Group G Jasmine Seapoe Richard Brown BA 4196 Ducati Case Study Analysis April 17, 2012 Background: Founded

d on July 4, 1926, Ducati was one the first Italian operations of radios and electrics components. Appearing with its first motorcycle during the post war period, it was in 1950s that Ducati introduced a series of increasingly sophisticated and powerful bikers with Ducatis technical signature: the Desmodromic valve distribution system. This sophisticated mechanical system allows the motorcycle engine to achieve more revolutions per minute and greater usable power and was still found in 2001 on every motorcycle produced. Unfortunately the Ducatis success declined rapidly in the early 1980s, due to the decision to redirect company to products other than motorcycles. Saving the company from the brink of bankrupt, new CEO Federico Minoli transformed the company into the most profitable motorcycle manufacture among the industry. Through the guidance of Minoli, Ducati managed to increase growth and profitability with revenues quadrupling since 1996. EBITDA had jumped to 33.4 million in Euros in 1997 to 60.0 million Euros in 2000 and market shares increased 1.6%. In spite of all this development, Minoli was concerned with the future of the company. Issues: With two goals in mind: a double digit growth and equaling Harely- Davidsons profit level, Minilo was left to develop a clear strategic direction for the company. With company beliefs about Ducatis strengths in mind; a good product, top-notch engineers and strong brand potential, the challenge for Minoli was to define a turnaround program that supports the profitability goals he had set. After much creative thinking, Minoli felt the right strategy for Ducati was to develop a global brand that could appeal to not only extreme drivers riders but also to a wider specter of customers, eventually transitioning from mechanical to entertainment. Alternatives: One alternative was to attack Harley Davidsons niche with Ducats interpretation of a cruiser: a cruiser fitted with Ducatis dsesmodromic L-twin engine, and also as motorcycle that could strike a frontal attack in Europe to the entire line of cruisers. Focusing more on the bikes style rather than performance it was more in favor of American riders. Entering a large segment with heavy competitors in addition to Davidson, was broadening Ducatis traditional nice the right more to sustain the profitable growth of the company? Although opportunity coast lies within the segment, Ducati would have to produce a better performing Cruiser than its top competitor Davidson to reach its goals of profit. Exhibit A shows further analysis of the competitive market for cruisers. Recommendations:

Group G Ducati must decide whether to penetrate the cruiser segment or to focus on its current segment. Both options offer advantages and disadvantages. The advantages for Ducati to enter the cruiser segment are the following: Segment expansion Market share growth The disadvantages for Ducati to enter the cruiser segment are the following: Additional investments for Euro 17 million and additional cost of Euro 26 million Davidson is already dominate in the segment Davidsons strong customer loyalty, affect Ducatis ability to create brand loyalty Unpredictable economic condition. Change in Demographics The advantages of focusing on current segment are the following: Reduction of risk Achievable opportunity cost Expansion of customer and brand loyalty through new production development Maintain strategy strength Based on the pros and cons, for Ducati to compete in the cruiser market, the following suggestions should be implemented. First, copying their sport bike segment strategy, Ducati must create a product that is differentiated from its competitors. The cruiser should be tailored with Ducatis history, producing Ducatis interpretation of a cruiser. This requires heavy capital investment for design and R&D and segment refocus on their new consumers. This could result to a lack of focus in their existing segment, possibly leading a decrease in brand value. Second, create a strategy to attract customers within the new segment. This will be difficult due the Davidsons domination. Also, Davidsons customers have high loyalty to their brand, making it harder for Ducati to develop a new customers platform in the new segment. Developing a new strategy could take a lot of research time. Although, Ducati is able to make such a capital investment to enter the cruiser segment, the uncertainly of the economy could affect Ducats profitability during the process of entering the market. Implementation: Opportunities are within their marketing is distribution strategy with the United States. Originating in the Italian industry, their strategy is projected to targets that industry rather than the United States, causing some difficulty to enter Davidsons market. Also, lack of advertisement within the United State doesnt allow them to really capture new customers. To gain interest from customers in this segment, Ducati should produce an imitation of Davidsons cruiser, tailored with Ducatis uniqueness. To attract American riders, Ducati will have to transition from Italian design and create bikes designed for American riders. Ducati must already produce bikes for older riders. Shifting demographics from 18-43 years to 46 years of age, Ducati will have tailored its product to attract their new demographic audience. This could be challenging for Ducati because of their success within a sports segment. Pricing must also be adjusted similar to Davidsons pricing, or even a little under

Group G priced. This would offer a competitive advantage, allowing them to penetrate the market and Davidsons domination over it. Advertising would also be great for the launch of the cruiser rather than marketing through specialized magazines. Ducati should expand and create ads for magazines of all kinds. This would grant Ducati more publicity, allowing them to target different audiences within that one market. Also, focusing more on women riders in the United States holds an opportunity cost. A possible partnership with a womens bikers organization such as Womens on Wheels, would give Ducati the change to engage female riders while also education on the Ducati brand. In addition, hosting launch events in states with high cruiser consumers, promoting advertising new products would a great way to inform US bikers of Ducatis brand. Similar to a bikers convention, this would solely focus on Ducati production. This could offer test drives and promotional deals such as a percentage off a bike purchase for the first fifty bikers to attend the event. This would offer consumers engagement and interaction. In conclusion, entering the new segment offers some disadvantage because the opportunity cost is achievable. Already suited with qualified production team and R&D Ducati have the ability to compete with competitors. In order to achieve this, they most revamp traditional strategies of design and innovation and tailor them towards their new targets audiences. This would allow them to have equal playing ground against Davidson, possibly resulting to a battle of number cruiser.