Ducati Essay

Federrico Minoli’s successful turnaround of Ducati was focused on brand creation which was supported by the reconfiguration of a number of activities ranging from increased efficiency in the production process to broadening its customer base. This turnaround can be attributed to two strategic changes that Ducati implemented; firstly Ducati increased its global reach and expanded its offerings within the sport segment and secondly it transformed itself from being a manufacturing company to an entertainment company e. g. he brand Ducati was not about just motorcycle anymore, but it was also about experiencing and enjoying various aspects of Ducati (Ducati Stores, Ducati Owner Clubs, Events, Museums etc.

). Furthermore, this successful rebound can be explained using Porter’s different frameworks. Porter believes that to gain a competitive advantage a company must compete on either overall cost leadership, differentiation, or a focused strategy. He reiterated that companies that do not choose one of these strategies will be stuck in the middle and find it hard to remain competitive.In the past five years of it turnaround, Ducati choose a focused strategy by competing in only sport bikes segment. In this perspective, the company is reinforcing to their customers, prospective customers, as well their members in the Ducati Owner’s Club that they specialize in sport bikes.

This is area they have comparative advantage. Another economic logic behind this success story lied in reduced costs (12. 4%), increased productivity (15%), improved quality and higher reliability.This was achieved by massive standardization of critical components, by increasing the outsourcing of production activities to 87%, by adopting a rigorous quality control process, by maintaining a tighter grip on the suppliers and by increasing the production efficiency through adoption of platform process. Technology superiority has long been a part of Ducati. The introduction of the Desmodronic valve distribution system and the L-twin engine brought a unique sound to the manufacturers’ motorcycle.This technological brilliance along with the top of the line engineers differentiated this Italian bike from its competitors.

The unique sound and sleek Italian design play a small role in the increase of the strong brand loyalty of Ducati’s customer base. The case shows that between 1995 and 2000 the repeat purchase intentions had increased from approximately 55% to a little over 60%. This percentage brings it to one of the highest ranked in the European market. The Value Chain of Ducati seems to be quite efficient.Ducati begins with R&D from its top notch engineers. Following R&D, 87% of production is outsourced. Ducati became one of the most efficient manufacturers in the industry by increasing the production of motorcycles per worker from 76 to 87 units between 1997 and 2000. Ducati increased the quality and reliability of their product by having a strict selection and quality control process.

The distribution of Ducati motorcycles is intended to provide quality dealers that offer technical and service support at superior levels.Weaknesses that plague Ducati begin with the brand image regarded as less efficient and less reliable then the Japanese bikes. The target customers of Ducati are between the ages of 18 and 35. This age range is quite narrow compared to the other industry leaders. Previous poor management limited the amount of potential growth before Federico Minoli took control.

Ducati advertises through specialized magazines only. This limits the amount of reach to potential buyers. Due to low production volume , Ducati has low economies of scale.Opportunity for Ducati includes technological development, as well as their marketing and sales effort. The creation of the “World of Ducati” and Ducati Stores” helped differentiate the Ducati product from their competitor. This was also aided by their success in the racing world and their ability to translate success into introducing production model into market that were viewed as technically superior and more reliable than their competitor.

Judging from above, I firmly believe that Ducati’s current strategy is very sustainable.By choosing the sport bike segment continuing to excel in racing world, Ducati is well positioned to expand its position in the market and protect itself from any attack from rivals, including Honda. Honda competes in all the bike segment, manufactures automobile, robot, etc. Honda could never reposition itself as the “sport bike company. Any of the current competitor in the bike industry can tout their wares in the sport bike segment as a sport bike company, but only Ducate can leverage its focused and unique position as the sport bike company.