Honda makes automobiles and motorcycles. BMW does as well. Now, here comes Audi. They appear to be on the verge of acquiring Italian upscale sport motorcycle brand Ducati. More than a decade ago, Ducati had faltered badly. Texas Pacific Group, a private equity firm, purchased a major stake in the firm in the mid-1990s. TPG hired turnaround specialists Federico Minoli, who led Ducati in a very successful comeback.
The deal provides a moment to reflect on the nature of the motorcycle industry. In many markets, as Gary Hamel has noted, "strategies tend to cluster around some central tendency of industry orthodoxy. Strategies converge because success recipes get lavishly imitated." Firms compete head-to-head in these situations, and overall industry profitability suffers as a result. The motorcycle industry, thankfully, does not fall into that type of destructive rivalry. Instead, firms have found a way to occupy different niches in the industry, and to avoid the type of vicious price rivalry that can damage margins irreparably. Ducati, Harley, and Honda, as an example, all compete in different segments of the market for the most part. That recipe has been very good for the key players in the industry. We'll see if anything changes with the Audi acquisition.