HARLEY DAVIDSON COMPANY Case Analysis I. DEFINITION OF THE CASE PROBLEM The Harley Davidson name has been shattered into pieces. The loss of customer’s demand for their products proves a problem probably too much to handle for the present managers/owners of the company. The product quality mainly has deteriorated significantly that leads to the low demand for the Harley Davidson choppers. Problems always do arise that need immediate actions to take place. What can be done in order to resolve this? Who do we have to replace for proper management of this company? How do we improve the product quality?
What designs do we have to change in order to make it more appealing to customers? Who do we approach for these new designs? What do the customers yearn for, more power or comfort? How do we get the customers back? How do we get them to trust the Harley Davidson name again? What should be done overall in order to make us rise back to where we were in the past? All these questions were the problems that the Harley Davidson Company was searching for in the hard times of the company. It really makes you wonder though if they would be able to overcome this, what do you think? II.
CRITICAL ISSUES These are some of the issues that were encountered by the company: 1. British competitors were beginning to enter the market with faster, lighter-weight bikes. 2. Honda Motor Company of Japan began marketing lightweight bikes in the United States, moving into middleweight vehicles in the 1960s. 3. The company purchased an Italian motorcycle firm, Aermacchi, but many of its dealers were reluctant to sell the small Aermacchi Harleys. 4. The rapid expansion led to significant problems with quality, and better-built Japanese motorcycles began to take over the market. . The Chinese government’s road restrictions pertaining to riding motorcycles in general in the country’s urban areas III. ANALYSIS OF THE ISSUES 1. British competitors were beginning to enter the market with faster, lighter-weight bikes. In the 1950s, Harley Davidson was the only remaining American manufacturer from more than a hundred firms that were producing motorcycles in the United States. But in the 1960s, this started to change. The competition became fierce. The British and the Japanese were entering the industry with their lightweight motorcycles.
Harley Davidson tried to compete by manufacturing smaller bikes but they had difficulty making them profitably. 2. Honda Motor Company of Japan began marketing lightweight bikes in the United States, moving into middleweight vehicles in the 1960s. In 1983, Harley-Davidson asked the International Trade Commission for tariff relief on the basis that Japanese manufacturers were stockpiling inventory in the United States and providing unfair competition. The tariff was granted on April 1, 1983, and a tariff for five years was placed on all imported Japanese motorcycles that were 700cc or larger.
This was a very clever strategy on the company’s part for this bought them ample time to “get back in the race and catch up with the competition. ” This strategy was more evident when Harley-Davidson itself petitioned for the tariff to be lifted because the company “felt capable and confident in its ability to compete with foreign imports. In five long years, Harley-Davidson was able to redeem itself as a brand and restored the brand’s quality image. 3. The company purchased an Italian motorcycle firm, Aermacchi, but many of its dealers were reluctant to sell the small Aermacchi Harleys.
This move, purchasing an Italian motorcycle firm, Aermacchi, was probably a wrong move. First of all, Harley-Davidson came into the industry with their big heavyweight bikes. This was the main image that they have created for their company and the market was quite fond of this image. Making that decision of making small Harleys did nothing but jeopardize the overall image of the company. People were probably turned off by this idea. It was very evident that they were just trying to compete in a competition that they have already won anyway.
The US Government was their important client. How lucky can a company get? 4. The rapid expansion led to significant problems with quality, and better-built Japanese motorcycles began to take over the market. American Machine and Foundry Co. (AMF) took over Harley in 1969. They increased production from 14,000 to 50,000 bikes per year. Of course this compromised the quality of the bikes they were producing. There was no balance in quality and quantity. Again, this was a bad decision from the management. The issue wasn’t low number of production, so why increase it?
The issue at hand was that the competitors were winning in a competition they weren’t even competing in. That was what they had to go into. When they did though, they did it rather very poorly. They need not increase quantity, but quality. 5. The Chinese government’s road restrictions pertaining to riding motorcycles in general in the country’s urban areas Harley made inroads to the previously elusive Chinese market. Its first dealer opened his store in downtown Beijing. But like any other country, it has its own government and each government has more or less different laws at some standpoint.
The Chinese government had road restrictions regarding riding motorcycles in the urban areas. This is such a hurdle for the store and for the company as well because the law has a huge impact on the sales of Harleys. PROs • Rehiring of management staff and all other divisions of the company •Revising of product designs •Revising of product specifications •Revising of manufacturing processes •This may lead to the possible modernization of manufacturing process •May lead to better product quality control management CONs •Timely and costly to modernize the whole factory The process of rehiring an entirely new staff and management is time consuming •The possibility of failure and complete bankruptcy of the company •Good quality of the products may not be fully guaranteed •May take a while for the consumers to fully rebuild the trust on the company •The possibility that other companies may overtake Harley Davidson’s reputation as a brand As with everything, there always are two sides. Risks should be calculated properly in order to make the most of the time available and also to maximize the resources available.
This is a very important phase in the reestablishment of company name. In order to be successful in fixing the company name, complete cooperation among all the sectors of the company should be available at all times. One by one, it can be done, by working together it can be achieved. IV. ALTERNATIVE SOLUTIONS TO THE PROBLEM Advantage Being known as the sixth leading motorcycle company in Europe, Harley Davidson has already established a brand name and has proven their quality performance throughout the years.
Their loyal customers have trusted greatly on their prestige and continually acquire their merchandise and products that they offer. Though it’s luxurious, Harley Davidson has the largest market share in Asia as compared with other Asian motorcycle companies. Harley Davidson became innovative regarding with their market strategies and has given further attention towards their employees through enhancement programs, creating more job opportunities. Their diversity has also expanded when it comes with their niche market, suppliers, networking companies and even with their advertisement.
Disadvantages/Risks of Harley Davidson 1. The Company has a number of competitors of varying sizes that are based both inside and outside the United States some of which have greater financial resources than the company. Many of the company’s competitors are more diversified, enabling them to compete in the automotive market or all segments of the motorcycle market. Also, if price becomes a more important competitive factor for consumers in the heavyweight motorcycle market, the Company may have a competitive disadvantage.
In addition, the Company’s financial operations face significant competition from various banks, insurance companies and other financial institutions, some of which are larger and offer more financial products than the Company. Failure to adequately address and respond to these competitive pressures worldwide could have a material adverse effect on the Company’s business and results of operations. 2. The Company’s marketing strategy of associating its motorcycle products with a motorcycling lifestyle may not be successful with future customers.
The Company has been successful in marketing its products in large part by promoting the experience of motorcycling. This lifestyle is now more typically associated with a retail customer base comprised of individuals who are, on average, in their mid-forties. To sustain long-term growth, the Company must continue to be successful in promoting motorcycling to customers new to the sport of motorcycling including women, younger riders and more ethnically diverse riders. 3. The Company’s success depends upon the continued strength of the Harley-Davidson brand.
The Company believes that the Harley-Davidson brand has significantly contributed to the success of its business and that maintaining and enhancing the brand is critical to expanding its customer base. Failure to protect the brand from infringers or to grow the value of the Harley-Davidson brand could have a material adverse effect on the Company’s business and results of operations. 4. The Company’s prospects for future growth are largely dependent upon its ability to develop and successfully introduce new, innovative and compliant products.
The motorcycle market continues to advance in terms of cutting edge styling and new technology and, at the same time, be subject to increasing regulations related to safety and emissions. The Company must continue to distinguish its products from its competitors’ products with unique styling and new technologies and to protect its intellectual property from imitators. In addition, these new products must comply with applicable regulations worldwide. The Company must make product advancements while maintaining the classic look, sound and feel associated with Harley-Davidson products.
The Company must also be able to design and manufacture these products and deliver them to the marketplace in a timely manner. There can be no assurances that the Company will be successful in these endeavors or that existing and prospective customers will favorably receive the Company’s new products. 5. The Company’s Motorcycles segment is dependent upon unionized labor. Substantially all of the hourly employees working in the Motorcycles segment are represented by unions and covered by collective bargaining agreements.
Harley Davidson Motor Company is currently a party to five collective bargaining agreements with local affiliates of the International Association of Machinists and Aerospace Workers and the United Steelworkers of America. These collective bargaining agreements generally cover wages, healthcare benefits and retirement plans, seniority, job classes and work rules. There is no certainty that the Company will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or that these new agreements will be on terms as favorable to the Company as past labor agreements.
Failure to renew these agreements when they expire or to establish new collective bargaining agreements on terms acceptable to the Company and the unions could result in work stoppages or other labor disruptions which could have a material adverse effect on customer relationships and the Company’s business and results of operations. 6. The Company’s operations are dependent upon attracting and retaining skilled employees. The Company’s future success depends on its continuing ability to identify, hire, develop, motivate and retain skilled personnel for all areas of its organization.
The current and future total compensation arrangements, which include benefits and cash bonuses, may not be successful in attracting new employees and retaining and motivating the Company’s existing employees. If the Company does not succeed in attracting personnel or retaining and motivating existing personnel, the Company may be unable to develop and distribute products and services and grow effectively. 7. The Company incurs substantial costs with respect to pension benefits and providing healthcare for its employees.
The Company’s estimates of liabilities and expenses for pensions and other post-retirement healthcare benefits require the use of assumptions. They include the rate used to discount the future estimated liability, the rate of return on plan assets and several assumptions relating to the employee workforce (salary increases, medical costs, retirement age and mortality). Actual results may differ which may have a material adverse effect on future results of operations, liquidity or shareholders’ equity.
In addition, rising healthcare and retirement benefit costs in the United States may put the Company under significant cost pressure as compared to our competitors. 8. The Company manufactures products that create exposure to product liability claims and litigation. To the extent plaintiffs are successful in showing that personal injury or property damage result from defects in the design or manufacture of the Company’s products, the Company could be subject to claims for damages that are not covered by insurance.
The costs associated with defending product liability claims, including frivolous lawsuits, and payment of damages could be substantial. The Company’s reputation could also be adversely affected by such claims, whether or not successful. 9. The Company sells its products at wholesale and must rely on a network of independent dealers and distributors to manage the retail distribution of its products. The Company depends on the capability of its independent ealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. If the Company’s independent dealers and distributors are not successful in these endeavors, then the Company will be unable to maintain or grow its revenues. 10. The Company and its independent dealers must balance the economies of level production with a more seasonal retail sales pattern. The Company generally records the sale of a motorcycle when it is shipped to the Company’s independent dealers and distributors.
In the past, the Company has not experienced seasonal fluctuations in its wholesale motorcycle sales, and as a result, the Company has been able to maintain production that is relatively level. Over the last several years, the Company has been working to increase the availability of its motorcycles at dealerships to help improve the customer experience. The increased availability of motorcycles has resulted in the timing of retail purchases tracking more closely with regional motorcycle riding seasons.
This requires the Company to adapt its methods for allocating its products to its dealer network so that allocation methods are aligned with retail demand. In addition, the Company’s independent dealers and distributors must manage seasonal increases in inventory. As a result, the Company and its independent dealers and distributors must balance the economies of level production with the inventory costs associated with a more seasonal retail sales pattern.
Failure to balance the two, or the inability of the Company to adequately adjust its allocation methods, could have a material adverse effect on the Company’s business and results of operations. 11. The Company relies on third party suppliers to obtain raw materials and provide component parts for use in the manufacture of its motorcycles. The Company cannot be certain that it will not experience supply problems such as unfavorable pricing or untimely delivery of raw materials and components.
In certain circumstances, the Company relies on a single supplier to provide the entire requirement of a specific part and a change in this established supply relationship may cause disruption in the Company’s production schedule. In addition, the price and availability of raw materials and component parts from suppliers can be adversely affected by factors outside of the Company’s control such as increased worldwide demand. Further, Company suppliers who also serve the automotive industry may be experiencing financial difficulties due to a downturn in that industry.
These supplier risks may have a material adverse effect on the Company’s business and results of operations. V. SOLUTIONS & RECOMMENDATIONS Well, only of all the things that can be said, only one should be said for this situation. “The customer is always right. ” This saying can and should be very well applied in this company in order to succeed in reestablishing the company name. The slightest details that consumers and customers complain about should be attended to in order to ultimately satisfy that specific customer.
Every customer has his or her own wants and needs. These should all be attended to with the greatest care and love. Care should be present in the staff that deals with the customers. Consistency with the production of choppers should also be attended to very well because this determines the overall quality of the product. Craftsmanship is worth every bit of strength available in the staff. In the end, the customer’s reaction to his or her own product will determine the success of the company in delivering what they should be doing.
What makes the customer happy is what should also make the company happy. These are all mottos that should be instilled in the company and in the entire staff as well. The employees of this company carries the name of Harley Davidson everywhere they go, pride should be present whenever one sees a bike on the road. When one can say “I helped in producing that bike. ” That is the ultimate pride and happiness that one can get in making sure that only the best craftsmanship was placed in making that bike.