Harley Davidson Strategy Essay Example

rarely sold as primary means of transportation which means sales are susceptible to economic fluctuations. To add to the vulnerability of this niche market Harley-Davidson limits production to maintain high-prices and intentionally avoids technological growth to maintain a nostalgic brand image.There have also been several failed attempts to diversify into related industries.

If one Harley-Davidson’s 2006 corporate level goals is to increase sales there needs to be significant amount of change on the business and functional level. It will crucial to identify new ways in which diversification can help them expand in a market that they have been in for over 100 years. 2. 2Untapped Potential in International Markets Harley-Davidson is a company that relies heavily on their brand identity as an American icon to push sales.While this strategy has been somewhat effective in the global market, it is their reputation for luxurious high-quality, heavyweight motorcycles that has helped them gain considerable market share abroad. Harley-Davidson has experienced considerable challenges during their entry into these foreign markets.

Some of the challenges have been specific to the geographical area, such as India’s incredibly high import tariffs and noise regulations, while others have been more general in terms of brand awareness, cost-structure, and market accessibility.While many of these challenges are typical of the struggles companies experience during expansion into foreign markets, it is vital that they are individually addressed in a thoughtful and practical manner. In addition as part of the same aforementioned corporate strategy, Harley-Davidson wants to increase international sales, with a specific goal to double market share within the European market. It should also be noted that the company has experienced difficulty growing in Europe’s

competitive market in the past.In order to achieve their objectives and solidify long-term revenue growth in the international market place Harley-Davidson’s ingrained status quo must be challenged. 3.

0. Analysis 3. 1. Analysis methodology To arrive at well-thought out recommendations it is crucial to comprehend the broad but unique playing field in which Harley Davidson conducts business.

In order to do this the motorcycle industry’s key success factors, global and domestic competitive landscapes and life-cycle attributes were thoroughly reviewed.The industry analysis serves as foundation to understand how, at a firm-level, Harley-Davidson has become a formidable leader in the domestic and global market, as well as reveal areas that need restructuring. Finally, the geographical markets in which Harley-Davidson has an established presence in and unexplored markets are evaluated in respect to their viability and potential for long-term growth. 3.

2. Industry analysis 3. 2. 1. Industry key success factorsAccording to IBIS World, at the very minimum a successful firm operating within the motorcycle manufacturing industry (NAICS 33699) must: * Comply with required legal product standards * Development of new products in order to broaden customer base * Utilize economies of scope and scale * Access to the latest and most efficient technology and techniques * Access to highly skilled workforce 3. 2.

2. Competitive Landscape Figure [ 1 ]: Porter's Five Forces for the Motorcycle Industry Porter’s Five Forces model (Figure 1) was used to determine the competitive nature of the motorcycle industry.There are several important takeaways from this analysis. First, the majority of market share belongs to four firms. This top heavy structure, along with capital intense start-up costs, makes it difficult for new firms

to enter the market.

Secondly, although raw materials are a large part of the cost structure for motorcycle manufacturing, there are so many suppliers that it allows firms to have more control over what they pay for the materials (IBIS World US Motorcycle, Bike and Parts Manufacturing Industry). 3. 2. 3. Product Life CycleAs indicated above the motorcycle industry is the mature stage of the product life cycle (See Figure 2).

There are several important implications of industries in this stage. First, technological change keeps new motorcycles relevant and attractive to consumers. Secondly, unless manufactures diversify their product line and/or enter new markets, revenue growth is determined by economic conditions. Finally, the lack of new entrants in to the market means that companies need to compete on cost in order in increase market share. Figure [ 2 ]: Product Life Cycle 3.

2. 4. Competitive OverviewThe competition within the motorcycle industry is defined by several factors including price, quality, reliability, performance and style. It is important to note that consumer preference to brands and types of motorcycle is very strong in this industry. It is not likely that a customer who prefers “race bikes” will ever switch to a “heavy weight” motorcycle. The table below ( [ Table 1 ]) is a concise overview the firms who compete in the global motorcycle market.

It is clear by looking at the analysis below, that the top firms who compete against Harley-Davidson enjoy a significant and valuable position in the motorcycle industry.Table [ 1 ]: Competitors Profiles Companies| Pricing strategy| Diversity of product line| Quality| Technology| Performance| Known for…(type of bike)| Harley-Davidson| Premium| Low| Yes| No| NO|

Heavyweight/Custom| Honda| Low-cost| High| Yes| Yes| No| Touring bike| BMW| Premium| High| Yes| Yes| Yes| Traditional| Ducati| Premium| Low| Yes| Yes| Yes| Racing| Kawasaki| Medium| Yes| Yes| No| Yes| Various| Yamaha| Medium| Yes| Yes| No| Yes| Racing| Suzuki| Low| Yes| Moderate| No| Yes| Various| 3. 3. Understanding Harley-Davidson as a FirmHarley-Davidson has been manufacturing and selling motorcycles since 1903. Despite a rough period in the 1980s, Harley-Davidson has maintained an extremely loyal customer base, a good reputation for quality, and an iconic brand identity.

By conducting firm-level analysis the reasons behind their triumphs and struggles become more apparent. It also reveals that despite the mature product life cycle there is opportunity to improve their over-all strategy in the international market 3. 3. 1. SWOT Analysis It is important for any company to review their internal strengths and eaknesses as well as their external opportunities and threats on a periodic basis gauge the overall health of the firm. The SWOT analysis below in Figure 2 details several tangible resources and capabilities that add value to Harley-Davidson.

A 50% share of the US market is directly reflected in their strong financial position. In 2005 Harley-Davidson had gross margins of . 38 and net margins of . 18 which far exceeded industry average (Harley Davidson Quartley Income Statement).

These strong financial were made possible no doubt by their focus on creating good supplier relationships which reduce the cost of raw materials.There are also several intangible strengths including; brand equity, reputation for good quality, intense customer loyalty and a strong H. R. department all of which create a strong competitive advantage. Despite all of these valuable resources Harley-Davidson does

have apparent weaknesses that need to be addressed.

The premium pricing and lack of diversity in their product line results in a very narrow and exclusionary target market. Counter intuitively, within the weaknesses there resides opportunity to grow and expand into geographical and consumer markets. Figure [ 3 ]: SWOT Analysis 3. 3. 2.

Harley Davidson’s StrategyIt is important that firms create a cohesive, consistent strategy supports the long-term growth and a strong competitive position. It can be seen in [ Figure 4 ] below that Harley-Davidson has significant value in both the functional and business level of their firm however if the top corporate level objectives of domestic and international sales growth are to be met their needs to be a bit of restructuring in terms of intensifying R;amp;D, broadening their niche market, investing in foreign manufacturing plants, and expanding their brand identity. Figure [ 4 ]: Harley-Davidson's Strategy Framework 3. 4.

Country Level AnalysisThis section evaluates Harley-Davidson’s current position in foreign markets, export strategy as well as potentially viable markets based on economic factors not yet explored by the firm. The countries were evaluated by comparing their GDP per capita, population distribution, Global Competitive Index (GCI), Political Risk Index (PRI) and Foreign Investment Index (FII). (For index descriptions, maps and rankings see Appendix A) 3. 4. 1Viable Foreign Markets After evaluating the countries found in (Appendix A) all the countries prove to be financially, politically and demographically viable markets for Harley-Davidson.

. 4. 2Individual Key Success Factors Despite the generally positive conclusion of the country/regional analysis done in Appendix A, there are several key success factors unique to Harley Davidson’s luxury, heavyweight motorcycle

industry that must be considered on an individual basis. They are broken down by country below with the particularly important factors highlighted: Europe * Harley-Davidson’s brand image does not translate well * Regionally focused on performance based, racing bikes Japan * Healthy Harley-Davidson sales growth in 2005 * Illegal to carry passenger on motorcycles India Import taxes at 90% for heavyweight motorcycles * Strict emission standards * Huge market China * Competitive pricing due to joint ventures between domestic and international companies Australia and New Zealand * Harley Davidson positive brand image translates well Brazil * Assembly done in-country Chile * Strong trade relations/ free-trade agreement * Affinity towards anything “American” * Strong economical growth * Strong pro-business institutions 4.

0Recommendations 4. 1Domestic Growth 1. Where- United States 2. When- Now If Harley-Davidson does not revamp sales now, there is a possibility of losing more market share 3.

How- The steps that must be taken at both the functional and business level. It is important that they capitalize on their strong brand identity. By utilizing more non-traditional methods like the success HOG association, to draw the biker community together will re-vamp their fiercely loyal customer base. Their narrowly defined target can be expanded upon by utilizing product placement as a marketing tool. By placing their products into media outlets that are targeted towards younger males and the growing demographic of non-traditional, affluent, young women Harley can ensure future Harley riders as their current target is rapidly aging.At the business level, their premium pricing strategy needs to be relaxed even if for a brief period of time.

If Harley was provide a more competitively priced technologically driven,

“limited-edition” motorcycle they could temporarily tap into a less affluent market broadening their loyal customer base all the while maintaining their limited production strategy. 4. 2International Growth Based on the analysis above there are several recommendations specific to different foreign markets that will help Harley-Davidson achieve greater global market share and improve the their long-term competitive advantage within their mature market. . Where- Chile, India and Europe 2. When- Now 3.

How- Allow for some localization of functional and business level strategy. 4. 2. 1Expand Brazil’s cost effective assembly model to Chile and India Chile’s economic potential, affinity toward American luxury, and affordable property gives Harley-Davidson the opportunity to tap into a new market without substantial risk. India with over one billion people is a market opportunity that needs to be exploited.

By allowing for the assembly process to take place in India it will reduce the cost substantially.It must be noted that this only the smaller models should be introduced, until India relaxes their regulations or Harley-Davidson improves its emissions technology. Finally to double market share within Europe, it is necessary for Harley-Davidson to ease their “nostalgia” positioning to better meet the technologically prone needs of Europe. The technological advancement needs to be communicated effectively through an integrative marketing plan to increase Harley-Davidson’s brand identity.