Piaggio Final v1.1

PIAGGIO Case Analysis Presented by: ____________

About Piaggio • Established in Italy in 1946 with Vespa – Best Selling Scooter • Leading manufacturer for European scooters • Close to Bankruptcy during 1980s till 1993 due to Lack of Focus • Expanded in India and China with 35 new models • Product Line: 50cc Scooter, trendy Typhoon Benetton, 50cc and 125cc Vespa

About Piaggio (cont.) Strengths

Weaknesses

Exemplary Leadership

Structural Overcapacity

Cult Image

Less global penetration

Bargaining relationship with Suppliers

Suppliers with limited capacity

Skilled Technicians

Heavy investment in design

Long lasting products

Environmental Analysis Market Characteristics (Europe) •Mopeds and Small Motorcycles (including scooters up to 125cc) •Target – teenagers + urban commuters •Demand depends on:  Demographics  Economic conditions  Weather patterns  Regulations and emission norms •Large motorcycles (125cc+) •Target – for sports and touring, people with high purchasing power •Demand is linked with the economic conditions

Environmental Analysis •Europe •Increasing demand for inexpensive and manoeuvrable vehicles •Increasing demand for classic scooters •Growing interest among the urban population •Asia •High population •Increasing purchasing power •Low penetration •Demand for PTWs •In Europe – 12% of the global demand or 1.7 million vehicles •In Asia – 70% of the global demand (30% solely from China)

Environmental Analysis Main Competitors

Aprilia (Italy) •Second largest motorcycle, scooter and moped manufacturer in Europe •Positioning - ” Sense of Wonder” •Strengths•Only European firm to cover the entire range of two-wheelers •Creativity, innovation, flexibility, speed •Purchased engine from Minarelli (reliable and cheap) •Star – Scarabeo Fashionable retro look Functionality •Weaknesses•Heavy reliance on suppliers

Environmental Analysis (Competitor Analysis Cont.)

Honda, Yamaha, Suzuki (Japan) Strengths  High-tech global products  Built on homogenous needs across world markets  Superior quality  Economies of scale leading to competitive prices/higher margins  Longer product life as compared to niche products  Decentralised operations to save the costs further  Strong foothold in South Asian newly industrialised countries

Environmental Analysis Opportunities

Threats

Increasing demand due to population

Competition from Japanese companies

Penetration into Asian Markets

Competition from European Companies

Potential introduction of EU regulations

Two wheelers were not considered primary vehicles Fast changing consumer preferences Market saturation in developed countries

Issues • Dominance by Japanese Companies • Less Economies of Scale • Structural Overcapacity

Alternative1- Maintain focus on Europe

Reason

• Strong suppliers relationship-High bargaining Power • Piaggio’s niche competency in Europe • Changing emission norms- First mover advantage

Benefits

• Gain first mover advantage • Increased market share

Constraints

Recommendations

• Saturation in offing in European market • Higher cost

• Increase price incrementally-Green Engine • Widen the product line – high margin products • Acquire Aprilia- Sports bikes

Alternative 2– Supply Green Engines Reason

Benefits

Constraints

Recommendations

• High manufacturing cost, Vespa’s sales forecast at 3,50,000 annually was not enough to breakeven.

• Only European company with expertise in Green Engine • Higher profit margins

• Competition with the Yamaha • Risk of duplicity

• Identify Markets • Pricing Strategy

Alternative 3– Expand Globally Reason

• Opening of new plants in Asian countries by Japanese

Benefits

• Direct competition to Japanese manufacturers • Cost Advantage – Economies of Scale, Local Resources • Meeting Structural Overcapacity

Constraints

Recommendations

• High Investment • Local laws • Challenges in current Product Line • Identify rapidly developing economies • Decentralization • Mass production- common product

THANK YOU