COMPETITIVE STRATEGY –

DUCATI ASSIGNMENT
Name: Ayushi Singhal
PGID: 61920622
Strategy for Ducati’s Turnaround
Product
• Launch of products in new segment: sport touring segment motorcycle
introduced (1997) for older customers which constituted 15% share of
units sold on an average (from 1997-2000) and commanded a
premium of ~25% vs. comparable products
• Introduction of new models within existing segments: several new
models launched under hyper-sport, super-sport and naked category
some of which were flagship and were sold at ~30% premium
• Other products/services: entry into accessories/apparel business to
provide whole range of products for Ducati riders. In addition, spare
parts were outsourced leading to greater availability and higher
revenues.
Production
• Outsourced production: all activities except R&D, design, quality
control and machining of crank cases and cylinder heads were
outsourced (87%) to small and specialised manufacturers leading to
efficiency (bikes produced per worker increased from 76 in 1997 to 87
in 2000). This led to significant reduction in COGS from 68% of
revenues in 1996 to 59% of revenues in 2000.
• Optimised supplier network: stringent selection procedures deployed
to optimise supplier network from 200 to 130. Short term contracts and
switching between supplier as need arises helped increase quality and
reliability

Distribution Promotion
• Control over distribution: established own sales and marketing • Series of events and activities were launched as a part of brand
subsidiaries to remove dependence on independent distributors promotion. This included presence at all major bike competitions (a
• Re-organisation of dealer network: focus on quality over quantity. factor which impacts purchase decision of 27% customers) – revenue
Reduction in number of retail dealers all across the globe. As a result from racing division increased from 0 in 1996 to Euro 7.9 million
dealer registration annually went from 14 to around 150 • Advertisement via exclusive and specialised magazines only in
• Setting up of Ducati stores: high end stores set up in selected cities contrast to competition brands
which not only provided superior customer service but also gave an • Setting up of museum which celebrated history of Ducati, Ducati
insight into Ducati’s legacy. It was a way to connect customers to the owners’ club to link Ducati owners across
brand • Various motorbike competition were organised
• Huge investments in R&D (Euro 3.2 mn in 1997 to Euro 12.9 mn in 2000) which helped to bring new models to market in
Other time. Increased coordination between R&D, marketing and racing division
• Restructuring of senior leadership team to get not just talented but passionate individuals
Core logic of Ducati’s turnaround and will it sustain?

Large segment of buyers were not attracted to the intrinsic attributes of the motorcycle but what the motorcycle evokes and
represents. “Ducati is not only about beating Japanese bikes, we have a powerful brand to preserve and develop, and
ultimately Ducati is not, or not only, a motorcycle company. We sell something more: a dream, passion, a piece of history,
and the motorcycle is at its core” - Federico Minoli

• As Minoli had put it, core logic for Ducati’s turnaround was to build a brand which people could resonate with. He envisioned Ducati
not just as a motorcycle company but a symbol of speed, passion and terrific history. In his opinion Ducati had:
• A great product
• Brilliant team of engineers and designers
• Strong potential as a brand;
and therefore all the efforts were directed towards creating a full fledged experience for the customers

• Ducati can sustain its success because it has been focussing extensively on building good and reliable products specific to its
customer segment and providing great services

• In addition, Ducati has been successful in creating a brand legacy which customers relate to and hence are loyal towards. Ducati has
transformed itself into a well knit community of engineers, researchers, riders, racers who were speed lovers, adventure fanatics and
passionate about the brand

• All the turnaround efforts (production efficiency, distribution control, premium pricing, new launches, R&D investments etc.) were
planned and implemented in the right way which lead to cost reduction and contributed to the continued growth of Ducati over the
years. This is expected to be sustained provided Ducati continues to deliver on its core.
Entry into Cruiser segment?
Enter Don’t enter Breakeven analysis
• Huge market segment with expected • Focus on improvements Expected average
unit sales of 400,000 in 2000 in existing products Selling price ($) 15000 selling price of a
• Opportunity to widen the customer and expanding the Cruiser
Pros base (targeted towards elderly) market share in sports Assuming same COGS
• Risk diversification among the segment COGS (%) 66%
as Harley's - Exhibit 12
motorcycle segments
• Huge expenditure required (17 mn in • Lose out on the Contribution ($) 5100
investment and additional 26 mn costs) opportunity to tap in
• Well established players in the market a huge business Fixed costs ($) 26,000,000 Pg 87
Cons (Harley) hence fierce competition segment
• Might lose focus on existing products
and alienate existing customer base Breakeven units 5098

• Ducati can breakeven at ~5100 units which is 1.25% of the 400000 units expected to be sold in 2000. This doesn’t seem to be
an unachievable target given Harley Davidson and its subsidiary were able to attain a combined market share of ~4.9% in
Enter sports bike category which was not their primary segment worldwide in 4 years
the • All the other competitors of Ducati (BMW, Honda etc.) have presence in all bike segments and hence would make sense for
market Ducati to diversify as well
• Key to success would to ensure continued focus on its existing products and customers. Ducati shouldn’t forget its core value
(experience) while building or entering the cruiser market.