Piaggio

Case #2: Piaggio (A)

Team 7

Business Policy: Case #2

Ryan Laughlin, Branden Davis, Allen Newman, Jason Kingston, John Nicholson, Connor Thurman, and Mike Davidson

Executive Summary

Piaggio is an Italian manufacturing organization specializing in scooter brands including Vespa, Gilera and Derbi. The assigned case study details the decision of Piaggio to begin building a new engine plant designed to produce “green” engines. A great number of factors influenced their decision. “Green” engines, or the lack thereof, were an immediate concern to Piaggio because of the expectation of new regulatory requirements from the European Union that aimed to reduce increasing traffic and pollution problems throughout Europe. These new “green” engines were estimated to reduce fuel consumption by 30% and pollutive emissions by 70%. However, these engines were also estimated to cause much higher manufacturing costs and therefore a significant increase in price. Piaggio’s decision was also affected by pressing considerations such as the market environment, world demand for powered two-wheelers (PTWs), production capacity, and healthy competition from within Europe and abroad. Our paper is concerned with analyzing Piaggio’s decision to produce “green” engines and our advice regarding the construction of a new engine manufacturing facility.

Case Questions

1. Do you consider Piaggio’s decision about building a new “green” engine manufacturing facility to be “strategic”? Why or why not?

“Strategy” is defined as a firm’s establishment of a long-run position that is both unique and defensible in its industry. We believe that Piaggio’s decision to build a “green” engine manufacturing facility cannot be defined as “strategic”. In the year 2000, the European Union was expected to unroll a harmonization program that aimed to institute new standards for the manufacturing and specifications of PTWs in Europe. These new standards were meant to combat increasing pollution...