Analysis of External Environment of Ducati (Answer of Q.

2)
In classical strategy literature, competitive advantage of a company is generally attributed to
the managements ability to position the companys assets against some external context
(Mintzberg et al, 2005 & Juga, 1999). This external context is referred (Porter, 2004) as
external environment for a particular company. According to Johnson et al (2008:54), the
environment is what gives organisations their means of survival. So, it is important to a
great extent that most of companies be aware of the environment in which they are
operating. In Authors view, Ducati was aware to a certain extent what is the external
environment surrounding it. This answer will attempt to analyse the external environment as
it appears to author from the analysis of case study (Wit & Meyer, 2004:854). This answer
will look first macro environment of Ducati using PESTEL framework, then Industrial
environment, and after that Competitors and Markets (Johnson et al, 2008) mainly using
Porters five forces model (Porter, 2004:6).
Macro environment of Ducati
Macro is remote environment of a company comprising economic, social, political,
technological and ecological factors (Pearce & Robinson, 2005). One way of looking at
remote environment is PESTEL framework (Johnson et al, 2008).

Political

Economic

Not clear from the case but

most of countries like USA,
UK, Japan, Italy, France,
Germany is quite stable and
company mainly operated
in developed countries.

Not comes explicitly from

the case but most of the
economies that company
was mainly operating in low

Legal

growth mature markets and

open economies.

Technological

Free markets, not

much restriction from
the governments
except safety
standards (In authors
view)

Fuel efficient and

high performance
engines
Improvement in
Paint, Trim,
Chrome, Exhaust
pipe shaping (Wit &
Meyer, 2004:857).
Electronic
Components

Environmental
Not explicit in
the case
Green issues (in
authors view)

Social

CAD & CNC

Women becoming
oriented towards
biking

Different tastes
and lifestyle , and
changing at faster
rate

Industrial Environment
PESTEL analysis helps a company analyse remote environment but more important is the
immediate environment of the company or industry in which the company is operating in
(Johnson et al, 2008). Five forces framework is one of tools to analyse the immediate
environment of a company. According to Porter (2004:7), The five forces framework
allows a firm to see through the complexity and pinpoint those factors that are
critical to competition in its industry, as well as to identify those strategic
innovations that would most improve the industrys and its own profitability.

Applying five forces framework to Ducati

Threat of New Entrants
Number of motorcycles
manufactures decreasing
(pg. 858)
Threat not significant as
already many established
players in the market and
required a significant initial
network, resources and

Suppliers

Buyers

Majority supplier
belongs to Emilian
District (pp.866)
Two sources available
for each part and
alternative available
(pp. 867)
Mostly short term
contracts except few
long term suppliers of
strategic importance
(867)

Industry
Competitors :Harley,
BMW, Honda, Yamaha,
Suzuki, Kawasaki
Handful of players but
all quite well
established and all
vying for customers
based on their
capabilities
Strong brand identity
for Harley models
Agreement between
Honda and Yamaha
about parts transport
AgA

Substitutes

BB

In sports sub segment Naked, Harley Buell

model was a threat. BMW also competed in
sport sub segment Naked (pg. 859)
Japanese companies Honda, Kawasaki, Suzuki,
and Yamaha had substitutable products (figure
3, pg. 859)

Wide variety of
individuals with equally
different tastes and
reasons for buying (pg.
856).
Knee down, Fast, Urban,
Weekend, Highway,
Easy and Undecided
riders.
Each buyer differed by
age, income, education,
gender

Assessing the extent to which Strategy of Ducati was market driven:

Approach of this school of strategy (Mintzberg et al, 2005) is analysis of external
environmental and using this analysis as the main reference framework for strategy
development. It is a very much a step by step approach (Porter, 2004). Strategy
development is primarily seen as seeking attractive opportunities in the market (Johnson et
al, 2008)
According to Porter (2004:231), Crucial strategic questions facing a firm are where in an
industry a firm competes and in what segments will focus strategies be sustainable. In
authors view to a certain extent Ducati adopted this philosophy when it tried to position itself
in the motorcycle industry during the turnaround period from 1996 to 2001 and further, to
what extent it can be said that strategy of Ducati was Market Driven. According to Porter
(2004:233),an industry is an array of similar or closely related products and Buyers. Ducati
did not try to go beyond motorcycle, related accessories and services as it comes out from
the case. It seemed to have followed porters definition (2004) what an industry is and
identified which industry it operates in.
Ducati appears to have focused its attention under the leadership of Minoli on differences in
customer needs i.e. market segmentation (Porter,2004; Wit & Meyer, 2004; Johnson et al,
2008) as depicted in the figure 2, map of market (Wit & Meyer, 2004:857). It appears that
Ducati identified Users needs and preferences for product characteristics (Johnson et al,
2008:77). Ducati identified customers as knee down riders, fast riders, urban riders,
weekend cruisers, highway lovers, easy riders and undecided bikers. Ducati saw these
customers as strategic customers (Johnson et al, 2008:78) and differentiated these different
users based on four broad categories i.e. Function, Life Style, Performance and Comfort.
After industry segmentation, Porter (2004:255) mentions that next question for companies
are where in the industry a firm should compete and how its strategy should reflect in this
segment. With a good understanding of industry and market Ducati is operating in, Minoli
and his team tried to identify unique features of Ducati. As Porter (2004:257) puts it, A firms
resources and skills, reflected in its value chain, will usually be better suited to some
segments than others, influencing the attractiveness of a segment for a particular firm. It
was ascertained that Ducati has a good product, its products were unique, beautiful and
performance bikes though less efficient and reliable than Japanese bikes (Wit & Meyer,
2004:857).
Based on industry and market analysis and after that looking at firms resources and skills, a
competitive scope i.e. a broader conception of the scope of firms activities encompassing
industry segment coverage, integration, geographic markets served and co-ordinated
competition in related industries (Porter, 2004:53) was decided by strategists at Ducati.
Though case study does not mention that Value-chain tool (Porter, 2004:36) was used at
Ducati but in authors view it appears from the case that Minoli was quite aware of collection
of activities that was being performed at Ducati to deliver the final product to its customers.
Competitive Scope has four dimensions namely Segment, Vertical, Geographical and
Industry (Porter, 2004:54). Ducati decided mainly to produced Sports bikes and serve the
knee down, fast and urban bikers. In authors view, this is what Porter (2004:14) refers to
Differentiation generic strategy. Ducati and its competitors position in the market can be
represented on the following diagram.

Differentiation and Positioning strategy of Ducati

Knee down Riders
Riders

Performance
Urban Riders

Ducati
Fast Riders

Japanese
Function

Life Style
Companies

High way lovers

Easy
Rider
s

Co
mf
ort

Harley
Davidson

Source: Adapted from Figure 2 (Wit & Meyer, 2004:857) and Figure 3 (Wit & Meyer,
2004:859).
(This diagram does not represent any scale but only the positioning of Ducati, Harley
Davidson and Japanese Motorcycle companies.)
It also appears from the case that Ducati was aware of its environment and Minoli and his
team did value chain analysis to understand where in the companies lie value and try to
match that value in a particular market segment.
Based on the above analysis from the perspective of market driven strategy, author will
attempt to answer to what extent the strategy of Ducati turnaround was market driven. But,
before that, author will look into role of capabilities played in the growth of Ducati and
consider the extent to which Ducatis strategy was resource driven.
Role of capabilities played in the growth of Ducati and analysing the extent to which
the strategy of Ducati is Resource Driven (Answer Q. 1)
According to Barney (1991) analysis of the impact of a firms environment on its
competitive position or market driven strategy is based on two assumptions.
First, firms within an industry or a strategic group are identical in terms of
strategic relevant sources they control and the strategies they pursue. Second,
these models assume that should resources heterogeneity develop in an industry
or group will be very short lived because the resources that firms use to
implement their strategies are highly mobile i.e. they can be bought or sold in

factor markets (Barney, 1991). However, in resource based view, it is suggested

that organisations are not identical and at least some resources and capabilities
of an organisation are inimitable by other organisations (Johnson et al, 2008:94 &
Barney, 1991).
For the analysis of the case and answering of this question, author would
consider the Daft (1983) definition of firm resources. According to Daft (1983),
firm resources include all assets, capabilities, organisational processes, firm
attributes, information, knowledge, etc. controlled by a firm that enable the firm
to conceive of and implement strategies that improve its efficiency and
effectiveness.
As it appears from the case, Minoli and his team put a significant emphasis on
identifying unique resources that have potential attributes for sustainable
competitive advantage. Top management identified resources and culture of
Ducati that was difficult for competitors to imitate. Resources, culture, methods
used to diagnosis of resources and how knowledge, culture was managed can be
summarised in following matrix.

Source: Adapted from the case study

The core of Ducatis branding strategy was soon crystallized into what was
dubbed as the world of Ducati. (Wit & Meyer, 2004:863). In authors view, this was to a
certain extent an attempt to harness organisations knowledge lying at different co-ordinates
of Ducati. The world of Ducati and various steps taken by management team at
Ducati can be identified with knowledge building using the knowledge spiral
model (Nonaka and Takeuchi, 1995:71). Spiral in the model suggests that four
modes of knowledge creation are interrelated and movement from one mode to
another is happening continuously (Mintzberg et al, 2005:211).

Tacit knowledge

to

explicit

knowledge

Dialogue
Socialisation
(implicit sharing of
tacit knowledge)

Internalisation
Field Building

Operational
knowledge
(learning by
doing)
(Racing division,
marketing, R&D,
Product
development
working in close
coordination)

Externalization
(converts implicit to
explicit)(Ducati
owners club, close
coordination of
various
departments)

Linking
Explicit
Knowledge
Combination
(combines and
passes formally
codified
knowledge)
(History wall,
Museum)

Learning by doing
Source: Adapted from Nonaka and Takeuchi (1995:71)

Building museum can be seen to some extent trying to make implicit knowledge
to explicit. Marketing and R & D department working closely with each other. It
was probably an attempt to understand and share implicit and explicit
knowledge. Ducati Owners club and Ducati.com can be seen as communities of
practice. Management was making a consistent effort to improve organisational
capabilities to outperform the competition and this can be seen along the five
dimensions: the speed i.e. ability to respond quickly, consistency in what
management was doing, acuity i.e. the ability to see the competitive
environment, agility i.e. the way organisation was adapting itself and
innovativeness ( Stalk et al, 1992).
From the case and based on the above models and analysis, it can be said to a
certain extent that top management during the turnaround phase of Ducati put
lot of effort and money (for example, spending money on museum rather fixing
the leaking roof). Minolis first few moves can be viewed as identifying company
capabilities, resources and core competencies. He tried to understand what the
company culture is and made an attempt to understand tacit knowledge, implicit
assumptions, the way of doing things, passion of Ducati employees for sports
bike and racing, and their stress on aesthetics and performance of bikes.
Role played by development of capabilities and organisational knowledge was
quite significant in Ducatis turnaround in authors view. As mentioned in the
case in 1998, Ducati developed the new 900SSie in 15 months compared to
over 36 months for previous model development and In 2001, Ducatis
engineering team was reputed as one of the most expert and skilled in the
industry (Wit & Meyer, 2004:868). In authors view to a great extent, it would have
been very difficult to achieve this efficiency and skill improvements unless
management at Ducati had not identified the capabilities and used them for the
turnaround of the organisation from a state of bankruptcy.
Whether Ducati Strategy was Market or Resource Driven ( Answer 1 and Answer 2)
and to what extent:
As discussed and represented in various models and diagrams in the answers of questions
1 and 2, in authors views, it can be seen there are links to thoughts of both the schools i.e.
market and resource driven strategies. Author will argue that it was a mix of both the
approaches towards strategy formulation, development and implementation. It was to a
great extent the ability of Minoli and top management of Ducati to analysis the environment,
market, buyer preferences, Ducati resources, capabilities, core competencies etc. made this
turnaround successful. And, author will further argue that strategy development during the
period of turnaround was more resource based driven than market driven as a large part of
market driven strategy was even being implemented even before Minoli joined and same
was to a certain extent during the turnaround phase. In Minolis words, I left with the
clear impression (when he came first time) that it was almost by chance and not

by strategic choice that Ducati had a product that the public loved. (Wit & Meyer,
2004:862).

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