GROUP A

five forces: KTM

competitive rivalry

bargainingpower ofsuppliers

bargainingpower ofbuyers

threat ofsubstituteproducts

threat ofnew

entrants

five forces analysis

industry attractivenessstrength

low medium high

rivalry amongst competitors

threat of new entrants

threat of new substitutes

bargaining power of buyers

bargaining power of suppliers

industry competitors

factor strength

low 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 strength

low medium high

relative price performance of substitutes

switching cost

buyer propensity to substitute

buyers

factor strength

low medium high

buyer concentration

buyer volume

switching cost

buyer information

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

c

porter’s four principal diagnosis components

what drives the competitor what the competitor is doing and can do

future objectives at all levels of management and in multiple dimensions

current strategyhow the business

is currently competing

assumptionsheld about itself and the industry

capabilitiesorganisation’s strengths

and weaknesses

competitor’s response profile• is the current competitor satisfied with its current position?• what likely moves or strategy shifts will the competitor make?• where is the competitor vulnerable? • what will provoke the greatest and most effective retaliation by the competitor?

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 ‘Honda’s Riders Club’, offering rider education reimbursement and arranging of Honda Hoot.

competitor threat gridfactors Kawasaki Suzuki Yamaha Honda

• future objectives

Focus on the production of high performance super bike

To pursue cost efficiencies and drive Research and Development

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

To surpass the customer expectations

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

• assumptions

Revenue from the motor cycle business would remain at a minimum of 25% of the total.

Revenue from the motor cycle business would remain at a minimum of 25% of the total.

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

- Monthly e-newsletter to remain in touch with the consumers- Focus on Street-Types bikes

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

- Focus on marketing and after-sales - Development of motorcycle community called ‘Honda’s Riders Club’

Competitor threat grid

factors Kawasaki Suzuki Yamaha Honda

• CapabilitiesKnown to manufacture high performance super bikes.

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

High quality design and racing technology

Customisation of the bikes as per the needs of the customers

•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 tariff’s by USA, in retaliation for the European Union’s 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: KTMStrength

• 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: KTMStrength (contd.)

• Customer segment was young and edgy, who were drawn by the legacy of KTM’S 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: KTMWeakness

• 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 ATV’s but not utility ones.

SWOT Analysis: KTMOpportunities

• 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: KTMThreats

• 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: KawasakiSTRENGTH

Known for design and high performance super bikes.Only manufacturer to develop hardcore sports bikeDevelopment of the “Good Times Owners Club”.Offering financial services for the purchase of Kawasaki products

WEAKNESS

THREATS

Markets in Developed countries were moving to saturation.

OPPORTUNITIES

To leverage the company’s strengths, 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: SuzukiSTRENGTH

Targeted the Japanese youth.Strong in adapting the trends associated with street-type motorcycles.Known for its advanced technological systems. Eg: Suzuki Advanced Cooling SystemPublishing of a monthly e-newspaper

WEAKNESS

Didn’t have an established community for its riders.

THREATS

Shrinking population of Japan.Aging baby boomer segmentShift in consumer preferences.Markets in Developed countries were moving to saturation.

OPPORTUNITIES

Expansion into Latin America, Asia and India by development of local sourcing, R&D and production infrastructure.

STRENGTH

Successfully adapted Harley’s 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

Markets in Developed countries were moving to saturation.

OPPORTUNITIES

Expansion into Latin America, Asia and India by development of local sourcing, R&D and production infrastructure.

SWOT ANALYSIS: Honda

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.

WEAKNESS

THREATS

Markets in Developed countries were moving to saturation.

OPPORTUNITIES

Expansion into Latin America, Asia and India by development of local sourcing, R&D and production infrastructure.

MARKET COMPARISON: Europe vs. United StatesFACTORS EUROPE UNITED STATES

SALES Drop in Sales. Expected to drop by 10% in 2003 and over 4 % each year over the next 3 years.

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.

TRADE PROTECTIONISM

None. Common regulations among all countries .

Had imposed a ban on the import of European bikes, resulting in 100% increase in prices

SUPPLIERS Small, unprofessional but on training were integrated and were vital for operations

Accustomed only to high-volume, low-technology products and hence hadn’t the technical skill nor inclination to respond to KTM’s needs

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 ATV’s as the technical knowhow is already present.