KTM’s growth direction alternatives regarding new geographies? (550 words)- Similarities and differences
KTM has 2 growth opportunities in terms of new geographies. The company can further expand its presence in the European or North American markets. If we define market by geographies, this is considered as a market penetration strategy under Ansoff Matrix, as the company focused on selling existing products into existing markets. To assess the attractiveness of European or the US markets, we carried out an external analysis to compare the markets infrastructures using five contexts framework. The five contexts are a country’s political and social systems, degree of openness, product markets, labour markets and capital markets. Only the relevant contexts will be discussed in below.
Under political context, there was a trend of ongoing expansion in the European Union in 2003. It has considerably intensified the competiveness in the European motorcycle market. From product markets perspective, the European motorcycle market was seen as mature and had experienced a declining growth for three years. Sales were predicted to continue deteriorating in the next three years. The market participants had raised concerns about their current and future investment in view of the unfavourable industry environment. Having said, the unified regulatory standard applied across countries in Europe had promoted and optimized the efficiency of resources allocation. In terms of capital markets, the advantage from adoption of Euro in reducing exchange rate risk between European countries was highly valued by market participants.
The US motorcycle market also exposed to some unfavourable conditions in political context e.g. the US government has imposed punitive tariffs on a number of European products. The impact of the duty was devastating to some market participants including KTM which had exports to the US market. From product market perspective, in contrast, the US motorcycle market was well developed with rapid growth for ten consecutive years. Particularly, the off-road segment that KTM focused on in 2003 had shown consistent growth with tremendous growth prospect over the next three years. Yet the US market was disadvantaged in capital market context as the strengthening of Euro had weakened the exports to the US market.
Other factors to be considered in evaluating the market attractiveness include KTM’s existing network and establishment in the 2 markets. KTM was headquartered in Europe where the company had extensive dealer and supplier networks. The company had achieved economies of scale in Europe through its developed manufacturing operation and system. In comparison, the company only had some dealers in North America. Besides, they did not have its own manufacturing plant and supplier network out of Europe. Therefore, it is challenging for KTM to work out the financial resources in building a manufacturing plant and developing its supplier network n this geography.