Strategic Analysis of Ducati

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TABLE OF CONTENTS
1.0 Introduction to Organisation................................................................................. 2
2.0 GAPS Analysis of Ducati....................................................................................... 3
2.1 Management Perception Gap.........................................................................3
2.2 Quality Specification Gap............................................................................... 3
2.3 Product Delivery Gap...................................................................................... 4
2.4 Market Communication Gap...........................................................................4
3.0 Ducati Market Analysis......................................................................................... 4
3.1 TOWS Analysis of Ducati................................................................................ 5
4.0 Strategic Issues Faced by Ducati..........................................................................8
5.0 Strategic Alternatives for the Issues.....................................................................9
6.0 Implementation of Strategy................................................................................ 12
6.1 Altering Companys Structure (People aspect).............................................12
6.2 Change Management (Process aspect)........................................................12
6.3 Control Systems........................................................................................... 12
6.4 Balanced Scorecard...................................................................................... 13
7.0 Conclusion and Recommendations.....................................................................14
REFERENCES............................................................................................................ 15

1.0 Introduction to Organisation

Ducati was established in Italy in 1926 by the Bolognese investors and was primarily involved in
the radio transmission products which were exceptionally popular in the market. The year 1935
brought the urge for the company leadership to open a new factory which was established with
an objective to develop a contemporary business centre. By the mid of the 1930s, the company
expanded into different markets including Europe, United States, and Australia. The production
of the first motorcycle by the company was initiated in the 1946 at the factory Borgo Panigale by
the name of Cucciolo. Later in 1968, the most admired motorcycles in the market from the
company was manufactured, Ducati Scrambler. The most remarkable achievement in the
company history was the Imola 200 miles in 1972 and later in 1988 Ducati won the Superbike
World Championship (Rafferty, 2000).
Cagiva Group purchased Ducati in 1983 brining success for the company in racing motorcycles
and following that, in 1993, Ducati produced one of the legendary motorcycles on its product
panel, the Ducati Monster. The first motorbike from the company was sold through the internet
in 2000. According to British Motorcycle Magazine, the company manufactured its Bike of the
Year in 2002 (Chung, 2012). The Superbike 1098 was announced in 2006 as the best design and
followed in 2007 three more designs were introduced in the market successfully on company
profile. The financial position of the company was improved in 2012 exceeding the
achievements in the past (Milan, 2012).
In the present time, the company is taking into consideration the strategic benefits of being in
alliance with Audi which is anticipated to bring more success for Ducati (Siler, 2012). The
mission of the company is to build a company which provides the customers with state of the art
products and proving the authentic Italian performance for the people supporting the idea of
freedom, rebellion and defiance (Falloon, 2011). Under the consideration of enhancing the
company profitability, a program needed to be implemented mainly to focus on increasing the
sales of the products through an extended product portfolio which was restructured to
accommodate the changing trends in motorbike market.

2.0 GAPS Analysis of Ducati

Gap analysis demonstrates the differences existing in the perceptions and actual experiences in
product or service delivery from two perspectives corresponding to the involvement of two
parties, provider and the customer. The customer gap is the difference between the customer
expectations and perceptions while the provider gap is of four types and work to rectify the
customer gap (Zeithaml et al. 2009). Gap analysis of Ducati Company is as follows.

2.1 Management Perception Gap

According to Zeithaml et al (1988), the management perception gaps is the distinction between
what a customer expects from the services or the products and what are the understandings of the
company of these expectations. The expectations of the customers are influenced by multiple
factors which may or may not be controllable (Wang and Pizam, 2011). Convenience shopping
for example is one of these factors and as the time requires, different new channels of facilitating
the customers are present like online shopping and customer appreciate the efforts of a company
to be available for its customers in every way that is handy for them.
The customer expectations are perceived by the management primarily based on the product
offering from exclusive stores in the physical premises. However, the new rage of the internet
and online shopping makes it essential for the company, regardless of the business or product
preferences, to be available for its customers online. Further, to enhance the customer loyalty and
brand engagement, the relationship marketing tactics are of great significance (Liou, 2009). A
majority of the products purchased now are selected as a result of search and buy process on the
part of the customer and lack of Ducatis online existence and focus on the transactional
marketing rather the high grossing relationship market could act as a hurdle for the progress of
the company (Gavetti, 2004).

2.2 Quality Specification Gap

The difference between the perceptions of the management of the customer expectations and the
specifications of the service quality are described as the quality specification gap (Zeithaml et al.
1988). Understanding the expectations of the customers is not enough for the management but to

develop product and service standard to be reflective for these perceptions and thus the focus on
the quality is critical which is described by this gap (McKnight and Berrington, 2008). The
products delivered by Ducati to the market are somewhat satisfying the customer expectations as
the product attributes are developed and delivered in close alliance to the product developed
standards by the company which are set after understanding what the customer expects from the
company.

2.3 Product Delivery Gap

The quality specifications defined and the actual product delivered, the difference at these two
steps is described as service delivery gap (Zeithaml et al. 1988). The products delivered by
Ducati though meeting the physical standards of the company for which it has long been
appreciated however the delayed product delivery to the customers has been causing a
remarkable market share loss (Gavetti, 2004). The pricing strategies of the company are adding
to the situation with a competitive market around, the company failed to modify its existence,
product provision and pricing adjustments are contributing to expand this gap in product
standards and the actual experience by the customers.

2.4 Market Communication Gap

The market communication gap is described by the difference between the communicated
product attributes to the customers and the actual product delivered (Zeithaml et al. 1988). The
marketing of the products by Ducati are attempted to be based on the actual product attributes
and the expectations of the customers in the pricing strategy, product warranty service and
product attributes are satisfied at all times. The lack of communication in different new media
however is a certain weakness and contributing to add gap in customer expectations and
marketing communication (Gavetti, 2004).

3.0 Ducati Market Analysis

In the business environment, the key aspect which must be focused by the company is the
competition and regardless of the business interest, the management of the company must keep a
close eye on the business rivalry position in the market. The major competitors of Ducati include

Harley-Davidson (American heavy motorbike manufactures, and present significant competition

in the sports and custom bikes), Honda (the largest bike and scooter provider in the global market
and considered most reliable by the customer for the fuel efficient, low emission and excellent
engine design), BMW (top European automaker, well known for the innovative motor bike
designs, and specialising in touring motorbikes), and Triumph (major market player in naked
bikes and competition provides in the touring and sports bikes) (Gavetti, 2004).
Other competitors in the market, which though have rather smaller market share but caused
Ducati to lose considerable market include Japanese manufacturers like Yamaha, Kawasaki and
Suzuki. These companies initiated by competing in small bike industry and gradually moved to
heavyweight bikes. In addition to the competition, the business operations of the company have
particular traits with the majority of the production being outsourced and the activities
demonstrating the companys core competency like the research and development, design and
quality control are under direct control of the company (Barksdale and Lund, 2006). In order to
manage the supply chain, tools applied included just in time system and short term supplier
contracts (Chung, 2012).

3.1 TOWS Analysis of Ducati

To evaluate the strategies of any company and to determine the points which require more focus
and restructuring, one of the most common tools which are applied in business studies is TOWS
matrix. In order to understand the deficiencies in existing business processes of Ducati, this tool
has been applied to the current operations and situation of the company. The results are presented
in the table below which describes the internal as well as external environment and gives
strategies to handle it (Nolan et al. 2008). The TWOS analysis would present strategies on the
basis of identifying threats and weaknesses which could be of value in coping with the potential
problematic situations in the market for Ducati.

Table 1 Ducatis TOWS analysis for strategic alternatives

EXTERNAL
OPPORTUNITIES

External

STRENGTHS

INTERNAL

Internal

o The unique and genuine product

portfolio
o Strong research and development
o Highly skilled and competent
engineering team

o The emerging markets around the

globe presents a potential for
expansion for Ducati like the female
market
o Establishing online stores to extend
the sale points for the company
o Working capital must be acquired
through different means
o Acquisitions of potential companies
working in the market to fortify the
customer database on the Ducati
panel
SO Strategy: Maxi-Maxi

1. The exclusive products of

Ducati be offered for the export
2. Acquisitions to attract more
loyal customers for motor biking
3. Developing brand awareness in
the international market
4. Innovative products could be
used to further expand in the
new markets based on not only
the customer type but
geographical presence

THREATS

o The increasing market competition

o Emerging technologies in the field
which are cheaper
o Availability of product substitutes

ST Strategy: Maxi-Mini

1. Customer services must be

emphasised by developing the
current marketing concepts
applied at Ducati
2. Applying different marketing
strategies, enhancing the
customer loyalty
3. Innovative products must be
developed to replace the products
on the panel near maturation in
future
4. Apply capital management for
effective supply chain
management

SES WEAKNES

WO Strategy: Mini-Maxi

o Poor Supply Chain

o Deficiency of the available
working capital
o Failure of the company to
diversify
o Inability to present company on
online media
o Reduced market share

1. Applying tools and techniques

to enhance the affectivity of the
current supply chain
management system of the
company
2. Involvement in strategic alliance
to overcome the working capital
deficiency
3. Applying tools of internet
business operations to expand in
Europe and international
markets

WT Strategy: Mini-Mini

1. To cope with the existing market

competition, diversifying and
restructuring the current product
portfolio
2. Redefining the resource
allocation to research and
development in order to cope
with the new technologies arising
in the market
3. Consider the merger option to
mitigate the liquidity crisis of the
company

4.0 Strategic Issues Faced by Ducati

On the basis of above analysis, it can be said that the key issue faced by the company is the
reduced market share and a number of factors contributed to it. One major factor in this regard
was the liquidity crisis faced when the shareholders of the company decided to switch to
production of products other than motorcycle despite the remarkable success rate of the company
products. After the company was acquired by Cagiva, the reputation was in many terms, rebuilt,
and the new street performance bikes of the company won the world superbike championship.
Despite the success and reputation strength, the payment delay was drastic for the liquidity
problem faced by the company affecting the relationships with the key suppliers leading to
delayed motor bike productions.
In addition to a large working capital required by the company to smoothly operate without
significant delays, an efficient and effective supply chain management system was also required.
The benefits of such a system would not only include effective production but also gaining a
competitive edge in the current market of overwhelming competition (Gavetti, 2004). Further, to
capture new markets in the international perspective, the company need to diversify its product
line to accommodate new and altered needs of the potential customers. Also the maturing market
products require to be replaced by new innovative products which in turn require more capital.
Loss in market share is also contributed by failure to diversify the products and inability to
replace the maturing products of the company (Morandi, 2009). The inability of the company to
establish its presence on the internet is also added to the key issue. The internet is being
considered as the most popular media to expand the customer base. A good strategy and an
excellent implementation plan are required by the company to cope with the situation (Morrison,
2009). This description could be demonstrated by a cause and effect diagram which is presented
in figure 1.

Poor Supply chain

Lack of Diversification

Increased Competition

Reduced
Market Share

Inability to establish
on Web

Inability to replace

Lack of working Capital

maturing Products

Figure 1 Cause and effect diagram of issues faced by Ducati

5.0 Strategic Alternatives for the Issues

The key problem faced by Ducati is the significant reduction in market share leading to the
reduced revenue generation and the factors contributing includes the poor supply chain and lack
of diversification pointing the key ones out of the rest. These are under the control of the
company management and require considerable planning and execution and a plan proposed to
Ducati to cope with these issues include the evolutionary changes in the business strategies to
accommodate gradual growth patterns (Schmidt, 2009). The first step is the product
diversification and the actual positioning of Ducati for being a manufacturer of the sports bike
must be expanded to capture new market segments which were not addressed by the company in
the past (Porter, 2007). In order to survive in this enormously high competitive market, the
company needs efficient planning and a proposed model of changes to handle the major issues
faced by the company to translate them in success factors for Ducati. In this regard, the
suitability matrix is developed in the next page to complete primary evaluation of problems and
their possible solutions in order to set the actions to close the gaps identified during gaps
analysis.
SOLUTIONS

OPTION 1

OPTION 2

1. Supply chain management Planning in depth strategic plan

Applying

the

strategy

Plan to

through integration of

of incorporation into global

diversification

different

alliance

global strategies

supply chain. Developing new

products on the company

supply c

products

portfolio

to

facilitate

this

by

on

of

introducing

integration process

several innovative products

which

are

also

priced

reasonably
2. Stabilisation of the
operational capital

Try to find different potential

Diversifying to new markets

The

sources

with

potentia

to

bring

working

innovative
are

products

capital to alleviate liquidity of

which

designed

and

could b

the company

developed to capture new

newly

market segments

segment
to

exi

custome
3. Establishment of online
presence

Promotion of products already

Diversifying the brand name

reflectiv
Expansi

on panel and the innovative

through

segment

ones on online media using one

geographical regions such as

in the

stop shop and launching a

the Latin America, Asia and

America

marketing

United States

campaign

to

strengthen the online presence

internet

in

other

The alternatives offered by the study identify the need for the company to utilise its innovation
power to expand in the different newly identified market segments. This expansion would
ultimately lead to increased revenue generation and in turn cope the liquidity crisis of the
company. The best suitable strategy in the company with the described situation is about
diversification (option 2). The justification of selected strategy is provided by reviewing its
feasibility, acceptability, and suitability as follows.
Outcome
Feasibility

Increased
market share

Strategic Option 2
By applying the strategy of diversification on different
products on the company portfolio by introducing several
innovative products with reasonable price will allow the
company to expand to new markets which will lead to
enhance its market share

Acceptability

New market
opportunities

Diversification and identifying new market segment

could gain high appreciation from the company
shareholders as it could lead to generate high profits by

Higher profits

utilising the company potentials. Exploring the internet

for new market opportunities could lead to significant

Suitability

Strategic
potential
outcomes

contributions to profit generation

Competitive
advantage

The diversification strategy offered to the company is best

suitable as the expansion of new marketing media and
new market segments combined with the innovative
companys potential could lead to get a competitive edge
for the company

6.0 Implementation of Strategy

6.1 Altering Companys Structure (People aspect)
People have critical roles in the context of implementing the proposed strategy (Johnson et al.
2008). Ducati can modify its existing structure to correctly and effectively apply diversification
strategy. The modifications are needed to be practiced at both corporate and functional levels. At

the corporate level, the top management will put the strategy into action by developing sound
policies and following adequate procedures. For instance, applying the strategy of diversification
for different products on the company portfolio by introducing several new innovative products
in new markets with reasonable price. Furthermore, the low and middle level staff will ensure an
effective utilisation of resources and perfect implementation of changing companys structure.

6.2 Change Management (Process aspect)

Table 2 illustrates different change management strategies available to Ducati but in
implementing the diversification strategy, the scope and nature of the change will be
revolutionary as the company is going to develop and transform innovative products and
procedures to new market which require revolutionary changes in the management from process
perspective.
Table 2 Types of the change

Source: Senior (2009, p. 47)

6.3 Control Systems

The establishment of a control system is inherent in managing, commanding, and organising the
behaviour of people and processes (Hill and Jones, 2007). The entire diversification process will
be largely based on organisational people and processes. Therefore, it is necessary for Ducati to
develop an effective control system with adequate resource allocation. For example, the
company can launch its new product completely according to the demands of the customers after
detailed research and development activities. This would be possible by promoting internal and
external communication and ongoing research and feedback. Further, Ducati can use service
blueprints to design routine processes which will support diversification procedure.

6.4 Balanced Scorecard

Finally, the company can use a balanced scorecard approach to have an idea about the progress
of the implemented strategy. A proposed balanced scorecard is available in table 3.
Table 3 Balanced Scorecard
FINANCIAL PERSPECTIVE
GOALS

Resolving
liquidity crisis

MEASURES

o Increased working
capital through
integration of global
supply chain
o Yearend financial
records
o Acquisition of financial
resources

INTERNAL PERSPECTIVE
GOALS

Continuous
product and
service
improvement

MEASURES

o Balanced scorecard
approach

o Increase in customer
base
Market oriented
o Market expansion
product
o Fortified market share
development
o Positive customer
feedback

CUSTOMERS PERSPECTIVE
GOALS

MEASURES

Providing quality o Establishing online sale

products in a
points
convenient and
o Customers feedback
accessible manner
Providing
products on time
in market

o Increase in number of
customers per year
o Increased customer
satisfaction

SUPPLIERS PERSPECTIVE
GOALS

Recuperating the
management of
supply chain

MEASURES

o Integration of global
supply chain
management

o Enhanced product
manufacturing
On time delivery
turnaround time
o Increased customer
satisfaction
Building long term o On time payments by
relationships with
enhancing the working
capital
the suppliers

7.0 Conclusion and Recommendations

The major recommendation for Ducati with its current position as described in the above analysis
is the advancement to establish a position in the e-commerce in order to expand its market share.
The first step in this regard is to develop a website by hiring professionals in the field and than
moving the social media highly appreciated now days by the customers of almost all products
affecting the consumer life. This could be used not only to communicate the product attributes

and new products but could be used to sell products, spare parts in distinct markets thus
expanding the market coverage which would ultimately increase the market share of the
company. Further, diversification and the innovation in products are required to replace the
existing maturing products of the company in the market in order to fortify customer base and
brand loyalty. Reallocation of resources to research and development could further contribute to
this aspect of Ducati operations.

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