Harley-Davidson Plans to Lay off 200 Workers
Harley-Davidson was founded in 1903 in the town of Milwaukee in Wisconsin, the United States of America. Harley-Davidson history continues with the use of motorcycles in World War I combat. The company provided the U. S. forces with 15,000 motorcycles during the war. By the year 1920, Harley-Davidson was the world’s largest motorcycle manufacturer.
Despite a drastic reduction in sales (from 21,000 in 1929 to 3,703 in 1933), the company was one of the two American motorcycle manufacturers to survive the Great Depression era. The outbreak of World War II resulted in a boon time in Harley-Davidson history. The company produced 90,000 bikes for the Allied forces. Harley-Davidson history is full of ups and downs. The company was able to survive the downturn in the 1970s due to the oil crisis.
Working its way back to the top, the company introduced Fat Boy and found itself the leader of the heavy bike (750+ cc) market once again. Harley-Davidson Motor Company is the largest manufacturer of heavyweight motorcycles in the United States. The company is notable for making one specific product, and is the most recognizable brand in the heavyweight motorcycle industry. Harley targets high-class customers, and represents success and high social status.
According to Harley-Davidson annual report 2015, Harley-Davidson manufactures cruiser and touring motorcycles that feature classic styling, innovative design, distinctive, sound, and superior quality with the ability to customize. The Company primarily produces on-road motorcycles with engine displacements of 601cc and greater. Its engines range in displacement from 494cc to 1802cc.
After I did a lot of research, I found that the problem for Harley is a combination of the decreasing demand for heavyweight motorcycles, the higher price, the aging of its core customer base, the increasing competition, the unstable quality due to massive recalls in the past years, and also the unfavorable economic conditions.
The core customer base comprising the baby boomer generation, which is the largest and wealthiest generation in history, is aging, and millennial customers tend to prefer fuel-efficient, lighter, and cheaper modes of transport like Honda and Kawasaki, and might be wary of leisure and luxury spending, especially having been through the recession. Harley-Davidson also faces competition from custom chopper producers, which have become extremely popular in the past years due to exposure from television shows such as American Chopper and Orange County Choppers.
These custom built motorcycles are an increasing threat to Harley-Davidson in the heavyweight motorcycle market. Moreover, Harley’s reputation for quality has taken a hit with recalls of almost 46,000 bikes, and several accidents and minor injuries have been associated with the faulty part. These factors could limit growth of Harley-Davidson motorcycles in the U. S. during the past couple years.
Lately, Harley didn’t do well on revenue as seen in the picture. According to Harley-Davidson annual report, last year, which is 2015, has been a tough year for Harley-Davidson would be an understatement. Harley reported a 3. 4% drop in retail motorcycle sales in the U. S. in the fourth quarter of 2015, as well as a 1. 7% dip for the full year of 2015, compared with 2014. The company also slipped 0. 6% worldwide in retail motorcycle sales in Q4 2015 and 1. 3% for the full year. Possible Strategies
As a marketing manager, I have identified three possible strategies, each of which have some major pros and cons that are associated with them, which I will discuss in some detail. Reposition (the way Harley markets its brand) Before the economic crisis, Harley-Davidson’s perceived brand value extended beyond the revenues it tangibly created with its Harley-Davidson t-shirts, jackets, etc, and was conservatively estimated at nearing $8 billion worldwide. Recently however this value has dropped considerably, and current estimates place it around $55 million today.
The only way to ensure constant brand integrity is for the company to engage riders outside of its core demographic, and engage them in a new way by expanding customer case such as younger generations and women. In order for Harley-Davidson to achieve this, Harley-Davidson should hire new marketing team, focus on lifestyle branding, focus brand elements on experiences and emotions, and not on mechanics. Harley-Davidson has a demographic problem, their core customers still being the white boomers, a group obviously decreasing in size. Harley-Davidson needs marketers that don’t think like its current marketing group.
It needs marketers who aren’t specialists for the over 40 crowd. Instead Harley-Davidson needs to find talent from companies like Red Bull or Apple. The proof of this is the marketing materials we have today. For the past years, we’ve seen Harley-Davidson continuing to play into the same demographic stereotypes. A strong lifestyle brand should appeal to all audiences, and as such Harley-Davidson should focus its brand messaging on things that all motorcyclists (and non-motorcyclists) identify with, for example: freedom, individuality, exploration, community, etc.
Exchanging these messages for ones currently being used will allow the Harley-Davidson brand to carry over into new rider segments much more easily and with less backlash. Product development If you haven’t developed any new and exciting products or services that capture the interest of your customers in the last two years, you could be headed toward stagnant or even declining revenues. The competition is active and your customers’ preferences are constantly changing. New product ideas don’t just appear spontaneously, and research, prototyping, testing and launching can’t happen without a budget.
Continuous expansion of product offering is an interesting strategy to boost the sale. As seen in Polaris, which include both Victory and Indian motorcycles, increased 94 percent in the 2013 fourth quarter to $68. 8 million due to the initial shipments of the new model year 2014 Indian motorcycles. Consumer retail demand for the Polaris motorcycle division was up over 100 percent with strong initial retail sales for the three all-new 2014 Indian Chief models and continued strong demand for Victory motorcycles with retail sales up in the mid-single digits percent range in North America. Pricing strategy
In this case, what the motorcycle manufacturer could do is reduce its model prices, and risk its margins. Much of the rest of the industry, such as Polaris, maker of the Indian and Victory motorcycles, has resorted to discounting. Polaris Industries (PII), parent of Indian Motorcycle, is offering some models for no money down, with a complimentary five-year warranty and a $1,500 credit for accessories. This strategy is working. Polaris reported its motorcycle sales were up 67% for the full year compared to 2014, fueled by strong demand for Indian, Victory and Slingshot bikes in 2015.
Assumptions and Comparative Analysis Price Assumptions My estimated number on costs for each strategy and increased sales will base on reliable sources of Polaris Industries, which is a competitor of Harley-Davidson, such as annual report and other dependable data from the internet, in order to make this report as verifiable as possible. The first reason that I chose Polaris because the Polaris motorcycle portfolio is focused on cruising and touring bikes, many of which compete with Harley-Davidson’s motorcycles.
Second, Polaris’s total revenue ($4. 7 billion) is similar to Harley-Davidson’s total revenue ($5. 3 billion) in size. The last reason is the fact that while 2015 was a difficult year, Polaris did manage to grow market share and increased sales for the sixth consecutive year. Moreover, Polaris motorcycle sales growing 67% last year and Harley-Davidson’s falling almost 2%. If those trends continue, Polaris will be selling more motorcycles than Harley in just three-and-a-half years.
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