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PIAGGIO (A)

Piaggio is one of the leading motorbike manufacturers in Europe.




Key Issues

1. Piaggio is now considering whether to invest in a new engine plant that would produce
environment friendly engines (meeting the standards and regulatory requirement of the
European Government) or not.

2. Growing competition from domestic (Aprilia-400% increase in sales) as well as international
rivals (Honda, Yamaha)

3. Piaggio produced only a few carefully designed models whereas competitors like Aprilia
brought many different models to the market, thus offering more variety to the consumers.
Piaggio was focussing more on product rather on consumer touch points (Myopia).

4. Piaggio was unable to reach economies of scale and thus reduce their cost of production. Also
they were more self dependent for other components and not utilizing the companies
resources efficiently.



Alternatives to deal with the Issue

1. Piaggio has already invested heavily in design and development of environment friendly and
technologically advanced engine which is the need of the future because of government
regulations. Piaggio could venture in providing its engines to other scooter manufacturers. This
would reduce the market share of other engine manufacturers and slowly curb their sales. As a
result, Piaggio would be producing more number of engines and the total cost of engines would
decrease due to economies of scale.

2. Piaggio can look to outsource the production of its new engine. As the production by
themselves would need a certain amount of sales to reach profitability. This can also be done
by acquiring or forming a joint venture with other engine supplying firm. It can also help the
company to utilize its resources for other requirements effectively.

3. Most of the sales of Piaggio was concentrated in Western Europe. Piaggio was not tapping the
potential of international market which other competitors were exploiting. This could lead to
market development and hence will help Piaggio meet their profitability targets for the new
engine.
4. Europe has attained the steady market. People in Europe were more fashion seeking and
therefore to increase its market share, Piaggio can invest in bringing new varieties of vehicles
(Gearless vehicles, unisex bikes). This would pull the youth more to their products and thus help
in capturing larger market share and counter attack Aprilia.

5. Being the market leader Piaggio may try to merge with the next in line, Aprilia, in order to
reduce the competitive resource interdependencies. If this merger is possible, then it might
help the two companies to join forces against the Japanese competition and would also help
Piaggio kill the direct competition it facing from Aprilia in various segments.




Recommendation

As Piaggio has already invested resources in the engine which is technologically superior and
the need of future, they should go ahead with evolving the engine and focus on increasing sales
by providing engines to other players also. They should also focus on marketing their product
and leverage on the environment friendly image to pull customers to their product.













UNDERTAKING
We hereby declare that our group as a whole has actively participated with full dedication in preparing the
report for case study PIAGGIO (A).

Date: 28/10/2013
Members:
Anirudh Harisinghaney (13PGDM007)
Arpit Kesarwani (13PGDM013)
Chetan Marwaha (13PGDM015)
Jhankar Mehra (13PGDM037)
K. Poojitha Gupta (13PGDM028)
Kolli Meher Divya (13PGDM029)
Shivam Arora (13PGDM054)