Motorcycle Industry example essay topic

EXECUTIVE SUMMARY The economy has changed and we are living in the information era where customers are everyday more and more informed, more sophisticated, and more demanding. Ducati faces a great challenge which is the one to react to fast changes and to select the adequate strategies that will allow it to do so. Through our project we intend to analyse the current trends of the motorcycle industry, where it is heading and what place Ducati occupies in it. Once we understand the whole picture we will go in depth, analyzing it and decomposing it into bits and pieces to better understand why it occupies this place, and what strategies it must take to maintain and improve its position and itself as a whole. INDUSTRY ANALYSIS In order to provide a deep and complete analysis of the Motorcycle industry we provide an extended Porter's five forces framework, because as we know this framework has several flaws and we have reinforced it with the factors we think affect the industry and alter its profitability. SEGMENTATION The market can be divided into 2 categories men and women.

In the category of men Men: Men under 30 group accounts for 44% of all sales. Therefore, a great opportunity exists here because of the group's size. This group's members buy motorcycles for their transportation and recreation needs. Men in this group buy more of mopeds, scooters and entry level lightweight road bikes. Men between 30 and 50 makes up 45% of buyers. The motorcycles most frequently purchased are the heavyweight tourers and cruisers.

Many buyers are married couples looking for an alternative to taking the car out for weekend drives to the country. Men over 50 group accounts for about 11% of motorcycle sales. The heavyweight touring class and the middleweight road bike categories account for most of the sales here. Women group is a segment that is growing at a fast rate, and represents an opportunity area.

PRODUCTS Three types of products and services are being offered in the motorcycle industry: motorcycles, accessories, and financing services. But te main products are motorcycles. which includes mopeds or scooters (125 cc), accounting for about 17% of total motorcycle sales; lightweight motorcycles road bikes, dirt bikes, dual purpose bikes (1255 cc to 499 cc), accounting for 51% of sales; sport motorcycles street bikes, and super bikes (450 to 749 cc) accounting for 13% of sales; heavyweight motorcycles cruisers, tourers (750 cc to 1500 cc) accounting for 19% of sales. POTENTIAL ENTRANTS This force analyzes the Characteristics of the market that threaten profits by making entry easy. In one hand the motorcycle industry requires economies of scale which in are accomplished by a large investment in personnel, facilities, inputs and factories, meaning that the exits costs and divestment's are very high. Another important factor to consider in the industry is the learning curve or experience curve. In this case Ducati and some of its competitors have been around for decades and some more fifty years so it is difficult for new entrants to match instantaneously the quality and performance of the products offered in the motorcycle industry.

In the other hand the necessary technology is readily available to entrants such as patents and intellectual property. The manufacturers design, technology and technical features that distinguish their motorcycles are not protected by patents or intellectual property rights. Which makes the design and technology available to new entrants and competitors as a result is easy to copy or be imitated. This can have adverse effects on the industry because new entrants or competitors can develop equivalent or superior manufacturing and design skills, which can lead to enhancement that can instead be patentable or protected from duplication by others. SUPPLIER POWER In the motorcycle industry a wide variety of parts are requires such as components and tools to in order to manufacture the motorcycles. Companies source their parts from different suppliers and most of them are not integrated backwards this already gives certain bargaining power to the suppliers which can be partly offset by using long term supply contracts or short term contracts depending on the suppliers offering, pricing and quality of products provided.

Since most of the motorcycle manufacturers do not fabricate all the components on their own and most of them are outsourced they are subject to variations on the price of such components. These variations may result from factors affecting suppliers and fluctuations in the prices of raw materials (including steel and aluminium) from which these components are manufactured. This affects the directly the cost of production per motorcycle. Having a close relation, communication or collaboration with suppliers is very important because delays in the delivery of parts and components may increase also the costs for manufacturing.

By consequence suppliers can directly affect the profitability of the manufacturers and confers them with certain power. Obviously it would be unethical and illegal for suppliers to do this on purpose... Most manufactures rely upon single-source suppliers for certain high-tech components so some suppliers may enjoy more bargaining power than others also their reputation is very important because some may perceive that components provided by these suppliers are what makes the motorcycle special. For example: Brembo which manufactures brakes and wheels and Remus that manufacture exhaust systems enjoy a remarkable reputation in the automotive industry. So changing one of these suppliers for another brand or generic brand may catastrophically affect or deteriorate the motorcycle reputation, perceived quality and image. Haven stated the above we can infer that some suppliers do enjoy a great deal of bargaining power because they know that it's in the motorcycle manufacturer interest to always purchase these components.

But let's remember that motorcycle raw materials and components are available from a variety of sources which in turn offsets part of this power. As a conclusion we can say in one hand that there is a good number of suppliers, inputs are not difficult to substitute, firm don't need to make specific investments in order to use inputs purchased from supplier and suppliers don't have the ability to integrate forward and in the other hand the reputation from suppliers is very important for some companies and customers. So we have a moderate supplier power in this industry (A way to measure this is the Price - cost margin of supplier). COMPETITION The motorcycle industry consists of several major manufacturers: one American which is Harley Davidson, that produces heavyweight motorcycles emphasizing good quality product and after sales service, thereby building up brand loyalty.

Then we have four Japanese producers Honda, Yamaha, Kawasaki, and Suzuki that are producing a full line of motorcycles ranging from scooters to heavyweights, and together control the largest share of the market. In the case of Honda we are talking about the largest company in terms of size, financial backing, and reputation. It is offering the widest selection of styles, classes and sizes within the heavyweight category. Then we have its follower, Kawasaki whose products include a full line of motorcycles, all terrain vehicles, jet skis and other. In both cases Honda and Kawasaki have gotten hurt in term of market shares because of their wide product line which translates into a low quality service because of the limited salespeople knowledge that salespeople have.

Moving on to European companies we find the BMW of Germany and Ducati from italy which are famous for producing quality products but because BMW has high prices it holds it from expanding sales. Most companies market their motorcycles and accessories worldwide and the international trade is characterized by foreign distributors and domestic sales through franchised outlets. We would like to mention some events that affected the Industry in the past. Starting in the during the early l 990's industry sales of motorcycles went through a rough period because of the recession and the competition from computers and electronic products which decreased consumers income. Sales of accessories and parts make up 36% of total retail sales which in our view it's a very interesting area producers to.