Business Strategies of Ducati and Harley Davidson - Research Proposal Example

Ducati or Harley Davidson Table of Contents Introduction 2 Business Strategies of Ducati and Harley Davidson 3 Reasons why Ducati should not build a touring version that looks like Harley 4 Reasons why Harley should design a strategic plan to catch up with Ducati in terms of sales 6 Conclusion 9 References 11 Bibliography 12 Introduction The project begins with the study of the business strategies followed by the two companies Ducati and Harley Davidson and makes a comparison between the two. The purpose is to present reasons whether Ducati should follow the strategies of Harley Davidson or vice versa. This is done by first explaining the business strategies of the two companies separately. Then a suitable explanation is produced to determine the feasibility of adoption of the strategies of both companies. Ducati is the manufacturer of expensive and high performance motorcycles. The company is based in Italy and has been producing the racing-inspired motorcycles. It has repeatedly won the World Superbike Championship for decades. The company launched its first e-commerce activities in 2000, selling a new motorcycle model named MH900e through the internet. In 1996, the parent organization of Ducati was confronted with a financial crisis because of which 51% of stake of Ducati was taken over by “Texas Pacific Group (TPG) and Deutsche Morgan Grenfell Capital” (Leenen & Jelassi, 2005). Harley- Davidson is a US-based manufacturer of touring motorcycles and cruisers. The company offered motorcycles, accessories, apparel, spare parts and general merchandise. It was considered to be a very powerful manufacturer of motorcycles across the world. It was a strongly recognized brand which produced the most innovative designs and capabilities of development (Leenen & Jelassi, 2005). Business Strategies of Ducati and Harley Davidson One of the most important business strategies of the company is its attempt to create innovative products and building new brands in order to maintain sustained growth in future. Since 1996, the company’s main objective has been to improve the efficiency of production and developing a high margin business for motorcycles. Apart from that, it has been trying to enhance the Ducati brand, reinforce the niche position of the company, improving the network of distribution and developing the e-commerce and networking activities. The company is known for its high sales of its products. In 2009, the company’s sale of spare parts, accessories and apparel increased by 9.8% between 2000 and 2001. The brand was further leveraged with the production of the high performing and functional motorcycles. The Sport Touring model and the Monster Models are examples of motorcycles with high functional value. There were 92 Ducati stores across the world in 2002. The company had numerous retail outlets which helped the company gain control over its network of distribution (Leenen & Jelassi, 2005). The company even sold its products over the internet while its dealer network helped to deliver the motorcycles to the customers. On the other hand success of Harley Davidson lies in its attempt for understanding and analyzing the product and the market thoroughly. The executives were perfectly aware and focused about what the brand exactly represented. They know exactly how they could touch the heart, mind and soul of the customers. One of the important aims of the company was to maintain a perfectly smooth relationship with the company’s dealers. There was a dramatic increase in the number of motorcycles produced by the company in 2001. In 2002, the figure witnessed a 10% rise. Another critical objective of the company was to expand its already established customer base of doctors, lawyers and CEOs. The company’s main customers were the rich bikers of the urban areas. The company’s product demands have been increasing at a fast rate and it has been successfully keeping up with its attempt to grow its earnings faster than its revenues. The company also successfully established 1300 dealer outlets across 48 nations. Reasons why Ducati should not build a touring version that looks like Harley Ducati does not manufacture and sell bikes like the way HD does. Ducati specializes in performance and styles which are based on the latest use of technologies. On the other had HD develops bikes based on comfort and nostalgia. These bikes are meant for the purpose of street usage. These bikes are primarily popular with the less affluent customers. They are made available at premium prices. It would not be judicious for Ducati to introduce a tourism version like HD because this would mean deliberately lowering its technological standard. The technology used by HD is far below those of its competitors. The technology gap has been kept deliberately because it wants to attract customers using its image (Bronson & Breaver, 2005). If the company tries to adopt the features of HD along with its own technology, this would add to the company’s cost. Moreover, the image and style of HD is already accepted among its customers where the technology takes a backseat. Thus the customers who have been using bikes made by HD would not be willing to pay a higher price for a similar product. They are quite content with the technology that they have been getting. Thus, adopting the looks of HD would be useless for Ducati. There are distinct differences between the production strategies of the two companies. HD maintains a strategy of increasing its production of bicycles at a lower rate than their demand. This is done to increase the manufacturing capacity of the company. On the other hand, Ducati’s sales remains significantly high and its products remain in great demand. Adopting the look of HD would obviously mean a reduction in the production capacity of the company. This would definitely not be an effective strategy on the part of the company. Lowering the production capacity which is already at its peak would be an unwise step. It would lead to the reduction of sales and consequently the revenue. HD has been the leader in the motorcycles industry for 6 long years. The domestic share of the market of the company has increased from 10% to 49.5% between 2001 and 2004. The challenge faced by the company is to limit its availability in order to ensure high mark-up rice for itself. This would be done at the prevailing market and competitive conditions. HD has developed itself as a unique breed which cannot be imitated easily. It is said to have created a culture in itself. It has been able to change the motorcycling hobby into a particular lifestyle. It has developed the ‘biker culture’ (Sapherstein, 1998). However the strategies of Ducati are different. It is possible that merely adopting the look of HD would not be enough the other requirement of the customers. Thus the attempt of trying to develop a version that would like HD would not be successful. It should also be noted that HD is not received well in a number of offshore markets where it is faced with a number of problems. Europe is one such example where HD does not perform well. Ducati, on the other hand has a well established market in Europe. Here the “American” mystique is lacking for its traditional bikes and H-D must compete with the V-Rod” (Bronson & Breaver, 2005). Here it has to compete with Ducati and BMW. Thus it would not be fruitful in adopting features like HD by Ducati. This is because the company would lose out on the market present in Europe. It would be difficult to build up the market in a place where its demand is poor. Moreover, HD has been able seek a trademark in a sound. In fact many of the competitors of HD have filed complaints against Harley’s trademark. There is a specific reason to this. The competitors have filed the complaints because all of them manufacture the cruiser style motor cycles using the V-Twin engine which produces a sound similar to that of Harley. According to Bob Star, the Yamaha spokesperson, “Yamaha has been building V-twin engines since the early '80s, and there's no difference between the sound their engine makes and the sound our engine makes. . . . All V-twins, by their nature, have two pistons” (Sapherstein, 1998). It is said that the same kind of piston would make the same kind of noise. Thus it is apparent that Ducati’s attempt to adopt a particular design of Harley would not be enough. It would not be able to have the trademark. This would go against the reputation of the company. This would actually fail to meet the expectations of customer who already has a particular perception regarding the company. It would not only spoil the image and goodwill of Harley but Ducati as well. Reasons why Harley should design a strategic plan to catch up with Ducati in terms of sales Following are some of the reasons why Harley Davidson (HD) should take steps to catch up with the sales of Ducati. With the changes in the business environment, firms have increasingly realized the requirement of collaborations for sustaining and creating competitive advantage in the market. Ducati is one such company which has successfully made some effective collaboration which has created value for the company. Ducati has been effective in trying to expanding its customer base. Recently it has used a number of internet mechanisms to reach its customers. This has proved to be beneficial for the company. Using the internet, the company was able to increase customer engagement, interactivity, increase its reach, speed, persistence and flexibility (Sawhney, Verona & Prandelli, 2005). The above strategy could be used by Harley to increase sales and competitiveness. Companies present in the motorcycle industry increase their competitive advantage not only by technology usage but also through customer interaction and relationship building with them. It is important to maintain the relationship throughout the time of ownership of the bicycle. Since motor cycles are considered to be a “lifestyle-intensive product” (Sawhney, Verona & Prandelli, 2005), the companies are required to create a community among the customers. This strategy should be given primary importance apart from the offering of innovative products and features. This has been one strategy that has been affective in building the reputation of Ducati. It is recommended that Harley adopt this strategy too. It is important that Haley develop a consumer community where its users would be registered. The internet has been able to add to the competitive advantage of Ducati by increasing the “fan experience” (Sawhney, Verona & Prandelli, 2005). The fans of the company can be used in a systematic manner for reinforcing the places, events and people who demonstrate the “Ducati life style and Ducati’s desired brand image” (Sawhney, Verona & Prandelli, 2005). The community so developed would help in expanding the customer base of Harley even further. This is because internet is the most widely used medium of networking. It is the easiest possible way of communication with a large number of customers within a short span of time and at reasonable cost. Harley would be able to reach out to a large number of people which could be further used for the purpose of expanding the market. Moreover, the company could also look at making the bicycle among women 10% of all riders (Hostetler, 1995). The adoption of technologies that Ducati uses is not recommended for Harley because this would consequently raise the price of products of the company. Ducati’s differentiation and positioning strategies have most effectively contributed to the sales of the company. The company developed techniques to make an assessment of the environment in which it would operate. Doing this, it chose the fast riders as its target customers. But the market segment chosen by Harley are the easy riders. Thus the strategies to position bikes made by Harley would be different from those used by Ducati. The primary strategy of Harley would be to create a niche marker for itself and do what is best to create that market. It is recommended that the company look towards increasing its promotional strategies more aggressively. Marketing forces and advertising should be used increased for the expanding the present market and spreading awareness. In other words, brand enhancement should be main focus of the company to increase its sales. In order to improve the brand name, the company should try and strength the distribution network. It would also require raising the production efficiency of the organisation. Harley’s strategy of keeping its supply lower than the demand would require restructuring. This is because the market is been increasingly flooded with a number of motor cycle companies. If a customer has demanded a particular model of motor cycle and had to wait for a long span of time, he would be tempted to buy motor cycles from the competitor companies. This could take away a major portion of the market share of the company. In order to retain success in the market, it should aim towards provided prompt service to its customers. This could be made possible by redesigning the supply chain process. The products of Harley are made up of those parts which are provided by outside suppliers. The production efficiency would depend on the efficiency of the suppliers which is critical to maintaining smooth running of the supply chain (Leenen & Jelassi, 2005). Conclusion During the course of the project it was found that the strategic objectives of the two companies, Ducati and Harley are quite different from each other. Ducati aims to produce expensive and high performance bicycles. On the other hand Harley produced bikes which technologically inferior than Ducati but based on more comfort and nostalgia. Harley’s bikes were very popular among the less affluent people in society. It was found that Ducati should not develop a model of motorcycle which looked like Harley because this would require degrading its technology deliberately. Moreover, if it retains the technology by only adopting the design and style of Harley this would raise the production cost of the bicycle. This cannot be considered to be a judicious move on the part of the company because it is popular among the less affluent in society. This strategy would make the bike less affordable for the already established customer base. Rather it is recommended that Harley should try and design strategies in order to catch up with Ducati terms of the company’s sales. The most important strategy that was used by Ducati to increase sales could be adopted by Harley. It could make use of the internet as this would allow the company to reach out to a large customer base. Since the internet is regarded as the most widely used medium of late, it would be able to spread awareness globally. Finally it is recommended that Harley should restructure its competitive strategy. Its plan of maintaining a supply lower than the demand should be changed. This is because this would tempt its customers to move towards its competitors. It is critical that Harley maintains prompt service for its customers to sustain in the market. It should maintain smooth running of the supply chain for this purpose. References Hostetler, J. S. (1995). A Study of the Social and Ergonomic Characteristics of the Female Motorcyclist and the Relationship with Company and Market Performance. Retrieved January 12, 2011 from http://emp.colorado.edu/files/SampleCapstonePapers/Women%20and%20Motorcycles.pdf. Leenen, S. & Jelassi, T. (2005). Ducat: Company Overview. Ducati (Italy) vs. Harlet-Davidson (USA). Retrieved January 11, 2011 from http://www.brainmass.com/resources/openfile.php?file_id=151983&auth_type=3&auth_user_id=0&posting_id=168163&studyguide_id=0&auth_string=9c59b28491a7ed3806433859880b9638&sgr_id=0. Bronson, J. W & Beaver, G. (2005). Will A New CEO Continue H-D’s Success?. Retrieved January 11, 2011 from http://road.uww.edu/road/dragow/Admin%20Policy/HARLEYCASEREVISED081005.doc. Sapherstein, M. B. (1998). The Trademark Registrability of the Harley-Davidson Roar: A Multimedia Analysis. Retrieved January 11, 2011 from http://www.bc.edu/bc_org/avp/law/st_org/iptf/articles/content/1998101101.html. Sawhney, M., Verona, G. & Prandelli, E. (2005). Collaborating to create: the internet as a platform for customer engagement in product innovation. Retrieved January 11, 2011 from http://alumni.kellogg.northwestern.edu/reunion/mbaupdate/Sawhney%20-%20Collaborating%20to%20Create%20JIM.pdf. Bibliography Falloon, I. (2006). The Ducati 750 Bible. Veloce Publishing Ltd. Jellasi, T. & Enders, A. (2008). Strategies for e-business: creating value through electronic and mobile commerce. FT Prentice Hall. Read More