Strategic Analysis Of Ducati 3h1h5t

Strategic Analysis of Ducati

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TABLE OF CONTENTS 1.0 Introduction to Organisation................................................................................. 2 2.0 GAPS Analysis of Ducati....................................................................................... 3 2.1 Management Perception Gap.........................................................................3 2.2 Quality Specification Gap............................................................................... 3 2.3 Product Delivery Gap...................................................................................... 4 2.4 Market Communication Gap...........................................................................4 3.0 Ducati Market Analysis......................................................................................... 4 3.1 TOWS Analysis of Ducati................................................................................ 5 4.0 Strategic Issues Faced by Ducati..........................................................................8 5.0 Strategic Alternatives for the Issues.....................................................................9 6.0 Implementation of Strategy................................................................................ 12 6.1 Altering Company’s Structure (People aspect).............................................12 6.2 Change Management (Process aspect)........................................................12 6.3 Control Systems........................................................................................... 12 6.4 Balanced Scorecard...................................................................................... 13 7.0 Conclusion and Recommendations.....................................................................14 REFERENCES............................................................................................................ 15

1.0 Introduction to Organisation Ducati was established in Italy in 1926 by the Bolognese investors and was primarily involved in the radio transmission products which were exceptionally popular in the market. The year 1935 brought the urge for the company leadership to open a new factory which was established with an objective to develop a contemporary business centre. By the mid of the 1930’s, the company expanded into different markets including Europe, United States, and Australia. The production of the first motorcycle by the company was initiated in the 1946 at the factory Borgo Panigale by the name of Cucciolo. Later in 1968, the most ired motorcycles in the market from the company was manufactured, Ducati Scrambler. The most remarkable achievement in the company history was the Imola 200 miles in 1972 and later in 1988 Ducati won the Superbike World Championship (Rafferty, 2000). Cagiva Group purchased Ducati in 1983 brining success for the company in racing motorcycles and following that, in 1993, Ducati produced one of the legendary motorcycles on its product , the Ducati Monster. The first motorbike from the company was sold through the internet in 2000. According to British Motorcycle Magazine, the company manufactured its Bike of the Year in 2002 (Chung, 2012). The Superbike 1098 was announced in 2006 as the best design and followed in 2007 three more designs were introduced in the market successfully on company profile. The financial position of the company was improved in 2012 exceeding the achievements in the past (Milan, 2012). In the present time, the company is taking into consideration the strategic benefits of being in alliance with Audi which is anticipated to bring more success for Ducati (Siler, 2012). The mission of the company is to build a company which provides the customers with state of the art products and proving the authentic Italian performance for the people ing the idea of freedom, rebellion and defiance (Falloon, 2011). Under the consideration of enhancing the company profitability, a program needed to be implemented mainly to focus on increasing the sales of the products through an extended product portfolio which was restructured to accommodate the changing trends in motorbike market.

2.0 GAPS Analysis of Ducati Gap analysis demonstrates the differences existing in the perceptions and actual experiences in product or service delivery from two perspectives corresponding to the involvement of two parties, provider and the customer. The customer gap is the difference between the customer expectations and perceptions while the provider gap is of four types and work to rectify the customer gap (Zeithaml et al. 2009). Gap analysis of Ducati Company is as follows.

2.1 Management Perception Gap According to Zeithaml et al (1988), the management perception gaps is the distinction between what a customer expects from the services or the products and what are the understandings of the company of these expectations. The expectations of the customers are influenced by multiple factors which may or may not be controllable (Wang and Pizam, 2011). Convenience shopping for example is one of these factors and as the time requires, different new channels of facilitating the customers are present like online shopping and customer appreciate the efforts of a company to be available for its customers in every way that is handy for them. The customer expectations are perceived by the management primarily based on the product offering from exclusive stores in the physical premises. However, the new rage of the internet and online shopping makes it essential for the company, regardless of the business or product preferences, to be available for its customers online. Further, to enhance the customer loyalty and brand engagement, the relationship marketing tactics are of great significance (Liou, 2009). A majority of the products purchased now are selected as a result of search and buy process on the part of the customer and lack of Ducati’s online existence and focus on the transactional marketing rather the high grossing relationship market could act as a hurdle for the progress of the company (Gavetti, 2004).

2.2 Quality Specification Gap The difference between the perceptions of the management of the customer expectations and the specifications of the service quality are described as the quality specification gap (Zeithaml et al. 1988). Understanding the expectations of the customers is not enough for the management but to

develop product and service standard to be reflective for these perceptions and thus the focus on the quality is critical which is described by this gap (McKnight and Berrington, 2008). The products delivered by Ducati to the market are somewhat satisfying the customer expectations as the product attributes are developed and delivered in close alliance to the product developed standards by the company which are set after understanding what the customer expects from the company.

2.3 Product Delivery Gap The quality specifications defined and the actual product delivered, the difference at these two steps is described as service delivery gap (Zeithaml et al. 1988). The products delivered by Ducati though meeting the physical standards of the company for which it has long been appreciated however the delayed product delivery to the customers has been causing a remarkable market share loss (Gavetti, 2004). The pricing strategies of the company are adding to the situation with a competitive market around, the company failed to modify its existence, product provision and pricing adjustments are contributing to expand this gap in product standards and the actual experience by the customers.

2.4 Market Communication Gap The market communication gap is described by the difference between the communicated product attributes to the customers and the actual product delivered (Zeithaml et al. 1988). The marketing of the products by Ducati are attempted to be based on the actual product attributes and the expectations of the customers in the pricing strategy, product warranty service and product attributes are satisfied at all times. The lack of communication in different new media however is a certain weakness and contributing to add gap in customer expectations and marketing communication (Gavetti, 2004).

3.0 Ducati Market Analysis In the business environment, the key aspect which must be focused by the company is the competition and regardless of the business interest, the management of the company must keep a close eye on the business rivalry position in the market. The major competitors of Ducati include

Harley-Davidson (American heavy motorbike manufactures, and present significant competition in the sports and custom bikes), Honda (the largest bike and scooter provider in the global market and considered most reliable by the customer for the fuel efficient, low emission and excellent engine design), BMW (top European automaker, well known for the innovative motor bike designs, and specialising in touring motorbikes), and Triumph (major market player in naked bikes and competition provides in the touring and sports bikes) (Gavetti, 2004). Other competitors in the market, which though have rather smaller market share but caused Ducati to lose considerable market include Japanese manufacturers like Yamaha, Kawasaki and Suzuki. These companies initiated by competing in small bike industry and gradually moved to heavyweight bikes. In addition to the competition, the business operations of the company have particular traits with the majority of the production being outsourced and the activities demonstrating the company’s core competency like the research and development, design and quality control are under direct control of the company (Barksdale and Lund, 2006). In order to manage the supply chain, tools applied included just in time system and short term supplier contracts (Chung, 2012).

3.1 TOWS Analysis of Ducati To evaluate the strategies of any company and to determine the points which require more focus and restructuring, one of the most common tools which are applied in business studies is TOWS matrix. In order to understand the deficiencies in existing business processes of Ducati, this tool has been applied to the current operations and situation of the company. The results are presented in the table below which describes the internal as well as external environment and gives strategies to handle it (Nolan et al. 2008). The TWOS analysis would present strategies on the basis of identifying threats and weaknesses which could be of value in coping with the potential problematic situations in the market for Ducati.

Table 1 – Ducati’s TOWS analysis for strategic alternatives EXTERNAL OPPORTUNITIES

External

STRENGTHS

INTERNAL

Internal

o The unique and genuine product portfolio o Strong research and development o Highly skilled and competent engineering team

o The emerging markets around the globe presents a potential for expansion for Ducati like the female market o Establishing online stores to extend the sale points for the company o Working capital must be acquired through different means o Acquisitions of potential companies working in the market to fortify the customer database on the Ducati SO Strategy: Maxi-Maxi

1. The exclusive products of Ducati be offered for the export 2. Acquisitions to attract more loyal customers for motor biking 3. Developing brand awareness in the international market 4. Innovative products could be used to further expand in the new markets based on not only the customer type but geographical presence

THREATS

o The increasing market competition o Emerging technologies in the field which are cheaper o Availability of product substitutes

ST Strategy: Maxi-Mini

1. Customer services must be emphasised by developing the current marketing concepts applied at Ducati 2. Applying different marketing strategies, enhancing the customer loyalty 3. Innovative products must be developed to replace the products on the near maturation in future 4. Apply capital management for effective supply chain management

SES WEAKNES

WO Strategy: Mini-Maxi

o Poor Supply Chain o Deficiency of the available working capital o Failure of the company to diversify o Inability to present company on online media o Reduced market share

1. Applying tools and techniques to enhance the affectivity of the current supply chain management system of the company 2. Involvement in strategic alliance to overcome the working capital deficiency 3. Applying tools of internet business operations to expand in Europe and international markets

WT Strategy: Mini-Mini

1. To cope with the existing market competition, diversifying and restructuring the current product portfolio 2. Redefining the resource allocation to research and development in order to cope with the new technologies arising in the market 3. Consider the merger option to mitigate the liquidity crisis of the company

4.0 Strategic Issues Faced by Ducati On the basis of above analysis, it can be said that the key issue faced by the company is the reduced market share and a number of factors contributed to it. One major factor in this regard was the liquidity crisis faced when the shareholders of the company decided to switch to production of products other than motorcycle despite the remarkable success rate of the company products. After the company was acquired by Cagiva, the reputation was in many , rebuilt, and the new street performance bikes of the company won the world superbike championship. Despite the success and reputation strength, the payment delay was drastic for the liquidity problem faced by the company affecting the relationships with the key suppliers leading to delayed motor bike productions. In addition to a large working capital required by the company to smoothly operate without significant delays, an efficient and effective supply chain management system was also required. The benefits of such a system would not only include effective production but also gaining a competitive edge in the current market of overwhelming competition (Gavetti, 2004). Further, to capture new markets in the international perspective, the company need to diversify its product line to accommodate new and altered needs of the potential customers. Also the maturing market products require to be replaced by new innovative products which in turn require more capital. Loss in market share is also contributed by failure to diversify the products and inability to replace the maturing products of the company (Morandi, 2009). The inability of the company to establish its presence on the internet is also added to the key issue. The internet is being considered as the most popular media to expand the customer base. A good strategy and an excellent implementation plan are required by the company to cope with the situation (Morrison, 2009). This description could be demonstrated by a cause and effect diagram which is presented in figure 1.

Poor Supply chain

Lack of Diversification

Increased Competition

Reduced Market Share

Inability to establish on Web

Inability to replace

Lack of working Capital maturing Products

Figure 1 – Cause and effect diagram of issues faced by Ducati

5.0 Strategic Alternatives for the Issues The key problem faced by Ducati is the significant reduction in market share leading to the reduced revenue generation and the factors contributing includes the poor supply chain and lack of diversification pointing the key ones out of the rest. These are under the control of the company management and require considerable planning and execution and a plan proposed to Ducati to cope with these issues include the evolutionary changes in the business strategies to accommodate gradual growth patterns (Schmidt, 2009). The first step is the product diversification and the actual positioning of Ducati for being a manufacturer of the sports bike must be expanded to capture new market segments which were not addressed by the company in the past (Porter, 2007). In order to survive in this enormously high competitive market, the company needs efficient planning and a proposed model of changes to handle the major issues faced by the company to translate them in success factors for Ducati. In this regard, the suitability matrix is developed in the next page to complete primary evaluation of problems and their possible solutions in order to set the actions to close the gaps identified during gaps analysis. SOLUTIONS

OPTION 1

OPTION 2

1. Supply chain management Planning in depth strategic plan

Applying

the

strategy

Plan to

through integration of

of incorporation into global

diversification

different

alliance

global strategies

supply chain. Developing new

products on the company

supply c

products

portfolio

to

facilitate

this

by

on

of

introducing

integration process

several innovative products which

are

also

priced

reasonably 2. Stabilisation of the operational capital

Try to find different potential

Diversifying to new markets

The

sources

with

potentia

to

bring

working

innovative are

products

capital to alleviate liquidity of

which

designed

and

could b

the company

developed to capture new

newly

market segments

segment to

exi

custome 3. Establishment of online presence

Promotion of products already

Diversifying the brand name

reflectiv Expansi

on and the innovative

through

segment

ones on online media using one

geographical regions such as

in the

stop shop and launching a

the Latin America, Asia and

America

marketing

United States

campaign

to

strengthen the online presence

internet

in

other

The alternatives offered by the study identify the need for the company to utilise its innovation power to expand in the different newly identified market segments. This expansion would ultimately lead to increased revenue generation and in turn cope the liquidity crisis of the company. The best suitable strategy in the company with the described situation is about diversification (option 2). The justification of selected strategy is provided by reviewing its feasibility, acceptability, and suitability as follows. Outcome Feasibility

Increased market share

Strategic Option 2 By applying the strategy of diversification on different products on the company portfolio by introducing several innovative products with reasonable price will allow the company to expand to new markets which will lead to enhance its market share

Acceptability

New market opportunities

Diversification and identifying new market segment could gain high appreciation from the company shareholders as it could lead to generate high profits by

Higher profits

utilising the company potentials. Exploring the internet for new market opportunities could lead to significant

Suitability

Strategic potential outcomes

contributions to profit generation

Competitive advantage

The diversification strategy offered to the company is best suitable as the expansion of new marketing media and new market segments combined with the innovative company’s potential could lead to get a competitive edge for the company

6.0 Implementation of Strategy 6.1 Altering Company’s Structure (People aspect) People have critical roles in the context of implementing the proposed strategy (Johnson et al. 2008). Ducati can modify its existing structure to correctly and effectively apply diversification strategy. The modifications are needed to be practiced at both corporate and functional levels. At

the corporate level, the top management will put the strategy into action by developing sound policies and following adequate procedures. For instance, applying the strategy of diversification for different products on the company portfolio by introducing several new innovative products in new markets with reasonable price. Furthermore, the low and middle level staff will ensure an effective utilisation of resources and perfect implementation of changing company’s structure.

6.2 Change Management (Process aspect) Table 2 illustrates different change management strategies available to Ducati but in implementing the diversification strategy, the scope and nature of the change will be ‘revolutionary’ as the company is going to develop and transform innovative products and procedures to new market which require revolutionary changes in the management from process perspective. Table 2 – Types of the change

Source: Senior (2009, p. 47)

6.3 Control Systems The establishment of a control system is inherent in managing, commanding, and organising the behaviour of people and processes (Hill and Jones, 2007). The entire diversification process will be largely based on organisational people and processes. Therefore, it is necessary for Ducati to develop an effective control system with adequate resource allocation. For example, the company can launch its new product completely according to the demands of the customers after detailed research and development activities. This would be possible by promoting internal and external communication and ongoing research and . Further, Ducati can use service blueprints to design routine processes which will diversification procedure.

6.4 Balanced Scorecard Finally, the company can use a balanced scorecard approach to have an idea about the progress of the implemented strategy. A proposed balanced scorecard is available in table 3. Table 3 – Balanced Scorecard FINANCIAL PERSPECTIVE GOALS

Resolving liquidity crisis

MEASURES

o Increased working capital through integration of global supply chain o Yearend financial records o Acquisition of financial resources

INTERNAL PERSPECTIVE GOALS

Continuous product and service improvement

MEASURES

o Balanced scorecard approach

o Increase in customer base Market oriented o Market expansion product o Fortified market share development o Positive customer

CUSTOMER’S PERSPECTIVE GOALS

MEASURES

Providing quality o Establishing online sale products in a points convenient and o Customer’s accessible manner Providing products on time in market

o Increase in number of customers per year o Increased customer satisfaction

SUPPLIER’S PERSPECTIVE GOALS

Recuperating the management of supply chain

MEASURES

o Integration of global supply chain management

o Enhanced product manufacturing On time delivery turnaround time o Increased customer satisfaction Building long term o On time payments by relationships with enhancing the working capital the suppliers

7.0 Conclusion and Recommendations The major recommendation for Ducati with its current position as described in the above analysis is the advancement to establish a position in the e-commerce in order to expand its market share. The first step in this regard is to develop a website by hiring professionals in the field and than moving the social media highly appreciated now days by the customers of almost all products affecting the consumer life. This could be used not only to communicate the product attributes

and new products but could be used to sell products, spare parts in distinct markets thus expanding the market coverage which would ultimately increase the market share of the company. Further, diversification and the innovation in products are required to replace the existing maturing products of the company in the market in order to fortify customer base and brand loyalty. Reallocation of resources to research and development could further contribute to this aspect of Ducati operations.

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