Case Study On Harley Davidson Marketing Essay

Harley-Davidson is one of the leading automotive companies, which produces heavyweight motorcycles, motorcycle parts, accessories, apparel and general merchandise. Harley Davidson’s motor company also provides financial services such as wholesale and retail financing and insurance programs. Harley Davidson’s primarily operates in the US. It is headquartered in Milwaukee, Wisconsin and employs about 7,900 people. The company recorded revenues of $4,781.9 million during the financial year ended December 2009 (FY2009), a decrease of 19.7% compared to FY2008. The decrease in revenues was primarily due to the difficult economic environment in FY2009. The operating profit of the company was $196.1 million during FY2009, a decrease of 81.5% compared to FY2008. The net loss was $55.1 million in FY2009, when compared to a net profit of $654.7 million in FY200 8

Harley-Davidson is the parent company for the group of companies including Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (Buell), MV Agusta Group and Harley-Davidson Financial Services (HDFS). The company offers more than 35 models of touring and custom Harleys through a worldwide network of more than 1,600 dealers, spread across six continents. The company also manufactures motorcycles under the brand Buell and MV Agusta. Harley-Davidson also involves in offering insurance, financing and instalment sales services to its customers and dealers.

Harley-Davidson, Inc. Key Recent Developments

In the year Jan 22, 2010 Harley-Davidson Unveils New Sportster later on

Jan 18, 2010 Harley-Davidson displayed new Features at MCN London Show.

In the year Dec 03, 2009 Harley-Davidson restructure motorcycle Operations in New York

Year 2009was known for Harley-Davidson to opens new Store in Michigan, in Aug 20, 2009 Harley-Davidson scouts four sites for new factory

http://www.researchandmarkets.com

The first motor bike was built by William Harley and Arthur Davidson in 1903 in their early twenties since then this motor company have seen many pitfalls. There have been many ups and downs, but it seems they have been proving their mission statement which is “We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.”

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In 1901 William Harley designed blueprint of the bike later in 1903 William and Arthur Davidson made the first motorcycle as a racing bike. In the whole year they just made one bike. In 1904 open thru bike for business purpose.

In 1910 the bar and shield logo was first used as a trademark, which was patent at US patent office one year later. In 1911 they started using f head engine. In 1912 accessories and spare parts department was formed and construction started of the factory. Company formed racing department 1913. In 1915 they entered in racing car events, company designed 3 gear bike. First motorcycle magazine were published in the world in 1917 during this year Harley Davidson produced and sold 1/3 of its production to US military. In 1918 half of the production of bikes was sold to the US. In 1919, 37 inch cubic inch twin cylinder model were introduced which was popular overseas, design was unique. In the year 1920 Harley Davidson’s was the biggest motor cycle producer in the world, motorcycles were purchased from over 2000 dealers and in 67 countries. In the year 1922 they invented first 74 cubic v twin ending on the JD and FD models, they were now doing dealership in 67 countries. Year 1925 was known for Harley Davidson’s gas tank models in distinct shape, Joe Petrail begins racing for Harley Davidson’s and he became one of the famous dirt track racer, in the year 1926 single cylinder motorcycles were again sold for the first time since the year 1918.in the year 1928 first two cam engine were made and available at that time bike was able to get the speed of 85-100mph. They also invented front brake on the bike in the same year. In the year 1929 they invented 45 cubic inch v twin engine and it proved very reliable that they stared doing variations in the models in the late 1972.

Harley Davidson holds certain values to create certain competence with their competitors.Which are as follows.

Tell the Truth.

Be Fair.

Keep Your Promises.

Respect the Individual.

Encourage Intellectual Curiosity.

Strategic capabilities can be defined as Set of capacities, resources, and skills that create a long-term competitive advantage for an organization.

http://www.businessdictionary.com/definition/strategic-capability.html#ixzz16op6A2Ox

Harley Davidson was a big brand name in spite of that when they had to face the competition of Kawasaki, Honda and Yamaha they ended up in bankruptcy. Porter (1985) sees competition in an industry by five different sources of forces. One of the important factors is threat of new entrance which was initially neglected by Harley Davidson motor company. Harley’s executive team knew that Japanese are far ahead of the quality management so they made a plan to visit nearby Honda plant. Barker J (1936) said that it is very important to know how your competitor is behaving in corporate market in order to gain advantage over you. Same logic is applied by the Harleys executive, when they felt need for competition analysis. They found out that Japanese are applying the concept of Joseph and Jurans total quality management which was rejected by Americans manufacturers as a result they offered this philosophy to Japanese. (Pearce, J. & Robinson, R. 2005)

Harleys also implemented just in time inventory (JIT inventory) which is very effective way of cost saving its main objective is to achieve eliminate product inventories from supply chain, this system also work on waste reduction and batch size reduction. as a result they only had to sell 35000 bikes than 53000 bikes in order to reach breakeven point. They also made some special arrangement with US government and requested to increase import tariffs to 40 % from 4%, this explains the strategy capability (Eigenhuis. A, 2007).

http://www.businessdictionary.com/definition/just-in-time-JIT-inventory.html

Harley Davidson’s main users always have been male audience (91%).Stakeholders can be defined as any group or individual that can affect or is affected by performance of the organisation.(Freeman 1987).Individual or group who depend on the organisation to fulfil their own goals and on whom in turn, the organisation depends (Johnson & schools 1999).

The firm is a system of stakeholders operating within the larger system of the host society that provides the necessary legal and market infrastructure for the firm activities (Clarkson, 1994).(Kaplan. R 2001) researched three aspect of in managing stakeholders. First is to know your stakeholders second is to know what you are suppose to deliver from the perspective of the stakeholder and third is to Hold your stakeholders accountable to the realities of the project.

The current business environment for Harley Davidson

For deriving the business environment PESTLE ANALYSIS is shown below for Harley Davidson (Lynch, R.2009)

Harley Davidson is very famous and well known motor company in the world.

They have introduced a academy which involves teaching how to ride bikes for non bike drivers.

The academy is called riders edge which introduced more than 1000 bikers to sport in year 2000

The average buyer of Harley Davidson is mid aged male particularly in their mid forties, having average household income of $78600.

Bikers who have Harley Davidson 30% of them hold a degree.

And only 9% of Harley Davidson US retail motorcycles drivers are women

Harley Davidson have strong repeat business s in 45% of motorcyclist who have Harley Davidson they have purchased Harley Davidson before

Harley Davidson is considered as a national icon for the whole country.

They also have opportunities coming from southern Asian countries like India and china but their operating situations are not certain.

Brazilian assembly decided to cut down on the import tax which is helping them to spread their business outside the US.

They are using v engine as the main manufacturer of the spare parts which is eco friendly by emitting less harmful emissions.

Currently Harley Davidson motor company facing some problems like in Asian countries like India where they have 60% tariffs and various other taxes which is causing Indian Harley Davidson lovers to buy the product at very high rate. And everyone can not afford the bike other than rich people.

http://blogs.ft.com/beyond-brics/2010/11/02/mind-the-bump-harley-davidson-comes-to-india/

Harley Davidson has unique noise which is louder than other bikes and emissions are not up to the level of some countries across the globe.

http://www.businessweek.com/ap/financialnews/D9JRAPU80.htm

Porter’s five forces

According to (Campbell.D,2002) explains the porters five forces. It is a framework for the industry analysis and business strategy development. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally, requires a business unit to re-assess the market place given the overall change in industry information.

No matter how hard company tries, if it fails to fit into the dynamics of the industry, ultimate success may not be achieved. Porter (1985) sees competition in an industry being governed by five sets of forces. When porter studied pharmaceuticals and airline industry he discovered that government regulations and deregulations were important factors.

Harley Davidson had powerful competitive strategy in terms of using the intangible resource and unique resources which the competitors were not able to do it. Harley Davidson had implemented Just In Time as sustainable competitive advantage. The production process was completely changed and the break even unit was brought down by nearly 50%. Harley Davidson believed that customers were no more sitting ducks so they didn’t believe in commercials as other customers. To keep their advertising cost low and create brand value and awareness they started the “Super Ride” campaign which attracted 40,000 customers.

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Internal rivalry

Yamaha, Suzuki and Honda these Japanese companies entered into the production of heavy weight bikes.

Competitors like Yamaha; they have their main revenue only from motor cycles.

One more American bike company who is Polaris they are the producer of the bike who have cheaper price than Harley Davidson.

Suzuki and Kawasaki had strategic alliance between then which resulted in development of both the company in product development, design, engineering, and manufacturing of the bikes.

Honda; who are the main competitors of Harley Davidson they eat up the Harley Davidson’s market share.

Threat of new entrance

Motor industry is very huge and vast industry and it requires very high investment but in US it has already reached the maturity stage so that there are only 4 major motor bike company. The scale of economy is very low in this sector.

There might be some small scale producers but they produce in very low quantity so that they cant be threat for Harley Davidson.

http://www.whybike.com/motorcycle255.htm

Bargaining power of suppliers

They have wide panel of supplier available so any supplier is intended to increase the price they can switch to any other supplier.

Steel, electrical equipment and shipping of end product are normally comes under the suppliers of Harley Davidson, and theses industries are yet not saturated so still lots of options available for them if they wish to switch supplier.

Bargaining power of customers

Harley Davidson has its unique image in the world they have limited dealers around the world so it can’t affect the financial position of the Harley Davidson’s. But it is very important for them to keep in mind that customers have lots of other options available; companies like Bajaj have launched bikes like avenger and Kawasaki enticer which is similar in design to Harley Davidson.

http://www.harley-davidson.com/wcm/Content/Pages/Diversity/supplier.jsp?locale=en_US

Threat of substitution

As we have spoken Kawasaki and Bajaj motor bike company have launched look alike of Harley Davidson bikes

But as we all know Harley Davidson’s bikes are famous for its uniqueness they have less threat of substitution.

Passenger cars, sports bike and scooter bike are the main substitute of Harley Davidson.

Ansoff matrix

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Ansoff Matrix consist of 4 strategies which are very essential to expand the business in order to survive in the competition, it is a business growth strategy. It helps to derive the growth of product and market.

Market penetration

It is a growth strategy in which business focuses on selling existing product to existing market. It helps to increase the current market share and and current products. This normally includes strategies like pricing, advertising, sales promotion and personnel selling

Market penetration also helps to protect governance of growth markets.harley Davidson have been very successful at this strategy because they have been very successful to retain their current customer as they have 45% customers who give them repeat business

http://www.harley-davidson.com/wcm/Content/Pages/HDFS/financial_services.jsp?locale=en_US&bmLocale=en_US

Market development

This is a strategy where company introduced its product to a completely to a new market. There can be different ways of accessing this strategy in terms of getting new geographical location, exporting to other country. Harley Davidson have been very successful in this strategy as they are exporting their product to different countries, also demand for Harley Davidson’s bikes is very high in other countries. Australia and other south pacific countries are the most importers of these bikes.

http://www.fashionunited.in/news/apparel/harley-davidson-bets-on-merchandise-301120101412

Product development

Product development is a strategy where company keeps the same market and they try to create different product.eg in the case of Harley Davidson because the tough looks of bike it was popular among the tough guys but later on they target US army.

http://www.fashionunited.in/news/apparel/harley-davidson-bets-on-merchandise-301120101412

Diversification this strategy is applicable when company is planning to introduced new product in new market, in case of Harley Davidson they started merchandising and started producing leather jackets shirts, key chain, caps and hats. http://www.harley-davidson.com/browse/browse_products.jsp?asst=MotorClothes/Youth&locale=en_US&bmLocale=en_US

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Harley Davidson is already established company. They may enter in new segment of market but giving low price and low benefits it will not match up with the brand image thus this company is century old it can go out for youthful customers with trendy bikes but there pricing strategy has to be such which will not harm the brand as the customers targeted in this segment will be price oriented. Harley Davidson had been in price conflict with Japanese manufacturer. Earlier Harley was a middle class bike but it is currently a high end bike so to lower price and minimize margins would go against the brand value of Harley Davidson. (W. Davidson 2000).

With high benefits and low price, Harley Davidson can consider hybrid option as it would offer an improvement to its products, this can give them chance of competitive advantage. Harley Davidson best competitive strategy is to group formation since last many years, but to segregate they need to involve young customers as Harley is very old brand. As the groups value this service they need to involve young customers.

According to (Johnson.G, 1998) there are three main ways of strategy to sustain competitive advantage and they are priced based strategies, differentiation and lock in priced based strategies. An organization pursuing low price strategies may be prepared to accept the reduced margin. An organization may be prepared to sustain and win price war with competitors. It will cost the company short or midterm losses to drive out competitors for long term, for example supermarkets as customers are going for online price list then going to purchase. The company should be focused on market segments.

Harley Davidson is brand of high value so it plans a strategy to lower its prices then it can go against its brand value. If the prices fall down anyone can afford Harley and the self esteem of owning a Harley would go. The company follows Just in Time for its production so they can achieve their breakeven point in 35000 units. If they lower the price the profit margin will be disturbed.

According to (Johnson, 1998) sustaining differentiation based advantage is very important for company to achieve competitive advantage. Author says that create difficulties of imitation of strategies. Author explains that the resources of the company are tradable like the skilled labor which can go to competitors. In intangible assets such as brand, image or reputation are difficult for a competitor to obtain.

Harley Davidson had strategies to use its intangible resources as its main marketing strategy. They started making group of Harley owners, selling the experience and giving a way beyond after sales service. These strategies were very difficult for Japanese companies to imitate. The company is very well sustainable in differentiation as it has been using intangible resources to promote than tangibles.

According to (Johnson.G,1998) suggest the idea of lock in where an organization achieves a proprietary position in its industry; it becomes an industry standard. Author gives an example that IBM, Microsoft all became industry standards but they were not necessarily the best products. Lock in means that other businesses have to conform to or relate to that standard in order to prosper.

Harley Davidson are in Lock In position as suggested by (Johnson.G,1998). Harley Davidson has achieved proprietary position in the motor bike sector. The strategies which Harley should implement such strategies that sustain their position as a proprietor.

SWOT analysis

It is very essential for any firm to pursue more opportunities and to know their upcoming threats; it gives a better chance to develop competitive advantage. To develop this strategy any firm should consider swot matrix.

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OPPORTUNITIES

The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world.

Women and younger riders are increasing becoming interested in bikes.

The international heavy weight market is growing and is now larger than US heavyweight market.

Market share increasing in Europe and Asia for last two years.

Increasing demand in US markets for bikes.

Customers value quality parts.

http://www.businessweek.com/ap/financialnews/D9JRAPU80.htm

THREAT

Harley’s ongoing capacity restrains a shortage supply and a loss in domestic market share in recent years.

Harley’s average buying age is 42 years old and increasing.

The European unions motorcycles noise standards are more stringent than those of environmental stand

Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified.

Environmental protection law.

Buell division needs to continue to produce a quality motorcycle under Harley’s brand name.

When putting all these strategies into action Harley Davidson should focus upon managing change because according to (Paton.R. 2008) Management and change are the same; change is inventible factor of any journey in company’s life.

According to Stacey, R. (2003) change has been studied and researched for many years. Philosophies, theories and models and techniques abound; all aim, with various degrees of credibility and success, to deliver sustainable organizational change.

According to Barney, J. & Hesterly, W. (2006) review of both theoretical and practitioner research models related to change have concluded that organizational change literature and the underpinning research continue to be highly responsive to the demands of management and also the workplace and market.

Following are the factors why organizations decide to introduce change in there organization According to ( Paton R. 2008) :-Changes in technology used, customer expectations or tastes, Changes as result of competition, a result of government legislation, a result of alterations in the economy , at home or abroad, communications media, supply chain, in distribution chain.

According to (Buchanan, 2006) the final cause of change in organization is where the organization tries to be ahead of the game by being proactive. For example where the

Organization tries to anticipate problems in the market place or negate the impact of worldwide recession on its own business, proactive change is taking place.

According to (Buchanan, 2006) Harley Davidson is been doing well in all the countries that are also aware of what is going on all over the world. They might be considering of bringing more change in the performance because of the recession in the Us economy, bringing more change might cause them less expense in procedures, technology, supply and chain of distribution. They were only targeting limited market initially when stared but as of now they have been targeting almost every demographic group of bikers, they have been using the JIT (just in time) process which is causing them maximum profit.