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Harley-Davidson is a company that began in a shed almost 100 years ago. In the beginning, Harley-Davidson supplied motorcycles for the military, and now they are the most prestigious heavyweight motorcycle corporation in the United States. In addition to designing, manufacturing and selling heavyweight touring, custom, and performance motorcycles, Harley-Davidson also has a product line of motorcycle parts, accessories, and general merchandise. The company's mission is to fulfill motorcyclists and the general public's dreams through the experience of motorcycling by expanding the line of motorcycles, branded products, and services in the selected market segments. This research report will discuss the company's overall status, competitive advantages, and current issues. Then some recommendation to solve the current issues will be discussed, along with the risks and potential implementation strategies.
Overall Harley-Davidson is currently in good shape. Its retail motorcycle sales through September grew in the U.S. (1.1 percent), Europe (8.0 percent) and Japan (1. percent) compared to the same period last year. Harley-Davidson retail sales resulted in market share gains in all major heavyweight motorcycle markets. Harley-Davidson uses a business level strategy that focuses on competitive differentiation with emphasis on innovative designs, production, and quality.
Harley-Davidson's most significant competitive advantage is its brand equity. Its ¡§eagle¡¨ logo is licensed to more than 100 manufactures. Successfully marketing this brand image, the company has been able to achieve a long-term relationship with its customers. Customer loyalty is most evident in the Harley Owners Group, which is a Harley-Davidson riders' fraternity with 600 US chapters. Harley-Davidson maintained brand equity well with creative marketing. This year the company hosted a national rally of HOG chapters as a part of its 100th anniversary celebration.
Marinating a good relationship with suppliers is critical in the manufacturing industry. Over the years, Harley-Davidson emphasized operational integrity and has developed a close relationship with its suppliers. Its manufacturing process includes using in-house supplier, which allows Harley-Davidson flexibility in product development as well as efficiency. This comprehensive manufacturing strategy also increases the company's production capacity, creating value from economies of scope.
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Another competitive advantage Harley-Davidson possesses is the consistent growth of strong revenue. Harley-Davidson outperformed the market in 001, achieving 16 consecutive increases in revenue and earnings. While the industry is slowing down, the company's revenue grew 17.1%, and earning per share rose by 6.4% from 000. The success of Harley-Davidson's earnings has allowed it to spend large amounts of capital for product development, permitting it to constantly come up with products. The success of the company also reflects its great ability to manage its company resources.
Harley-Davidson also has as a very good relationship with its employees. Harley-Davidson offers long-term agreements to their employees in Missouri, Pennsylvania and Wisconsin. Its organizational culture was acclaimed also by Fortune magazine, who named the company for ¡§Top 100 Companies to Work For.¡¨
Despite, the current success of Harley-Davidson, its future may be in question. The median age of its buyers is nearly 46, up from 5 in 187. This may cause a problem in the long run because as its median age of its customer increases, sales will decrease due to changes in lifestyle. Also, Harley-Davidson is loosing its market share in the younger market. Competitors like Honda are slowing gaining foot in the younger and lightweight market. The company's share of the US new bike market has dropped to percent, down from a 7 percent peak in 17 as Japanese rivals increases their competition. The company is also facing issues in its international markets. The company has not achieved the same level of success like it has in the United States. In 18, the company ranked number seven in terms of amount of market share held. Harley-Davidson had only .%, compared to 4% market share held by Honda.
Due to these current issues, the following two strategic recommendations are made. First, we recommend Harley-Davidson to diversify its product line by entering to the non-heavyweight market by creating a new subsidiary company. Although Harley-Davidson currently owns 45% share of the US heavyweight market, the market has been shrinking over the years. To secure their revenue source and stay competitive, the company needs to break into this new market. By creating this subsidiary company to produce lightweight motorcycles, the company can eliminate the risk of aliening its loyal customers who expect Harley-Davidson to continue with its heavyweight motorcycles image. This recommendation will allow Harley-Davidson to avoid upsetting its customers, to stay true to its reputation, and to continue to satisfy the growing lightweight customers. Diversification also allows Harley-Davidson to stabilize company performance by spreading the risk over many markets.
Another way for Harley-Davidson to compete in the industry is to gain greater recognition in the European market. Europeans are the major buyers of motorcycles and is a vital market to motorcycle manufacturers. Despite its dominance in the domestic market, Harley-Davidson maintains a low market share in Europe. In order to achieve higher profitability, we recommend Harley-Davidson to reevaluate its current European strategy. Harley-Davidson should conduct a research to learn why they are not the number one motorcycle company in the international market. This may require them to understand the country's culture and values. Then using the result from the research, Harley-Davidson should formulate a new strategy to gain a higher market share in the international market.
The implementation of the above two strategies will have some risks. For instance, if the subsidiary company fails, this may have immense harmful effects on Harley-Davidson. To start the company, Harley-Davidson will have to use a lot of its capital. If the subsidiary company fails, Harley-Davidson will lose all that valuable capital, capital that could have been used for new product development. This outcome may negatively affect Harley-Davidson stock portfolio performance. Harley-Davidson is also at the risk of losing customer loyalty. Even though the subsidiary company will try to market itself as its own company unrelated to Harley-Davidson, people will still know that Harley-Davidson is the parent company. Therefore, Harley-Davidson may be at risk of loosing its reputation as the biggest most profitable motorcycle company.
The success of the subsidiary company will be difficult. The subsidiary company will not have the competitive advantage of using the Harley-Davidson brand name. The new company will have to build its own marketing and product strategies. The company however will have the technology and human resource capability of Harley-Davidson. Nonetheless, the new start-up company will be going head to head competition with Honda and Yamaha, who already has a strong presence in the lightweight motorcycle market.
By implementing the second strategic recommendation, Harley-Davidson will not incur much risk. Harley-Davidson does not have much to loose by taking a step back to analyze their current international market. The most they will lose will be the money spent on the conducting the research. However, the savings and possible profit obtained by the implementing the results of the research will outweigh the research cost.
Implementing the suggested strategies first involves changing the company's mission statement to include global and international market after the word ¡§general¡¨. By doing this, it is showing that the company as a whole is committed to do what it takes to increase market share worldwide. Then to execute the new European strategy, it may be necessary to hire a top management team who has local and international experience. The management team should also consist of individuals that are familiar with the European culture, Harley-Davidson's operations, and competitors' business strategies. As a result of this, Harley-Davidson will be able to achieve a more differentiation and multidomestic strategy approach to its products, which may be necessary to ensure success in the European market.
To implement the second recommendation, Harley-Davidson will first need to allocate capital to the development of the new subsidiary company. The location of the subsidiary company should be close to the existing Harley-Davidson companies, so that valuable resources can be shared among them easily. The new company will need to also conduct research to learn what the younger customers want in lightweight motorcycles. Harley-Davidson may also want to hire a new marketing team, since Harley-Davidson's old culture may seep into the new company.
The above two recommendation may not solve all of Harley-Davidson's current issues, but it will be a start. Harley-Davidson is currently doing very well overall financially, so the board members can take its time to research and plan how it is going to solve its current issues. Harley-Davidson is a good company and we have no doubt that the company will continue to be successful for many years to come. It will be interesting to see the actual strategies Harley-Davidson implements. To find out this answer, we will just have to stay tuned.
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