Harley Davidson’s net profit in 2010 was 146. 55 million versus a net loss of 55. 12 million in 2009 (Global Data, 2011). There are three key elements in which the company has to improve to continue making profit. First, resolve the Unfunded Employee Post-retirement Benefit plan to keep employees producing a good product and maintain a top level company/employee relationship. Secondly, intense competition in the motorcycle market has to be addressed if Harley Davidson plans to increase sales and profit, finally, competition is strong and the brand name alone will not increase its profitability.
Strategic Global Branding is the main key to Harley Davidson’s continued rise, and without it the company will stagnate and be reduced to a minor player in the motorcycle industry. Issue #1: Unfunded Employee Post-retirement Benefits Causes: Poor stock market performance depleted the plan’s assets. Harley Davidson losses profits due to “Federal regulations that require that when a pension plan, or defined benefit plan, is underfunded by 15 percent or more, the employer must contribute to the fund to bring it back to more than 85 percent in funding” (Rovito, 2003).
The Pension Protection Act of 2006 required the company to contribute to its pension plan when profits are minimal due to a lagging economy (Harley Davidson 10-K, 2011). Impacts: Harley Davidson could continue paying contributions to benefit plans, but the slow economy and stocks continuing to fall could hinder benefits paid to employees (Global Data, 2011). Harley has unionized employees and if the potential retiring class gets delayed a strike is inevitable. A strike will slow production and cause significant profit loss.
Recommendations: To keep from mounting up more retirement benefits the company should consider using more temporary labor. This would save the company from additional employee benefits being tacked on to an already challenging problem. The motorcycle market overseas offers the company immense potential by lowering manufacturing cost by outsourcing parts (Hagerty, 2011). The company has to look at innovators like Ford Motor Company and IBM. Ford changed their assets from stocks to bonds. This change allowed Ford to be less susceptible to market variations concerning their pension plan, which are depleted during a recession.
Ford predicted a seven billion dollar pension fund deficit from 2007 to 2009 without implementing the plan (Treasury & Risk, 2010). IBM replaced the last of its pensions with a 401(k) plan. The plan came with matching contributions, low fees, custom portfolios, financial help, and more (Feldman, 2009). This allowed the IBM employees to control their own money and take risks as they see fit. Harley Davidson has to look at empowering the employees with a 401(K) plan similar to IBM and Ford. With ninety four percent of one hundred thousand IBM employees active, the plan averages one hundred and twenty seven thousand dollars per employee.
This doubles all United States companies’ national average for 401(k) plans (Feldman 2009). Issue #2: Intense Competition in the Market Causes: A sluggish global economy has driven prices down and forced consumers to demand a better product for less. One problem for the company is loss in domestic customer base as the result of changing market. The baby-boomer generation is heading away from motorcycles into retirement. The primary consumer will soon disappear leaving the company searching for consumers to fill this void.
The younger generations seem to prefer sport bikes. These types of motorcycles are controlled by Japanese manufacturers (Ong, 2011). Impact: The company will lose potential bulk sales and massive profit loss if it is not formulated to compete in the global arena of young motorcycle riders. Honda will continue to look for ways to improve their profitability and product marketability to maintain the strong hold on the motorcycle market in an effort to continue as the largest manufacturer of motorcycles since 1959, as will other motorcycle manufactures (Datamonitor, 2011).
Recommendations: The company has to compete by selling motorcycles with innovating new products at or under what the market of each economy can bare. This has to be done without de-valuing the brand name. The company has to promote how it has the latest and greatest motorcycles on the market. This will take some of the fear away from consumers and give the company leverage for sales to more discriminating buyers. Any Harley Davidson owner wants to know that they have the best money can buy. The company can offer simple things such as loyalty credit for buying an dditional motorcycle. Sponsor motorcycle club events that have positive impacts domestically and globally. The company has to play an active part to keep the public focused on Harley Davidson Motorcycles. Issue #3: Strategic Global Branding Causes: Strengths of the company’s product is that its motorcycles have not changed much in style or major mechanicals attributes. The product still resembles early bikes and it is the styling that defines the product integrity. The lack of change over time is the major difference to its competitors.
Consistency in product dependability has helped sale motorcycles in the current climate but will it provide the same for future consumers? Impact: Branding globally will give the company worldwide exposure and tap the younger generations curiosity to recapture what the early Harley Davidson enthusiast loved so much about the experience. Global Branding done properly will give the company a competitive advantage that captures the next generation consumer and increases sales and profitability.
Recommendations: Social media tactics such as movies, videos, Facebook and Twitter and any other media channel to provide exposure to attract younger consumers. The company also has to be engaged with global governments and demonstrate how Harley Davidson Motorcycles is an asset in any culture and environment. Large scale marketing of the brand will bring some influence, but minor adjustments to the mechanics and price of the motorcycles to fit the culture will bring consumer confidence.
Manufacturing plants will mean jobs for local employees if the company can market itself properly. This equates to product promotion within the culture if the company can be presented as an asset (Boone, Kurtz, 2009). Competitors in a global market will have a large impact on forcing companies to operate responsibly and Harley Davidson has to take the lead. By promoting themselves as operating responsibly and building a positive image, they make their competition follow suit or face going out of business.
Companies that promote corporate responsibility in all aspects of their business are usually successful in their undertakings. Companies that focus on local cultures, economic concerns, and environmental implications are perceived to be responsible in their operations (Boone, Kurtz, 2009). From my personal experience subcontracting work Chevron Corporation is a good example of a company that operates its business units responsibly. Chevron focuses on environmental concerns while being very active in the communities in which it operates its refineries.
Harley Davidson has to benchmark the top global companies and develop a plan that will promote a good public relations platform to implement a Strategic Global Branding Plan. Harley Davidson has to bring the tough rugged biker theme to the global market in a way that appeals to each individual area for a highly effective marketing plan. The emphasis on global branding is worth the upfront cost for future growth (Global Data 2011). Conclusion: The company’s major domestic customers are progressing towards retirement. The customer base is not established enough to continue forward with strong results.
The future of Harley Davidson’s profitability remains uncertain (Global Data, 2011). With significant amounts of time and energy spent on global branding and product development it will eliminate that uncertainty. The company has to stick with a growth strategy that focuses on the value of employees, competitive advantage, and increasing the brand’s strength. By continuing to utilize a diverse plan as the source for accompanying its maintainable competitive advantage, the Harley Davidson Motorcycle Company is sure to sustain a competitive position in its marketplace.
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