Master Thesis BA Strategy & Innovation (BKM123A25)
Market and product strategies on the Dutch motorcycle market –
a focus on five companies
University of Groningen Faculty of Economics and Business Master Thesis BA Strategy & Innovation (BKM123A25)
Sibe Bosman – s1749994 Supervisors: prof. dr. ir. F.P.J. (Frans) Kuijpers – assigned supervisor
K.J. (Killian) McCarthy – 2nd supervisor dr. T.L.J. (Thijs) Broekhuizen – coordinator
Abstract
This research paper investigates which product and market strategies are successfully executed on the Dutch motorcycle market. Up until now, previous studies mainly focused on the ecology and the technological aspects of the motorcycle industry, while hardly any attention is paid to examine and measure concrete strategies. To unveil which strategies are successful, this study focuses on five different international companies and performs external direct and indirect analyses to figure out how these companies are able to create competitive advantages. The five companies, or brands, examined here are BMW, Harley Davidson, Honda, Suzuki and Yamaha. By using Porter’s generic strategies and elements of the marketing mix, and making these applicable to the Dutch motorcycle market, my results show clear differences and similarities between product and market strategies pursued between these European, American and Japanese brands (over the past nine years). Of the brands examined, Harley Davidson is the only niche player, focusing on differentiation. The other brands are active in a broad market scope in which BMW focuses on differentiation, whereas the Japanese brands fall in between cost leadership and differentiation.
Index
Abstract 2
Introduction 4
Part 1: Literature review 6
Theoretical background, part I: indirect and direct external analyses 6 Theoretical background, part II: strategy, congenial theories and strategy execution 10 Theoretical background, part III: theoretical integration, hypothesises and measuring method 16
Measuring method 17
Part 2: Methodology 20
Part 3: Results 22
The Dutch motorcycle industry in an international context 22
The general environment (analysis) 23
Industry/Product Life Cycle (PLC) 28
Industry (environment) analysis 29
Summary and conclusions of the (indirect and direct) external analyses 31
Market and product strategies used within the Netherlands 32
Price analysis 32 BMW 34 Harley Davidson 35 Honda 37 Suzuki 38 Yamaha 40
Summary and conclusions of the market and product strategies used 42
Advantages and disadvantages of the strategies used 44
Summary, conclusions and discussion 46
Limitations and suggestions for further research 47
References 49
Appendices 53
Appendix I.A.: definitions and boundaries 53
Appendix I.B.: measurement techniques and indicators 54
Appendix II: highlights of IDI’s with Dutch motorcycle distributors 57
Introduction
The first motorcycle was invented by Paul Daimler in 1885.1 Until 2006 has the concept of two wheels and an engine hardly changed. Reason for this is the introduction of an innovative three-wheel motor-scooter (the MP3) by Piaggio, an Italian (motor-)motor-scooter manufacturer. According to the Dutch law it is a motorcycle, but it may also be driven by people with a car driving license. Another recent innovation comes from a new Dutch company (EVA Products) that develops and produces motorcycles that either run on diesel fuel, or bio-diesel, or GTL.2 In line with this innovation are motorcycles that run on batteries. The first electric motorcycle was developed in 1994, but has not become a success yet due to its high weight and overall bad performance.
Current articles and studies about the motorcycle industry are concerned around ecology, i.e. why some companies survive while others die. In addition, the majority of those studies are performed in countries with a rich motorcycle history and not about the ‘richless’ Dutch market with an average of around 17,000 units sold per year. Limitations of certain studies are the lack of a solid macro analysis and the homogenously considered competition. When taking the mentioned innovations in account, it made me wonder which strategies are used on the Dutch motorcycle market and whether innovation plays a role within those strategies or not. The main research question is which market strategies are
successfully used on the Dutch motorcycle market? This research question is supported by the
following sub questions which market and product strategies can be distinguished? How are the
strategies put into practice? What are the advantages and disadvantages of the strategies used? So,
this research is particularly focused on strategy because the total sales number per year almost entirely consists out of international brands that do not develop (technological innovations) and produce in the Netherlands. Assuming that this is true, I expect that the Dutch distributors and dealers are depending on what their foreign mother company has to offer and that the emphasize will lay on product and market strategy in combination with sales and marketing. The underlying question is whether innovation plays a role within those strategies and whether or not the strategy points to this issue.
The research has several goals when answering the research and sub questions. First, answers to these questions can be relevant for existing companies active on the market; it can lead for example to new insights about the market and can be taken into consideration for their long-term strategy formulation and implementation. Second, the answers can be relevant and considered by new entrants trying to enter the market. In other words; what can new (innovative) entrants learn from existing strategies used. Last, this article can be seen as a contribution to existing articles about motorcycles and strategy, like the way in which strategic and innovative factors can be measured and defined in this market.
1
Source: Encyclopedie van motoren, Brawn, R. (2008)
2
To figure the questions and assumptions out, this research combines existing theory about strategy and innovation and applies it to the Dutch motorcycle market. This makes the research explorative and descriptive of how the companies put strategy into practice. To perform research I have chosen to focus on five different companies that are active on the market for a long time and when combined have the highest market share over the past nine years; from 2000 up until 2008. These companies are BMW, Harley Davidson, Honda, Suzuki and Yamaha. There has been chosen for these five because I expect that they do, or have something, that works well.
To collect data, I have made use of secondary as well as primary data to increase reliability and validity. Secondary information is collected among others from the Dutch CBS, RAI Vereniging, BOVAG, and the ANWB for statistical and market information. Other information came from catalogues and encyclopaedias of motorcycles, scientific articles, motorcycle magazines and from the companies themselves. Information from the latter has been dealt with caution because it might be biased. The secondary information is completed with primary data in the form of individual depth interviews (IDI’s) with marketing/communication managers and employees of the selected companies. There has been chosen for this type of interview not in particular to collect opinions, but to control secondary data and to gain additional information to fill in the missing gaps.
Because this study concentrates on the Dutch market and five different companies, it has several limitations. First it performs research among five motorcycle brands in terms of sales and market share, which exclude other companies with remarkable less sales and market share. A second limitation is the timeframe from 2000 until 2008. The research will not be limited entirely to this timeframe, but sales numbers per brand are only available for these years. Third, the research will also limit itself to newly sold motorbikes and the companies, which means it does not go into supplement products such as clothing, merchandising, etc. Last, due to my limited technological background does this study not go into too much detail about those specifications, except for engine capacity.
Part 1: Literature review
In this part of the research, specific findings and definitions of prior studies are discussed, which coincide into an integrated overview with hypothesises. It is also discussed how the theories relate to each other and why I think they are important to analyze and include. This literature review starts with a basic input of strategy, namely an external environment analysis, also known as the DPEST-analysis, in combination with an industry and competitor analysis and congenial theories. After these macro-related models, theory about business models is discussed, followed by strategies including
complementary assets, innovation, customer equity and execution practices. The last section of part one integrates the theories by mentioning the hypothesises applied to the Dutch motorcycle market.
Theoretical background, part I: indirect and direct external analyses
Every organization faces and is influenced by exogenous factors known as the general, industry and competitor environment. Organizations can act upon or adopt to these factors, while several factors can be taken into consideration but are unable to control and predict.
One way of analysing the general environment is by using the DPEST-analysis, consisting of demographic, politic/legal, economic, socio-cultural and technologic segments (Hitt, 2003, pp.41). These segments, making up the general environment, are all the factors that have an influence on the industry and the firms within it. An objective of this analysis is to identify opportunities and threats; conditions that help and exploit, or may hinder a company to achieve strategic competitiveness. The demographic segment are statistical features about a population, like the size, age structure, geographic distribution, ethnic mix and income distribution. The economic segment refers to the state and nature of the national economy in which companies are active. When investigating the national economy one can think of the gross domestic product, inflation and personal saving rates, as well as the global economy since this goes beyond spatial boundaries. The role of the government, and therefore the political/legal segment, is concerned around regulation and stimulation by making and monitoring laws. On the contrary, companies and other influential groups try to influence these regulations and laws. The government does also have the power to interfere in the economy. The
socio-cultural segment is focused on a society’s attitudes and values and they often determine the
The abovedescribed segments and their elements challenge companies to understand the effects on their current and future (strategic) plans. They are present in every industry, but vary in the degree of turbulence and complexity which make them hard to understand for some companies in certain areas.
Completing and drawing conclusions from a DPEST-analysis is not the sole analysis to base decisions on, especially because such an analysis concerns all the companies active in the industry and because the segments have an indirect influence. In order to make better decisions, it is important to look at forces that play a role inside the industry as well. Such an analysis, the industry environment analysis, usually follows the general environment analysis and has a more direct effect on the firm’s strategic competitiveness.
An industry is a group of firms producing products/services that are close substitutes (Hitt, 2003, pp.55). How intense the competition is among this group of firms is determined by five forces. These are the threat of potential entrants and the threat of substitute products (vertical integration), suppliers and distributors/dealer channels (horizontal integration), together determining the industry rivalry. These forces were introduced by Michael Porter in 1980 and are well-known as Porter’s five forces. The horizontal forces represent the supply chain; the build-up flow of resources to the final customer. Companies are dependent on inputs and therefore suppliers. The price tag of them depends on supply and demand and the costs of switching to another supplier. If there are enough substitutes to choose from, prices are negotiable and when no substitutes are available, price goes up. The idea is the same for the power of distributors/dealer channels; bargaining power is low when demand is low, but when there are enough substitutes bargaining power increases and prices decrease.
The added value in every chain is the difference in revenues minus costs, or the value which is added to the resources. The more attractive the industry, the higher the added value and profits. Under such circumstances (capital) investments will enter and the threat of entry will, ideally, increase. The same holds true the other way around where profits and added value are low; the threat of entry will be low. Companies also deal with estimated revenues and calculated costs when entering. If the difference is higher than existing companies (incumbents), then the potential to enter is low. In their article value
chain envy: explaining new entry and vertical integration in popular music, Mol et al. (2005), describe
the relationship between the value that can be created and the value that can be captured in the supply chain. When this relationship is unequally distributed, new entry or vertical integration by incumbents is likely to happen. Besides new entrants, an industry is confronted by substitutes; these are products that compete in a new way and have a certain benefit-cost ratio.
Overall, the forces are an effective way to see which players are active in an industry and who has relatively strong power (over others). To report the interrelatedness between actors, it is wise to draw up an industry framework in addition to the industry analysis. This shows the most important connections of the company vis-à-vis direct and indirect/supportive players within a larger picture.
Just like the DPEST-analysis, the industry factors have an influence on all the companies and can vary in degree of importance. In theory it might seem as if the forces are static, but in practice they change over time. One of the reasons why industries evolve over time is due to changes within and around environments. Evolution takes, in general, place in four phases; they start (introduction), grow, mature and eventually decline. This model is called the industry life cycle and is calculated by the total industry sales over a period of time. In relation to the industry life cycle is the, perhaps, better-known
product life cycle (PLC), which describes different stages of products in terms of units sold over time.
In this model products are born, their sales grow, they reach maturity and decline or die (McGee et al., 2005, pp.292). Every stage of both cycles has its own characteristics and are therefore important to keep in mind for making strategic decisions.
The introduction phase is characterised by start-ups and the role of entrepreneurs. If successful, the more attractive the industry, the higher the added value and profits become. The industry as a whole and the number of entrants will increase in this situation fighting for market share. In the last two stages, maturity and decline, the industry and total sales will decline leading to a shake-out in which the strongest firms survive.
Growth of demand is an important feature for the product life cycle and can be characterised by S-shaped patterns reflecting shifts and the evolution of products (Grant, 2002). In the introduction stage the growth rate can be very slow as new product needs to create legitimacy. If and when acceptance is gained, rivalry grows and competing firms fight for a single dominant product design next to market share. This allows for product standardization and encourages to cut costs by shifting from product to process innovation leading, ideally, to economies of scale (the estimate of the proportion by which unit costs fall as experience of the production increases). Maturity is marked by saturation because existing products are not satisfactory anymore. New (technological) products are needed in this phase in order to boost sales. This leads to an extension of the industry life cycle, while causing a decline of the product life cycle for those products that have become obsolete. How long new products are viable depends on the context of the market.
Companies are each others’ direct competitors if the strategic choices of one company influence the results of another company (Besanko, 2000, pp.201). In the car industry, for example, Renault and Ford are each others’ direct competitors, but they do not directly compete with Bentley. The strategic choices, or the ‘how’ to compete, are discussed later on. Let’s first consider the competitor analysis from an economic angle with perfect competition at one extreme and monopoly at the other (McGee, 2005, pp.85). This view, the market structure, uses the number of firms and their market share as a starting point. If one firm supplies the entire industry, it is called a monopoly (C1), and it has 100% market share. As a consequence this firm controls the market and can charge high prices. Close to a monopoly is the dominant firm with one to a very few competitors in which the C1’s market share is smaller than 90% but 60% greater than the (other) dominant firm. The monopolistic firm is, in essence still dominating the market. This is different in an oligopoly (C4), divided into tight and loose, in which a few companies make up the total market for around 60-100% or in which they have a total of around 40% market share altogether respectively. Power completely shifts when the number of companies is numerous. Perfect competition and monopolistic competition are market structures in which many firms are active, with equally distributed or small market share (around or less than 10%). Rivalry is intense at this extreme, often consisting of hard to differentiate commodity products. Market price is determined at the market level by supply and demand, so letting firms hardly any choice to alter prices.
Mapping the market structure is helpful because shifts in the number of companies and market share can lead to possible adjustments and necessary changes to firm’s existing strategies. Other components of a competitor analysis are a firm’s capabilities, future objectives and assumptions (Hitt, 2003, pp.66). A firm’s capabilities are known as the Strengths and Weaknesses of the SWOT-analysis to see in which areas improvement is desirable. Future objectives and assumptions concern a companies’ own goals versus those of the competition by asking a set of questions, such as: how do we compare our goals to the competition, do we assume the future to be volatile, where will emphasis be placed in the future, is our current strategy viable in the near and long future etc. Information about competitors is helpful in order to response to each other’s actions, especially when industry rivalry is high and the future is uncertain.
Theoretical background, part II: strategy, congenial theories and strategy execution
Companies, or organizations, consist of people and resources coordinated to produce tangible and intangible outputs to achieve things they desire or value, i.e. to achieve their goals (Jones, 2007, pp.2). Reason why companies exist is laid down in their business model and should not be confused with strategy. In her article why business models matter, Joan Magretta (2002), provides a definition of what a business model is and how it differs from strategy. She argues that a business model is like telling a new story; it tells what a business is about and how it makes money in a particular industry. A successful business model represents a better way (of organizing things) than existing alternatives (by adding value), and answers two questions: who is the customer and what does the customer value?
Strategy, then, explains how you are going to be better than your competitors by being different. So, to
her, a business model describes how a company generates money, while the strategy describes how to distinguish yourself from your competitors.
Being different in an industry with perfect competition is unnecessary because entry is easy, everyone has the same information and products are identical. Put it differently: an industry is perfect if Porter’s five forces are equally balanced. As a consequence, price is the sole competitive variable of such an ‘efficient’ market. However, industries are not perfect and it is in the in the interest of the companies to distinguish themselves to charge higher prices by creating market imperfections (McGee, 2005, pp.148). The most common strategies to create market imperfections are described by Porter’s
generic strategies (1980) based along the lines of market scope (broad or narrow) and product characteristics (commodity or differentiated) (McGee et al., 2005, pp.159; Besanko, 2000, pp.364).
This model suggests three broad strategic positions; cost leadership or differentiation in a broad market scope and focus in a narrow market scope.
Companies following a cost leadership strategy strive to be the lowest cost producer. This is realized through investments in large-scale production facilities, economies of scale, experience (learning) and by monitoring costs on a continuous basis involving all stages of the value chain (Mintzberg, 1997, pp.102). No-frills commodity products of a reasonable quality in a relative stable environment are, in principle, sustainable to use because the price of these products is determined by the market.
If companies do not consider cost leadership to be a proper strategy, they can choose to differentiate themselves by adding value and charging higher prices for its products/services, while not focusing on costs per se. Adding value involves innovative high-quality products, better performance, the use of marketing and relying on brand/customer loyalty. Through these unique features, a firm extorts higher prices. This strategy is, compared to cost leadership, more appropriate/used in dynamic environments. Under both of these two broad market scopes, companies offer a large/extensive range of related products to (almost) all the customer groups that exist in the market (Besanko, 2000, pp.385).
point and there are numerous examples exhibiting that the stuck in the middle principle does work well in practice, such as Toyota in the car industry or Caterpillar in construction (Cronshaw et al., 1990; Miller, 1992).
Another remark to be made here is that costs should not be confused with price. Low cost does not automatically imply lower prices and differentiation does not particular relate to high prices. A low cost leadership may simply be used to make big profit margins and a differentiated product may be low priced temporarily to enter a new market (segment).
The third generic strategy narrows the market scope to focus on a special market segment. This means that companies pursue one, or a combination, of the two strategies in a particular niche that is poorly served by the broad market. To serve this niche, firms either focus on a narrow set of product varieties or on a narrow set of special (un-served) customers, or both. Being active in a niche carries the risk to become exhausted if those special needs fade away or when they become part of the broad market.
As the focus strategy shows, choosing a strategy inherent advantages as well risks/disadvantages (McGee, 2005, pp.210). Besides the risks that the market niche becomes unattractive and part of the broad market, focus might also be threatened by broad-scope competitors that tap into their niche. Advantages of focus are also evident, such as the ability to choose cost and/or differentiation within the segment, truly knowing the niche (and its customers) and the ability to protect the niche (not always successful but is possible via Intellectual Property Rights).
When implementing a cost leadership, a company may face the risk of new product differentiation (and thereby making costs a minor criteria), changes in customer tastes and style or when it is faced by technological changes. Differentiation has less problems with monitoring customer needs and has the advantage of strong marketing expertise. They, on the other hand, run more risk with controlling costs of differentiation in combination with ‘wrong pricing’ (asking too high/low prices, for example due to excessive costs), not staying ahead (for example when a low cost competitor comes out earlier with an innovative product) or their created added value is not noticed by customers. Another risk they face is in a situation where customers become more cost-sensitive; a differentiated high-priced product is hard to turnaround into a lower priced product because it would demolish the earlier built-up added value. So, both strategies can become fragile if (external) market conditions change. To make sure that the current generic strategy is viable in the future, companies should ask themselves two questions: how large is my competitive advantage, and for how long am I able to continue using it?
Some, however, argue that the market is not at the centre of strategy making. They argue that market strategies are the result of what firms have created internally and, therefore, organizational capabilities and resources are the bases of competitive advantages (Besanko, 2000, pp.384). In other words: generic strategies are the outcome of a firm’s internal resources and competences; also known as the
Resource-Based View (RBV) (McGee, 2005, pp.252). Initial work of this theory was brought forward
by Jay Barney, for example in his article firm resources and sustained competitive advantage (1991). To him, the RBV is a unique set of competitive advantages that a firm posses (tangible and intangible resources) and that are hard to copy by others (sustained competitive advantage). The resources must, therefore, be valuable, rare, imperfect inimitable and sustainable in order to fulfil the requirements for being unique to a company.
In line with Barney’s article, Teece (1986) describes how complementary assets and appropriability
regimes are important variables for innovations in different stages of the industry/product life cycle.
He argues how it is possible that (superior) technological innovations fail, while followers/imitators are able to outperform the innovator. Before explaining how this works, it is important to know a bit more about innovations and how they can be used for strategic purposes.
Inventions are non-commercialized innovations, i.e. an invention is something new which is not
available on the market (yet). When an invention is available on the market, it is called an innovation (Westland, 2008, pp.8). Some argue that the final customer is the ultimate judge to decide whether an innovation is something new or not; Wijnberg (2004) for example.
An extensive study on the definition of innovation is performed by Garcia & Calantone (2002). They argue that the development, production, marketing and sales should lead to financial success (rents) of the invention. Furthermore, they divide innovations into incremental, really new and radical referring to their degree and impact. Incremental innovations include small product improvements by using existing technologies in existing markets. At the other extreme, radical innovations cause
discontinuities in both the existing markets and technologies. Really new innovations are in between these extremes including new technologies to existing markets or existing technologies to new
markets, but not both. Besides these type of product innovations, they can also be divided into process, transaction, business model innovations etc. (Jacobs, 2007, pp.29). Knowing the type and degree of innovation is helpful in determining strategic choices and if it is necessary to create legitimacy.
Even though inventions have the potential to become profitable innovations, rents do not always flow back to the innovator. Whether this is likely to happen or not depends, according Teece (1986), on
appropriability regimes and complementary assets. The former points to the ability of legal protection
If an innovation is introduced into the market it is, in general, in the introduction phase of the industry life cycle and, as we saw before, is marked by entrepreneurs/start-ups. Teece calls this phase the
pre-paradigmatic phase, which is marked by product innovation by trial and error. If the innovation is
(highly) technological, entrepreneurs are able to protect them and have a large(r) chance to win. If it is less/not possible to protect the innovation in the pre-paradigmatic phase, successful commercialization shifts to complementary assets. So, in this stage of the industry/product life cycle start-ups are, in principle, in disadvantage if they are unable to protect their innovation unless they acquire effective complementary assets.
Product innovation goes on until a dominant design emerges. When this is reached, the phase shifts from product innovation to process innovation. In this phase, the paradigmatic phase, economies of scale and learning become more important to reduce costs and to serve a broader market. This mature stage is dominated, in general, by incumbents owning the (necessary) complementary assets. In this phase of the industry life cycle, new entrants are not excluded to enter, but becomes much harder since they do not have the advantages/assets that incumbents have. If other things are being equal, offering a lower price than competitors, or differentiate, or entering a market niche are possible market strategies to enter in the paradigmatic stage.
So, Teece’s article shows variables to protect the value of innovations (to be) created in the different phases of the life cycles for entrepreneurs/start-ups as well as for incumbents. The more technological an innovation, the higher the chance that an innovator is able to win, unless the innovation is easy to imitate by followers/imitators. In such a scenario, followers/imitators are able to ‘copy’ the innovator and make use of their complementary assets to outperform the innovator. So, it also shows first-mover advantage and followers/imitators as a way to create competitive advantage and how they are able to protect these positions (McGee, 2005, pp.239).
Complementary assets, as mentioned by Teece, are still recent and applicable in today’s economy in which firms need to offer more than just quality products for a reasonable price. In their book driving
customer equity, Rust et al. (2000) confirm Teece in a way that to receive rents and to safeguard future
existence, it does not only come down to selling technological innovative products. They argue that, in the new economy, goods shift to services, transactions to relationships, attracting customers to
retaining customers and product focus shifts to customer focus. (Innovative) products should not be considered as unimportant due to these shifts, but they are as important as attracting new customers and to keep existing (fixed) customers satisfied. To achieve this, value equity, brand equity and
retention equity are important factors for effective strategy. These three drivers combined are, what
they call, customer equity (Rust, 2000, pp.9).
Value equity is concerned around quality and convenience compared to price based on objective and
objective attributes, but rather on emotion, subjective and irrational perceptions. A brand does three things: it attracts customers, it reminds customers and it recalls emotions. If customers are satisfied, the likelihood that they will return and re-purchase products from the same brand increases, i.e. customer retention increases. Other features of satisfied customers are that they say positive things about the firm/brand, recommend its products to others, remain loyal and are willing to pay premium prices (Cronin, 2000). Retention equity is concerned around building (long-term) relationships with customers so they keep returning; this can range from loyalty programs to offering after-sales service. In general, it is desirable to focus on all the three variables to increase customer equity, but this is not always possible and needed. A starting point is to ask which of the three equity drivers is most important for the customers, or to the firm. Another input is, again, the life cycle. For companies in a mature phase it is more important to focus on all three variables than for companies in the introduction phase (Rust et al., 2000, pp.63). Overall, their book is a welcome addition to existing theory about complementary assets by focusing on three causal drivers that stimulate customer equity.
Until so far, it looks as if strategy is always created and planned in advance. These planned strategies are made after thorough considerations before they are put into practice and then monitored to track their progress. Although this seems logical, results are not always achieved entirely as intended; some plans will exceed expectations, while others will be disappointing. A pattern of realized decisions and actions that was not expressly intended is called emergent strategy (Mintzberg, 1998, pp.11). This strategy evolves over time where actions are taken one by one, step by step, until consistency or a pattern develops rather than making a deliberate plan. A well-known example of unplanned strategy is the Honda-case (McGee, 2005, case C027). This case shows how Honda introduced their lightweight motorcycles on the American market in the 1960s without a deliberate plan and without knowing the chances of success/failure. After several drawbacks, they managed to gain a large market share versus the incumbents. This case shows that strategy does not always have to be planned upfront. So, strategy is neither entirely planned nor is it entirely unplanned leading to results that are realized or unrealized respectively.
which is a strategic combination of instruments to stimulate (financial) results. Traditionally, the mix holds four instruments; Product, Price, Place and Promotion (McCarthy, 1960).
Products refer to the (total) assortment of available products, including their tangible and intangible
specifications (models, brand, design, quality, service etc.). Depending on the strategy, the range of outputs can differ in volume, variety and variation (Slack, 2007, pp.16). Offering a high number of products is not automatically connected to a low cost strategy, but depends on the generic strategy. Differentiators can, for example, offer a broad assortment of products with added value (innovative high-quality products with a good performance), while cost leaders are able to offer the same sort of products without the added value. The latter is also reflected in the price; products with added value will, in general, have a higher price tag due to the added value, while standardized products will be priced lower. Furthermore, price works as a way to gain money by setting a margin on the cost-price, give discounts to attract more customers etc. Promotion is another way to add value to products and justifies charging a higher price. Overall, promotion is about the amount of advertisement the firm uses to communicate the brand and products, as well as attracting and reminding customers and recall emotions. To attract and promote innovations it can also be interesting to make use of market, peer or expert selection, where the opinion of the market/consumers, or of other producers, or of experts play a role determining success or failure (Jacobs, 2007, pp.115). Place, the last P of the original marketing mix, includes the selection and usage of distribution channels the company chooses to use for selling its products. The type of stores to use and the amount of products to sell is closely related to strategy. Firms pursuing a differentiation strategy are, in general, better off with an exclusive dealer network (prime-located buildings with visible/distinctive buildings and interior), while low-cost leaders may choose for less exclusive distribution channels/independent retailers (McGee, 2005, pp.239).
Theoretical background, part III: theoretical integration, hypothesises and measuring method Even though all the analyses, theories and models discussed are a thorough basis to make deliberate strategic choices and decisions on, there is no agreement on a universal definition. In spite of that, everyone seems to agree that strategy is important (Mintzberg, 1998, pp.9; McGee, 2005, pp.5). Neither is there a ‘strategy cookbook’ that tells practitioners exactly what to do in a given situation, nor does it guarantee that the decisions made are right or wrong, since the outcomes only become visible after implementation. So, what the analyses, theories and models do tell is how an industry works so that practitioners are able to create market imperfections/competitive advantages and how they are able to maintain them. This part integrates several of the theories discussed, followed by the hypothesises, and how the theories are made measurable to the Dutch motorcycle by mentioning the indicators and techniques used.
Inputs of the generic strategies are, usually, the indirect and direct external analyses and several of these variables/aspects will also be present on the Dutch motorcycle industry. Taking the context of the motorcycle industry in account, I assume that it is in the mature phase of the industry/product life cycle where a few firms (incumbents) dominate the market. To achieve competitive advantage they will be using different generic strategies to differ themselves and take (possible) trade-offs for granted. Now, assuming this, the first hypothesis is: on the Dutch motorcycle market, companies pursuing a
broad market scope are more successful than companies being active in a narrow market scope.
Contingent on the generic strategy chosen, this should be made possible by the internal resources and organizational structure. However, I expect that the Dutch market is characterized by distributors who are depending on what their foreign mother company (and manufacturing plant) has to offer (product assortment/portfolio). If this is the case, then the Netherlands is (merely) an import and sales country in which, I assume, Porter’s horizontal forces will play an important role. Accordingly, the second
hypothesis is: the focus of the companies in the sample is more based on Porter’s horizontal forces
than on Porter’s vertical forces.
If it is true that there is hardly any development and production on a large scale in the Netherlands and if Porter’s horizontal forces are strong, I expect that the internal competences (and the RBV) are less important to consider. Instead, the emphasize would focus more on the P’s of the marketing mix and complementary assets for gaining competitive advantage. Most of these factors mirror a companies’ product and market strategy and, thereby, becomes visible to customers. The last hypothesis concerns around one of these factors in particular; the role of innovation. Since I assume that the product life cycle is in the mature phase, I wonder what the role of innovation plays within product and market strategy and whether firms focus on it in their strategic execution practices. Hence, the third, and last,
Measuring method
Because the hypothesises and the main and sub questions in the introduction on page 4 include several words related to the motorcycle market, they have to be made measurable. The same applies to the theory discussed. This paragraph combines these theories in combination with the definitions applied to the Dutch motorcycle market, and are used for my data analyses and in the results part.
A starting point to analyze and view market and product strategies is by using Porter’s generic strategies. A way of analysing market and product strategies is by the number of products (volume) and the representation of these products over the number of segments. In their article ‘innovation and
product development strategies in the Italian motorcycle industry’, Muffatto & Panizzolo (1996),
make the same distinction as Porter. They divide market and product strategies in the Italian motorcycle industry on the basis of three variables, namely volume producers, specialists and niche specialists based on the number of different products. The former two refer to companies using a broad market scope whereas the latter (niche specialist) uses a focus strategy. In addition, Muffatto & Panizzolo use engine capacity as an indicator of the type of vehicle offered in terms of complexity and sophistication in relation to the design. Engine capacity (technological) is referred to as the amount of cylinder capacity that an engine produces and goes hand in hand with the design (non-technological). Motorcycles equipped with the same engine capacity are grouped; models equipped with an engine capacity above the 950cc are the highest group. The definitions segment and design mean the same here, to refer to a model that has certain features/aesthetic that is represented in a certain segment. So, the number of different products/models (volume) and the representation within the number of
segments in combination with engine capacity are proper indicators to determine product strategy and
market position. The number of segments is determined above the number of different products to determine market strategy, because this number says something about the composition of the product portfolio and the type of customers that a company is after. So, the lower the representation over the number of segments, it is plausible to pursue a narrow market scope (serving a particular customer group); while the higher the number of segments and products, it is more plausible to pursue a broad market scope (serving a wider customer group).
Close related to engine capacity and design for strategic purposes, are (other types of) innovations. As just discussed, innovations in the motorcycle market are not solely technological, but also dependent on non-technological aspects such as the design/aesthetics. Because it is highly assumed that the motorcycle market is in the mature stage, the vast majority of innovations will be incremental with the applications of small developments and existing technologies on the motorcycle concept (when taking Garcia & Calantone’s definition into account). Here, I have made a distinction between two types of innovation; incremental and really new. The number of upgraded models on the market are an
new models in existing segments (so no upgrades from previous models) and/or entirely new models in a for the company previous un-targeted market segment. These two definitions do not mean that other types of incremental (technological) innovations are omitted here, but they are often assimilated in one or more of these new models. One can think of ABS and breaks, lights, instigation, use of new materials etc. Incremental innovations, like these, with a particular meaning to the (entire) industry are mentioned separately.
The above described indicators are reasonable for analysing market and product strategies in the motorcycle market, and for determining the role of innovation within those strategies. Ultimately, strategic choices have to be expressed and executed in practice by using the marketing mix. The price range is also an indication that Muffatto & Panizzolo use for referring to the design complexity and innovativeness, expressed via the product range and a marketing communication campaign. Another obvious role is reserved for the dealers, who have a special role in representing the brand. In line with the marketing mix is the role of complementary assets that are needed to commercialize innovations, such as a strong product portfolio in combination with a brand name and image, a distribution network (availability), service, and economies of scale. The marketing mix and complementary assets are not particularly bounded to the last nine years to which this research is devoted, so these indicators will look more into the backgrounds of the brands and discusses the most important ones accordingly. Because it is expected that the Dutch market is a mere sales country, the entire product portfolio in combination with the distribution channel, price and promotion weigh heavier than complementary assets in determining market strategy.
Success is, as mentioned under hypothesis one, defined according to the total sales numbers per year.
Although the sales numbers, and thereby the market share, does not necessarily have to say much about revenues and profit, it is a general standard to use. Success should also not to be confused with possible success factors or sales per segment. Synonyms used for the term motorcycle are Powered Two-Wheelers (PTW), motorbikes, or just bikes and will also be used as such throughout this thesis. It should be noted that a motorcycle is a vehicle on two or three wheels, according to the Dutch traffic regulations (RVV in Dutch). So, a motorcycle combination either in combination with or without a small trailer falls under the category motorcycle too, according to the Dutch law.3 A motorbike is usually equipped with a two or four stroke petrol engine with an engine/cylinder capacity between 50 and 2000cc (mopeds have less than 50cc). Other words used in the hypothesises and in the main and sub questions are according the theory as mentioned under part one.
So, these are, in great lines, the most important definitions of the measure indicators that are discussed in the results part. For further information about the measuring methods, comprehensive definitions, and boundaries, I refer to Appendix I on page 53. There, it can also be read how my datasheets are composed with the aid of operational definitions. How the hypothesises and the main and sub questions are investigated is discussed in the following part: part 2.
3
Part 2: Methodology
To answer the hypothesises and to figure the assumptions out, this qualitative research makes use of secondary and primary data. Qualitative research, also known as content analysis, is proper to use for obtaining arguments, motives and opinions and ‘aims to achieve an in-depth understanding of a situation’ or a certain phenomena (Cooper, 2006, pp.196/715; Kooiker, 2003, pp.6/59). To accomplish this, qualitative research draws data from various sources, such as published texts, objects (visual or textual), settings and environments, organizations or institutions and people (individual or groups). Since the majority of the hypothesises and assumptions focuses on market/external-side of strategy, I can rely on secondary data. This information is supplemented by primary data to control secondary data and to fill in the missing gaps. In this way, the research explores which strategies are used on the market and confirms how the chosen firms use strategy in practice.
As can be seen on Figure and Table 1 (See Appendix III, pp.69), an average of around 17,000
motorcycles are sold on the Dutch market per year. Furthermore, the sales numbers per brand between 2000 and 2008 show that BMW, Harley Davidson, Honda, Suzuki and Yamaha are the market leaders. When combined, they are good for market shares between 65 and 80 percent over the past nine years (see Figure & Table 2 and 3, pp.69/70).4 Looking at these companies individually, it can be concluded that the Japanese firms (Honda, Suzuki and Yamaha) sell the most units per year and are the ‘real’ market leaders (this is the case for years now).5 Because these five international brands have different backgrounds, a rich history and because they come from different world regions, I assume that they pursue different strategies and give a sufficient view of the market. The latter is also a reason for not including Kawasaki, which is the sixth largest company with a slightly smaller market share than Harley Davidson and BMW. So, these five companies make up the majority of the market in terms of sales and are a good representation of the Dutch motorcycle market. Therefore, they make up the
sample throughout this research.
Secondary data is derived from various sources. First of all, I collected information about the industry and the companies. This type of information came, among others, from the RAI Vereniging, BOVAG, the CBS, ACEM, the ANWB, the RDW and the Ministry of Public Work for statistical and market information on motorcycles. Particular information I was looking for, came from encyclopaedias and catalogues of motorcycles, motorcycle magazines and from the companies themselves, such as the information they state at their website and in their annual reports. The latter was dealt with caution because it might be biased. At the same time, scientific articles in relation to the motorcycle industry were searched and sorted on relevance to find reliable factors for comparing product and market strategies, for defining innovation and for execution practices.
4
BOVAG: Top 10 nieuwe verkochte motoren 2005-2008
5
Although the secondary information was a very sufficient data source and a reliable contributor to the research already, it was completed with the use of primary data in the form of individual depth interviews (IDI’s). IDI’s are ‘a type of interview that encourages the participant to talk extensively, sharing as much information as possible’ and usually lasts between 20 minutes (telephone interviews) and 2 hours (face-to-face interview) (Cooper, 2006, pp.208 & 711). This type of interview is
commonly used as a part of qualitative research and is chosen because the persons interviewed have specific knowledge and experience. The people I set up interviews with are managers and employees of the companies in the sample with a background in marketing and/or communication. I decided to choose these people because they should know what is going in the industry and what the position of their firm is within it. Besides the additional information these interviews yielded, they were helpful to control secondary information, for example to compare quotes and arguments to increase validity.
As the end of the research neared, it became clear that the missing parts of the secondary information were not as big as previously thought of. That is why the IDI’s were performed via telephone instead of face-to-face interviews. These telephone conversations took place after the literature review and (external) analyses were finished. This was done to specify the list with questions to the company in question. Besides open-end questions, I placed statements to confirm/check if my earlier findings were correct and to ask their opinions and attitudes about certain topics. All the telephone interviews lasted about 20 minutes. During and after the interviews I made extensive notes about the most important findings. The list of interviewees including names, positions and the results can be found in appendix II, from page 57. In this appendix it can also be read that Harley Davidson was, unfortunately, not willing to participate. Even after several telephone trials and email correspondence they state that they are unwilling to corporate to my research because they are unable to share sensitive company
information with external parties. Fortunately, the other companies were positive about the interviews and were willing to answer my questions and share thoughts.
Part 3: Results
Before I apply the theory to the sample, this part starts with some information about motorcycles and the Dutch market/industry from a global and European perspective. I think that this may be useful to present for those who do not own a motorcycle license and/or a motorcycle to show that the machines are more than a ‘just’ a transportation mean and to get an idea of the market.
The Dutch motorcycle industry in an international context
Ever since 1885, when the first motorcycle was invented, the concept of two wheels and an engine that make up a motorcycle has not changed. Whether it be a simple one-cylinder, a MotoGP-racer, a tour bike or a motorcycle combination (= zijpspan), it are all motorcycles (Brawn, 2007, pp.54). An exception to the rule is the recent Piaggio MP3, which is also available in an edition that may be driven by people with a car driving license.6 After the invention in the late ninetieth century, the industry took off rapidly throughout Europe and the United States between 1900 and 1930. This period is recognized by developments on the concept and technological advances. During World War One and Two a lot of motorcycles were used by armies, but the development on the bikes developed much slower during these years. After the war, in the fifties, it were especially the British brands that booked major success in their home market and in the United States (330,000 units sold in the U.K in 1959 alone, while Harley Davidson ‘only’ sold 10,000 at that time). On the continent Europe, the Brits received more competition from Germany (BMW for example) and Italy (Ducati, Gilera and Vespa), which came with improved technology and styling. In the 1960s, competition became even more fierce with Japanese companies introducing well-equipped motorbikes which dominated the last decades of the ninetieth century.7
Today, the vast majority of the production and sales of motorcycles and mopeds takes place in the Far East. The countries in Asia, see Figure and Table 4 on page 70, are accountable for around 90 percent of the total global supply (JAMA, 2006). Within Europe, Italy is the largest producer of motorcycles and mopeds (an average of around 700,000 units over the last decade) followed by France, Spain and Germany (200,000 and 100,000 units respectively) (Acem, 2007). The global sales numbers also tell something about the difference in the usage of the machines. In the Far East, the usage is much higher and primarily for everyday usage (commuting traffic) and family transportation. These bikes are low cost utility vehicles marked by their small size and small engine capacity. One of the reasons why it is used so extensively is because it is a cheap form of transportation and easy to get around in over-populated areas. In Europe and North America, on the other hand, the usage is more recreational oriented and the size of the machines as well as the engine capacity is much larger (Pinch & Reimer, 2007). An exception to this rule form the southern European countries where the usage is more
6
Source: Alle motoren 2009, Vos, R. (2009)
7
popular and extensive, among others due to the good weather (ERSO, 2008). This said, some argue that if Henry Ford was unable to make cars cheap in the 1920s by economies of scale, it would be likely that Americans would make use of motorcycles these days as a cheap and affordable transportation mean (Brawn, 2007, pp.13).
The Netherlands, then, are a very small market when placing it in an international context (in absolute sales numbers is an average of 17,000 nothing compared to China, for example, where around 17 million units were sold in 2005). However, 33 motorbikes per 1,000 inhabitants makes it an average number within Europe (ERSO, 2008). Besides the sales number of new bought motorbikes, the market for second hand motorcycles is even larger: between the 35,000 and 40,000 units are sold per year.8 As in any industry, there can be distinguished several market segments and models, just like there are SUV’s, coupes, convertibles, sedans, etc. in the car industry. Within the Dutch motorcycle market the tour, street, all/off road, enduro/motocross, sport, super sport, scooter and custom/chopper bikes can be distinguished.9 In the mid-1980s, not all of these segments were offered by distributors (some refused to do it and/or could not do it), despite the high demand from Dutch consumers. As a
consequence, consumers with particular desires were pointed to the ‘grey circuit’, consisting of traders who imported them (new and second hand). In 1995, the rules for the grey circuit (or parallel import) changed drastically with strict rules that are checked by the RDW. A year later, the regulations to import a specific model that is unknown or unregistered by the RDW has to be checked individually. The latter lead to the end of parallel import because it became too expensive.10 Today, Dutch
distributors, also called importers, of international brands sell (almost) all models that are available.11
The general environment (analysis)
To proceed the previous session, the next paragraphs and parts are entirely devoted to the Dutch motorcycle market, unless clearly specified. Every motorcycle company is exposed to exogenous factors that (can) have an impact on all of them. When looking at the Dutch market, this is a good starting point to see which factors play a role as well as recognizing (possible) opportunities and threats that can be used for strategic choices.
Of an estimated 16.5 million Dutch inhabitants around 23 percent is between the 50 and 70 years old. It is expected that this group will continue to grow the next couple of years because the people who were born after the Second World War, the so called Post-War generation/baby-boomers, is aging and it is expected that a lot of them are going to retire within the next couple of years.12 When retired, this
8
RAI: www.raivereniging.nl; Promotor (= part of the ANWB): www.promotor.nl
9
Source: RDC/RAI, 2007
10
Source : alle motoren 1951-heden, Vos, R. (2003)
11
RAI: www.raivereniging.nl
12
generation has leisure time and (relative) a lot of money to spend. This demographic factor is an interesting number for the motorcycle market because on an average of half a million motorcycle license owners over the past nine years, are around 100,000 motorcyclists 55 years or older (which is around 20 percent). In total, half of the half a million people who are in the possession of a motorcycle license are between the 40 and 60 years old, while the group between 18 and 30 years old is much smaller (around 10 percent of all motorcyclists) and even decreased over the last couple of years.13 Since 2004 is the motorcycle ownership, those who own a motorbike, the highest among the forty-year-olds. One of the reasons why this group is so large, is because this group used to be the thirty-year-olds; since 2003 decreased the motorcycle ownership of this group by 16 percent. The sales growth over 2007 is for the vast majority ascribed to motorcyclists of 40 years and older.14
At the end of 2008, the total ownership of motorcycles is close to 600,000 units, which is an increase of 40 percent compared to 2000.15 The number of motorcycle licenses increased accordingly; between 2005 and 2008 the increase is 33 percent.16 However, only half of the half a million motorcyclists is an ‘active’ user; meaning that they view it as their only transportation mean and motorcycling is a passion or even a way of life to them. This group mainly consists of men in the age category between 25 and 54 years old. Today, the majority of motorcyclists is still male (75 percent), although the number of women who obtained their license increased slightly from around 20 in the nineties to 25 percent the last decade (CBR, 2008).17 The other half sees their motorbike as a ‘second’ transportation mean pointing to the fun and practical aspects. Together, the average radius is 4,800 kilometres per year. One of the reasons why this number is relative small, is because the majority uses their motorbike for recreational usage (42%). Other purposes are vacation (21%), commuting traffic (32%) and business (6%). Due to the limited usage, drivers do not build up much experience (SWOV, 2009).
Overall, two demographic aspects are striking; one is that the popularity of motorcycling has increased a lot over the last decade; as well in terms of total sales as in the number of licenses issued. The second is that this group is relatively ‘old’, namely forty-year-olds and those between the 40 and 60 years old. This group is responsible for the vast majority of the sales numbers over the last couple of years. So, aging is also visible in the Dutch motorcycle market and forms an interesting target group.
Another factor that has contributed to the increasing popularity is the state of the global and national
economy. After years of economic growth until mid-2008, the last quarters are marked by an
economic recession (often referred to as the ‘financial crisis’). Was the growth of the GDP (gross domestic product) respectively 3.9, 1.9, 0.1, 0.3, 2.2, 2.0, 3.4, 3.6 and 2.0 percent over 2000 until 2008, the last two quarters of 2008 and the first of 2009 show a decrease (4.5 percent decrease in the 13 CBS: www.cbs.nl 14 RAI: www.raivereniging.nl 15
Moto73 tijdschrift: Moto73, nr.18, 2009, pp.12
16
Tweewieler: www.tweewieler.nl
17
first quarter of 2009). The buying-power is, usually, in line with the economic situation: over 2000 until 2008 the data shows 5.0, 1.6, 0.1, 0.7, -0.3, 3.0, 2.8 and 0.8 respectively. The disposable income per household increased from €25,300.= in 2000 to €33,500.= in 2008. This is a positive development if the inflation rate remains low as well. The inflation was indeed quite low between 1.5 and 2 percent over 2004 until 2007, but grew to 2.5 over 2008. Another disadvantage over 2007 and 2008 were the higher costs of energy and health care.18 Total savings grew to around 250 billion euros at the end of 2008 compared to 200 billion at the end of 2004. Saving behaviour over the last couple of months of 2008 and the beginning of 2009 might be a consequence of the financial crisis.19 At the end of 2008, 11.8 percent less was spend on durable consumer goods compared to the beginning of 2008. Over 2006 and 2007, 3 and 2 percent respectively was spend on durable consumer goods. Also from 2000 until 2005 showed a positive trend with growth rates between 0.8 and 3.6 percent.
Although the economy is in decline at the moment, the sales numbers of motorcycles are pretty stable (and predictable) over the longer term. An ‘advantage’ of the relative small sales numbers per year is that variation only differs a couple of hundred to a thousand, i.e. percentage-wise the difference looks pretty big, but in absolute numbers it is not.
So, a logical explanation for the difference in sales per year is the state of the economy; in general when the economy is growing, the sales of motorbikes are growing too. Although this seems plausible, this is not always true. In 2001, 2002, 2003, 2005 and 2006 when the economy grew (albeit by a small number), over 2001 the sales dropped in those years between the 0.65 and 10.5 percent. This shows that the economy is not always the sole and correct indicator for sales growth or decline. There are other external factors that play a role for buying a motorcycle, such as the weather (most sales take place when the weather is good; often in the spring and the summer), high oil prices and the realization that a motorbike is a practical, functional, cheap and fast way of transportation.20
template was introduced in April 2004 to increase safety and to reduce the chance of accidents (Krijgsman et al., 2009, pp.136). Safety is an important issue because motorcyclists are more
vulnerable in traffic, wearing a helmet is therefore mandatory and it is wise to wear protection cloths (although this is not obliged). Several other rules and regulations are different compared to those of cars and other transportation means. To name a few: road tax is a fixed amount (while tax for cars depends among others on the weight and type of fuel) and is much lower compared to cars, Vehicle Testing Regulations do not apply to motorcycles, motorcyclists are allowed to ‘pass’ traffic jams etc. (Krijgsman et al., 2009, pp.110).22 Besides the government, there are parties that represent shop owners’ and motorcyclists’ interests, such as the KNMV, the RAI Vereniging and the BOVAG.23
Durability and ‘going green’ are hot items these days. These socio-cultural factors are particular visible in the car industry, where car manufacturers are forced by the European Union to invest in cleaner cars and technologies and alternatives for fossil fuels to reduce pollution.24 These so called emission standards are also applicable in the motorcycle industry and this sector has booked progress in this field over the last decade. Another issue is to improve safety. Companies associated with the ACEM have decided that 50 percent of new motorbikes should have advanced breaking system (ABS) by 2010 and 75 percent in 2015. This aspiration should help decreasing the number of fatal accidents by 50 percent in 2010.25
Apart from environmental and safety issues, there are traffic jams every day. To avoid them, people consider alternatives such as public transportation and the car, but the popularity for motorbikes as a fast, clean and good value for money transportation mean is increasing. The latter is stimulated by a relative new segment: motor-scooters which are more practical, comfortable and functional to use.26 This segment increased from 766 units in 2003 to 1,000 in 2006, 1,608 in 2007 and 2,435 over 2008, representing 14 percent of total sales. Other segments that became more popular are the all/off road segment and the street/naked. These two segments increased over 2003 to 2007 from 8 to 19 percent. The tour segment is, and always has been, the most popular segment but decreased from 30 to 20 percent among others due to the popularity of the other segments.27 The custom/chopper segment shows a slight increase over 2003 until 2007. Striking is the downward trend of the super sport segment from 3,500 units in 2003 and 2004 to 2,389 in 2007 (RDC/RAI, 2008).
Half of all bikes that are sold within these segments have an engine capacity of 950cc or higher, followed by engines with a capacity between the 551 and 750cc (around 30 percent). A possible explanation for these trends is the aging of motorcyclists because this group has different tastes than
22
Autobelastingen: www.autobelastingen.nl; Alle motoren 2009, Vos, R. (2009)
23
KNMV: www.knmv.nl; BOVAG: www.bovag.nl; RAI: www.raivereniging.nl
24
EU: http://ec.europa.eu; the Guardian: www.theguardian.co.uk
25
RAI: www.raivereniging.nl
26
BOVAG; www.bovag.nl; Consumentenbond: www.consumentenbond.nl
27
younger motorcyclists.28 Other reasons, mentioned by the interviewees, are that motorcycles with a higher engine capacity are more comfortable to drive and that these motorcycles are more expensive (younger motorcyclists spend, usually, less money on a motorcycle).
Besides these segments, engine capacity and shifts in preference, Dutch consumers value maintenance because they are unwilling to accept risks concerning safety. Recent years show a growing trend in the sales of spare parts, especially among A-brands.29
The motorcycle industry has a minor role within the Dutch economy because there is no development and production on a large scale by Dutch or international companies. The market is recognized by Dutch distributors which import, represent and sell international brands. As such, (almost) all the (technological) innovations, development and production takes place outside the Netherlands.30 A recent exception is a Dutch company called EVA Products, which develops and manufactures a motorcycle that either runs on diesel fuel, or bio-diesel, or GTL.31 The motorcycles of the companies in the sample are developed and produced in Europe (Germany), the United States and Asia (Japan). The most important elements of a motorbike, such as the frames, the brakes, the suspension always underwent improvements ever since the invention.32 Several technological advances are copied from the car industry, such as ABS and airbags. Petrol engines are, just like in the car industry, the standard and throughout the years the focus has been on making them more powerful and cleaner. Because fossil fuels will run out one day, the industry looks for possible alternatives and a proper replacement for the petrol engine. Some technological developments are hybrids, electric motorbikes and new types of fuel cells (H2O for example).33 The first electric motorcycles recently came on the market by new companies like Brammo, Zero Motorcycles and Vectrix.34 Maarten Timmer, a graduate from the University of Delft, has designed an electric race motorcycle and is now working on a feasibility study for putting it in production.35 Last June, the first eGrandPrix took place at the Isle of Man and there are plans to make this a returning event.36 This race may help in creating a better image because electronic vehicles are still seen as slow, dull and unattractive. The first hybrid, by Piaggio (the MP3 Hybrid), is also available since this year. New types of fuel cells, such as H2O, are not in production and on the market (yet). Overall, new developments and techniques are still in its infancy but the future will unveil what will become the new standard after/next to the petrol engine.
28
Source: Appendix II (interviews with distributors)
29
RAI: www.raivereniging.nl
30
CBS: www.cbs.nl; RAI: www.raivereniging.nl
31
EVA Products: http://www.dieselmotorfiets.nl/eva.html
32
Source: Encyclopedie van motoren, introduction and chapter one, Brawn, R. (2008)
33
Promotor: www.promotor.nl
34
Brammo : www.brammo.com; Zero Motorcycles : www.zeromotorcycles.com; Vectrix: www.vectrix.com
35
Maarten Timmer : www.maartentimmer.com
36
