KTM Ready to Race Case Solution

Global trends for motorcycle industry have also emerged. In North America, sales expected to increase by almost 10% in 2003 and the off-road segment is well-established, sales expected to grow by 17%-18% over the next three years. On the contrary European market has shown a decline for three years, sales expected to decrease by 10% in 2003 and by 4% in the next three years. A parallel trend was rising in Japan. Asia and Latin America's market seem to be promising areas for the expansion of motorcycle industry.

2. Porter Five Forces

i. Barriers to Entry

There are high barriers to entry in this industry owing to high costs of Research and development. There is oligopolistic competition, Honda and Yamaha having the largest market share, 43.1% in European off-road market and 62.4% US off-road market in 2002. The Strong dealer network is necessary for the off-road segment, which adds to the cost.

ii. The threat of Substitutes

The decline which is visible in Japan's and European market is due to growing baby boomer generation; they want different and sophisticated means of transportation. Possible substitutes, however, are buses, cars, and other public transportation. The switching costs are low for consumers.

iii. Bargain Power of Suppliers

The automobile supply industry is quite fragmented, so the bargaining power of suppliers is low.

iv. Bargain Power of Buyers

 Since there are varieties of options for customers, so the bargaining power of buyer is high.

v. Rivalry

With motorcycles being a differentiated product, and the industry needing high fixed costs and investments, competition is established on differentiation. So, the competition is high and will continue to remain high in the future as well.

3. KTM Core Competencies

KTM designs and manufactures motocross, rally and cross-country racing motorcycles; the target market for KTM is adults and children. The sales had reached to € 314.1 million, in 2002. About 70 percent of KTM's revenues came from off-road motorcycle sales, by the end of 2002. KTM provides its customers unique engine configuration and exclusive design elements, compact and reliable engines, all attributes required for the off-road bikes. KTM also offers bikes which are categorized as dual sports bikes and used for adventure and everyday riding in the city, with the elements similar to those of on-road bikes. The orange color of the motorcycle and the styling is distinctive.

In its marketing activities, KTM displays greatly off-road motorcycle racing so as to establish the "ready to race" and the positioning of the brand is "focused, uncompromising and extreme," to explain adventure oriented feature of the brand. Given the short average life span and quick launch of new models and up gradation, Enduro and Motocross are fastest growing sectors of KTM's product sales. The major factors contributing to the company's success is racing, along with R&D, which enabled KTM to establish first-class functioning into all its products. KTM sponsored racers in every major off-road racing circuit in Europe with much success.

4. SWOT analysis

5. Competitors Analysis

Net sales of Kawasaki in North America is 40.8% and in Europe 16.9%. Suzuki's net sales in Europe are 20%, in North America 19% and Japan 47%. Whereas, Yamaha's net sales in Asia is 18.8%, in Europe 23.2%, in North America 34.0% and in Japan 15.1%. KTM's net sales in Europe is 60.7% and in North America 29.5%. As compared to the financials of KTM and its competitors, KTM has spent a lot on its R&D and sales & sports activity, which gives an advantage to KTM over its competitors.

6. Supply Chain

Initially, KTM used general importers for all the markets. Later KTM moved from general imported to its sales subsidiaries for the reason being regulatory standards established by EU, which was hard to fulfill at that time. This step was a significant supporting factor to KTM's success in recent years. KTM has an existence in 72 countries around the world.