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Closing Case 1: Internationalization at Harley-Davidson

Question 1: What is the nature of international business environments Harley faces? What
types of risks does the firm face?
The nature of international business environments Harley faces: Since the mid-1990s, Harley
management have made their decision that future success would come from expansion into
foreign markets and have established a distribution network and local subsidiary worldwide.
However, due to the variety in different regions in the world where they operate business
activities with differences in cultures, tastes, buying power, etc.. the nature of international
business environments is absolutely complicating and often unpredictable with intense
competition from not only domestic market but also other foreign markets and other economic
events around the world.
Four types of risks that the firm faces:

Cross-cultural risk: At the moment, Harley is operating its business activites in many
different countries around the world, especially in Japan, Europe and Brazil. In the
future, they even want to expand its market share in other countries such as China, India
and Canada. Unlike in the United States, those countries differ in languages, lifestyles,
mind-sets, customs and religion. For example, European enjoy performance bikes but in
the U.S, people prefer Custom and Touring bikes. Thus, If the firm does not understand
deeply about each nations culture, they can cause serious misunderstanding among
foreign people and even fail to set the appropriate business strategies and effective

customer relationship.
Country risk: the risk includes the possibility of foreign government intervention in
Harleys business activities. As mentioned in the text book, we can see some of the
political, legal and economic environment that put the company at risk: high import
tariffs in Brazil which doubled the cost of bikes to Brazilian buyers; limitation of
motorcycle usage in Chinese cities and high trade barriers and local emissions
regulations in India and even the global recession in 2008-2010. Each of these
regulations affect Harleys decision of how to manage its business without break any

rules.
Currency risk: Because the main products of Harley are bikes, the revenue from abroad
of them flutuates with the change in the exchange rate in each region where they

introduce their products.


Commercial risk: the firms potential loss from poorly developed or executed business
strategies. For examples, we can see the Harleys purchase with Agusta Group for $109

million in 2008 but then they had to divest its interest in Augusta in 2010 because of
ecoomic conditions.

Question 2: How can Harley benefit from expanding abroad? What types of advantages
can the firm obtain? What advantages acquired abroad can help Harley improve its
performance in its home market?
When expanding abroad, Harley can benefit mostly from increasing in global revenue. As
mentioned in the text book, Harley earned one-third of its total sales from international markets
and even lower costs thanks to the availability of low-cost foreign workers. Moreover, the loss
in one nation can be recover by the gain in other areas, which helps the firm to overcome
problems If any.
In addition, the firm can also obtain other types of advantages such as brand recognition
worldwide (due to good reputation), targeting emerging markets with high population such as
India and China (with a promise of increase in revenue dramatically in the future), updating
efficient management techiques (Japanese style), gaining market shares globally, the Research
and Development in products because of diversity in customers tastes and needs (expanding
models offerings with improving in quality) and cutting down costs with the assembly plant in
Brazil which has low-cost workers. All of these factors have helped Harley to continue
expanding and gaining profit even in the very tough markets around the world.
Among all these advantages, Harley can also improve its performance in its home market from
the outsourcing finanacial sources, the develoment in quality and designs from other nations and
the cost reduction of low-cost workers.

Question 3: How can Harley effectively compete with rivals from Japan and Europe?
What strategies should management apply to grow the firms sales in those regions?
Harley can effectively compete with rivals from Japan and Europe due to some reasons: First,
Harley has gain its reputation in the U.S as the leading motorcycle brand of abour 50% buyers,
which helps them to achieve foreign customerstrust and interest. Second, Harley have also
made significant inroads in Europe, a vast marketplace that is home to dozens of countries with
diverse and distinctive needs and tastes, through a broad range of bikes that suit their citizens.
Third, although Harley have to face tough competition in Japan with domestic brands such as
Honda, Kawasaki, Suziki and Yamaha, it can still sell more than 12,000 motorcycles there

annually and make a profit. Last but not least, Harley also take more consideration into one of
the hottest topics nowadays: the greenhouse gas and climate change. They have made great
effort into reducing pollution, as well as energy and water usage in order to achieve
sustainability strategy and of course, preparing to a lower-carbon economy. These actions and
its recycling program help Harley to strengthen the brands reputation in Japan and Europe in
particular and in the world in general, which also enhances its publics concern and interest
enough to gain revenue globally.
To grow the firms sales in those regions, management should apply some strategie such as:

Developing a new motorcycle design targeting at the inexpensive and lightweight model

but still follows Harleys spirite in order to atract customers mainly in Japan.
Creating a new generation of energy-saving and environment-friendly motorbikes to
gain publics favour and thus, getting more customers who are concern about the

environment issues.
Searching for more low-cost workforces to minimize cost.
Suitable marketing strategies which does not cause misunderstanding messages.

Question 4: Competitors such as Lifan and Zongshen are beginning to emerge from China,
where they enjoy competitive advantages like low-cost labor and extensive experience with
emerging markets. How Harley compete against such firms? Should Harley more
aggressively pursue emerging markets such as Brazil, China and India? If so, what
strategies will help it succeed in those markets?
Harley can compete against such firms in some ways such as:

Opening a assembly plant in China to reduce cost from Chinese tariffs, distribution fee

and also from low-cost workers here.


Improving products quality, technology and designs to suit Chinese tastes and also to

prevent couterfeit entrepreneurs.


Applying marketing programs which focus on Chinese peoples interest and concern.
Establishing a efficient distribution network to the fastest delivery (because China is the
second-largest and the most populous contry in the world).

Harley should more aggressively pursue emerging markets such as Brazil, China and India in
order to gain market shares in those new emerging econimies and catch profit in the future as
these countries have dramatically increasing economies and densely populated areas. In order
to achieve that goal, the firm sould apply some of these strategies:

Low-cost offering products (due to assembly plant that has allready been settled in

Brazil).
Working with the gorvenments in Brazil, China and India in the issue of taxes, tariffs and
other regulations, as well as license of invention in order to protect company from

counterfeit issues in China.


Deeply reseaching about the characteristics of peple in these countries so that the firm
can create suitable marketing programs that gain public interest of China as well as
design appropriate models but still remain at minimum cost.

Question 5: Evaluate Harleys environmental sustainability initiatives in the evolving


regulatory environment on global greenhouse gas. What advantages does Harley gain by
attempting to produce environmentally safe and sustainable products?
Evaluate Harleys environment sustainability initiatives in the evolving regulatory environment
on global greenhouse gas: in the recent years, more and more countries have been concerned
about the envinronmental problems including global greenhouse gas. In some regions such as
India, California and Taiwan have imposed serious new GHG standards on motorcycles and
there will be so much more countries participating in the near future, which will be a challenge
of developing technology for Harley and many other firms in the world.
Advantages that Harley gains by attempting to produce environmentally safe and sustainable
products

Better image to the puplic, which results in greater competitive advantage and popularity

not only in the U.S but also in the world.


Aligning Harleys actions with stakeholder expectations, strenghtening the brand and

atracting more finanacial investment.


Avoiding breaking the rules or regulations in ones nation about environment issues.