What are Ducatisti buying?
Core of the brand is Italian but scope is global
Value Creation =
The difference between the customer’s willingness to pay and the supplier’s opportunity cost.
It’s also the perceived benefit to the customer
=> The concept of value creation says nothing about profit: we can create value without making a profit
Value Creation: 1996 – 2001
Ducati VRIO analysis:
Resources:
- Highly skilled engineering
- Customer Loyalty
- World of Ducati week (record attendance, cannot be copied)
Value Capture: 1996 – 2001
Ducati has found ways to increase the WTP while reducing costs => create value
However, a company can create value without capturing any of it e.g. when prices are lowered too much, more value is created but not captured
How did Minoli capture value i.e. getting customers to spend more money?
- Offering entry models in all categories of motorcycles
- Following a concept of lifetime customer
- From beginner model towards premium segment
- Offering limited edition models at higher prices
- Increasing the sales of accessories and parts
- Releasing new models i.e. sports touring
Main strategy = offer choice: increase portfolio
=> Increase in sales (“The Turnaround”) led to decrease in prod costs. Ducati captured that value (producer surplus). As Ducati didn’t increase the price compared to its competitors (mistake), customers captured part of that value too.
Producer and Cosumer Surplus:
Producer Surplus
The selling price minus production costs. Contributes to the firm’s profits
Consumer Surplus
Willingness to pay minus price
What went wrong in the next era: 2001 – 2005
Negative factors outweigh positive.
Customer Acquisition Model:
- Lower priced bike is competing with a Japanese bike with superior technology
Product Discontinuity
- 999 failure to meet expectations
Loss of volume in US market
- Lost all employees
Ducati Competitive advantage:
Competitive Advantage: Sell emotions
Intangible assets:
- Heritage
- Community
- The dream
What are possible strategic options?
- Partnership?
- Should they focus on entry models? But there are asian competitors. Should they focus on high end models?
- Should they be acquired? Should they acquire?
- Reestablish bigger focus on racing?
Ducati introduced Scrambler again (historical/nostalgia model) as the main customers are 50+, with more customisation.
Wrap-up:
- Value Creation
- Value Capture
- Sustainability of Value Created/Captured
Strategic options should always be evaluated through these three criteria
=> We focused on the internal dimension but there needs to be a fit with the external dimension as well as with dynamic capabilities
