Colin Rowe MGMT 471 Ducati Case Notes 1. How did Ducati turnaround from the brink of bankruptcy to become one of the most profitable motorcycle manufacturers in the world?At first Ducati was known for having technical superiority and a strong reputation but decided to go away from just motorcycles. Ducati had a unique product, some of the best engineers, a brand with strong potential. They decided they wanted to appeal to not only the extreme riders but a broader audience and move from mechanical to entertainment. Ducati used a differentiation strategy in creating their competitive advantage. Ducati motorcycles are standardized and had a longer life span than their competitors, allowing them to charge a premium because it saves the consumer money in the long run. They emphasized the durability and performance on all of their products over what the rest of the industry was offering. Ducati also differentiated themselves by creating a number of other activities to promote their growth and highlight their value. The entered racing, started advertising inmagazines which was not common at the time, created a museum and Ducati owner clubs and started putting together Ducati events. The supplier costs increased however with Ducati’s strategy tomove R&D, production and distribution in house and spending more money creating these new activities but are still lower than the industry leader’s Harley-Davidson (Exhibit 12) increasing the gap between willingness to pay and supplier costs. Ducati’s ability to differentiate itself from competitors with their durable, high-performance models makes up for the increased costs they have incurred, adding value to their firm. 2. Why are buyers willing to pay such a premium for Ducati motorcycles?Buyers are willing to pay such a premium for Ducati motorcycles because their differentiation strategy shows consumers the benefits of their superior durability and performance therefore allowing Ducati to charge a higher price, there is a cost value. Additionally their the price for their motorcycle has steadily increased over the years and they have not seen a drop or plateau in their earnings. Exhibit 1 shows that their total revenues from 1997 to 2001 when from $195.63 to $422.1 million dollars. Their approach to target a broader consumer base has helped them increase their market share. Because Ducati has been able to add value to their product, they have increase their market share from 5% to 7% (Exhibit 3). This is a good indicator that their consumers see the value in the product and are willing to pay extra for