Ducati Case Solution

Introduction

This case sheds light on Ducati, which is an Italian company owned by Audi through its Italian subsidiary Lamborghini. The company manufactures and designs motorcycles. Federico Minoli turned the company around in five years from the state of bankruptcy to one of the most successful motorcycle manufacturers in the world. The company's revenues increased from 1996 to 2000 exponentially. The company manufactures different product models including hyper sport, super sport, naked and sport-touring appealing to different customer's prerequisites. The super-sport and naked models have seen tremendous growth and are responsible for generating the most revenues for the company.

Porter’s Five Forces Analysis

After analyzing the industrial structure of the company and assessing and evaluating other businesses in the motorcycle manufacture industry, Porter’s five forces analysis has been conducted, through which we get.

Competitive Rivalry: The competitive rivalry is high for the company as other competitors are well established in the market with strong brand image and market share as illustrated in Exhibit-1 below, where Honda, Kawasaki, Suzuki and Yamaha had most of the market share. Especially the competition is high in the sports division of the industry in which the company competes with Japanese corporations and others including BMW, Harley-Davidson, and Triumph which are all technologically advanced with a strong brand image in the industry and have easy access to capital. In turn, it allows the companies to spend more on their R&D project. Furthermore, this has increased the competition in the industry for Ducati. In order to gain a competitive advantage, the company has to invest more in its R&D activities, which would put the company in a compromising position when dealing with any uncertain events which would affect the company's profitability and sales. For this reason, the switching cost of customers was low which increased the competitive rivalry.

Threats of New Entrants: In the industry, the threats of new entrants was small, haste sector contained well-established companies with a strong brand image. It was tough for any new business to engage in the industry and survive as the other competitor was involved in price wars with new ventures. Furthermore, the cost of establishing the business was very high as the motorcycle manufacturing industry was well-structured and was bound to meet certain standards by the governments. Almost all the competitors had fully automated plant and machinery to manufacture their products in bulk quality effectively. The capital requirement to set up a fully automated plant to produce the product was very high for a new company and also the fact that the number of the successful manufacturer of motorcycles had decreased and the number continued to decline. This, as a result,discouraged the new investor from investing in the industry. As a result, this increased the rivalry between the existing companies to gain competitive advantage and create barriers to entry for any new opponent.

Threats of substitutes: The threats of substitutes is medium for the enterprise as there are many other alternatives available to the customers including cars, mopeds, all-terrain vehicles, snowmobile, and golf carts. However,none can compare with the freedom a rider feels when he/she rides a motorbike. The industry comprises of passionate motorcycle lovers who keep the demand for bikes alive. In turn, this increases the competitive rivalry between the companies to gain those passionate motorcycle fans.

Bargaining power of buyers: The bargaining power of the buyers is high as the switching cost is low. Due to the strong brand image and high quality of the competitors, the customers can quickly switch between brands where others also provide the same product with minor differences. This has resulted in an increasing competitive rivalry between the companies to gain and retain clients.................

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