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Harvard Case - Ducati Motorcycle (Italy): Riding Traditional Business Channels or Racing through the Internet

"Ducati Motorcycle (Italy): Riding Traditional Business Channels or Racing through the Internet" Harvard business case study is written by Tawfik Jelassi, Stefanie Leenen. It deals with the challenges in the field of Strategy. The case study is 25 page(s) long and it was first published on : Oct 31, 2000

At Fern Fort University, we recommend Ducati pursue a digital transformation strategy that leverages the internet to enhance its existing business model, while simultaneously exploring new avenues for growth through disruptive innovation. This strategy should prioritize brand management, product development, and customer experience, while maintaining a focus on sustainable competitive advantage through core competencies in performance, design, and Italian heritage.

2. Background

The case study focuses on Ducati, a renowned Italian motorcycle manufacturer facing a strategic crossroads. Despite its strong brand and performance-driven image, Ducati is struggling to maintain market share and profitability in an increasingly competitive and technologically-driven industry. The company's traditional business model, heavily reliant on physical dealerships and traditional marketing channels, is being challenged by the rise of online sales, digital marketing, and the evolving customer expectations of the internet generation.

The main protagonists of the case are Claudio Domenicali, Ducati's CEO, and the company's leadership team, who must navigate this strategic dilemma and chart a course for Ducati's future success.

3. Analysis of the Case Study

To analyze Ducati's situation, we can utilize several frameworks:

  • Porter's Five Forces: The motorcycle industry is characterized by intense competitive rivalry, with established players like Honda, Yamaha, and Harley-Davidson, as well as emerging brands from Asia. Threat of new entrants is moderate, but the threat of substitutes is increasing due to alternative modes of transportation like electric scooters and bicycles. Buyer power is moderate, as consumers have diverse options, but loyal Ducati customers are willing to pay a premium. Supplier power is low, as the supply chain is relatively fragmented.
  • SWOT Analysis:
    • Strengths: Strong brand recognition, iconic design, high-performance motorcycles, loyal customer base, Italian heritage.
    • Weaknesses: Limited global reach, reliance on traditional distribution channels, high production costs, limited product portfolio.
    • Opportunities: Growing demand in emerging markets, increasing interest in premium motorcycles, digital marketing and online sales, potential for product diversification.
    • Threats: Economic downturn, competition from established and emerging brands, technological advancements, changing consumer preferences.
  • Value Chain Analysis: Ducati's value chain consists of R&D, design, manufacturing, marketing, distribution, and customer service. The company's core competencies lie in design and performance, which are crucial for its competitive advantage. However, its reliance on traditional distribution channels and lack of digital capabilities create inefficiencies and limit its reach.
  • Business Model Innovation: Ducati needs to embrace business model innovation to adapt to the changing market landscape. This could involve:
    • Direct-to-consumer sales: Leveraging e-commerce platforms to reach a wider customer base and bypass traditional dealerships.
    • Subscription services: Offering access to exclusive content, events, and services through subscription models.
    • Data-driven marketing: Utilizing technology and analytics to personalize marketing campaigns and target specific customer segments.
    • Partnerships: Collaborating with technology companies and online retailers to expand reach and enhance customer experience.

4. Recommendations

Ducati should adopt a multi-pronged strategy that combines digital transformation with strategic innovation:

  1. Digital Transformation:

    • Enhance online presence: Develop a robust online platform that integrates e-commerce, customer service, and community features.
    • Leverage digital marketing: Implement targeted digital marketing campaigns across social media, search engines, and content platforms.
    • Optimize customer experience: Provide seamless online and offline customer service, personalized recommendations, and interactive content.
    • Data-driven insights: Utilize technology and analytics to understand customer behavior, optimize marketing campaigns, and improve product development.
  2. Strategic Innovation:

    • Disruptive innovation: Explore new product categories, like electric motorcycles or connected vehicles, to tap into emerging markets and disrupt existing industry norms.
    • Product diversification: Expand product portfolio to cater to different customer segments and price points, while maintaining brand consistency.
    • Strategic alliances: Partner with technology companies, online retailers, and other industry players to leverage complementary capabilities and expand reach.
    • Globalization strategies: Target emerging markets like India and China, where demand for premium motorcycles is growing rapidly.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  1. Core competencies and consistency with mission: The recommendations align with Ducati's core competencies in design, performance, and Italian heritage, while leveraging the internet to enhance its brand and reach.
  2. External customers and internal clients: The recommendations focus on improving customer experience, expanding reach, and providing value to both existing and potential customers.
  3. Competitors: By embracing digital transformation and disruptive innovation, Ducati can differentiate itself from competitors and gain a competitive advantage.
  4. Attractiveness - quantitative measures: While quantifying the impact of these recommendations requires further analysis, the potential for increased market share, revenue growth, and profitability is significant.

6. Conclusion

Ducati has a unique opportunity to leverage the internet to enhance its existing business model and explore new avenues for growth. By embracing digital transformation and strategic innovation, the company can maintain its position as a leading motorcycle manufacturer, while navigating the challenges and opportunities of the 21st century.

7. Discussion

Other alternatives not selected include:

  • Maintaining the status quo: This would likely lead to declining market share and profitability as competitors gain ground.
  • Focusing solely on traditional channels: This would limit Ducati's reach and growth potential in the digital age.
  • Merging with a larger competitor: This could provide access to resources and technology, but it could also dilute Ducati's brand identity and core competencies.

The key risks associated with the recommended strategy include:

  • Technological disruption: Rapid advancements in technology could render current strategies obsolete.
  • Competition: Aggressive competitors could disrupt Ducati's market position.
  • Customer acceptance: Customers may not readily adopt new products or services.

8. Next Steps

Ducati should implement the following steps to execute the recommended strategy:

  • Develop a comprehensive digital transformation strategy: This should include specific goals, timelines, and resource allocation.
  • Invest in technology and infrastructure: This includes upgrading IT systems, developing new digital platforms, and hiring skilled personnel.
  • Create a culture of innovation: Encourage experimentation, collaboration, and a willingness to embrace change.
  • Monitor progress and adapt: Continuously evaluate the effectiveness of the strategy and make adjustments as needed.

By taking these steps, Ducati can successfully navigate the digital landscape and secure a bright future in the competitive motorcycle industry.

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Case Description

This case discusses the e-business strategy of Ducati, an Italian manufacturer of high-performance motorcycles. It describes how, on January 1st, 2000, Ducati exclusively sold through the Internet its new MH900e motorcycle at 15,000 Euros per unit. It was the first motorcycle ever sold through the Internet and the first-year production of the MH900e was sold out after just 31 minutes! The case also presents the way the company created the physical and the virtual World of Ducati.

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