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Piaggio Harvard Case Study

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PIAGGIO (A)
By: Elena Bueso #10297661

This case study case will be addressing three main topics of discussion regarding Giovanni Agnelli’s strategy for growth as Piaggio’s CEO. The topics are the following: 1. Is Piaggio’s decision about building a new “green” engine manufacturing facility to be a strategic one? Why or why not? 2. The comparison and contrast of the strategies chosen by Piaggio, Yamaha, and Aprilia for competing in the PTW market. What are the relative strengths and weaknesses of each? 3. State whether or not Giovanni Agnelli should build the new engine facility

First, I do not think that manufacturing a "green" engine is a good strategy. It is a good initiative but we cannot disregard that fact that ultimately, generating profits are the main goal of any company. Yes, they are looking into the future and planning ahead how to adapt to upcoming regulations on new environmental standards, but instead they should think outside the box, and come up with different possible solutions to ensure and to make this market breakthrough a success. I think they are under looking the possibility of having "green" engine external suppliers. Even though this may contradict their manufacturing standards, there are many hidden benefits. They could do a pilot of this genius idea without putting at stake the company's well being and further more take as an example Aprilia's recipe for success. This should give them a more broad range of possibilities and help them focus their resources on what they're known for, and what they do best: affordable nostalgic, old fashion look motorcycles, that has been their badge and differentiating quality from the beginning. They have to have a defensive attitude on these matters, keeping in mind that the Japanese will always figure out a way of producing lower COST MOTORCYCLES and "green" engine motorcycles in the future.

Now, we are going to list three companies that share the same industry and market. They each posses a unique approach and seem to have different vision of success.

1. Piaggio, an Italian MOTORCYCLE COMPANY that's best know for their high quality fashionista signature scooters (Vespa). 2. Aprilia, an Italian MOTORCYCLE COMPANY that's best known for their high quality scooters and racing motorcycles. 3. Yamaha, a Japanese company, known for their high-tech quality vehicle global dominance.

Piaggio has taken pride over the decades on their high quality nostalgic motorcycles. They have been able to achieve this reputation by manufacturing all components and possessing all technical capabilities in-house. It used to be their strength, for they could assure the quality of its product and eliminate the risk of purchasing poor performing engines. But times have changed; the world is moving faster every time and with it comes evolution. Minarelli is a perfect example. Minarelli produces high quality engines, just as good as the ones Piaggio produces. Piaggio should be looking at this as an opportunity for improvement, they could significantly reduce their 30% overall manufacturing costs on engine production and start outsourcing this particular piece, for now, that strength has become a weakness. Piaggio's strength most definitely is its retro signature scooter; they have created a whole movement around it, from a fashion perspective, like the brand value Harley-Davidson offers. If they manage to stay focused on the reason of their success they will CONTINUE to prosper.

Aprilia has a very different way of doing things. They outsource all components and closely work with over 150 external suppliers, allowing them to focus resources on design and marketing. Although this has been perceived as a strength, and mainly the reason of their success, this could represent a great risk for any misfortune on this segment could easily make them stumble. Another weakness is their ambition. They seem to be a very fierce competitor, taking chances when they see them. This not always leads to good outcomes, especially without taking into consideration the consequences of making bold moves. They seem to have it all figured out and as far as this case is concerned they have never experienced misfortunes on those departments, but it does not mean they could not happen in the future. Their greatest strength compared to Piaggio is that they produce fast high quality motorcycles. They have explored the racing motorcycle market more in depth, and is what has given them credibility and high end market positioning.

Yamaha is a motorcycle monster compared to the ones above. Their vision of success is large, not bounding them to any specific market; therefore, their global strategy has owned up to this philosophy and made of this their strength by excellence. They found homogeneous needs across the world and then mass-produced high quality motorcycles with low manufacturing costs. A weakness for them was the fact that they transferred productive assets to the East Asian newly industrialized countries, elevating transportation costs and ultimately causing imports to decline. They had to redesign their business model, and quickly seek ventures with local manufacturers.

As for our third topic of discussion, I think Giovanni Agnelli should not invest in building the new engine facility. Engines are not a differentiating factor for costumers; it seems to me Piaggio would be putting a lot of effort and resources on something that's not valuably traceable for consumers. I think Piaggio should invest in other areas, and improve its products. Piaggio should channel its focus towards costumer needs; find out why certain costumers prefer Aprilia's motorcycles to theirs. Consumers seem to have a bigger preference for motorcycles with larger wheels than smaller ones. Larger wheels provide more comfort and security for consumers that travel longer distances. For example, commuting to work or traveling between towns. I think if Piaggio focuses and explores these opportunities, they could gain competitive advantage in their perspective consumer markets.

In conclusion, costumers don't care about the hurdles and complications the company has incurred, when they seek for a motorcycle of this nature, they are seeking for quality, looks (fashion wise) and price (convenience), they should base their planning over those principles and go from there.

Piaggio should also conduct a study oriented on its engine production, and consider the possibility of cutting costs of engine manufacturing by outsourcing to Minarelli. Minarelli is a respectable engine manufacturer which mass produces reliable and relatively cheep motorcycle engines.

These are some ideas Piaggio might want to explore instead of diverting their resources on the "green" engine manufacturing facility.…...

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