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Minoli ducati

25/03/2021 Client: saad24vbs Deadline: 2 Day

Professor Giovanni Gavetti prepared this case solely as the basis for class discussion. Professor Andrea Lipparini of the Cattolica University of Milan contributed to prepare the industry overview. The author wishes to acknowledge Professors Tarun Khanna and Jan Rivkin for comments on an earlier draft. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

G I O V A N N I G A V E T T I

Ducati By the end of 2000, Federico Minoli had won his battle. Over the past five years, the “turnaround

artist” -- as Forbesi magazine dubbed him –- had transformed a company on the verge of bankruptcy into one of the most profitable motorcycle manufacturers in the world; a mechanical concern into a global brand; a fast motorcycle into a symbol of Italian design and tradition, extreme performance, and technical excellence. Under Minoli, Ducati had enjoyed explosive growth and profitability. Revenues had quadrupled since 1996; EBITDA had grown from 33.4 million Euros in 1997 to around 60.0 million Euros in 2000; the market share had gone from 5.1% in the sport bikes segment in 1997 to 6.7% in 2000 (see Exhibit 1).

Despite this success, Minoli was concerned with the future of the company. He knew that Ducati could not grow indefinitely, and was struggling with what strategy might overtake these bounds. Minoli and the rest of Ducati’s top management team were considering different alternatives. One alternative was to attack Harley Davidson’s niche with a Ducati interpretation of a cruiser. Was this broadening of Ducati’s traditional niche the right move to sustain the profitable growth of the company?

The Market for Motorcycles in 2001

The roots of the motorcycle industry date back to 1868, when Louis Perraux installed a steam engine on a rudimentary bicycle. In 1894, the Hildebrand brothers and Alois Wolfmüller produced the first motorcycle with an internal-combustion, two-cylinder gasoline engine. The motorcycle quickly became a cultural icon. As T. Krens, the curator of “The Art of the Motorcycle” exhibition at the Guggenheim Museum in New York, observed:

The motorcycle is a perfect metaphor for the twentieth century. Invented at the beginning of the industrial age, its evolution tracks the main currents of modernity. The object and its history represent the themes of technology, engineering, innovation, design, mobility, speed, rebellion, desire, freedom, love, sex, and death. Park the latest Ducati, Harley, Honda, or BMW on a street corner in any city or town in the world, and a crowd will gatherii.

For the exclusive use of G. Wu, 2019.

This document is authorized for use only by Guohua Wu in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019.

701-132 Ducati

2

Products

Approximately 1.6 million motorcycles were sold around the world in 2001 (see Exhibit 2). Industry experts divided the market for lage-displacement motorcycles into four segments: off-road, cruisers, touring and sport bikes. The off-road segment typically included both motorcycles for purely off-road use, and motorcycles designed for both on-road and off-road use (dual purpose bikes). These motorcycles were characterized by an upright ergonomics, thickly padded seats, soft shocks, and superior sturdiness. The largest players within this segment were all of the Japanese manufacturers, KTM, BMW, and Huskvarna. Cruisers were big motorcycles with an upright riding position. Their design emphasized styling over comfort and speed, and was preferred by many American riders. Harley-Davidson dominated this segment, while Japanese companies such as Honda, Yamaha, Suzuki, and Kawasaki imitated the traditional Harley style. In 1997, BMW introduced its own interpretation of a cruiser, which enjoyed a stunning commercial success. Touring bikes were larger motorcycles equipped for longer rides and greater comfort. Within this segment, the three largest players were BMW, Harley-Davidson, and Honda. Sport bikes had lighter frames, a more forward seated position, and emphasized speed, acceleration, and minimal comfort. This niche, which Ducati identified as its relevant market (see Exhibit 3), could be further disaggregated into four sub-segments: hyper-sport (extreme performance, closely derived from the racing world), super-sport (high performance, good handling and low weight), naked (good performance and urban riding) and sport touring (speed and handling, married with comfort for longer rides). Japanese companies dominated this niche, while European firms such as Ducati, BMW, and Triumph also vied for market share. Harley-Davidson entered the sport bike market by acquiring Buell Motorcycles in 1998. This segment was Ducati’s reference market.

Customers

A wide variety of individuals, with equally different tastes, bought and rode motorcycles (Exhibit 4). “Knee down,” or racing aficionados, sought extreme performance and functionality (e.g., reliability and technical excellence). ”Easy-riders” lay at the other extreme, and associated the motorcycle with a particular lifestyle. “Weekend riders” and “highway lovers” were more interested in attributes like functionality and comfort, while a large portion of “undecided bikers” preferred a more balanced and versatile bike. Each customer type differed by age, income, education and gender. For instance, the median age for a Harley-Davidson customer in 2000 was 46 (up from 35 in 1987), while most of Ducati’s buyers, whose median age had consistently decreased in the last few years, ranged between 25 and 35 years old.

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