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Harley - Davidson

Estrategia Empresarial (Universitat de les Illes Balears)

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HARLEY-DAVIDSON’S
This case is about Harley-Davidson company, one of the most prominent motorcycle
manufacturers in the world.
It was founded in 1903 by William Harley and brothers William, Arthur and Walter
Davidson. As the years came by, the organization became the sole survivor of the
150 US motorcycle producers that had existed in 1910. But as soon this new
company reached the fame, new competitors started to imitate its products and with
it it came: the direct competition, (“Honda, Suzuki, Yamaha, and Kawasaki had long
been offering V-twin cruisers styled closely along the lines of the classic Harleys, but
at lower prices and with more advanced technologies”), leading to the company a
loss of financial value and a declining market share.
80 years later, after world war I, Harley Davidson emerged as an independent,
privately owned company with debt. A few months later, thanks to the new
programme called “MAN” (Materials- As- Needed) which boomed and led to an
increase in sales and a return to profitability, the company went public in 1986.
The growth of the company continued until the financial crisis in 2008-2009 ,being
the US the principal country of the entrant income. Respecting other countries in the
world, Harley faced severe competition with other brands, such as: Honda
(Japanese), BMW (German), Suzuki, Yamaha, Kawasaki and Triumph. Even though
the great competition, Harley Davidon differs from the others by its image and
customer loyalty ( “Harley-Davidson had long recognized that it was not selling
motorcycles: it was selling the Harley Experience.”).
Despite this consumer loyalty and image, over the years Harley- Davidson’s
developed a competition disadvantage due to its lack of investment in I+D (the
automotive technology) of its products and also due to its low production volume
relative to Honda and other worldwide manufacturers. Also, their efficiency was also
limited by its dispersed manufacturing operations.

A key part of Harley-Davidson’s growth strategy was expanding sales outside of the
US, but it was hard to separate the relationship that the image of the American had
with the motorcycle (“The US and Harley are tied together,” observed Hugo Wilson /
“the guy who’s into Harleys here is also the guy who owns cowboy boots. You get a
Harley and you’re buying into the US mystique.”). Notwithstanding, the company
tried to expand their products all over the world, being the most succefull countries:
Asia and Latin America.

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Finally, contrary to many fans, some bloggers and journalists that consider that the
expansion of its output and market share may have contributed to its declining
desirability, the plan of the new CEO(Keith Wandell, who was just incorporated in the
Financial crisis in 2009) which consisted in : restoring funding for Harley’s consumer
lending activity, cutting back production and with many others, laying off employees;
turned out to be the best Restoring Plan for the company to return to its traditional
growth trajectory.

1. Identify Harley-Davidson’s strategy and explain its rationale.

Harley- Davidson market strategy is based on Michael Porter’s Model: A model that
consists in identifying and analyzing five different competitive forces that shape
every industry and helps determine every weakness and strengths within it.
Harley-Davidson applies differentiation as its main generic strategy for competition
enlaced with generic strategy (Porter’s Five).

One of the main strategies this company uses is Market Penetration, along with
others like: Product Development.

The market Penetration consists in reaching more customers but in the same
markets, like the United States. The main resource of income of Harley- Davidson
comes from The US consumer. Also, the differentiation generic system empowers
them to penetrate current markets. Secondly, Market and Product Development;
since there’s multiple brands that imitate their products, they now use product
development and innovation as a secondary growing strategy, with the objective of
investing more in Research and Development that leads to high competitive
advantage among others.

In conclusion, Harley applies differentiation as its main generic strategy with the
objective of creating a competitive advantage based on unique product innovation.

2. What resources and capabilities are needed to be a successful supplier of

motorcycles?.

I believe that to be a successful supplier of motorcycles you need to have

exceptional product inventory and knowledge, flexibility and willingness.

First of all, it’s necessary to be constantly innovating, a quality that leads to investing
in Resources and Development, because if not, there’s obviously a competitive

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disadvantage among other brands. Second of all, Flexibility, that comes hand in
hand with innovation; for example: if we are leaders of the marketing segment we
have to be aware and flexible of the possible changes that could happen in the
market industry, such as: Consumer preferences, Interest and exchange rates, etc.
Finally and, in my opinion, the most important quality, willingness to make your
company the best one in the whole world.

3. How can Harley-Davidson sustain and enhance its competitive position?.

For a start, there’s a lot of problems Harley- Davidson’s management should

face. In the first place, the production area; many bloggers believe that the
transfer of the production to the European Market would reduce their costs :
“My suggestion is to make all their engines, the soul of their bikes, in the US.
This would allow them to open plants overseas to help in lowering
manufacturing costs, yet still keep their iconic image”. (dpgoodness, 2018,
p.1). Another blogger suggested: “look into building every continent’s bikes
within the same region … while keeping the American bikes in the states.”
(Fahd, 2018).

An additional problem is the aging image of the company and its lack of
expansion into new markets and generations : “the tariffs and the ‘Twitter war’
are masking the true issues… (1) Aging consumer base (and) (2) younger
people want fast “zippy” motorcycles that are substantially less cost.” (Kevin
O’Meara, 2018). Some other concerns about the brand were their possible
involvement in Politics and their loose focus on new markets: “The Company
should not run its business based on the short term whims of the POTUS who
will be out of office at some point.” (JimHBS89, 2018) comment based on a
tweet made of the President of the United States (“Many @harleydavidson
owners plan to boycott the company if manufacturing moves overseas. Great!
Most other companies are coming in our direction, including Harley
competitors.”)

In my opinion, there are many problems the management sector of the

company should solve but ensuring that nothing deters the Company’s current
strategy, moving the production for the European Market overseas and
concentrating on improving and creating new products for new and existing
markets, will absolutely make a difference in their strategy and competitive
advantage.

Bibliography:

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