Harley Davidson case study

Submitted by
Edwin Nash
MGT 527
Introduction:

Harley Davidson Company was set up in 1903 by William Harley and Arthur Davidson. In 1920

the company became very famous as the largest and most important motorcycle manufacturers in

the world. They spread across like wildfire in many continents by making themselves available

as franchises. It was known as a very strong and financially stable firm. They were recognized as

the heavyweight manufacturers of motorcycles. They have invested sums of money in research

and development so as to help them boost their financial performance. (Michael, Duane &

Robert,2015).

The case evaluates and explains the strategic plan that is available for the firm to use. It has

maintained operations when compared to other motorcycle firms that weren’t very successful.

The Harley Davidson firm has two segments that they deal with. The first is their range of

motorcycles which includes their performance bikes and accessories and parts and second is the

financing department. The financing department provides financial help to dealers, retailers and

independent distributors. They also offer motorcycle insurance and loans to their customers. The

Harley Davidson firm is a major game player in America to produce motorcycles and have setup

their businesses globally from which majority of the sales come from Asia, Latin and North

America and Europe (Michael, Duane &Robert, 2015). Due to its brand loyalty the firm has

experienced huge growth and success. Then in 2008 the firm faced trouble and had to close

down some of their factories due to recession in the US economy. So this in turn affected the

firm’s growth as the consumers were not ready to spend on a leisure and luxurious item. They

saw a drop in sales by 7% and income declined by 2.3%. However they came out of the

recession by maintaining productions below demand (Michael, Duane &Robert, 2015).

Current Situation/Issues/Problem:

Below are the following:

1. The current issue is that the firm’s products were expensive, unreliable and not of

performance when compared to their competitors like the Japanese motorcycle

companies. When it was acquired by AMF (the American machine and Foundry

Company) the focus was not on the quality but more of getting high profits. This in turn

made the customers to switch brands as the switching costs would be less and the

Japanese brands were affordable and of performance. (Batra, Ahuvia&Bagozzi,2012).

2. The other issue or problem was that a brand value wasn’t created among its customers.

The needs and interest of the stakeholders weren’t met. Due to the mismanagement of the

firm their goals to accomplish their vision was failed.

3. There wasn’t value being added in their operations especially in the after sales support

like customer service. Consumers these days expect new and updated technological

features like new ideas and innovations but Harley Davidson remained unchanged for

almost 12 years and so when customers would approach them with questions the

customer’s service would be of no help.

Alternatives for each issue:

An alternative for the first issue would be to make sure the products before they roll out to be

of reliable quality tried and tested for performance. The advantage is that it would ease in

identifying the issues which can potentially arise and so this guarantees effectiveness and

efficiency on the products being sold to the market. The disadvantage would be that

sometimes malfunction could happen and safety may not be guaranteed as it is all developed

by technology and labor.

 An alternative for the second issue would be to empower employees so as to make them

focus on value added activities as this will help in meeting the needs of the stakeholders. The

advantage of this would be that the stakeholders have a sense of belonging and shows the

firm cares for its consumers. The disadvantage would be that the stakeholders can lose all

their investments which become losses.

The alternative for the third issue would be to improve the after sales service by improving

the customer service team. It can be done by giving adequate training, attractive benefits and

salaries. The advantage of this strategy is that it will motivate the employees to improve their

skills in attracting the customers to buy the products. The disadvantage will be that the

employees can show less interest in their work if the benefits and the environment they work

doesn’t seem attractive. This in turn can affect the customer service being provided.

Justification to selected Alternatives:

To justify the alternatives, the products are tired and tested before being sold out. This can help

in knowing the quality, authenticity and uniqueness of the product. Harley Davidson was known

for their standard products. Before being acquired by the AMF, almost one third of its production

was reserved and sold to the US army. So this made their motorcycles to be a class apart

innovation during a motorized warfare.

It is also justifiable for a firm to have their vision and mission and embed their stakeholder’s

interest in the vision as it helps them to foresee their future. This action is supported by a

proactive decision making and thoughts. Even during the recession time the firm had a strong

platform to continue producing so as to meet the demands which was successful.

 Conclusion:

Thus to conclude one can say that the Harley Davidson firm is a success story in spite of all

the downfalls it faced. The firm had a turning point after AMF opted out and when they

introduced new engines and bikes. With the precepts of logistics enhancement and just in

time inventory techniques, the firm was able to achieve competitive advantage and above

average returns. It also helped them to attain efficiency in their operations by adding value.

Appendix A:

SWOT Analysis:

Strengths:

1. strong brand loyalty globally

2. high industry growth and market share

3. proven product quality

4. Strong marketing department which sponsors and participates in major motorcycle shows.

5. Robust cash flow

6. Strong relationships built on trust and respect with suppliers and dealers.

Weakness:

1. Declining financial performance

2. Difficult to attract and retain talented employee

3. High price as the bikes being made are costly.

4. Mostly viewed as a luxury and leisure brand.

5. Prone to error due to large scale production

6. Ability to develop sophisticated products is limited.

Opportunities:

1. Young riders are increasing becoming interested in bikes.

2. Increase demand for bikes in the global market.

Threats:

1. Government polices varies globally and can affect the trade policies.

2. Competition in global markets can be challenging.

3. High rise in oil prices. The bikes are heavy so they consume a lot of oil.

4. The competitors have large financial and marketing resources which are more diverisified.

1. Outline the threats in Harley-Davidson’s external environmental. Which threats

pose the greatest short-term and long-term risks for the company?

The threats mentioned in the case was that first the consumers viewed the product as leisure then

was the struggle in managing target market and finally the demand for cost drivers for

motorcycle markets are ever changing. The threat which poses the greatest short tern and long

term risks was the struggle to manage the target market and the price of bikes that keeps

fluctuating. They also faced threats of global markets as countries lowered their prices of

motorcycles and made it more affordable and convenient as they knew that the Harley Davidson

firm would be a strong competitor. (Hyungil,Do Young, &Kyong, 2014).

2. Identify the company’s core competencies. Given the existing situation, does Harley-

Davidson have a competitive advantage that is sustainable?

The core competencies of the firm were price differentiation and brand loyalty. The

firm’s perceived value was of creating a brand loyalty through the title of “American dream of
freedom”. Their focus and target was on customers who valued style, heritage, reputation and

durability. This was all made possible with the resources and capabilities put together which

gave them competitive edge over their competitors (Zheng Zhou, Yim&Tse, 2005). The price

differentiation was another core competency. The consumers saw the brand as a strong quality

with high cost for the elite people. Their premium products have been established for a long term

and the success of that has helped them attain competitive advantage among its consumers. Yes

Harley Davidson does have a competitive advantage that is sustainable in the long run. It is

because of the strategy it has formulated and implemented. They were good in doing things

better than their rivals. That is they created a brand name and reputation in the market locally and

globally. They also were able to produce different types of bikes by keeping production costs

low which in turn made it hard to imitate or substitute for the competitors as their bikes were

unique. (Agarwal, Malhotra, & Bolton, 2010).

3. Define Harley-Davidson’s business strategy. Based on your analysis, do you

recommend any changes in strategy to address the threats facing the company?

The firm’s business strategy was the differentiation strategy. They focused and targeted a

specific group of people. Harley Davidson did it so as to attain a competitive advantage. They

also used it to build a brand image and market their products as high value and of quality to

customers who regarded and valued it for the heritage, style, reputation and durability.

(Jae,Jungwoo&Jongsu,2013). The firm’s asset has been its brand loyalty, it signifies the

American pride. Harley Davidson also takes part and sponsors many events and even give free

riding courses to the younger and female riders. More so, the firm provides an open customer

forum to focus group, customer surveys to hear the customer’s view. And they use the data and

input to improve on their products.

I would recommend some changes to the firm like they can change their production process by

adding value in each stage. Switch to low cost production techniques and use more of just in time

inventory to save resources. They can also target all types of people make changes in the

demographics and even the political environment situations. They also need to improve and work

on the betterment of tapping global markets. They need to retain their brand name across the

globe by targeting low income groups especially the young generation. If they do all of these

they can achieve sustainable growth locally and globally.

4. Evaluate international conditions and the company’s performance outside of the

U.S. What options are available to support Harley-Davidson’s overseas expansion?

Harley Davidson has set up franchises in different countries across the world. They were

able to penetrate and setup their brand name. In India it became successful as they built

production plants so as to save them import duties by almost 80% when compared to high

tariff charges being imposed when exporting overseas. It was able to meet the needs of its

target market in India by providing quality products, parts and accessories to suit the

needs of the market. It was also able to lower its price which increased its competitive

advantage position. But in china it faced problems and became unsuccessful because of

the stringent government laws. Additionally, the cost of importing was very high as when

exporting 30% more was added to the cost of the each product. More so, the Harley-

Davidson competitors in China gained competitive advantage by providing varieties and

cheaper products to suits the customer’s needs. The firm also needs to change its target

market of 29-55 year olds. It is a threat to the internal and external environment. Their

focus should be more on the younger generation. The younger crowds prefer bikes that

are fast and lightweight. So the firm can adjust its research and development department
and make the changes. By targeting both the older and younger crowds will help in

generating revenues domestically and internationally. Another suggestion would be for

Harley Davidson to build a manufacturing plant in china as it will help lower import

duties and achieve their profits.

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Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson, (2015). Strategic Management:

Competitiveness and Globalization Concepts. Cengage Learning Eleventh Edition