GROUP A

five forces: KTM

threat of new entrants

bargaining power of suppliers

competitive rivalry

bargaining power of buyers

threat of substitute products

five forces analysis

industry attractiveness
rivalry amongst competitors threat of new entrants threat of new substitutes
strength
low medium high

bargaining power of buyers

bargaining power of suppliers

industry competitors
factor
low

strength
medium high

industry growth concentration and balance fixed costs / value added

intermittent overcapacity
brand identity switching cost informational complexity diversity of competitors corporate stakes exit barriers

substitutes
factor
low

strength
medium high

relative price performance of substitutes switching cost buyer propensity to substitute

buyers
factor
low
buyer concentration buyer volume switching cost buyer information

strength
medium high

buyer profits
substitute products pull-through price-sensitivity price/total purchases

product differences
brand identity ability to backward integrate impact on quality/performance decision maker incentives

porters four principal diagnosis components

what the competitor is doing and can do

what drives the competitor

competitors response profile

future objectives
at all levels of management and in multiple dimensions

is the current competitor satisfied with its current position?

what likely moves or strategy shifts will the competitor make? where is the competitor vulnerable?

current strategy
how the business is currently competing

assumptions
held about itself and the industry

what will provoke the greatest and most effective retaliation by the competitor?

organisations strengths and weaknesses

capabilities

competitor A:Kawaski (future objectives)

Focus on the production of high performance super bike, which should be known for its design. To pursue cost efficiencies and drive Research and Development

competitor A: assumptions
Revenue from the motor cycle business in future would remain at a minimum of 25% of the total.

competitor A: current strategy

Developed the Good Times Owners Club for the motorcycle owners Entered into an alliance with Kawasaki to leverage each others strengths, cost effectiveness and share R & D.

competitor A: capabilities
Known to produce high performance super bikes.

competitor B:Suzuki ( future objectives)

Target the youthful Japanese market by adapting to Street Type motorcycles. Expected to push towards internationalisation.

competitor B: assumptions
Revenue from the motor cycle business in future would remain at a minimum of 25% of the total.

competitor B: current strategy

A monthly e-newsletter to remain in touch with the pulse of the consumers Focus on Street-Types bikes along with touring models

competitor B: capabilities
Development of Suzuki Advanced Cooling Systems, which increased the racing performance of the touring models

competitor C:Yamaha ( future objectives)

To surpass the customer expectations

competitor C: assumptions
Revenue from the motor cycle business in future would remain at the present figure of 50%.

competitor C: capabilities
High quality of design and racing technology

competitor C: current strategy

Focus on the Yamaha Racing Team, to gain insight into the latest racing trends. Outsourcing of the non-value added activities to take advantage of the cost efficiencies.

competitor D:Honda ( future objectives)

To be a lifestyle product, by connecting with its consumers High focus on safety of its riders.

competitor D: capabilities
Customisation of bikes according to the tastes of its customers

competitor D: current strategy

Focus on marketing and after-sales methodologies. Development of motorcycle community called Hondas Riders Club, offering rider education reimbursement and arranging of Honda Hoot.

competitor threat grid

factors Kawasaki
Focus on the production of high performance super bike
future objectives

Suzuki
Target the youthful Japanese market by adapting to Street Type motorcycles.

Yamaha

Honda
To be a lifestyle product, by connecting with its consumers High focus on safety of its riders.

To pursue cost efficiencies and drive Research and Development Revenue from the motor cycle business would remain at a minimum of 25% of the total.

To surpass customer expectations

the

assumptions

Revenue from the motor cycle business would remain at a minimum of 25% of the total. Monthly enewsletter to remain in touch with the consumers - Focus on StreetTypes bikes

Revenue from the motor cycle business would remain at the present figure of 50%.

current strategy

- Developed the Good Times Owners Club for the motorcycle owners Alliance with Kawasaki

- Focus on the Yamaha Racing Team - Outsourcing of the non-value added activities

- Focus on marketing and after-sales - Development of motorcycle community called Hondas Riders Club

Competitor threat grid

factors Kawasaki Suzuki
Development of Suzuki Advanced Cooling System to increase the racing performance of the touring models

Yamaha

Honda
Customisation of the bikes as per the needs of the customers

Capabilities

Known to manufacture high performance super bikes.

High quality design and racing technology

Impact Reaction

Likely Response

Internationalism diversification into Asian and Latin American countries Vendor development, R&D, setting up of local infrastructure.

Internationalism diversification into Asian and Latin American countries Vendor development, R&D, setting up of local infrastructure.

Internationalism diversification into Asian and Latin American countries Vendor development, R&D, setting up of local infrastructure.

Internationalism diversification into Asian and Latin American countries Vendor development, R&D, setting up of local infrastructure.

Environmental Analysis: Economic

Growth of the automobile industry in North America for 10 consecutive years. Growing income strength of the middle class in Latin America. Development markets in Asia and Latin America, which are highly price competitive.

Environmental Analysis: Political

Countries like Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta etc. are expected to join the European Union followed by Bulgaria, Turkey. Croatia and Romania. Creation of a common regulatory framework across the European Union which made it possible for KTM to follow just one standard. Imposition of tariffs by USA, in retaliation for the European Unions ban on American beef, which resulted in 100% duty surcharge on bikes imported from Europe

Environmental Analysis: Social

Popularity of the on-road bikes for transportation and recreation and usage of off-road bikes for cross-country racing. Desire for a certain lifestyle and community experience from the old on-road bikers, while the need for the young, urban males for urban transportation. Decrease or graying of the baby boomer generation which were moving towards other means of transportation (Japan)

Environmental Analysis: Technological

Recent trend in the automobile industry to move towards 4 stroke engines and away from 2 stroke engines.

SWOT ANALYSIS: KTM Strength

Reputation for production of reliable, high-quality core parts. Financing from Venture Capitalists and Private equity firms. Products off the factory line were ready to race. Short average life span of the motor cycles and quick introduction of new models and upgrades. Highly diversified product portfolio which comprised off sport mini cycles, rally bikes, super motor bikes etc. Sponsoring of major off-road racing circuits in Europe which helped cultivate its brand image. Gaining control over the suppliers, dealers, market investment and market information after the formation of EU. KTM bikes being sold for a premium compared to Japanese brands. Allocation and placing orders for nearly 90% of next years production. Using Dealer Net to coordinate, track shipments and inventory among the dealers. Flat hierarchy, shared vision, strategy and democratic work environment.

SWOT Analysis: KTM Strength (contd.)

Customer segment was young and edgy, who were drawn by the legacy of KTMS championship titles. Alliance with companies like Red dull, to appeal to the segment of extreme sports fans. Availability of high end technological know-how to produce sporty All Terrain Vehicles.

SWOT Analysis: KTM Weakness

Lack of control over the dealers chosen thereby having no control over market information, level of investment or the introduction of newer models. Bikes manufactured were challenging to ride and were meant for experienced riders. Ability to produce only sport ATVs but not utility ones.

SWOT Analysis: KTM Opportunities Develop in-house on-road motorcycles. Develop utility All Terrain Vehicles. Go on a geographical expansion into Europe and Latin America. Integrate with the smaller suppliers, who were based out of Europe and develop specialized tools and technology.

SWOT Analysis: KTM Threats

Lack of professionalism from the bigger suppliers who supply to Gm and Ford. Less efficient, small time automotive suppliers on whom KTM was overlay dependent. Drop in the sales in the European Region

SWOT ANALYSIS: Kawasaki

STRENGTH Known for design and high performance super bikes. Only manufacturer to develop hardcore sports bike Development of the Good Times Owners Club. Offering financial services for the purchase of Kawasaki products WEAKNESS

THREATS

OPPORTUNITIES

Markets in Developed countries were To leverage the companys strengths, moving to saturation. pursue cost effectiveness and share R and D with Suzuki. Expansion into Latin America, Asia and India by development of local sourcing, R&D and production infrastructure.

SWOT ANALYSIS: Suzuki

STRENGTH WEAKNESS Targeted the Japanese youth. Didnt have an established community Strong in adapting the trends associated for its riders. with street-type motorcycles. Known for its advanced technological systems. Eg: Suzuki Advanced Cooling System Publishing of a monthly e-newspaper

THREATS

OPPORTUNITIES

Shrinking population of Japan. Expansion into Latin America, Asia and Aging baby boomer segment India by development of local sourcing, Shift in consumer preferences. R&D and production infrastructure. Markets in Developed countries were moving to saturation.

SWOT ANALYSIS: Honda

STRENGTH Successfully adapted Harleys marketing and after-sales methodologies. Ability to customize the bikes as per the requirements of the customers. Developed a community called Honda Riders Club of America, which gives rider education reimbursements etc. WEAKNESS

THREATS

OPPORTUNITIES

Expansion into Latin America, Asia and Markets in Developed countries were India by development of local sourcing, moving to saturation. R&D and production infrastructure.

SWOT ANALYSIS: Yamaha

STRENGTH Followed the philosophy of Kando surpassing customer requirements. Focus on the Yamaha racing team. Focused on core competencies in design. Outsourcing of non-value added activities to take advantage of cost efficiency. THREATS OPPORTUNITIES WEAKNESS

Markets in Developed countries were Expansion into Latin America, Asia and moving to saturation. India by development of local sourcing, R&D and production infrastructure.

MARKET COMPARISON: Europe vs. United States

FACTORS SALES EUROPE Drop in Sales. Expected to drop by 10% in 2003 and over 4 % each year over the next 3 years. UNITED STATES Increase in sales. Positive growth in 10 consecutive years. Expected to grow by 17-18% over the next 3 years.

CURRENCY FLUCTUTATIONS

None. Euro was expected to be the common currency.

Dollar was losing out because Euro was strengthening.

Had imposed a ban on the import of European bikes, resulting in 100% increase in prices Accustomed only to high-volume, low-technology products and hence hadnt the technical skill nor inclination to respond to KTMs needs

TRADE None. Common regulations PROTECTIONISM among all countries . SUPPLIERS Small, unprofessional but on training were integrated and were vital for operations

Recommendation
Expand dealer network with new models in High Growth in North America Expand operations in to new potential markets like Latin America, Asia and Africa Even though off road segment is growing, on road market is too large to ignore, hence should enter into off road. Should launch utility ATVs as the technical knowhow is already present.