Strategic Recommendations: Existing Strategy Generic Strategy: Focused differentiation. Their mission statement makes this clear enough, which is to be the leader of the high performance off-road sport motorcycle market. Grand Strategies: Product innovation, product development, and a strategic alliance with Polaris Industries. KTM’s brand image is dependent on these grand strategies, most customers buying a KTM for the sake of owning a quality product with the latest racing technology incorporated into their production motorcycles.

Current Strategy: Pros and Cons KTM’s existing business structure and strategies ensure product quality, while reducing costs for raw materials, and producing up to 450 motorcycles per day at each of their four assembly plants (KTM, 2005). KTM’s research and development functional unit has often set the trend of the latest technology incorporated into off-road motorcycles (for example, the first rear disc brake equipped supercross motorcycle in 1986). However, the firm’s debt has increased significantly in order to build the new engine production plant in Munderfing, and their new development center in Mattighofen. Also, brand image is quite limited in North America and other regions besides Western Europe. This is the result of the larger Japanese firms (Honda, Yamaha, Kawasaki, and Suzuki) producing larger quantities of motorcycles at lower prices.

Options for KTM Become a supplier of high performance motorcycle components to the larger Japanese firms. This was done before, when KTM supplied radiators for the liquid-cooled two-stroke supercross motorcycles produced by Suzuki in the 1980s. Expand the company further by establishing assembly plans in the three other regions of the world in which their products are sold: South Africa, New Zealand or Japan, and the United States. Produce the undifferentiated components at these plants, while the Austrian assembly plants ships the completed engines and latest innovated products to the final assembly plants. Open corporately-owned dealerships in North America, rather than giving the rights to sell KTM products to smaller, generic motorcycle shops. Finally, expand sponsorship of enduro and longer duration motorcycle competitions in North America, since motocross and supercross events are already sponsored usually by the larger Japanese firms.

Reasons for Strategic Changes: Separate Assembly Plants At present, completed motorcycles are shipped directly from Austria to their respective sales divisions in Europe, North America, Japan, New Zealand, and South Africa. This involves large shipping costs, and a reduced capacity of products which can be shipped. KTM can ship a greater quantity of completed engines and sub-frame assemblies to each regional assembly plant, and therefore reduce production costs in Austria, while also increasing the number of completed motorcycles available for sale internationally. Each assembly plant can respond more quickly to technical service bulletins and design flaws with undifferentiated components, such as wheels, fork tubes, and rear suspension systems, than having the sales divisions have to work through the Austrian assembly plants for the solution. This also leaves the option available to KTM for customers to purchase unique, customized motorcycles, selecting from a variety of engine/transmission assemblies, frames, and product features, rather than buying a standard issue model. This is something no off-road motorcycle manufacturer has done yet.

Reasons for Strategic Changes: Supplying Japanese Firms While the objective is to sell more KTM products, KTM itself is already the supplier of performance radiators for other recreational motorized vehicles. KTM has always been a manufacturing company first, with a focus in motorcycle production finally becoming realzied in the mid 1950s. Selling differentiated, KTM-specific components to the Japanese firms saves Honda, Yamaha, Kawasaki, and Suzuki their own research and development costs. The Japanese firms already copy the innovations that KTM produces. This would simply save the costs incurred by the Japanese firms, while also giving KTM income when its competitors succeed in selling more products than they do. KTM’s customers can already purchase PowerParts for their motorcycles directly from Austria. The next logical step would simply be to begin producing KTM brand performance parts for the Japanese motorcycles, especially since many of the new features are based on KTM’s innovations.

Reasons for Strategic Changes: Race Sponsorship and Dealerships The Japanese firms already have a hold on the majority of motorcycle advertising in North America, the region of the world which often defines the latest trends in motorcycle racing. For example, Honda already markets towards whole families, far more effectively than any of the other Japanese firms in the last few years. This can be seen in their latest marketing campaign. KTM is better known for the Dakar Rally, and other similar long-distance endurance races, while the Japanese firms have a greater hold on AMA Supercross, Motocross, and Supermoto events. Expanding the brand image into North American enduro races through the AMA offers less competition than trying to establish a place in events already taken. Having corporately-run dealerships in North America is something the larger motorcycle firms, including Harley Davidson, do for both brand image and quality control. KTM motorcycles, on the other hand, are currently purchased through independent motorcycle dealerships and shops that offer a mixed bag of products, including Triumph, BSA, and other brands.

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