What other strategic alternatives are available to Minoli in 2001?
1. What other strategic alternatives are available to Minoli in 2001? Which alternative would you recommend? Why? Remember- You have models that can help you here.
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9-701-132 REV. MARCH 8, 2002________________________________________________________________________________________________________________Professor Giovanni Gavetti prepared this case solely as the basis for class discussion. Professor Andrea Lipparini of the Cattolica University ofMilan contributed to prepare the industry overview. The author wishes to acknowledge Professors Tarun Khanna and Jan Rivkin for commentson an earlier draft. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffectivemanagement.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 bereproduced, 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.GIOVANNI GAVETTIDucatiBy the end of 2000, Federico Minoli had won his battle. Over the past five years, the “turnaroundartist” — as Forbesi magazine dubbed him –- had transformed a company on the verge of bankruptcyinto one of the most profitable motorcycle manufacturers in the world; a mechanical concern into aglobal 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 around60.0 million Euros in 2000; the market share had gone from 5.1% in the sport bikes segment in 1997 to6.7% in 2000 (see Exhibit 1).Despite this success, Minoli was concerned with the future of the company. He knew that Ducaticould 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. Onealternative was to attack Harley Davidson’s niche with a Ducati interpretation of a cruiser. Was thisbroadening of Ducati’s traditional niche the right move to sustain the profitable growth of thecompany?The Market for Motorcycles in 2001The roots of the motorcycle industry date back to 1868, when Louis Perraux installed a steamengine on a rudimentary bicycle. In 1894, the Hildebrand brothers and Alois Wolfmüller producedthe first motorcycle with an internal-combustion, two-cylinder gasoline engine. The motorcyclequickly became a cultural icon. As T. Krens, the curator of “The Art of the Motorcycle” exhibition atthe Guggenheim Museum in New York, observed:The motorcycle is a perfect metaphor for the twentieth century. Invented at the beginningof the industrial age, its evolution tracks the main currents of modernity. The object and itshistory represent the themes of technology, engineering, innovation, design, mobility, speed,rebellion, desire, freedom, love, sex, and death. Park the latest Ducati, Harley, Honda, or BMWon a street corner in any city or town in the world, and a crowd will gatherii.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati2ProductsApproximately 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 forpurely off-road use, and motorcycles designed for both on-road and off-road use (dual purposebikes). These motorcycles were characterized by an upright ergonomics, thickly padded seats, softshocks, and superior sturdiness. The largest players within this segment were all of the Japanesemanufacturers, KTM, BMW, and Huskvarna. Cruisers were big motorcycles with an upright ridingposition. Their design emphasized styling over comfort and speed, and was preferred by manyAmerican riders. Harley-Davidson dominated this segment, while Japanese companies such asHonda, Yamaha, Suzuki, and Kawasaki imitated the traditional Harley style. In 1997, BMWintroduced 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 thissegment, the three largest players were BMW, Harley-Davidson, and Honda. Sport bikes had lighterframes, 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 furtherdisaggregated into four sub-segments: hyper-sport (extreme performance, closely derived from theracing world), super-sport (high performance, good handling and low weight), naked (goodperformance and urban riding) and sport touring (speed and handling, married with comfort forlonger 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 byacquiring Buell Motorcycles in 1998. This segment was Ducati’s reference market.CustomersA wide variety of individuals, with equally different tastes, bought and rode motorcycles (Exhibit4). “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 themotorcycle with a particular lifestyle. “Weekend riders” and “highway lovers” were more interestedin attributes like functionality and comfort, while a large portion of “undecided bikers” preferred amore balanced and versatile bike. Each customer type differed by age, income, education andgender. For instance, the median age for a Harley-Davidson customer in 2000 was 46 (up from 35 in1987), while most of Ducati’s buyers, whose median age had consistently decreased in the last fewyears, ranged between 25 and 35 years old.Women had become an attractive new customer base for motorcycle manufacturers, and wereparticularly important to some manufacturers like Harley and Ducati. Harley’s proportion of femalepurchasers had increased from 2% in 1987 to 9% in 2000. Ducati claimed that women were attractedby the low seat height and weight of its motorcycles and accounted for 8% of sales of some models ofits most popular bike, the Monster.Specialized magazines, such as Motorcycle Consumer News, Rider, and Cycle World, catered to cyclebuyers and educated them about the technical and stylistic characteristics of new products. Theytested and ranked new motorcycles on several criteria, such as style, engine performance, handling,and overall comfort. Although the majority of the motorcycle companies advertised throughspecialized magazines, only some of them—typically the largest manufacturers—also advertisedthrough the non-specialized press. Motorcycle firms also gained media coverage by participating inracing events. In addition, movies brought cachet to motorcycles. Motorcycles had been featuredprominently in Hollywood movies, most notably the Triumph ridden by Marlon Brando in “TheWild One” and the Harleys ridden by Peter Fonda, Dennis Hopper, and Jack Nicholson in “EasyFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-1323Rider.” Department stores like Bloomingdale’s and Harrods sometimes used motorcycles in theirwindow displays.Technology and R&DFrom the first 7 mph wooden Daimler Einspur of 1885 to the 171 mph MV Augusta F4 of 1998,motorcycles’ performance, comfort, reliability, and ease of maintenance had improved vastly. Theseadvances ranged from significant innovations, which offered superior performance anddistinguished companies’ brands, to stylistic features introduced for little cost by combining modifiedcomponents from old models. Kawasaki’s 1984 world’s first, 16-valve, liquid-cooled 4-cylinderengine, Ducati’s Desmodromic valve management system and L-Twin engine, or BMW’s anti-lockbraking system were examples of the former type of innovation. Nevertheless, improvements likepaint, trim, chrome, and exhaust pipe shaping were also necessary to appeal to modern bikers,especially when deference to the company’s styling tradition caused innovation to occurincrementally.Starting in the mid-‘70s, the most important trend had been the progressive introduction ofelectronic components. More recently, advances in materials science led companies to introducecomposites, carbonium, titanium and magnesium to make their bikes lighter and more reliable.Industry experts estimated that in 2001 in-house R&D expenditures ranged between 2% and 5% oftotal revenues.Motorcycles’ technological improvements stemmed from different sources. Manufacturersconcentrated on optimizing engine performance while decreasing motorcycles’ weight, as well asimproving their aerodynamics to lower fuel consumption and toxic emissions. They also pushedsuppliers to improve quality and technology, thus enhancing components like sophisticated “air-assisted” forks, mono-shock rear suspensions, and front and rear disc brakes. Especially since theearly ‘80s, some major companies like Honda, Kawasaki, Yamaha, and Ducati had also used racingcompetitions to develop technical solutions and test materials, and eventually transferred effectivesolutions to their production series. The racing circuit encompassed a number of differentcompetitions, the most important of which were the Grand Prix (with the 125 cc, 250 cc, and 500 cccategories) and the Superbike Championship (with bikes ranging from 750 cc to 1,000 cc). Industryanalysts agreed that a recent trend that can be generalized to the entire industry had been a strongerintegration between R&D and marketing, which caused a larger number of technical improvementsor innovations to derive from market surveys or customer feedback.The pace of technological innovation was aided by the advent of CAD and CNC technologies,which greatly helped manufacturers’ efforts in styling, prototyping and assessing product feasibility.ManufacturingMost motorcycle companies invested heavily to automate production lines and worked with partssuppliers to improve quality and delivery. Only a few firms, such as Triumph, increased their levelof vertical integration. Triumph in 2000 outsourced around 58% of its production. Many outsourceda considerable portion of their inputs. As a consequence, most of them had a highly flexible,streamlined production structure. Outsourcing minimized fixed asset investment, but the quest forquality, reduced costs, and responsiveness to market fluctuations forced final assemblers to createstrong commitment at the level of suppliers. For instance, Harley established a supplier advisorycouncil (SAC), made up of 16 suppliers, to expose supplier executives to the best practices of othersuppliers in the Harley-Davidson network.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati4With the increasing reliance on third-party suppliers, the manufacturing process had essentiallybecome an assembly line where motorcycle components were assembled. Motorcyles werecomposed of four major parts: the engine, whose main parts were the crank case and the cylinderheads, the frame, the fairing and the front forks. Other key components included the wheels, thebraking system, the handlebars, the fuel tank, the headlights and the control instruments. Themajority of the components were first tested, then assembled together as “sub-groups”, and finallymounted on the vehicle, while others (such as the exhaust system) were individually fitted to thebike.Leading motorcycle firms throughout the world also implemented Japanese manufacturingtechniques, including Just-in-Time and Materials as Needed production in order to respond morereadily to market fluctuations, optimize production levels, and improve quality. To make suchprograms work, these firms solicited the commitment and participation of all employees. AtTriumph, for instance, yellow sheets stood out on bulletin boards everywhere, exhorting workers towrite down ideas and suggestions that would increase efficiency and quality. They also changed jobdesign and human resource management practices at the plant level, and emphasized group effort tosolve problems.DistributionAll the major motorcycle companies had some presence in the three major markets: United States,Europe, and Japan. Their typical distribution systems comprised two types of agents: wholesaledistributors and retailers. They used wholesale distributors to build and manage the network of retaildealers in a geographic area. Depending on the strategic importance of this area, they usedindependent, partly, or totally owned wholesale distributors (e.g., subsidiaries). In most cases, theirretail networks were composed of multi-franchise dealers—dealers selling motorcycles of multiplebrands—whose role was to sell the bike and provide adequate technical assistance.The size of the network, and therefore the degree of penetration into the market, were largely afunction of the company’s strategy. Large Japanese mass-producers such as Honda and Yamahatended to maximize “reach” and penetration, while companies such as Harley, BMW, and Ducatiemphasized the quality of the dealer and, where possible, used single-franchise agreements. In 2001the industry was polarized around these two models. Firms using the latter strategy appeared toview their stores as a way to control prices and brand positioning by allowing direct communicationwith customers. The most extreme case of this approach was Harley-Davidson, which had single-franchise agreements with the majority of its dealers (a total of approximately 600 dealers in theUnited States) and had also launched the “Genuine Deal” campaign to build dealership loyalty.CompetitorsOver the last century, the number of motorcycle manufacturers had decreased dramatically. As of2001, there was one major American manufacturer, four Japanese manufacturers, and a handful ofEuropean firms (see Exhibit 5).Harley-DavidsonHarley-Davidson was the major American motorcycle manufacturer, anddominated the U.S. heavyweight (>650cc) motorcycle market. In 2000, it achieved its fifteenthconsecutive year of record revenue and net income, increasing the former by 18.5% to $2.2 billion andthe latter by 30.1% from 1999. In 2000, Harley produced 204,500 motorcycles, a 15.5% increase over1999, and Buell sold 10,200, with 2,400 additional unit shipments. Its Parts and Accessories andGeneral Merchandise businesses made strong gains in 2000, with increases in revenues of 23.5% andFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-132514%, respectively, over 1999. Relative to the other major motorcycle producers, Harley had a moremodest global presence. However, despite its strong focus on the American market (in 2000, 78% ofHarleys were sold in the United States), it recently increased its presence in Europe by fine-tuningsome bikes to fit European tastes (e.g., taking off chrome and accessories on popular Europeanmodels such as the Night Train). Since going public in 1986, its stockholders had realized acompound annual growth rate of over 40%.Industry experts considered Harley-Davidson the prototypical example of a “lifestyle” company.Particularly in the United States, Harley was a social and cultural phenomenon, representing thehistory of motorcycling – Harley was founded in 1903 – and symbolizing a set of values – freedomand rebelliousness above all – that were key attributes of the American biker culture. Harley’s brandwas among the strongest in the industry, and the Harley Owners Group (H.O.G.), founded in 1983,was the largest club of motorcycles owners in the world, with 640,000 members. Harley-Davidsoncompeted in the touring and custom market segments, and with one model — the 883 — in the Nakedsub-segment of the sport market. Buell competed in the Sport segment. In 2001 Harley-Davidsonoffered 23 models in four major families with U.S. prices ranging between $5,595 to $20,360. The U.S.average price was $14,350.HondaWith 5.4 million bikes produced (including scooters and small displacement bikes),Honda was the world largest manufacturer of motorcycles. The company shared technology,engineering capabilities, marketing and distribution know-how with its automobile division. TheHonda CB750 Four, first introduced in 1969, started the “superbike” boom and represented a majorshift in the motorcycle industry. Like the other Japanese manufacturers, Honda competed in all ofthe segments of the motorcycle industry, and had a strong reputation for reliability and technicalexcellence. With its capabilities in four-stroke technology, Honda also led the motorcycle industry inproducing motorcycles and scooters utilizing low emission, fuel-efficient four-stroke engine designs.Honda entered the U.S. market in 1959. In 2001 Honda offered 23 models of >500 cc motorcycles.U.S. prices ranged between $4,999 and $18,999. The U.S. average price was $9,300.BMWBayerische Motoren Werke (BMW) was one of Europe’s top automakers. Its automobilesaccounted for nearly 60% of its sales. Its motorcycle division celebrated its seventy-fifth anniversaryin 1998. BMW was the top European competitor in the United States. In 2000, with a network of 160motorcycle retailers, the company posted record sales in the North American market of almost 12,000units, an increase of nearly 20% over year-end sales figures for 1999. BMW bikes pioneered technicalinnovations like advanced suspension systems, fuel injection, and anti-lock brakes, thus giving thefirm a reputation for exceptional quality, safety, reliability, and comfort. BMW entered the U.S.market in 1975. In 2001 BMW production was specialized in touring bikes accounting for a total of 11models. The company also offered a cruiser and a performance bike. U.S. prices ranged from $8,100to $19,600. The U.S. average price was $14,500.TriumphIn 2001 Triumph produced approximately 30,000 motorcycles. The company startedproducing motorcycles in 1902. It was one of the world’s most notable brands in the 1950’s, thanks inpart to its appearance in Marlon Brando’s movie “The Wild One.” Although forced to liquidate in1983 due to financial problems, Triumph was turned around in 1991. By applying Japaneseproduction techniques, Triumph had recently gained a reputation for making virtually unbreakablebikes. Triumph’s customers were largely high-income middle-aged professionals. Its most popularmodel was a naked, the Thunderbird, which was similar to what it marketed in the 1960s. In 2001 itcompeted in the touring, sports and off-road/dual purpose segments for a total of 9 models with U.S.prices ranging between $7,000 and $12,000. The U.S. average price was $9,500.Other Japanese manufacturersIn 2001 the other three Japanese competitors held a marketshare of 57% of Ducati relevant market. Yamaha, Suzuki, and Kawasaki entered the U.S. motorcycleFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati6market in the 1970s by selling small motorcycles. They then moved into the heavyweight segment. InEurope, Suzuki had a larger market share than Honda; in Asia, Kawasaki trailed only Harley andHonda. These companies competed on technological innovation and price, but were not as strong inthe cruiser market, where Harley had a stronger appeal.Best known for its motorcycles, which accounted for almost half of its sales, Yamaha Motor alsomade water vehicles, all-terrain vehicles, leisure and fishing boats, snowmobiles, and golf carts. Itsold about 85% of its motorcycles outside Japan. In 2001 the average U.S. price of Yamahamotorcycles was $10,200. Suzuki was Japan’s #1 minicar producer. Its non-vehicle productsincluded generators, outboard marine engines, and prefabricated housing. It sold about half of itscars and nearly 75% of its motorcycles outside Japan, and partnered with General Motors, whichowned 10% of Suzuki, and planned to double its stake. Suzuki sold motorcycles in the United Statessince 1963 and had a reputation for reliability. It offered bikes for road riding, motorcross, andeverything in between. In 2001 the average U.S. price for Suzuki motorcycles was $7,600. KawasakiHeavy Industries had many divisions, from industrial equipment, transportation, aerospace, andconsumer products. Its consumer products (23% of sales) ranged from motorcycles to Jet Skiwatercraft and all-terrain vehicles. After introducing 11 new models in 2000, it introduced four newmodels in 2001 and made significant changes to key models in its Vulcan™ cruiser line—which wasnamed “Cruiser of the Year” by Motorcycle Tour & Cruiser magazine. In 2001 the U.S. average pricefor Kawasakis was $8,450.Honda and Yamaha recently agreed to jointly transport their motorcycles and spare parts with thehope to save 30% on their delivery costs. Kawasaki and Suzuki planned to enter a similar allianceshortly.The Turnaround ProgramDucati was founded on July 4, 1926, when Antonio Cavalieri Ducati and his three sons establishedone of the first Italian operations of radios and electrical components. In 1935 Ducati startedproduction at a new factory in Borgo Panigale, just outside Bologna, at the heart of what later becamethe most extensive Italian mechanical district. Not until the post-war period did Ducati’s firstmotorcycle appear. The bike, “il Cucciolo,” soon became a blockbuster. The 1950s witnessed theintroduction of a series of increasingly sophisticated and powerful bikes, and particularly theappearance of Ducati’s technical signature: the Desmodromic valve distribution system. Thisinnovation, developed by the celebrated Ducati engineer Fabio Taglioni, was a sophisticatedmechanical system allowing the engine to achieve more revolutions per minute and greater “usable”power. The Desmo system could still be found in 2001 on every motorcycle produced, representingthe soul of all Ducatis: the deep intoxicating noise made by the desmo engine was music to the ears ofpurists.Thanks to their technical superiority, Ducati motorcycles rapidly achieved success in theinternational racing circuit. This success fueled growth throughout the sixties and the seventies, andthe development of a strong reputation in the performance segment of the motorcycle industry. In1972, a Ducati 750 Super Sport prototype won a dramatic victory in the Imola 200cc race. Thismotorcycle, which was configured with an L-shape desmo engine (two cylinders mounted at a 90-degree angle) and a Formula Uno-derived tubular trestle frame, inspired the production of a new lineof larger displacement motorcycles that represented the stylistic and technical foundation of modernDucatis.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-1327Despite the innovativeness and technical excellence of its product lines, Ducati’s fortunes declinedsharply in the early 1980’s, primarily due to the decision of its major shareholder at that time (IRI, aState holding company) to refocus the company on products other than motorcycles. In 1985 IRIdecided to sell its motorcycle assets, and Cagiva, an Italian manufacturing conglomerate andproducer of small displacement motorcycles, acquired Ducati. Under Cagiva, Ducati suddenlyrecovered its reputation for on and off-track excellence. An impressive series of victories in theWorld Superbike Championship where, for the first time, a Ducati two-cylinder engine defeated afour-cylinder engine produced by Japanese competitors, was paralleled by the introduction of a newseries of stunningly beautiful street performance bikes. However, towards the mid nineties, liquidityproblems at the larger Cagiva group deprived Ducati of the necessary working capital funding,which, in turn, delayed its payment terms to some key suppliers, resulting in significant productiondelays.Ducati was one step from going bankrupt when, in September 1996, a majority stake in thecompany was acquired by the Texas Pacific Group, an American private equity firm. Abel Halpern,HBS ’93 and TPG partner was the driving force behind the deal. He had a passion for high-end,“nichey” businesses, and was driven by the firm belief that Ducati had enormous potential that waslargely unexploited due to poor management. For this reason, he needed a first-class, highlycommitted management team, and TPG appointed Halpern’s friend and former colleague at Bain &Co., Federico Minoli, as CEO of Ducati.PrologueFederico Minoli began his career at Procter & Gamble, Italy, in 1974. It was a few years later atMcKinsey that he became involved with, and fascinated by, problems of strategic change. He thenmoved to one of McKinsey’s clients, Benetton, as CEO of the U.S. subsidiary, which he turned aroundin less than four years. Finally, before his experience in Ducati, he joined Bain & Co. in Boston, wherehe specialized in “turnaround management”:I was a University student between ’68 and ’72. It was a “hot” period in Italy. I rememberspending full nights discussing the meaning of revolution, of Marxism . . . we were all littlerevolutionaries, we wanted to change the world, everything. Well, while these ideologies arewell behind me, I can certainly say that this disposition towards change, the idea thateverything should be continuously re-discussed is still the way I look at things. Any decisionto change, even if well planned and analyzed, always leads to a new territory that needs to bediscovered and charted. That’s where I draw my professional satisfaction. I like the process ofchange, not success per se. I accepted [the chance] to run Ducati because I saw a company that,beyond its liquidity crisis, needed to be radically changed in order to fully exploit its enormouspotential.iiiMinoli moved to Ducati’s Bologna headquarters in summer 1996 with two goals in mind: double-digit growth, and equaling Harley-Davidson’s profit level, which was by far the highest in theindustry, with an EBITDA margin of about 20%. In a few weeks, Minoli appointed a completely newtop management team. He looked not only for “talent,” but also for talented managers who couldbecome passionate about Ducati. None of the new hires had previous experience with the motorcycleindustry. At the very beginning of Minoli’s tenure, Ducati was struggling to develop a clear strategicdirection, functional divisions were largely absent, and the top management team operated in whatMinoli terms “a structured chaos.” He believed the lack of rigid internal boundaries, especially ifcoupled with clear leadership and managers who identified strongly with Ducati, would stimulatecreative decision-making.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati8When Minoli arrived at Ducati, he found it had three things. First, Ducati had a good product.Although they were regarded as less efficient and reliable than Japanese bikes were, Ducatis wereunique, beautiful performance motorcycles. Second, Ducati had a group of top-notch engineers—both in the R&D and in the racing divisions—whose main goal was to continue defeating theJapanese in the Superbike Championship (see Exhibit 6). These people were the real soul of Ducati.According to Minoli, these were the people who ultimately ran the company:The company was driven by its excellent engineers and designers. These people were allpurists, “knee down” riders, fanatics of the motorcycle: speed, performance and innovationwere the attributes defining their world. They had an extreme notion of what a Ducati andtherefore a Ducati rider, a “Duke,” should be. When I came here for the first time, I left withthe clear impression that it was almost by chance and not by strategic choice that Ducati had aproduct that the public loved. The market and market research were unknown to them . . . thisplace had an incredibly strong engineering culture with a real passion for races . . . and don’tforget that we are in the middle of Emilia, the region of Ferrari, Lamborghini, Maserati andmany others, a place where you can almost breathe the passion for races and mechanics.ivThird, Minoli found a brand with strong potential. In major European markets, Ducati’s brandloyalty ranked among the highest in the motorcycle industry, with about 55% of its small customerbase expressing repeat purchase intentions.Strategizing at DucatiWith these beliefs about Ducati’s strengths in mind, the challenge for Minoli and his team was todefine a turnaround program that would support the profitability goals he had set. With aproduction of 12,117 motorcycles in 1996, Ducati had a worldwide market share of 4% in the sportsub-segment of the >500cc Road Market. The objective was to bring the market share to 10%,although Ducati personnel were polarized around two alternatives. One involved continuity withthe company’s culture and dominant thinking: invest heavily in the product and rationalizeproduction processes. Many of Ducati’s engineers were convinced that a totally new engine—perhaps a standard non-desmodromic engine—was important to stay ahead of competitors, inparticular Japanese manufacturers. Others, especially engineers in the racing division, werefascinated by the idea of entering the Grand Prix Championship, the prestigious competition fromwhich Ducati was still absent. But Minoli disagreed. Despite acknowledging the possibility ofefficiency improvements, he felt that the right strategy for Ducati was to develop a global brand thatcould appeal not only to “extreme” riders, but also to a broader spectrum of customers. He believedthat large segments of buyers were not attracted by the intrinsic attributes of the motorcycle, but bywhat the motorcycle evokes and represents. As Minoli put it:Soon after my arrival I had 20 billion lire to invest. How to invest it? It was a difficultperiod. Our engineers were frustrated, and our workers were operating in difficult conditions.The roof of the factory was broken. It rained into the factory . . . and here we are in Bologna,the Italian communist stronghold . . . you can imagine the pressures from the unions. Well, inthis situation, instead of fixing the roof, I decided to build the museum. It was a difficultdecision, but it was an important one. It sent the right signal to the company. It symbolizedthe radicalness of the ideological change I was proposing: that Ducati is not only about beatingJapanese bikes, that we have a powerful brand to preserve and develop, and ultimately thatDucati is not, or not only, a motorcycle company. We sell something more: a dream, passion, apiece of history, and the motorcycle is at its core. In one word, we were moving from themechanical to entertainment.vFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-1329The core of Ducati’s branding strategy was soon crystallized into what was dubbed “The World ofDucati” (see Exhibit 7). The motorcycle was the center of this system. The satellites representedactivities, some of them totally new, that were held together by the same goal of creating theintangible attributes that, according to Minoli, would have made Ducati something more than aunique motorcycle.ProductsIn 1996 Ducati offered products in three categories of the sport segment of the large displacement(>500cc) motorcycle industry: hyper-sport, super-sport and naked (see Exhibits 8 and 9). One yearlater, it entered for the first time the Sport-Touring segment, a category with an older customer base.While 62% of the customers in the Hyper-sport category were between 18 and 30 years old, 73% ofthe customers in the Sport-touring category were over 30 (see Exhibit 10). Since 1996 Ducati had alsoconsiderably widened the offering within each family. Typically, the introduction of new entry-levelmodels (e.g. Monster Dark) was coupled to the introduction of new high-end models (e.g. MonsterCromo). One of the first challenges that Minoli and his team confronted was identifying the coreattributes underlying the identity and uniqueness of Ducati motorcycles—elements to be universallyassociated with the brand. Five distinctive traits emerged, and all of the company’s currentproduction was characterized by these features: Desmodromic distribution system, L-twin engine,tubular trestle frame, Italian style, and Ducati’s unique sound (which the company was attempting topatent). Thanks to a rigorous quality control system, since 1996 Ducatis also improved reliability andoverall quality. Ducati motorcycles had longer lifespan than typical competitors’ machines. Forinstance, the lifespan of the engine was typically 10 years, and the frame at least 5 years.In 1997 Minoli decided to enter the business of accessories and apparel by acquiring a controllingstake in Gio.Ca.Moto, a company that was already producing a line of accessories for Ducati.Hyper-SportThese high-tech motorcycles were closely derived from the motorcycles competingin the World Superbike Championship, and were fitted with a performing 4-valve engine. Thepredecessor of the current production—the 916—won four “motorcycle of the year” awards fromMotorcycle Consumer News (MCN), the leading British specialized magazine. Utan Guilfoyle, one ofthe curators of the “Art of Motorcycles” Guggenheim Exhibition commented:The ’90s, in a way, has been Ducati’s decade. Alongside the Monster, they produced the916, which brought the chaotic ‘80s racetrack aesthetic to a sublime expression. This designwas born out of a marriage between the technical brilliance of Ducati’s race-bike designer, andan instinctive understanding of how a motorcycle could appeal to the rider now ten yearsolder than the young buck who first threw his leg over an ‘80s Japanese speedster.Aspirational and inspired, the 916 is the motorcycle for the would-be Ferrari driver: Italian,fast, and, of course, redvi.In 2001, the company offered two basic models—the 996 and the 748—each produced in threedifferent versions. The 996S, Ducati’s flagship motorcycle, sold for $21,895, allowing the company tocharge the premium shown in Exhibit 11, and contributed for 43% to the total revenue generated bymotorcycles. The key competitors were Honda, Yamaha and Suzuki.Super-SportThe company launched its first super-sport (SS) bike in 1973. For years, the SS hadbeen the most popular Ducati on the road. In 1998 Ducati launched a radically new model,characterized by a futuristic design and good handling. These motorcycles were fitted with Ducati’straditional 2-valve engine, which, while not guaranteeing the same performance as the 4-valveengine, was popular for its smooth power delivery. The SS competed with all of the Japanesemanufacturers, Triumph, and finally BMW, which recently entered the super-sport segment.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati10NakedThe Monster, Ducati’s naked motorcycle, recently became its most popular bike. On theMonster, Utan Guilfoyle commented:Ducati’s designer Galluzzi got the idea to recreate these naked grunge guns in a productionmotorcycle, a notion that flew in the face of every contemporary motorcycle design rubric fromTokyo to Munich . . . the Monster is a brilliant piece of pop-culture interpretation, a bike for thestreets, rather than the fantasy racetrack that had inspired a previous generation ofmotorcycles.viiSince 1996, the number of models in this family had continuously increased, thanks to mainlyexomorphic modifications. The monster was now offered in 9 different models, ranging from $6,150to $13,000. The key competitors were BMW, Triumph and Honda.Sport-TouringThese motorcycles offered a more comfortable riding position than the otherDucatis. After the launch of the ST2 in 1997, which was fitted with the 2-valve engine, a newmodel—the more performing ST4—was introduced in 1998. Different from the other Ducati’sfamilies, the number of Sport-Touring models had not increased since 1998 (with the exception of thelaunch this year of the ST4S, a more performing version of the ST4, fitted with the championship-winning 996 engine). Both BMW and Triumph competed in this segment, as well as all of theJapanese manufacturers.Limited editionsIn 1999 Ducati launched the MH 900 Evolution, inspired by the 1974 DucatiMH 900. Created by Ducati’s famous designer Pierre Terblanche, the MH 900 Evolution, of whichonly 2,000 were produced, was sold through Ducati’s website for EURO 15,000. The 996R, anotherlimited edition of 500, sold at the worldwide price of Euro 26,000.Spare parts, accessories and apparelDucati recently outsourced both production andlogistics of spare parts to two companies operating in the Emilian mechanical district. Greateravailability of parts (the catalogue went from 10,000 items in 1997 to 15,000 items in 2000), improveddistribution, and revised pricing policy resulted in a considerable increase in the contribution ofspare parts to total revenues.The accessories and apparel business was comprised of three categories of products. First,custom-made bike components to increase the performance and individuality of the motorcycle.Second, the company offered high-quality Ducati-branded riding gear (racing suites, jackets, helmets,gloves etc.). Ducati had a joint-venture with Dainese— a worldwide leader in the production oftechnical gear for sport riders—to develop and manufacture riding equipment reflecting theexclusivity and racing character of the company. The third line of products included t-shirts, capsand memorabilia. The accessories and apparel business had grown consistently since Ducati enteredit. Among motorcycle manufacturers, only Harley had a higher incidence of accessories and apparel(12% of revenue), about doubling what Ducati derived from these products.ActivitiesProductionAlthough in 1996 almost 80% of production activities were already outsourced,since then Ducati had been implementing an aggressive outsourcing policy, maintaining in houseonly R&D, design, quality control, and the machining of two key strategic components: crank casesand cylinder heads (Exhibit 12 displays how the cost structure of Ducati had changed over time). Asof 2001, outsourcing had grown to approximately 87%, and the company planned to bring it to 90%,probably the highest in the industry (industry experts estimated that the average outsourcing levelfor the industry was lower than Ducati’s). The majority of Ducati’s suppliers belonged to the EmilianFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13211district, which was populated by a dense web of small and medium specialized mechanicalmanufacturers (the parts and components acquired by non-Italian suppliers accounted for around15% of the total value acquired by third parties). This industrial district was comprised of a numberof smaller clusters of firms, each of which specialized in particular classes of mechanical products(agro-mechanical, automobile/motorcycle components, machine tools etc.). The number of firmsgravitating around the motorcycle industry (scooters and small displacement motorcycles as well asbigger motorcycles) in the proximity of Bologna had recently been estimated at around 2,400. Ducatiwas collaborating with a number of these firms (Ferrari, Maserati, Minarelli-Yamaha, LombardiniMotori etc.) to form the “Engine Technology District,” a series of joint activities such as R&D,purchasing, suppliers’ quality control, employee training etc. Despite its relatively low volumes, in2001 Ducati was considered one of the most efficient manufacturers in the industry also thanks to thestandardization of its products. In 1999, it produced all of its models using only two crank cases andthree cylinder heads (see Exhibit 13). The number of motorcycles produced per worker increasedfrom 76 in 1997 to 87 in 2000.Ducati also radically rationalized its network of suppliers through the adoption of more strictselection procedures and careful quality control procedures. Since 1996, the total number of suppliershad decreased from 200 to 130. The three most important suppliers were: Brembo (for brakes, wheelsrims and clutch), Magneti Marelli (for control units and fuel-injection systems), and the JapaneseShowa Corporation (for forks and shock absorbers). With the exception of a small number of long-term supply contracts for components, Ducati had only short-term contracts with its suppliers. Ittypically identified at least two sources of supply for each component, and switched to the alternativesupplier as the need arose. These arrangements ultimately increased the quality and reliability ofDucatis, which in 1996 were known for their mediocre reliability and high maintenance costs.Finally, the company moved towards a platform approach to production: the motorcycle wasdivided into a relatively small number of components, which were in turn made of sub-components.One key supplier was responsible for the provision of a component, and managing the suppliers ofthe sub-components. Ducati already implemented platform production processes for a large numberof components, and already identified other platform projects that it expected to implement in thenext two years.DistributionIn the past, Ducati distributed its motorcycles directly through multi-franchiseretail dealers in Italy, and through a series of independent distributors covering specific geographicareas in the rest of the world, with the only exception of the United States, where the companyowned a subsidiary. Each distributor was responsible for managing its network of retail dealers, themajority of which were multi-brand.In 1997 Ducati started a new distribution strategy, which was designed to unfold in three phases.The first phase consisted of taking control of distribution and marketing in strategic markets byestablishing totally owned sales and marketing subsidiaries. In the last four years, Ducati establishedsubsidiaries in Japan, France, Germany, the United Kingdom and Holland. The second phase wascentered around the re-organization of the network of dealers. Different from the majority of itscompetitors (with the exception of Harley), Ducati did not aim to increase geographical reach, butrather to improve the average quality of the dealers. This meant competent sales forces, goodtechnical assistance, and an adequate physical space where Ducati motorcycles and apparel could bedisplayed. In this vein, the company greatly reduced the overall number of retailers throughout theworld. For instance, in Italy the number of dealers decreased from 165 in 1996 to 65 in 2000. As aconsequence, annual registrations per dealer went from 14 to around 150.The third phase consisted of the creation of a chain of “Ducati Stores”—mono-franchise dealers inselect markets and cities around the world. These stores not only offered superior technical andFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati12service support, but also a unique retail environment emphasizing the distinctive traits of Ducati’sbrand: while a “History Wall” displayed images of Ducati’s racing heritage, an “Engineering Wall”showed a large scale engineering drawing of the 916, Ducati’s symbol. In addition to motorcycles,these stores presented merchandised areas dedicated to “Ducati Performance” accessories andapparel. In Italy, which represented the benchmark for the distribution strategy (see Exhibit 14), thecompany had 36 Ducati Stores. Outside Italy, Ducati Stores were launched in a number of majorcities, from Manhattan to London, from Vienna to Sydney, and so on.Product development and R&DIn the last few years the company invested heavily, especiallyin new design technologies, product development and human capital. R&D investments went from3.2 million Euro in 1997 to 12.9 million Euro in 2000. Excluding research activities carried out in theracing division, in 2000 the company spent around 3.7% of its revenues in R&D activities. Althoughin the past Ducati employed an external design house (the Cagiva Research Center), it had recentlyestablished an internal design division (Ducati Design Center). As a consequence of these efforts, thecompany greatly reduced the “time to market” for new product launches. In 1998, Ducati developedthe new 900SSie in 15 months compared to over 36 months for previous model development. In 2001,Ducati’s engineering team was reputed as one of the most expert and skilled in the industry. Theproduct development and R&D department operated in close contact not only with the racingdivision, but also with the marketing department. Market research provided a fundamental input toboth design and technological innovation.With the exception of design activities, since 1996 the company’s product development and R&Dactivities had evolved from being largely internal to a more “open” structure, where Ducaticoordinated a number of external sources of technical skills and innovations, typically located in themechanical district of Bologna. For example, the company started cooperating with TWR, a majorFormula One engine development center, and formed a joint venture named HPE (High PerformanceEngineering) with some local producers like Piero Ferrari of the Ferrari car company to developadvanced engine technology.The World of DucatiIn addition to the “Ducati Stores,” the “World of Ducati” comprised a series of other activities thathad been consistently developing in the past three years.RacingIn contrast to competitors’ teams, Ducati recently adopted what Minoli dubbed an“open paddock” policy: members of Ducati Clubs could “live” the racing event in close contact withthe team, participating in dinners or social events during the days preceding the competition. In arecent study conducted for the U.S. market, the presence of Ducati in the Superbike competitions wasindicated as the most important purchase factor by 27% of the people interviewed (all current Ducaticustomers). The second most important factor was magazine tests (25%). Additionally, the sportorientation of the brand and its link to competition (together with Ducati’s Italian style) ranked as themost prominent features of the brand in a recent large-scale survey conducted through the companywebsite (see Exhibit 15). The brand loyalty of Ducati’s customers strongly improved since 1996 (seeExhibit 16).In the last few years, revenues from sponsors and the sale of race engines and bikes greatlyincreased. In 1996, the racing division spent approximately 3.9 million Euro, with almost no revenue.In 2000 it spent around Euro 10.2 million, but revenues increased to Euro 7.9 million.The racing team was also a sophisticated R&D laboratory: new features designed specifically forimproving performance on the racetrack were continuously created and tested. Some of them wereFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13213later adapted and introduced in series road bikes, especially (but not only) in the Hyper-sport family.In fact, the racing team operated in close collaboration with Ducati’s R&D and product developmentunits.AdvertisingIn contrast to many other motorcycle companies, Ducati advertised its productsonly through specialized magazines. In 1998 it launched its first global advertising campaign entitled“Ducati/People.” The campaign featured only Ducati workers and their motorcycles in and aroundBologna in black and white retro’ pictures, and emphasized some central values of the brand: theItalian style, the history of the company, the young age of the riders and their sporty attitude.Ducati also engaged in a number of co-marketing initiatives with different major internationalbrands: Neiman Marcus offered a limited edition 748L in its premiere men’s catalogue in 1997; DKNYprovided apparel to the 1999 Ducati racing team; Donna Karan designed a collection of leathergarments with the Ducati logo; Harrods of London featured Ducati motorcycles in its windows; thecover page of Sotheby’s first motorcycle auction featured a Ducati MH 900 E, etc.MuseumIn addition to the symbolic role that it played in the context of Ducati’s strategictransition, the museum, which was located in Ducati’s headquarters, also attracted 10,000 visitorseach year. The museum was opened in 1998, and celebrated the history of the company, its technicalachievements, and in particular its racing tradition. It was designed as a circular race track, with agigantic helmet in the middle, and, in addition to detailed technical descriptions of each bike, itdisplayed the majority of the race track models that Ducati had produced since 1948. Visitors werealso allowed to tour the company’s production facilities, which were recently redesigned as a littletheme park to enhance the experience of the visiting fans.Ducati Owners ClubsDucati estimated the presence of more than 400 Ducati Clubs around theworld, typically started by individual owners. Since 1996, the company had started a series ofinitiatives to establish a direct link with the Clubs. For instance, dealers around the world wereencouraged and supported to coordinate enthusiasts’ activities through their stores (e.g., ridingcourses, among which a riding school for women, social events etc.).EventsIn 1998 the company organized the first World Ducati Weekend in Bologna, which hada great public success and was attended by approximately 10,000 Ducati enthusiasts from around theworld. The same event was repeated in 2000 attracting 23,000 fans. In 2001 Ducati was organizingthe re-edition for vintage motorcycles of the “Motogiro d’Italia,” one of the oldest and mostcelebrated motorcycle competitions. The “Motogiro d’Italia” was a race for bikes through the cities ofItaly, and, despite its great popularity, it was suspended in 1957 due to the severity of the accidents itcaused.Ducati.comIt was midnight on January 1, 2000, when Ducati sold its first motorbike—the futuristic limitededition MH900 Evolution—exclusively over the web. Within 31 minutes an entire year’s production(500 units) was sold at a worldwide price of 15,000 Euros. Ten days later, the number sold had risento 2,000 units, or a further year’s production. A similar “experiment” was repeated recently with thesale online of the 996R limited edition.Despite the level of interest this operation generated, e-business was not the key priority forDucati.com. With more than 500,000 monthly hits and 300,000 emails received per year, the Internetwas for the company a powerful interface with its customers. Cristiano Silei, Minoli’s right arm inthe turnaround program, and the mind behind Ducati.com commented:For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati14What happened with the MH 900 E was very important. It showed us the power of theInternet. But you should understand one thing. If it is true that we do a lot of e-commerce—apart from limited edition motorcycles, we sell parts and accessories . . . we also sell wreckedparts of racing bikes . . . yes, some enthusiasts are willing to pay money, lots of money for anengine that broke during a race—it is also true that this is not what Ducati.com is all about.The Internet is first of all a great instrument to communicate to our virtual visitors our racingand Italian identity. Consider that we estimate that only 43% of our hits come from currentcustomers. But the Internet is also an incredible mechanism to understand their needs, theirpsychology. Apart from the usual chatrooms, email etcetera, we regularly conduct on-linepolls, market surveys. The response rate is always impressive. And we take them into accountfor our decisions. Finally, the Internet creates a community. These people talk to each other,they feel part of something. . . .viiiDecisionsAt the end of April, 2001, Ducati had a market share of almost 7% of its relevant market, andindustry analysts agreed that the company had excellent growth prospects for a few years to come.The goal of 10% market share was in sight. But Minoli was not satisfied:I consider the turnaround practically over. The company has changed in all of the rightareas. We are approaching Harley’s profitability, and, while I think we can reach it, we shouldfind new sources of business to continue our profitable double-digit growth in the nextdecade.ixMinoli was, among other alternatives, considering entering Harley’s niche, the cruiser market.With approximately 400,000 units sold in 2000, this was an extremely large segment in the large-displacement motorcycle industry. To develop a cruiser Ducati would need to make additionalinvestments for Euro 17 million, and additional costs of approximately Euro 26 million. Minoli hadin mind a Ducati interpretation of the cruiser: a cruiser fitted with Ducati’s desmodromic L-twinengine, and also a motorcycle that could strike a frontal attack, at least in Europe, to the entireHarley-Davidson’s line of cruisers. He therefore envisioned a line of bikes to be priced at Harley’slevels: from $10,000 to approximately $20,000.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13215Exhibit 1Select Financial Data for Ducati (Euro millions): 1997-200019971998199920002001EaTotal revenues195.63240.05294.5379.5422.1Gross profit74.5791.71118150.5165.9Other operating income0.531.184.14.97.0SG&A41.752.471.395.4103.0EBITDA33.446.4950.860.0369.9D&A16.6719.1724.429.632.8EBIT16.3727.3226.430.437.0Net income2.7(1.24)8.910.513.4Market shareb5.16.26.06.77.0Source:Company dataaAnalysts’ estimatesbDucati Relevant MarketExhibit 2The Worldwide Market for Motorcycles: New Registrations 1996-2000*-0200,000400,000600,000800,0001,000,0001,200,0001,400,0001,600,0001,800,00019961997199819992000Ducati Rel. MarketTouringCustomsOff Road/Dual PurposeSmall Motorcycles 935,3371,111,2701,261,2631,463,2391,566,21529.7%3.6%25.5%8.3% 33.0% 33.9%33.9%33.8%32.7%8.4%6..8%6.9%7.9%24.5%24.3%22.8%22.9%30.3%32.0% 32.7%33.2%2.9%3.0%3.8%3.4%Source: Company estimates* The Small Motorcycles segment includes motorcycles with an engine displacement < 500 cc, and excludes scooters.For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati16Exhibit 3Market Shares of Select Competitors: Ducati Relevant Market (Sport Niche)WorldEurope1996199719981999200019961997199819992000Ducati3.9 5.16.2 66.74.35.26.56.47.0Honda23.324.723.521.421.523.825.824.221.522.7Kawasaki16.3 1515.715.813.415.015.015.315.812.3Suzuki23.824.422.122.123.824.524.121.321.923.5Yamaha18.5 17 1921.220.621.318.718.421.822.0BMW5.14.84.74.63.55.85.44.84.83.6Harley-Davidson5.84.83.83.33.31.51.21.21.01.0Buell00.21.21.31.600.30.50.60.5Source:Company dataExhibit 4A Map of the MarketLifestylePerformanceFunctionComfortKnee down ridersFast ridersHotrodders/Urban ridersEasy ridersWeekend cruisersHighway loversSource:Case-writer elaboration of company dataFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13217Exhibit 5Presence in Different Market SegmentsOff Road/Dual PurposeCruiserTouringSportHyper-SportSuper-SportSport-TouringNakedDucatiHDBMWTriumphHondaKawasakiSuzukiYamahaSource: Case-writer elaborationExhibit 6World Superbike Championship—1990-2000 Hall of FameWinner: RiderWinner: Manufacturer1990DucatiHonda1991DucatiDucati1992DucatiDucati1993KawasakiDucati1994DucatiDucati1995DucatiDucati1996DucatiDucati1997HondaHonda1998DucatiDucati1999DucatiDucati2000HondaDucatiSource:Case-writer elaborationFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati18Exhibit 7The World of DucatiADVERTISINGEVENTSD.O.C.(DUCATI OWNERS CLUB)MOTORCYCLESACCESSORIESAPPARELRACINGSTORESMUSEUM &UNIVERSITYSource:Company documentExhibit 8Breakdown of Motorcycle Sales (in units sold)Units19961997199819992000Hyper-sport4,7808,2638,2999,20712,289Super-sport2,9004,1605,1394,2544,058Touring03,5172,6492,8933,081Naked4,9598,27111,99416,77019,659Total12,63924,21128,01133,12439,087Source:Company dataFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132 -19-Exhibit 9The Product LineccHPNumber ofModelsU.S. PriceCompetitorsHyper-Sport748-99697-1356$13,295-$21,895Honda Yamaha SuzukiKawasakiSuper-Sport750-90064-803$7,895-$11,495Japanese BMW TriumphNaked400-90043-1019$6,195-$12,995BMW Triumph Honda HarleySport-Touring90083-1173$12,295-$13,795BMW TriumphSource:Case-writer elaborationFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132 -20-Exhibit 10Customer ProfileDucati Hyper-SportDucati Super-SportDucati Sport-TouringDucati NakedHarley-DavidsonSex98% Male99% Male98% Male96% Male91% MaleAge Range62%: 18-3564%: 18-3573%: 31-4366%: 18-3545.6 (Median)Job24% Professional22% Self Employed26% White Collar21% Blue Collar23% White Collar23% Self-Employed26% White Collar20% Self Employed$ 77,000 (Median)Marital Status56% Single57% Single51% Married65% SingleN/AKM/Year65%: 5,000-12,00061%: 5,000-12,00065%: 5,000-12,00065%: <8,000N/AMotorcycle Knowledge41% Good40% Fair43% Good47% FairN/ABikes>500cc owned41%: >354%: <=249%: >369%: <=121%: <130%: From Competitors49%: From HarleySource: Case-writer elaboration based on company dataFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13221Exhibit 11Price Premium vs. Comparable Products (average % premium per family)YearHyper-SportSuper-SportSport-TouringNaked199731.02%8.03%29.97%13.27%200131.4%7.2%20.4%13.03%Source:Case-writer elaboration based on company estimatesExhibit 12Cost Structure (% of total revenues)aDucati 2000Ducati 1996Harley-Davidson1. Motorcycles Material43.455.845.02. Related Products6.92.28.03. Direct Personnelb566.44. Indirect Personnel3.74.24.5[COGS(1+2+3+4)][59][68.2][65.9]5. R&Dc1.10.12.06. Variable Sales Costsd5.95.16.07. Fixed Sales Costse14.510.45.08. G&A4.75.33.0[Total 5+6+7+8][26.2][20.9][16]Source:Case-writer estimatesaIncludes parts, accessories and apparel (16.6% of total revenues in 2000)bInbound logistics, quality management and operationscPart of Ducati’s R&D costs are capitalized (approx. 2.7% of total revenues)dDistribution, dealer bonus and warranties costseSales, Marketing and after sales department costs, advertising, events, racing costs, subsidiaries costsExhibit 13Product Standardization in 1988Crank CasesCylinder HeadsEnginesModelsSegment/FamiliesDucati237154Harley-Davidson335214BMW557154Honda121220266Source: Company documentFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati22Exhibit 14Distribution StrategyTake Control Revamp Network Ducati Stores Distribution Control Market Penetration Ability . . . . . . UK (1 store) Japan (1 store) France (3 stores) Germany (5 stores) US (5 stores) Italy (36 stores) Source:Company documentFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132 -23-Exhibit 15Central Brand Attributes1,01,52,02,53,03,54,04,55,0Sport orientatedItalian styleLinked tocompetitionUniquenessTechnologyLinked to theSuperbikechampionshipTraditionReliabilityExclusivityQuality/PriceFashionable PublicitySource: Company documentFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
701-132Ducati24Exhibit 16Repeat Purchase Intentions 1995-2000 (European data for major competitors)010203040506070PercentageBMWHarley-DavidsonDucatiHondaKawasaki19952000Source: Case-writer elaboration based on company dataFor the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
Ducati701-13225Notes i Forbes, July 1999.ii The Art of Motorcycle, Guggenheim Museum Publications, 1998.iii Interview with Federico Minoli at Ducati headquarters, Bologna, Italy, March 22, 2001.iv Interview with Federico Minoli at Ducati headquarters, Bologna, Italy, March 22, 2001.v Interview with Federico Minoli at Ducati headquarters, Bologna, Italy, March 22, 2001vi The Art of Motorcycle, Guggenheim Museum Publications, 1998.vii The Art of Motorcycle, Guggenheim Museum Publications, 1998.viii Telephone interview with Cristiano Silei, April 21, 2001ix Interview with Federico Minoli at Ducati headquarters, Bologna, Italy, March 22, 2001For the exclusive use of J. Keller, 2023.This document is authorized for use only by Jack Keller in Strategic Management – Fall 2023 taught by Derek Kruse, Creighton University from Jul 2023 to Dec 2023.
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