Ducati OrgnCritique
Ducati OrgnCritique
Ducati OrgnCritique
Organisational Critique
Contents
Page
1 Theoretical Review
2
A: International strategy analysis
2A: 1 SWOT
2A: 2 PESTEL
5
5
6
7
7
4 Conclusions
5 References
6 Bibliography
14
7 Appendices
18
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
Appendix G
Appendix H
Appendix I
Appendix J
18
18
19
20
21
22
22
18
18
18
1 Theoretical Review
Ducati has manufactured its core products in Bologna, Italy since 1926 (Lerro &
Schiuma, 2005); however, Ducati habituates a global market; therefore, it is logical to
analyse Ducati utilising analytical frameworks that consider Ducatis situation: (1)
Resources and strategic capability analysis; (2) international strategy analysis.
Scholars determine that strategic approaches to organisational analysis belong to
schools of strategy (Mintzberg et al. 1998; Whittington, 1993; White, 2004).
Mintzberg et al.s (1998) Ten Schools of Strategy (appendix A) detail that theoretical
schools of study should be considered when undertaking organisational analysis.
Mintzberg et al. (1998) expanded the model further by grouping the ten schools into
two sub schools (appendix B): Prescriptive schools that focuses on hard processes
where analytical outcomes are predictable; Descriptive schools that concentrate on
the more unpredictable soft socio cultural influences on the internal and external
organisation.
Ward & Rivani, (2005) argued that the results achieved through application of
conceptual models are influenced not only by the outcomes of the models applied, but
also by the personal experiences of the analyst.
Considering these findings the resultant strategies will be subjectively determined by
the models applied and by the person performing the analysis. Intrinsically, according
to Ward & Rivani (2005) the strategic conclusions drawn from this study will
therefore be driven by the same values.
The analysis of Ducati will use aspects of Mintzberg et al.s (1998) theoretical
approach to scrutinise the resources and strategic capability of Ducati in detail;
however, alternative models will be used to consider international strategy analysis
within the macro environment that Ducati habituates.
SWOT (Humphrey, 2004; Appendix C); PESTEL (J & S quoted by, Mswaka, 2012;
appendix D) and Porters five forces (2008; appendix E) will be employed to gain
perspective on the macro environment; however, the models are not without criticism:
Agyapong and kwamena (2011) found the SWOT model superficial due to a lack of
detailed analysis; whereas, Hill and Westbrook (1997) concluded the model merely
facilitated discussion on strategic awareness without delivering worthwhile outcomes.
Prahalad and Hamel (quoted by Kodama, 2006) determined that Porters five forces
(2008) works well in stable market conditions, but is not reactive to market dynamics.
In addition Kodama (2006) continued to state that Porters five forces (2008) is
incomplete in the sense that the model has gaps. Kodama (2006) argues that the
model fails to adequately consider organisational resources and capabilities; therefore
the model is better employed in conjunction with the resource based view (RBV;
Amoo, 2012; appendix F) defined as spanning the 'culture school' and the Learning
school' (Hurtado, 2008).
The Greiner Curve (Greiner, 1972; appendix H) will be used to reference Ducatis
evolutionary growth and Ansoffs Product Market Grid (1957; appendix I) will be
used to determine the strategic options open to Ducati.
The RBV concentrates upon the particular resources organisations own that gain
competitive advantage by focusing internally and testing for core competencies within
the organisation that achieve value for customers and lead to differentiation from
competitors; whereas, SWOT; PESTEL and Five Forces focus on market positioning
and the environment (Anon, 2012). According to Barney (1991; 102, quoted by Foss
and Ishikawa, 2006) competitive advantage is achieved through the implementation
of value creating strategies unique to the individual firm and unavailable to
competitors.
The value chain (Porter, 1985; appendix G) will be employed to study Ducatis:
operations; procurement; technological developments and infrastructure, in
conjunction with the VRIN model (Barney, 1991)
Statistics will underpin the study and further scrutiny should uncover transformation
dynamics and emergent strategies; a concise examination of the organisational: type;
structure and leadership will be incorporated.
Using the models should provide foundations for performing strategic analysis on
hard and soft organisational factors. Secondary research will aim to define
Ducatis: purpose; aims; objectives and strategy in the short and long term futures.
Ducati proceeded to implement a user led knowledge based strategy built upon an
innovative internet platform that saw Ducati the MH900e become the first motorcycle
sold over the internet; the MH900e sold out in 31 minutes (Jelassi & Leenen, 2003).
Partnerships were forged with complimentary brands (Oakley; DKNY) leading to new
merchandising opportunities.
Threats
5 Forces; appendix E: 5: Ducats principal competitive rivals in the sports bike sector
are: Honda, Yamaha and Suzuki. Each enjoys large economies of scale compared to
Ducati and therefore incurs lower production and logistical costs that are reflected in
end user prices; however, Ducati enjoys superior brand loyalty (Gavetti, 2204).
5 Forces; appendix E: 1 & 2: With regard to threat of new entrants: the sports bike
market is competitive; however, Ducati has established brand loyalty, racing pedigree
and a sound production and sales platform; therefore, entry to the market is difficult
as is product substitution.
2A: 2 PESTEL
Using PESTEL (appendix D) the environment that Ducati operates within will
become clearer.
A: 2.1 Political
The financial markets did not react well to recent turmoil regarding the status of the
ex Italian Prime Minister Silvio Berluscon (Faris, 2011); interest rates rose which
impacted organisational operating costs and profits; the resulting weak euro against
the US dollar exchange rate (mdn.mainichi.jp, 2012) leaves Ducats global marketing
strategy vulnerable; Ducats largest presence is in the USA (motorcycle.com, 2012).
A: 3.3 Economic
In response to the political situation, inherent increased operating costs and falling
sales in the US Ducati had to increase prices by 6% (Bertacche & Ebhardt, 2010);
Ducatis chief financial officer commented The euro's strength against the dollar is a
real worry (Enrico D'Onofrio, quoted by (Bertacche & Ebhardt, 2010).
A: 3.3 Social
Motorcycles are enjoying a golden era. On television the number of dedicated sports
and enthusiast programmes are rising; spectators numbers at race tracks are growing,
as is merchandising (britishsuperbike.com, 2012).
Ducati facilitated the growth of Ducatis online dedicated community Ducatisti;
linking the external with the internal community and creating new alliances with
customers and enthusiasts leading to new knowledge and increased brand loyalty
(Lerro & Schiuma, 2005).
A: 3.4 Technological
Ducatis racing DNA is fundamental to technical progression and brand success;
however, lack of on track success could deteriorate the Ducatis association with
winning and negatively impact brand image.
Integrating customers into design through online communities has led to market
success and built a detailed insight into customers needs. Ducati has exploited
integrated web based technologies to directly link Ducati with dealers, suppliers and
customers to deliver added value in the resource chain, at the point of sale and in after
sales service, strengthening the relationship with customers; but making Ducati reliant
on IT (Lerro & Schiuma, 2005).
A: 3.5 Environmental
The low road taxation charges reflect that motorcycles are greener options than cars;
however, it cannot be ignored that accident death rates on motorcycles compared to
cars across all sources are higher.
A: 3.6 Legal
Motor highway control is increasingly regulated; Ducatis competitive advantage lies
in performance (Coffman and Odlyzko, 1998); therefore, further regulation could be a
concern.
Ducati used LEAN six sigma business process reengineering (BPR) to ingrain best
practice and quality into the hard aspects of production (Lerro & Schiuma, 2005).
Ducati embarked upon divestiture as opposed to backward vertical integration through
outsourcing production of non core components passing R&D onto the supplier
(themanufacturer.com, 2012). Fulfilment was handed over to dealers at 1%
commission rates as Ducati performed all the marketing and production; two suppliers
for each component was sourced increasing the knowledge pool and reducing the
need for warehousing to deliver just in time products (Lerro & Schiuma, 2005).
B: 1.2 Culture School
Transformational management (Schermerhorn, 2004) embedded new ideas and
behaviors into the culture of producing motorcycles at Ducati. Transformational
change embodied in Ducati World synthesised the vision and innovated change and
developed organisational knowledge as Ducati was brought closer to suppliers and
users through a new software platform.
Ducatis expansion in merchandising through partnerships with fashionable brands
like Oakley and DKNY ensures valuable merchandising R&D knowledge is gained,
keeping the brand merchandise on vogue.
4 Conclusions
The application of SWOT; PESTEL and Porters 5 Forces (2008) to analyse the
industry environment determined that Ducati is vulnerable to two major threats: large
volume competition and Ducatis own success.
Using The Greiner Curve (1972: appendix H) for reference most stages of growth
open to Ducati have been explored; intangible resources such as knowledge gained
through the online community and relationships with the race team and dealer
network leading to innovation remain Ducatis key assets.
A dealer and supplier network that had grown to support Ducati had become over
burdening. From the late nineties management began has turned around Ducatis
fortunes; Ducati embraced change to recover performance and market share; Ducati is
back to a position of strength.
Growth in all product ranges increased net profit for 2009 by 63%; North America
and the Far-East sales increased by 64%; market share is 8.6% and registrations
increased by 5% in 2010 (Del Torchio, 2012); Ducati is growing in all markets.
The global economic instability has stripped Ducatis prime sports market sector by
12.1% since 2008; however, Ducati sales and profits were up at home (Del Torchio,
2012) and in emergent markets like Asia and North America Ducati sold 63% more
bikes in a deflated market (Bureau, 2011; webbikeworld, 2012).
Ducati sales Assets have decreased over the same period however, adding perspective
(robotdough.com, 2012); as have Ducati stocks (Ducti Motor Holding S.p.A., 2012).
Competitive advantage in the sports bike sector remains strong through.
5 References
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7 Appendices
Appendix A
Ten Schools of Strategy (Mintzberg et al, 2009)
1. Design - A process of conception
2. Planning - a formal process
3. Positioning - an analytical process
4. Entrepreneurial - a visionary process
5. Cognitive - a mental process
6. Learning - an emergent process
7. Power - a process of negotiation
8. Culture - a social process rooted in culture
9. Environmental - a reactive process
10. Configuration - a process of transformation
Appendix B
Prescriptive schools (3):
Design
Planning
Positioning
Entrepreneurial
Cognitive
Learning
Power
Cultural
Environmental
Configuration
Appendix C:
Definition of SWOT
A process generates information that is helpful in matching an organization or groups
goals, programs, and capacities to the social environment in which it operates. Note
that in itself is only a data capture the analysis follows:
Strengths
Positive tangible and intangible attributes, internal to an organization.
They are within the organizations control.
.
Weakness
Factors that are within an organizations control that detract from its ability to
attain the desired goal.
Which areas might the organization improve?
.
Opportunities
External attractive factors that represent the reason for an organization to exist
and develop.
What opportunities exist in the environment, which will propel the
organization?
Identify them by their time frames
.
Threats
External factors, beyond an organizations control, which could place the
organization mission or operation at risk.
The organization may benefit by having contingency plans to address them if
they should occur.
Classify them by their seriousness and probability of occurrence.
Appendix D:
The PESTEL framework (1)
The PESTEL framework categorises environmental influences into six main types:
Political
Economic
Social
Technological
Environmental
Legal
Thus PESTEL provides a comprehensive list of influences on the possible success or
failure of particular strategies J & S (2011)
Appendix E:
Porters five forces framework; Porters five forces framework helps identify the
attractiveness of an industry in terms of five competitive forces:
1.
2.
3.
4.
5.
J & S (2011) quoted by, Mswaka, Walter. PhD. (2012 Environmental analysis for
strategic decisions: LECTURE 4- NEEDSLEC 4 TITLE ADDING. Lecture 3,
BHS0007 Corporate Business Strategy: University of Huddersfield Business School,
Huddersfield.
Appendix F:
School
Design, Learning
Cultural, Learning
Planning, Learning or Power
Cognitive, Cultural
Learning, Environmental
Environmental, Power or Cognitive
Environmental, Entrepreneurial
Configuration, Entrepreneurial
Power, Positioning
Positioning, Power
Amoo, Nii. PhD. The Resource-Based View (RBV) of the Firm: Analysing Resources
& Strategic Capabilities, Lecture 5, BHS0007 Corporate Business Strategy:
University of Huddersfield Business School, Huddersfield.
Appendix G:
The idea of the value chain is based on the process view of organisations, the idea of
seeing a manufacturing (or service) organisation as a system, made up of subsystems
each with inputs, transformation processes and outputs. Inputs, transformation
processes, and outputs involve the acquisition and consumption of resources - money,
labour, materials, equipment, buildings, land, administration and management. How
value chain activities are carried out determines costs and affects profits.
Most organisations engage in hundreds, even thousands, of activities in the process of
converting inputs to outputs. These activities can be classified generally as either
primary or support activities that all businesses must undertake in some form.
According to Porter (1985), the primary activities are:
1. Inbound Logistics - involve relationships with suppliers and include all the
activities required to receive, store, and disseminate inputs.
2. Operations - are all the activities required to transform inputs into outputs
(products and services).
3. Outbound Logistics - include all the activities required to collect, store, and
distribute the output.
4. Marketing and Sales - activities inform buyers about products and services,
induce buyers to purchase them, and facilitate their purchase.
5. Service - includes all the activities required to keep the product or service
working effectively for the buyer after it is sold and delivered.
Secondary activities are:
1. Procurement - is the acquisition of inputs, or resources, for the firm.
2. Human Resource management - consists of all activities involved in
recruiting, hiring, training, developing, compensating and (if necessary)
dismissing or laying off personnel.
3. Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's
transformation of inputs into outputs.
Author: Daniel Bye (2010). University23
of Huddersfield: Corporate Business
Strategy; Computing in Business course 2010/11
4. Infrastructure - serves the company's needs and ties its various parts
together, it consists of functions or departments such as accounting, legal,
finance, planning, public affairs, government relations, quality assurance and
general management
Porter, M.E. (1985) Porters Value Chain. Institute for Manufacturing; University of
Cambridge. [Online]. Available from:
http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html. [Accessed: 6 January
2012].
Appendix I:
Appendix J:
VRIN Model
The four key criteria by which capabilities can
be assessed in terms of providing
a basis for
achieving sustainable competitive advantage
are:
value,
rarity,
inimitability and
non-substitutability
Journal of
threats,
acceptable levels
VRIN (2)
R Rarity
VRIN (4)
N - Non-substitutability
Competitive advantage may not be sustainable if there is a threat of substitution.
Product or service substitution from a different industry/market. For example,
postal services partly substituted by e-mail.
Competence substitution. For example, a skill substituted by expert systems or
IT solutions
Amoo, Nii. PhD. The Resource-Based View (RBV) of the Firm: Analysing
Resources & Strategic Capabilities, Lecture 6 (2); 6-11. BHS0007 Corporate
Business Strategy: University of Huddersfield Business School, Huddersfield.