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Analysis of External Environment of Ducati (Answer of Q. 2)
In classical strategy literature, competitive advantage of a company is generally attributed to
the management’s ability to position the company’s 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 Author’s 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
Porter’s 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
Not clear from the case but most
of countrieslike USA, UK, Japan,
Italy, France, Germanyis quite
stable and companymainly
operatedin developed countries.
Economic
Not comes explicitlyfrom the case
but most of the economiesthat
companywas mainlyoperating in
low growthmature markets and
openeconomies.
Legal Technological

2. 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 forcesframeworkallowsa
firmto see throughthe complexityandpinpointthose factorsthatare critical to competitioninits
industry,aswell asto identifythosestrategicinnovationsthatwouldmostimprove the industry’s
and itsownprofitability.”
Applying five forces framework to Ducati
Industry Competitors:Harley,
BMW, Honda, Yamaha, Suzuki,
Kawasaki
Handful ofplayersbut all quite
well established and all vying for
customersbased on their
capabilities
Strong brand identity for Harley
models
Agreement between Hondaand
Yamahaabout partstransport
AgA
BB
Buyers
Wide varietyof individuals
withequallydifferenttastes
and reasonsforbuying(pg.
856).
Knee down,Fast,Urban,
Weekend,Highway,Easyand
Undecidedriders.
Each buyerdifferedbyage,
income,education,gender
Womennew customerbase
Threat of New Entrants
Numberof motorcycles
manufacturesdecreasing(pg.858)
Threat notsignificantasalready
manyestablishedplayersinthe
marketand requiredasignificant
initial network,resourcesand
investment
Suppliers
Majoritysupplierbelongs
to EmilianDistrict(pp.866)
Two sourcesavailable for
each part andalternative
available (pp.867)
Mostlyshort term
contracts exceptfewlong
termsuppliersof strategic
importance (867)
Substitutes
In sports sub segmentNaked,HarleyBuell modelwasa
threat.BMW alsocompetedinsportsubsegmentNaked
(pg.859)
Japanese companiesHonda,Kawasaki,Suzuki, andYamaha
had substitutableproducts(figure 3,pg.859)

3. 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
author’s 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 porter’s 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 firm’s
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 firm’s resources and skills, a
“competitive scope i.e. a broader conception of the scope of firm’s 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 author’s 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 author’s view, this is what Porter (2004:14) refers to
“Differentiation” generic strategy. Ducati and its competitor’s position in the market can be
represented on the following diagram.

4. Differentiation and Positioning strategy of Ducati
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 Ducati’s 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)
Accordingto Barney(1991) analysisof the impactof a firm’senvironmentonitscompetitiveposition
or marketdrivenstrategyisbasedontwo assumptions.First,firmswithinanindustryora strategic
groupare identical intermsof strategicrelevantsourcestheycontrol andthe strategiestheypursue.
Second,these modelsassumethatshouldresourcesheterogeneitydevelopinanindustryorgroup
will be veryshortlivedbecause the resourcesthatfirmsuse toimplementtheirstrategiesare highly
mobile i.e.theycanbe boughtor soldinfactor markets(Barney,1991). However,inresource based
view,itissuggestedthat“organisationsare notidentical and atleastsome resourcesand
Japanese
Companies
Ducati
Harley
Davidson
Knee downRiders
Riders
Urban Riders
Highway lovers
Easy
Riders
Fast Riders
Function
Performance
Comfort
Life Style

5. capabilitiesof anorganisationare inimitable byotherorganisations(Johnsonetal,2008:94 &
Barney,1991).
For the analysisof the case and answeringof thisquestion,authorwouldconsiderthe Daft(1983)
definitionof firmresources.AccordingtoDaft(1983), “firmresourcesinclude all assets,capabilities,
organisational processes,firmattributes,information,knowledge,etc. controlledbyafirmthat
enable the firmtoconceive of andimplementstrategiesthatimprove itsefficiencyand
effectiveness”.
As itappearsfromthe case,Minoli andhisteam puta significantemphasisonidentifyingunique
resourcesthathave potential attributesforsustainablecompetitive advantage.Topmanagement
identifiedresourcesandculture of Ducati thatwas difficultforcompetitorstoimitate.Resources,
culture,methodsusedtodiagnosisof resourcesand how knowledge,culturewasmanagedcanbe
summarisedinfollowingmatrix.
Source:Adaptedfromthe case study
Resources and competencies Identified
Desmodromic Distribution System
L-Twin Engine
TubularTrestle Frame
Unique Sound
Beautiful, sophisticated powerful bikes
Culture supporting sports bike attributes
In explicit andimplicit knowledge
Culture
Passion forRaces
Unique Beautiful Performance Bikes,Stresson Asthetics
Top Notch Engineering
Purists
Passion for speed, performance, innovation
Diagnosis of Resources
Bench Marking Harley Davidson Businessand
Model of distribution and valuechain analysis
Mappingvarious activites and valuedelivered
Managing Knowledge, building
culture and building
competencies
Museumbuilding
Ducati Stores, 'HistoryWall'(pp. 867)
Coordination among R&D, Product development, Racing
divisionandMarketingdepartment
Ducati Owners club, Events, Ducati.com
Resources of
Ducati

6. “The core of Ducati’sbrandingstrategywassooncrystallizedintowhatwasdubbedas‘the worldof
Ducati.”(Wit & Meyer, 2004:863). In authors view, this was to a certain extent an attempt to
harness organisation’s knowledge lying at different co-ordinates of Ducati. The worldof Ducati
and variousstepstakenbymanagementteamatDucati can be identifiedwithknowledge building
using‘the knowledgespiral model’ (NonakaandTakeuchi,1995:71). Spiral inthe model suggests
that “fourmodesof knowledge creation”are interrelatedandmovementfromone mode toanother
ishappeningcontinuously (Mintzberg et al, 2005:211).
Tacit knowledge to explicitknowledge
Dialogue
FieldBuilding
Socialisation
(implicit sharing of tacit
knowledge)
Externalization (converts
implicittoexplicit)(Ducati
owners club, close
coordination of various
departments)
LinkingExplicit
Knowledge
Internalisation
Operational knowledge
(learning by doing)
(Racing division,
marketing, R&D, Product
development working in
close coordination)
Combination
(combines and passes
formally codified
knowledge)
(History wall, Museum)
Learning by doing
Source: Adapted from Nonaka and Takeuchi (1995:71)
Buildingmuseumcanbe seentosome extenttryingtomake implicitknowledge toexplicit.
Marketingand R & D departmentworkingcloselywitheachother.Itwasprobablyanattemptto
understandandshare implicit andexplicitknowledge. Ducati OwnersclubandDucati.comcanbe
seenascommunitiesof practice. Managementwasmaking aconsistentefforttoimprove

7. organisational capabilitiestooutperformthe competitionandthiscanbe seenalongthe five
dimensions:the speedi.e.abilitytorespondquickly,consistencyinwhatmanagementwasdoing,
acuityi.e.the abilitytosee the competitive environment,agilityi.e.the wayorganisationwas
adaptingitself andinnovativeness( Stalketal,1992).
From the case and basedon the above modelsandanalysis,itcanbe saidto a certainextentthat
top managementduringthe turnaroundphase of Ducati putlotof effortandmoney(forexample,
spendingmoneyonmuseumratherfixingthe leakingroof). Minoli’sfirstfew movescanbe viewed
as identifyingcompanycapabilities,resourcesand core competencies.He triedto understand what
the companyculture isand made an attemptto understandtacitknowledge,implicitassumptions,
the way of doingthings,passionof Ducati employeesforsportsbike andracing,andtheirstresson
aestheticsandperformance of bikes.
Role playedby developmentof capabilitiesandorganisational knowledgewasquite significantin
Ducati’sturnaroundinauthor’sview. Asmentionedinthe case “in1998, Ducati developedthe new
900SSie in15 monthscomparedto over36 months for previousmodel development”and “ In 2001,
Ducati’sengineeringteamwasreputedasone of the mostexpertandskilledinthe industry”(Wit &
Meyer, 2004:868). In author’sview toa great extent,itwouldhave beenverydifficulttoachieve
thisefficiencyandskill improvementsunlessmanagementatDucati hadnot identifiedthe
capabilitiesandusedthemforthe turnaroundof the organisationfroma state of bankruptcy.
Whether Ducati Strategywas 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 author’s 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 Minoli’swords,“Ileftwiththe clear
impression(whenhe came firsttime) thatitwasalmostbychance and notby strategicchoice that
Ducati hada productthat the publicloved.”(Wit & Meyer, 2004:862).

8. Reference:
Mintzberg,H.,Ahlstrand,B.& Lampel,J.(2005) Strategy Safari:a guided tour through thewildsof
StrategicManagement.1stedn.NewYork:Free Press.
Nonaka,I. & Takeuchi,H.(1995) The knowledgecreating company:How Japanesecompaniescreate
the dynamicsof Innovation.New York:OxfordUniversityPress.
Porter,E.M. (2004) CompetitiveAdvantage.NewYork:Free Press.
Stalk,G., Evans,P.,& Shulman,L. (1992). Competingoncapabilities:the new rulesof corporate
strategy [online].Harvard BusinessReview.70(2). pp.57-69. Availableat:
http://web.ebscohost.com/ehost/pdf?vid=3&hid=105&sid=b3cb24fd-785b-45ea-bd05-
3b6d0c0410fb%40sessionmgr102. Accessed: March 5, 2008
Barney,J.(1991) Firm ResourcesandSustainedCompetitiveAdvantage. Journalof Management.17
(1).pp. 99-120
Daft,R. (1983) Organisation theory and design.New York:West.
Wit,B. D. & Meyer,R. (2004) Strategy:Process,Content,Context.3rdEdn.London:Thomson
Learning.
Johnson, G.,Scholes,K.,&Whittington,R.(2008) ExploringCorporate Strategy.8thEdn.London:FT
Prentice Hall.
Juga,J. (1999) ‘Generic capabilities: combining positional and resource-based views for strategic
advantage’. Journal of Strategic Marketing [online]. 7(1). pp. 3-18. Available at:
http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4220287&site=ehost-live [Accessed: 08
March, 2008]
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