidson Business and Model of distribution and value chain analysis Mapping various activites and value delivered Managing Knowledge. Ducati. culture was managed can be summarised in following matrix. According to Daft (1983).capabilities of an organisation are inimitable by other organisations (Johnson et al. “firm resources include all assets. Resources and competencies Identified Desmodromic Distribution System L-Twin Engine Tubular Trestle Frame Unique Sound Beautiful. capabilities. culture. methods used to diagnosis of resources and how knowledge. firm attributes. Racing division and Marketing department Ducati Owners club. organisational processes. 1991). As it appears from the case.

” (Wit & Meyer. marketing. 2005:211). 2004:863). It was probably an attempt to understand and share implicit and explicit knowledge. Marketing and R & D department working closely with each other. this was to a certain extent an attempt to harness organisation‟s knowledge lying at different co-ordinates of Ducati. Spiral in the model suggests that “four modes of knowledge creation” are interrelated and movement from one mode to another is happening continuously (Mintzberg et al.com can be seen as communities of practice. R&D. 1995:71). close coordination of various departments) Socialisation (implicit sharing of tacit knowledge) Linking Explicit Knowledge Internalisation Operational knowledge (learning by doing) (Racing division. Ducati Owners club and Ducati.“The core of Ducati’s branding strategy was soon crystallized into what was dubbed as ‘the world of Ducati. Product development working in close coordination) Combination (combines and passes formally codified knowledge) (History wall. The world of Ducati and various steps taken by management team at Ducati can be identified with knowledge building using ‘the knowledge spiral model’ (Nonaka and Takeuchi. Museum) Field Building Learning by doing Source: Adapted from Nonaka and Takeuchi (1995:71) Building museum can be seen to some extent trying to make implicit knowledge to explicit. Tacit knowledge to explicit knowledge Dialogue Externalization (converts implicit to explicit)(Ducati owners club. Management was making a consistent effort to improve . In authors view.

consistency in what management was doing.organisational capabilities to outperform the competition and this can be seen along the five dimensions: the speed i. 1992). implicit assumptions. Author will argue that it was a mix of both the approaches towards strategy formulation. made this turnaround successful.” (Wit & Meyer.e. 2004:868). Ducati’s engineering team was reputed as one of the most expert and skilled in the industry” (Wit & Meyer. It was to a great extent the ability of Minoli and top management of Ducati to analysis the environment. the ability to see the competitive environment. market.e. spending money on museum rather fixing the leaking roof). ability to respond quickly. resources and core competencies. Minoli’s first few moves can be viewed as identifying company capabilities. “I left with the clear impression (when he came first time) that it was almost by chance and not by strategic choice that Ducati had a product that the public loved. And. capabilities. Ducati developed the new 900SSie in 15 months compared to over 36 months for previous model development” and “ In 2001. In author’s view to a great extent. it can be said to a certain extent that top management during the turnaround phase of Ducati put lot of effort and money (for example. it can be seen there are links to thoughts of both the schools i. Whether Ducati Strategy was Market or Resource Driven ( Answer 1 and Answer 2) and to what extent: As discussed and represented in various models and diagrams in the answers‟ of questions 1 and 2. From the case and based on the above models and analysis. Ducati resources. the way of doing things. acuity i. it would have been very difficult to achieve this efficiency and skill improvements unless management at Ducati had not identified the capabilities and used them for the turnaround of the organisation from a state of bankruptcy. In Minoli’s words. and their stress on aesthetics and performance of bikes. development and implementation. in author‟s views. the way organisation was adapting itself and innovativeness ( Stalk et al. He tried to understand what the company culture is and made an attempt to understand tacit knowledge. buyer preferences. passion of Ducati employees for sports bike and racing. Role played by development of capabilities and organisational knowledge was quite significant in Ducati’s turnaround in author’s view. author will further argue that strategy development during the period of turnaround was more resource based driven than market driven as a large part of market driven strategy was even being implemented even before Minoli joined and same was to a certain extent during the turnaround phase. market and resource driven strategies.e. 2004:862).e. core competencies etc. As mentioned in the case “in 1998. agility i. .

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