The aim of this paper is to discuss the critical evaluation of the transformation process undertaken by Harley Davidson and analyse the contribution that the transformation made to the success or failure of the Harley Davidson. This paper also highlighted the competitive analysis of the US motorcycle industry and analsye the strategies that helps the Harley Davidson to get the sustainable competitive advantage from their 2nd most powerful competitor Suzuki. All the related strategies are described in Appendix due to word limitation. This paper also focuses on the further strategies such as EPR system, porter generic strategies etc. by which Harley Davidson would get competitive advantages before 2004. As a manager, author would also recommend differently and how they could use those strategies before 2004 to get the sustainable competitive advantages and also the successful implementation of transformation process.
This study involves a general evaluation of Harley Davidson to assess its transformation process. The study also attempts to assess the impact of the change on their performance. More specifically, the study aims at:
* Identifying Harley's transformation process
* Justifying the transformation process
* To conduct a brief literature on change management relating with Harley's case
* Analyse the Harley's competitive advantage from their competitor
* To recommend differently as a manager regarding different strategies to get the sustainable competitive advantage
The report has used various books, e-journals and websites.
It is assumed that information collected for the purpose of the report is correct and relevant.
1. Company Overview
Harley Davidson began in Milwaukee in 1903 when two partners, Bill Harley and Arthur Walter Davidson, developed a one cylinder motorcycle. Harley Davidson grew quickly. By 1912 Harley Davidson was exporting their motorcycles overseas. During WW1, over 20,000 Harley-Davidson motorcycles were used. By the end of the war there were over 2000 dealerships worldwide.
After WW1, the demand for motorcycles in Europe grew rapidly. Harley Davidson became a leader in innovative engineering during the 1920's. However, during WW2 Harley Davidson prospered with sales of motorcycles to the military. They earned the coveted Army-Navy award for excellence in wartime production. After WW2, Harley Davidson transformed from producing military to recreational motorcycles. By 1953, Harley Davidson was the last remaining motorcycle manufacturer in the United States.
By 1960 Harley Davidson had begun a gradual decline. Harley Davidson merged with the American Machine and Foundry Company (AMF). This merger briefly raised sales. By the mid 1970s, a declining market, a sluggish economy and increasingly fierce competition from Asian manufacturers was once again taking its toll on Harley Davidson. This culminated in a 1981 management buyout saving Harley Davidson from bankruptcy.
After the 1981 management buyout, Harley Davidson had to re-organize. Faced with a terrible reputation for quality and rising costs, Harley Davidson focused on marketing. It wanted to differentiate itself from its competitors by building upon its heritage and its unique American styling. These improvements turned Harley Davidson into a remarkable success story. Between 1999 and 2004 revenues grew on average 14% yearly while profits grew 23% on average yearly.
Harley Davidson is now the largest American motorcycle manufacturer. They design manufacturer and sell heavyweight touring, custom and performance motorcycles. Currently the company has over 28 models of touring and custom Harley motorcycles distributed through a network of more than 1300 dealerships worldwide. They also sell motorcycle parts, accessories, clothing and collectibles. The company also makes motorcycles under the Buell nameplate.
(Source: Harley-Davidson, 2009)
2. Change Management
Change is constant. Change in organisations is said to often be made in three areas: 1) structure, i.e. new services or programs; 2) technology, i.e. alteration in equipment and/or automation; and 3) people, i.e. selection, hiring, training, relationships, and attitudes. Change management is a strategy designed to transition from the status quo to some new ideal way of doing business. Change management has been defined as ‘the process of continually renewing an organization's direction, structure, and capabilities to serve the ever-changing needs of external and internal customers' (Moran and Brightman, 2001, pg. 111). According to Burnes (2004) change is an ever-present feature of organizational life, both at an operational and strategic level. Therefore, there should be no doubt regarding the importance to any organisation of its ability to identify where it needs to be in the future, and how to manage the changes required getting there. Consequently, organisational change cannot be separated from organisational strategy, or vice versa (Burnes, 2004; Rieley and Clarkson, 2001). Due to the importance of organisational change, its management is becoming a highly required managerial skill (Senior, 2002).
3. Change Management Process
Organisational change can be described as the process of moving away from a current condition to realize some future state. Change management involves managing the process of achieving this future state. According to Nickols, (2004), change can be viewed from two vantage points, that of the people making the changes and that of the people experiencing the changes. In the top-down process, or strategic viewpoint associated with management, the focus is on technical issues such as the investment required, the processes for implementing the change, how soon the change can be realised, and the outcome. In the process of bottom-up viewpoint of the employee, the focus is on what the change means to the individual, how they can cope with the change, and also how management can assist them through the transition. In this context, effective change management should be able to help individuals evolve from negative feelings such as fear and anxiety towards positive feelings about the changes being made. Effective change management deals with diagnosing problems and determining an alternative that involves changing the organisational structure or processes. It also identifies and deals with the individual responses to change that can hinder the success of the project. To understand change management better, we need to understand the various models and strategies that managers may follow. Some of the models include the Leadership model, Improvisational Model, Theory E versus Theory O, and the ADKAR model (Please Refer Appendix A1)
4. Harley Davidson Transformation Process
The Harley Davidson transformation began with a company that was suffering. In the 10 years to 1983, Harley's market share of the 850 CC plus motorcycle category had dropped from 80% to 23%. The company was hemorrhaging cash and profits. Staffs were demoralised. The culture and environment was toxic. According to Jenkinson & Sain, (2009), the Transformation process of the Harley Davidson was divided into two phases:
The first phase of the transformation involved rationalisation and tough command and control management. This was First phase of change management process. It was not enough however to create success for this positivity and commitment of Harley Davidson. For this reason Harley Davidson decided to go second phase of the change process (Jenkinson & Sain, 2009).
The second phase of the management was core-integrated marketing of Harley Davidson. Harley Davidson had to move out of financial regulation and power governance into shared marketing commitment towards vision and value based on a collective appreciation of the Harley identity (Jenkinson & Sain, 2009).
Harley's problems began it was the company was sub optimized internally, with many hostile management/union relationships, and failed to match the market in customer value. The Japanese did not create the problem: they exposed the problem. Many companies share this problem. They may have succeeded in avoiding the extreme problems that Harley had, often by effective first phase management. The challenge of is to move into second phase. Second phases Integrated Marketing depends first on uniting everyone around a collective vision of value that connects to the identity and purpose of the organisation/brand. This depends on a profound and shared understanding of customers and an organisation that can deliver value seamlessly throughout all customer experiences across the relationship. This also means connecting and matching spiritual with practical qualities: vision, purpose, values with information, processes, and systems (Henshaw & Kerr, 2001).
5. Implementation of Transformation process
There are a number of factors that affect the strategies used for change management (Please refer Appendix B1), and ultimately whether the change is effective. One set of factors is how resistant people are to change. People may resist change because they are unsure of how it affects them, misunderstand the changes, have a different assessment of the current and future environment, or simply have a low tolerance for change. A second factor is the urgency of the change. How important is it, and how critical it is to the business needs of the organization? This also affects the time frame under which the changes need to be implemented. A third factor is how ready is the organisation for the change? Does it have the skills and knowledge needed to implement the change? Finally, management will have preferred strategies for managing the change. This might be based on research and studies they have made, or from past experiences (Kotter, 1996).
If we look at the various models (Please refer Appendix A1) for change, it is apparent that there are certain situations where a particular model will not be as effective. For example, I would not expect the improvisational model to work well in a rigid, autocratic environment. This model would work best in an informal, cooperative environment where the workers are encouraged to take risks and display initiative, and everyone is open to new ideas (Orlikowski and Hofman, 1997). The Theory E and Theory O models represent opposite ends of the spectrum. Theory E is more appropriate when the focus is on the short term, and the goal is to maximize the return on investment. The Theory O is more appropriate when the emphasis is on the long-term survival of the company (Beer and Nohria, 2001). The leadership and ADKAR models are both effective in situations where the change is a programmed change, and management needs to secure the buy-in and support of the employees. Both of these models emphasize the leadership aspect of change management, and deal with the behavior of individuals in response to change.
6. Transformation Model for Harley Davidson
Integrated Marketing amounts to a widening of the responsibility, potential and vision for many marketers and therefore for marketing. Rich Teerlink, CEO of Harley-Davidson, describes a leadership journey by which just such a transformation took place. Under his leadership, Harley-Davidson changed from a somewhat toxic, hierarchical, command and control organisation to something new and nimble that is the present-day foundation for its ongoing success as an Integrated Marketing leader. Initially that change did require command and control to get out of the solvency crisis. However, the sustained success that Harley Davidson has, its came from a different kind of change. Involvement, empowerment and alignment were the secret of success of Harley Davidson. The result is something called the Business Process, an extensive and ongoing programme of Harley Davidson that involved and involves everyone in the Harley Davidson from top to bottom in establishing shared values and vision, shared mission and operating philosophies, and agreed objectives and strategies (Jenkinson & Sain, 2009).
According to Teerlink (cited in Jenkinson & Sain, 2009) and his partner in the process, consultant Lee Ozley, “Instead of demanding compliance, managers have to earn, and call upon, commitment”. The extensive change process, over several years, that led to this, known as the Joint Vision Process, also led to a radical new organisation. Instead of the conventional hierarchical structure, Harley-Davidson developed what they call a circle organisation of three overlapping elements concerned with creating demand, producing products and providing support. A leadership and strategy council at the centre has members nominated from these circles.
Harley-Davidson Circle organisation
Jeff Bleustein, former president of parts and accessories, describes the uniqueness of the circle organization, According to Bleustein, there are a lot of companies with self-managing work teams on the factory floor. In fact, that's where a lot of innovation comes in some companies as far away from the executive offices. He took this concept of self-managing groups and made it work at the executive level of Harley Davidson. The solution to Integrated Marketing is not to blindly copy the Harley- Davidson solution. Jeff Bleustein also give some criticism against the integrated marketing approach. He predicted that integrated marketing approach would not work, because Harley Davidson grew organically out of the process. However he has observed some other radical structures both within the marketing department of the large organisation. He was certain that to achieve best practice in Integrated Marketing there is a need for the organisation structure to grow out of and reflect the organising idea of value and purpose that animates the brand organisation, rather than be driven by traditional considerations of power and status (Jenkinson & Sain, 2009).
Ron Hutchinson, currently vice president for parts, accessories and customer service, gives a perspective on this change and its effect that relates to Integrated Marketing. He verified that this was a vision of the way people needed to be engaged in an organization, and developed a structure the Business Process of Harley Davidson that allows for theoretical alignment of an individual's job with the long-term direction of the company. Hutchinson aware of that no other organisation has built a whole process and structure around that. In the final analysis, he would say the customer service department, where a customer spent eight hours a day taking phone calls from unhappy campers, is a true test of whether the Business Process works or not. He was convinced that Harley Davidson wouldn't have the reputation that they have today in the marketplace if they didn't have front-line people excited by charismatic, visionary leadership, who can see exactly how their little piece of the organization fits into the long-term strategy and direction of the company (Teerlink & Ozley, 2000).
According to Teerlink, to complement the organizational changes, new rewards and incentive systems were introduced. They are changing their pay system to pay for performance. They needed their people to understand empowerment. An employee must make the decision that he or she wants more training no one will tap an employee on the shoulder but once an employee are there, they will help an employee. The executive committee was the first group to go through the [Leadership] institute. They didn't want anyone to get the attitude that the executive committee doesn't have anything to learn (Nolan & Kotha, 2007).
Line workers were exposed to the interrelation among products, sales, and profitability. Harley Davidson also prepared nontechnical explanations of how cash flows and flexible production affected financial success. Harley made substantial changes in worker job descriptions, responsibilities, and production processes to increase job enrichment and worker empowerment. In 1993 Harley-Davidson acquired a minority interest in the Buell Motorcycle Company, a manufacturer of performance motorcycles. Through this investment Harley hoped to enter select niches within the “performance” motorcycle market, which several top executives thought would return Harley to its heritage of product innovation and development through lessons from the racetrack (Teerlink & Ozley, 2000).
7. Successful Transformation process in Harley Davidson
Due to successful transformation process of Harley Davidson (H-D), impressive integrated marketing strategy gave Harley Davidson a brand name that more recognized than any other company. Indeed, the strategy was not to focus on reducing the costs, or on the distribution improvement, but the main element was to create customer value. In other words, H-D's was to give more credibility, trust, safety, desires, quality of product and service, and thus fidelity to its brand. In order to reach that goal, H-D centralised its marketing on these topics, for example creating a Harley Owners' Group who rallies more than 900,000 members worldwide (Harley-Davidson, 2009). The main interest of this group is to ensure members to know each other, and become a second family who share the same interests, wills, and thoughts. This integrated marketing strategy also ensures H-D to maintain a strong relationship with its customers, and thus a strong brand name all over the world. According to customers, the owners of H-D say that this brand understands customer's needs, and also that they are always for their customer if a problem appears. These remarks can be linked with H-D's values. According to H-D “Our values are the heart of how we run our business. They guide our actions and serve as the framework for the decisions and contributions our employees make at every level of the Company.” These values are: Be Fair, Tell the Truth, Keep Your Promises, Respect the Individual, and Encourage Intellectual Curiosity (Harley-Davidson, 2009).
This integrated marketing approach can also be linked with the mission statement of H-D:
“We fulfill dreams through the experience of motorcycling by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments (Harley-Davidson, 2009).”
In order to be successful, organizations must determine clear financial and strategic objectives (Hitt et.al, 2005). Harley Davidson gained a greater market share, achieved higher product quality than rivals, maintained a stronger reputation and a better branding strategy than its competitors, increased levels of customer satisfaction and finally attained stronger customer loyalty due to successful transformation process.
In the 60's and 70's Harley's strategic intent was based on “going shoulder-to-shoulder against the predominantly Japanese companies” (Harley-Davidson, 2009). Harley could not compete on the price level, and the Japanese products were of superior quality, Harley decided to compete in other areas. Their new strategy was to connect with people on an emotional level. They are not selling a product but a way of life, a way of thinking. Due to successful transformation process of Harley Davidson changed its strategy from selling products to selling community (Teerlink & Ozley, 2000). And the fact that H-D has developed a Brand stretching strategy, which was an element of Harley's success in developing relationships with customers. Indeed, owners can buy other Harley's products than bikes; it means that they can be more than a biker, they can join Harley's group buying leather accessories or clothes, and even cosmetics.
8. Competitor Analysis/Strategic Issues
There are four strategic issues that H-D has to face with. The most important is the European market where H-D has to increase its sales, then, linked with the first issue, there is a fierce competition with the Japanese firms such as Honda and Yamaha. The other issues are the women's market and the accessories, which are in decline.
Harley-Davidson is not very famous in Europe where Harley's market share of 650 cc plus motorcycle is less than 7% (6.6%), while in North America Harley-Davidson has a huge market share (46.4%), 21.3% for the Asian market. The main industry competitors are Honda, Suzuki, Yamaha, Kawasaki and BMW. Harley-Davidson is the market leader in the U.S. market with 46.4% market share (Teerlink & Ozley, 2000). Their domestic position is quite secure however the rival companies are all aiming to increase their impact on the North American market.
Rival manufacturers such as Kawasaki or BMW have all made a serious attempt to establish them at the heart of Harley's market. The Japanese bikes were often considered to be ‘sissy' cycles by Harley lovers (Mitchell, 2001). This image is slowly changing and the Japanese companies are trying to ‘out Harley' the Harley models. Yamaha motor USA is starting to improve its position in its various markets. The U.S. sales have increased for 47% since 1998. Harley Davidson had a tough time in creating an image for themselves particularly in the cruiser markets. Harley continues to dominate the U.S market and is also the leader in the Asian/Pacific markets with 21.3% market share (Henshaw & Kerr, 2001).
Yamaha is also trying to outperform Harley and is improving its mass customization skills. The Yamaha website offers a section that allows customers to design their own bike and choose the look and functionality they desire. The interface ensures customers to choose from 75 Yamaha accessory items and makes it easy for the customer to purchase the bike online. The Yamaha V Max model, the Drag Star, and the Road Star models attract customers with their slick design and technological tweaks (Yamaha, 2009). The Yamaha sports models are also very successful and the company is still maintaining a strong position in world markets.
European rivals are also trying to make an impact on this lucrative market. Italy's Moto Guzzi recently introduced the V11 EV custom cruiser. BMW introduced 3 models of its R1200C cruiser and thanks to clever advertising is beginning to improve its position in the U.S. and Asian markets (BMW Annual report, 2004).
9. Harley Davidson's Strategic Implementation
While Harley was booming in U.S market during the late 1950s, then the market attracted Japanese motorcycles manufacturers, beginning with Honda. Other Japanese firms, Suzuki, Yamaha and Kawasaki also followed Honda. Behind Honda, Suzuki was the main competitor for Harley Davidson and while Suzuki marketed smaller, quieter and more fuel-efficient motorcycles that required little or no maintenance and were easier to handle compare to Harley's bikes. In order to get sustainable competitive advantages, Harley Davidson implemented different types of strategies that helped them become one of the most dominant motorcycle producers in the world as well as differentiate them from their one of the most powerful competitor Suzuki.
As stated earlier, strategic issues that H-D has faced is increased segmentation in the motorcycle industry causing them to shift focuses in their strategy. With the purchase of Buell Motorcycle Co. they have been successfully able to increase their market segmentation by offering high quality bikes at competitive price. This allowed H-D to have the opportunity to move from a differentiation strategy to a cost/differentiation strategy (Henshaw & Kerr, 2001).
Harley Davidson's use of the Cost/Differentiation as a Business Level Strategy has proven highly successful since they have been in business. They have always tried to differentiate themselves from everyone else in the motorcycle industry, by producing a brand image that many competitors have failed to recreate. Harley Davidson has two different companies built into one. The first of the two companies produces motorcycles at competitive prices against their competitors. Harley Davidson demands high standards of quality and efficiency and demand lower costs, which will add to a higher quality less expensive motorcycle. Harley Davidson has done extensive research to find out information about their average customer. Harley Davidson concluded that the average motorcycle consumer is a married, college educated, 38 year-old male earning $44,250 a year and his average income is increasing. Research also shows that females represent 10% of the new purchasers (Henshaw & Kerr, 2001).
The second company that Harley Davidson implemented is the Costume Vehicle Operations or CVO. This company specializes and customizes the motorcycles to suit the individual owner. Harley Davidson also offers genuine parts and accessories so Harley owners can customize their own motorcycles. The CVO tries to use the differentiation strategy to beat out its competitors. The customisation of a motorcycle can prove to be very expensive and time consuming, but Harley Davidson knows that what good is a bike if you cannot show people who you really are. The customers are willing to wait an average of 1 year after placing their order to receive their customized motorcycle. Every other motorcycle manufacturer is trying to imitate Harley and their products. Harley has the top of the industry manufacturing process with large state of the art factories, and distribution, with many small and personalized, to market dealers, who sell their products (Harley-Davidson, 2009)
Harley Davidson's Corporate Level Strategy tends to favour the Related Diversification Strategy. Their two primary businesses are related to each other in some manner or another. The two divisions, CVO and the Competitive Price Division, are related by using the same suppliers. Although the two divisions serve two totally different responsibilities to the consumers, they are truly related in their strengths to differentiate themselves from all the other competition. Harley Davidson does not do much promotion at the corporate level. Primarily, the local dealers do their promotion (Mitchell, 2001).
Harley Davidson Motor Co. of Wauwatosa, Wisconsin has become known for translating process innovation into business revival. A significant contributor to this growth is a new-product cost management strategy, based on design for manufacturability. The company recognized that while 70% of their product cost was determined at the design function, the cost strategy went far beyond the function of product development. Their strategy was two fold, with the first linking cost management to corporate objectives, and the second validates and measures progress towards cost targets. Cross-functional integration was paramount in implementing this strategy. Cost analysts work with development team members, while design engineers worked closely with manufacturing personnel to understand cost constraints in conjunction with an understanding of how things would be made. This strategy has helped Harley-Davidson capture nearly 50% of the U.S. market for motorcycles, while achieving double-digit revenue growth (Teerlink & Ozley, 2000).
As a manager author will identify the key areas of further strategic implementation by which Harley Davidson will get sustainable competitive advantage in their industry.
Author identifies that Harley Davidson still not using the EPR system. Harley Davidson can use the ERP system to enhance the integrated marketing approach. Usually ERP systems will have many components including hardware and software, in order to achieve integration, most ERP systems use a unified database to store data for various functions found throughout the organisation. The term ERP originally referred to how a large organization planned to use organizational wide resources. In the past, ERP systems were used in larger more industrial types of companies. However, the use of ERP has changed and is extremely comprehensive, today the term can refer to any type of company, no matter what industry it falls in. In fact, ERP systems are used in almost any type of organization large or small. In order for a software system to be considered ERP, it must provide an organization with functionality for two or more systems. While some ERP packages exist that only cover two functions for an organization Payroll & Accounting, most ERP systems cover several functions. Today's ERP systems can cover a wide range of functions and integrate them into one unified database. For instance, functions such as human resources, supply chain management, customer relations management, financials, manufacturing functions and warehouse management functions were all once stand alone software applications, usually housed with their own database and network, today, they can all fit under one umbrella the ERP system (Tech-faq, 2009).
In retrospect, author would have recommended that Harley do a few things differently. First, they could have researched the literature on what types of problems mechanistic manufacturing organizations face when they try to implement an ERP system in a highly inflexible environment. There was enough research and case analysis available to do this. While they were clearly aware of potential change resistance and the need to get all stakeholders involved, the amount of time their search and selection process required was ridiculous in today's business environment. Author speculate that the sheer demand and high prices of their product allowed them to wallow in their inefficiencies a few more years before they had to bite the bullet (Hirschboeck et.al, 2004).
Second, obtaining the advice of experienced software and supply chain consultants earlier in the process probably could have saved some time and created a defined focus. Often, managers use the discipline and recommendations of consultants to reinforce the need for organizational change. With the purchasing process out of control, they could have brought in some purchasing expertise to clean up some of the mess before selecting a software system to help organize the process.
According to the website, only 10% of the Harley's customers are females. But female bikers are more and more interested by bikes (www.moto-station.com). Yamaha and Kawasaki are trying to take advantage of this growing interest of female bikers and many of their ads feature women on motorcycles. Harley Davidson can take this new opportunity to get sustainable competitive advantage in their industry.
Another key issue for the future is the problem of the accessories. Indeed, those products such as perfumes or cosmetics are decreasing a lot. So, Harley-Davidson should take a decision about this unsuccessful strategy of brand stretching. But, this strategy has a lot of success regards to the leatherwear and fashion area. Harley-Davidson should continue to improve this brand stretching and not leave the market of cosmetics and perfumes.
Harley was successful in transforming its scattered purchasing functions into a supplier relationship management program. The supplier portal now serves 300 of its 695 suppliers. In 2004, the company was extending portal access to its accessories and merchandise suppliers. This year, Harley will have about 300 IT employees (Hirschboeck et.al, 2004). The department should manage by experienced leaders who specializing in a particular area of expertise supporting a key company function.
Record earnings for the first quarter of 2004 were gained from a 13% increase in sales, the largest in its history ((Nolan & Kotha, 2007)). Analysts are crediting its profit growth and margin control to improvement in its supply chain efficiencies. Harley holds a 46% market share in heavyweight motorcycles in the US. The company sponsors a club for its customers, known as the Harley Owners Group (HOG) that allows the company to do direct market research and solicit ideas for product development and testing from 600,000 members. In 2002, the company produced 28 models (over 263,000 units) of touring and custom motorcycles in nine production facilities (Jaffe, 2000). Harley Davidson can increase this type of Sponsor's club that will help the company to get the continuous feedback regarding the customer's needs and wants.
Its fastest growing market niche is female, with women now accounting for 9% of new sales (up from 2%). American baby boomers are responsible for the company's recent popularity and growth. Harley can capitalize on the baby boom retirement opportunity, as 70 million Americans will have the time, money and interest in leisure travel and adventure.
Although motorcycles are sold internationally, three main geographic markets comprise the bulk of motorcycle sales North America, Asia, and Europe. The largest is the North American Market (USA and Canada account for about 60% of this market) accounting for 60% of worldwide motorcycle sales (Klein, 1984). With the baby generation aging, opportunities exist for the penetration of new markets for Harley Davidson.
The Japanese market accounting for a great chunk of the Asian Market is an untapped one for foreign manufacturers. Government regulations and trade policies make it difficult for foreign manufacturers to enter though. Most Asians consider motorcycles as a basic means of transportation. Harley Davidson may target the areas include China, Korea, Taiwan and Vietnam.
The European Market is another market with great potentials since Europeans have a higher disposable income and enjoy a higher standard of living. Eastern Europe is not offering a good deal mainly because of its unstable political and economic environment. To succeed in these markets, Harley Davidson need to modify products to meet local needs, provide after sales service, expand distribution networks, and create strong customer relationships (Klein, 1984).
This paper has given an intuitive look into strategies at work and based on the analysis done it is reasonable to assume that H-D will be successful staying competitive. H-D implemented changes in the ‘90's to prepare for the future challenges and stay ahead of competition. They have targeted towards improving and expanding manufacturing and creating new products and services. Thus far, the strategies have been very successful and have built strong relationships with all their shareholders.
H-D has found new ways to extract margins from its customer base through finance contracts, licensing agreements, product upgrades, and accessory goods. It has expanded it product line to the small and mid-size range with the purchase of Buell Motorcycle Co. They know who their customers are, and which markets they need to expand on. They also have happy unionized workers who share the same values as the management team. Most importantly through the decades, H-D motorcycles have had the ability to generate emotion. This emotion and loyal has never been duplicated by any company to date, and probably never will. If H-D continues to innovate there is not question that they continue to gain market share.
1.0 Change Management Theories
1.1 Drivers of Change Management
Nowadays, business world change is an inevitable quality. It is necessary for all management of the companies to prepare for all upcoming technological advances, personnel and organizational changes. In order to minimize the impact of change, every employees need to brainstorm about what will be done tomorrow and the day after that. There are many different forces that the organization faced from the change. Awareness of forces can assist managers to determine when an organization change should be implemented. Organizations are presented with change when external and internal drivers create a need for change. Awareness of external and internal forces can assist “managers in determining when they should consider implementing an organizational change” (Kinicki & Kreitner, 2004). The simulation presented driving forces that led the company to success of the organizational goal: increase-networking solutions by transforming the consumer product. For example, the company, Synergetic Solutions, Inc. wanted to advance in networking globally by increasing productivity, so implementing measures to assess employee absenteeism and work activity was imperative for the manager to perform before initiating change. Market changes also force companies to engage in organizational reengineering.
1.2 Reasons Behind Individual Resistance to Change:
Despite the potential positive outcomes, changes are often resisted at organisational level. Resistance to change appears to be a common phenomenon, it can take many forms and it may be difficult to identify the exact reason for the opposition. Some common reasons for individual resistance to change within the organisations can be categorised under the following headings. (Akin et al., 2006)
§ Habit: People tend to respond to situations in an established manner. Habits may serve as a means of comfort and security and as a guide for easy decision-making. (Akin et al., 2006)
§ Economic implications: People tend to resist changes that are perceived as reducing their pay or their rewards or seen as an increase in work for the same level of pay. (Akin et al., 2006)
§ Loss of freedom: There will be resistance if alterations are seen as likely to prove inconvenient, make life more difficult and reduce freedom of action. (Akin et al., 2006)
§ Security in the past: There is the tendency in some people to see security in the past and any changes may be frightening. (Akin et al., 2006)
§ Fear of the unknown: Changes tend to generate in people anxiety and fear. Transformations in the organisation may represent a degree of uncertainty. Although organisations have to adapt to their environment, they may set up defences against changes and they prefer to concentrate on the routine things they perform well. Some of the main reasons for organisational resistance against change are described below. (Akin et al., 2006)
§ Maintaining stability: Organisations tend to maintain stability and predictability. It is very important in order to keep a formal organisation structure, rules establishment and definition of assigned responsibilities and duties. (Akin et al., 2006)
§ Investment in resources: Changes may require large resources that may already be committed to investments in other areas. (Akin et al., 2006)
§ Threats to power or influence: Change may be seen as a threat to the power or influence to a certain groups within the organisation, such as their control over decisions, resources or information. (Akin et al., 2006)
In order to solve the problems that may occur, as a consequence of the new implementation, managers should comply with the following factors.
§ Consultation and participation: The managers should attempt to solicit the co-operation of staff and help them to feel that decisions that are taken are in their own interest. This comes from a high level of consultation and encouragement for staff to participate in the decision making process. (Akin et al., 2006)
§ Motivation: Motivation is an important aspect in the operation of a control system. Lack of positive motivation can lead to frustrated behaviour resulting in lack of commitment and poor job performance. (Akin et al., 2006)
§ Organisation structure: The structure of an organisation can affect the implementation of control system. Organisation structure can be distinguished in terms of two divergent system of management practice, the mechanic and the organic system. The first is a more rigid structure and is appropriate to relatively stable conditions. It is characterised by a clear hierarchical structure of authority and closely defined duties and responsibility. The organic system, however, is amore fluid structure and happens to be required for conditions of change and for uncertain environmental influences. This system is characterised by a network structure of control, authority and communication, the continual adjustment and redefinition of jobs. (Akin et al., 2006)
1.3 Models of Change Management
1.3.1 Leadership Model
Change management at organisation will help to build support for its new initiatives, uncover any hidden resistance to change, and enable its management to be more successful at leading change within the organisation. An effective implementation plan will addresses any human variables and should encompass several strategies. Throughout the change process leaders should stay energized and motivated, despite setbacks. Change agents should also challenge assumptions. Leaders of change should deal directly with challenging people and not let them erode the change process. A successful plan creates purpose and meaning for everyone involved in with the change. It is important since change generally can take a long time to implement, leaders should quickly gain perspective on problems that might surface and remain focused on the goals and objectives of the change. (Kotter, 1996)
John Kotter (1995), an organizational change expert, developed an eight-step model for leading organizational change. According to Kotter, these eight steps must be performed sequentially. His model represents three phases of the change process previously identified by Kurt Lewin, a social psychologist. One of the early change management theories was a three-step model developed by Kurt Lewin in 1947. Lewin believed that change was inevitable but short lived. Lewin's model consisted of three steps. (Kotter, 1996)
The first step was unfreezing whereby the old behaviors were stopped or broken. This process of breaking the behavior could be easy or very difficult depending on the situation (Burnes 2004)
The next step was that of moving. Moving was the actual changes taken place or where the old behaviors were replaced with new behaviors. Resources were identified and used during this step to make the change (Higgs et.al, 2005). Lewin believed in order for change to occur all elements of the change needed to be identified and reviewed.
The third and final step was called refreezing. Refreezing was the step in which the behaviors that were changed were stabilized. Lewin believed that change without reinforcement was short lived. Sometimes in order for refreezing to occur organizations had to change their culture and policies and procedures (Burnes 2004).
To examine the three-step model we can say that the first phase is the initial preparation for the change process in which employees are asked to let go of what is familiar. The second phase involves actual implementation of the change; this is the lengthiest phase and could take several months to several years dependent on what behavior is being modified. The last phase is paramount in that it involves ingraining the new attitude or behavior so that it becomes a part of the organization's new culture.
1.3.2 Improvisational Model
The traditional change management models start with the idea that change is the result of a well thought out plan of action that identifies certain goals, how these objectives will be met, and the tools and techniques that will be employed to ensure that the plan is carried out as charted. But when examining how much change actually occurs, Orlikowski and Hofman found that in many instances, it is simply a reaction to unanticipated conditions. (Orlikowski and Hofman, 1997) The premise of this model is that rather than planning for change, much change is improvised in response to unanticipated events. The model has two primary assumptions:
* Change is not an event with a defined end point where the organization returns to a new equilibrium state. Rather, change is an ongoing, constant process.
* Change is not anticipated
The authors identify three types of change:
* Anticipated change is defined as planned actions, with directed, intended outcomes
* Emergent change is a spontaneous response to some event where the outcome was not intended, nor anticipated
* Opportunity-based change also is not anticipated, but the change is intentionally introduced because of an event
1.3.3 Theory E and Theory O Model
In this model, two different theories of what drives change are given. Under Theory E, the purpose of the change is economic, or the creation of value for the organization. The leadership is top-down, emphasis is on the organizational structure, processes and procedures, and the planning is programmed. Under Theory O, the purpose is to develop the human resources of the company and build long-term performance based on a high level of commitment. The leadership is more participative, the focus is on developing a corporate culture, and planning is emergent. (Beer and Nohria, 2001)
1.3.4 The ADKAR Model
The emphasis of this model is that change occurs along two dimensions, the business need of the organization and the personal experiences of the employees undergoing the change. The model finds that management generally deals effectively with the business needs such as developing the scope and objectives for the change, designing the organizational structure and processes of change, implementing the new systems and processes, and analyzing the results of the implementation. But in order to be successful, management must also be able to address the apprehensions that employees have to change. They need to communicate the business need that the change addresses, elicit a desire in the employees to support the changes either through positive or negative incentives, determine if the employees have the knowledge and skills to support the changes, and finally determine what they need to do in order to make the changes stick.
Plz Refer: http://www.change-management.com/tutorial-adkar-overview.htm
1.4 Strategies for Resistance of Change:
Several strategies were identified to further implement change and reduce resistance at organisation The relevance of different change strategies is that they build upon different assumptions about human motivation and hence willingness to engage in change at a particular point in time” According the Cipd (2009), the strategies are given below:
Firstly is the normative-re-educative strategy, which is focused on values of each individual and that changing those will change specific behaviors and thus reduce change resistance. “It is based upon core beliefs, values and attitudes. So change will occur as individuals change their attitudes and this leads them to want to behave differently” (Cipd, 2009).
The second strategy is the rational-empirical strategy. This one is based on the use of persuasion. By persuading individuals that believe it is their own choice and they will better adjust to change? “The benefits of a change therefore need to be highlighted and sold to the individuals as being of personal benefit to them” (Cipd, 2009).
Next is the power-coercive strategy, which implies that power will convince people to conform. By enforcing ones power, people will choose to follow. “A potential issue with this process is that once the power is removed, individuals may revert to previous behaviors” (Cipd, 2009).
Finally is the action-centered strategy. This strategy essentially focuses on the actual problems and creating solutions to those problems. An organization can used the surveys to identify problems and implemented activities that would solve them (Cipd, 2009).
2.0 Transformation Process Model
3.0 Situation Analysis of Harley Davidson
3.1 Porter's Five Forces Analysis
Porter (1980) stated that the essence of formulating competitive strategy relates to a firm's environment and companies that can adapt their strategy along changing environments may be able to stay compete with others. Therefore, it is important to consider microenvironments factors before conducting corporate strategies. The five forces framework (barriers to entry, threat of substitutes, competitive rivalry and bargaining power of buyers and suppliers) helps to identify the sources of competition in the industry as a business has to comprehend the dynamics of its industry and markets to compete effectively. (Porter, 1980)
This model is used to analyse broad aspects of the environment. These factors will directly influence the capability of the current competitive position of an organisation.
Threat of New Entry: Low
Requiring high capital investment to enter the business because of the scale economies in production, research, marketing and service of this industry is high.
Brand Identification of Harley Davidson has been strongly established for years. The entrants will face a big barrier to overcome customer loyalty of Harley.
Harley has developed its limited distribution channels via licensed private dealer and distributor. The new entrant of this industry most probably has to create its own distribution channel and make another investment, which causes a barrier to entry this industry become high.
Powerful Buyers: Low
The product is targeted to individual buyer rather than large-volume buyer therefore buyers will have only small power to force the price down.
The product is differentiated or targeted for niche market therefore the buyer will not easily find the alternative product.
Harley also produces parts and accessories as proprietary components for their bikes which are not produced by other company.
There is quite a small number of this industry in the same market.
Since the product is differentiated, the customer tends not to price sensitive.
Substitute Products: High
Customers' taste is shifted into Japanese motorbike.
Products with the sophisticated features, high quality and new design have been available in the market to adopt the trend-shifting.
Other means of transportation that are less season restrictive.
Powerful Suppliers: Low
The supplier's customer are not fragmented so they have a high bargaining power
Switching cost of changing suppliers is not too high since it doesn't require to invest heavily to be a supplier.
Competitive Rivalry: High
Lack of products differentiation or narrow product line
Industry growth is slow, precipitating fights for market share that involve expansion minded members
Exit barriers are high. Harley has a high loyalty to keep the business survive.
The rivals, for example Honda, are diverse in strategies, origins and ‘personalities' to compete and continually run head-on into each other.
3.2 SWOT Analysis
The external analysis inspects opportunities and threats that exist in the environment. Both opportunities and threats subsist independently of the organization. The way to distinguish between a strength and weakness from an opportunity or threat is to claim if this issue exist if the company did not exist. Opportunities are conditions that exist but must be acted on if the firm is to benefit from them. Threats refer to conditions or obstructions that may prevent the firms from reaching its objectives. The area that are used to analyses to look at all external factors affecting a company includes, customer analysis, competitive analysis, market analysis and environmental analysis (My strategic plan, 2005).
Harley Davidson has tremendous brand imaging embedded within American culture. This identity creates a powerful psychological bond between Harley Davidson and its customers. Harley Davidson motorcycles are considered to be more than just motorcycles they are legends. Harley Davison is an American icon brand. The Harley Davidson symbol is based on a pattern of associations that include the American flag and the eagle that is reflective of the passion and freedom Harley Davidson customers enjoy. Harley Davidson customers consider themselves to be Harley Davidson people. It is a lifestyle. This company reinforces this identity through the H.O.G. (Harley Owners Group) and many other well-publicized events. In 2003 H.O.G.s membership totaled 840,000.
The loyalty of the Harley Davidson customer is seen in the long run through repeat business. Repeat business is a tremendous source of income for Harley Davidson. The loyalty of Harley Davidson customers is unrivalled with 45% of purchases being made by existing customers. The fact that Harley Davidson motorcycles are slightly unique allows its customers to feel as though they have a custom bike that has lead to acceptance of higher prices. Due to higher demand for these motorcycles, resale prices are higher than its competitors allowing the owners to feel as though their Harley Davidson is an investment. This allows costumers to justify paying the higher price.
Over 80% of Harley Davidson suppliers are located with 160 miles of one of their manufacturing plants. This just-in-time delivery system and long term supply contracts with their vendors has increased Harley Davidson's manufacturing efficiency. The utilization of JIT principles and the continued upgrading of technology in research and development have given Harley Davidson a competitive advantage. The 1996 opening of a product development center in Milwaukee was created to the shorten the length of time it took to get products from design stage to the markets.
Harley Davidson motorcycles are more expensive than their competition. Even lower end models may be too expensive for potential customers. The higher prices Harley Davidson chares may not only be costing them current customers, but it may cost them future repeat customers.
Harley Davidson may be limited by their size. It's competitors have many more resources and products. The diverse product lines offered by the competition may allow them to make a lower profit on some products in order to gain market share. These companies may subsidize entry-level motorcycles with the goal of attracting these same customers into more profitable motorcycles due to customer loyalty. It may be very hard for Harley Davidson to attract this type of new customers due to their high entry prices.
Harley Davidson's main competitive threats are Honda, Kawasaki, Suzuki and Yahama. Domestically the competitors include Polaris, Excelsior and Indian. Polaris is a leader in the snowmobile market and has recently entered the motorcycle market with its Victory brand of motorcycles. The famous Indian motorcycle has recently been re-introduced, however, its re-introduction is still in its infancy. However, Indian motorcycles have a history that could allow it to create a strong brand image and cultural following similar to Harley Davidson. As the only major U.S. manufacturer of motorcycles, Harley Davidson success may result in increasing competition from other domestic manufacturers in the future as the try to mimic Harley Davidson's marketing success.
The post baby boomers have been the main customers for Harley Davidson throughout the 1980s and 1990s. As this segment of the population age, their purchasing power will decrease. Shifting of the demographics will force Harley Davidson to rely on a portion of the population that will be declining. This will force Harley Davidson to target new customers. Buell motorcycles was purchased in the late 1990s to allow Harley Davidson to sell the Buell line of performance motorcycles, which appeals to younger customers. However, the Buell line of motorcycles has not gained any significant domestic market share of performance motorcycles.
Woman constitutes roughly have the population. However, Harley Davidson on has approximately 3% of its sales from women customers . Competitors have been able to entice woman into buying their products by offering smaller, more woman specific motorcycles. With only a specific product line, Harley Davidson may be alienating future customers.
Harley Davidson has much strength that can lead to great opportunities for the future. They include introducing more products for woman and expanding their product line to compete internationally.
The international competition in the heavyweight motorcycle (651+cc) industry is competitive. Harley Davidson only had 8% market share in Europe compared with 49% market share domestically in 2003. Harley Davidson even had a 26% market share in this segment in Australia/Japan. This heavyweight Harley Davidson motorcycles that are popular domestically does not have the same appeal internationally. Harley Davidson should also heavily promote the Buell line of motorcycles to increase market share in the sport motorcycle sector that the Japanese competitors have succeeded in. Harley Davidson could look at further increasing its international manufacturing expansion to instill its wildly successful brand identity with foreign consumers.
Harley Davidson could entice more women into their products by offering a wider variety of motorcycles. Women only consist of just over 3% of sales. This growing market could be penetrated if the right type of motorcycles were manufactured. By utilizing their strong brand image, the female market could leader very lucrative for Harley Davidson.
3.3 Harley Davidson's Value Chain Analysis
Marketing & Advertising
Harley Owner Group convoys free advertising
Promotions at motorcycles rally and improve dealer network to broaden appeals to new customers
Not much spending on advertising
Licensing brand/logo to more than 100 manufacturers thereby increasing exposure to customer
Distributing newsletter and promote rallies
Harley Davidson mechanics and dealership personnel were trained at Harley Davidson University. They took course in retail management, inventory control, merchandising, customer service, diagnostics, maintenance, engine service technique.
Provide in -dealership courses through its web based distance learning program
Demo ride in various location through all US
Daily rental to decide whether they want to buy
Providing training course for inexperienced riders in America, Europe and Asia (25 hour Riders Edge Program) contributed to company increased sales from female buyers (increased from 2% total sales before adapting to 9% in 2003). The company found that woman more likely to purchase after taking training course
Financial service to make it more affordable
The company's expansion plan of its York and Pennsylvania plants expects to allow the company to increase production to 400,000 units by 2007.
Showrooms offer a large assortment of clothing items and accessories in addition to new motorcycles
Dealers are responsible for operating showrooms, stock parts and accessories.
161 dealers in Japan
50 dealers and 3 distributors in Australia and New Zealand
7 dealers in South East Asian and East market
Public listed company
Strategy & planning are not clear
3.4 Porter's Generic Strategies
If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry. Even though an industry may have below average profitability, a firm that is optimally positioned can generate superior returns. A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent (Department of Management Science and Technology, 2009).
Cost Leadership Strategy
This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market. Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership (Department of Management Science and Technology, 2009).
A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily (Department of Management Science and Technology, 2009).
The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist (Department of Management Science and Technology, 2009).
Porter's Generic Strategies and Five Forces
These generic strategies each have attributes that can serve to defend against competitive forces. The following table compares some characteristics of the generic strategies in the context of the Porter's five forces (Department of Management Science and Technology, 2009).
3.5 EPR Theories
Integration is Key to ERP
Integration is an extremely important part to ERP's. ERP's main goal is to integrate data and processes from all areas of an organization and unify it for easy access and work flow. ERP's usually accomplish integration by creating one single database that employs multiple software modules providing different areas of an organization with various business functions. Although the ideal configuration would be one ERP system for an entire organization, many larger organizations usually create and ERP system and then build upon the system and external interface for other stand alone systems which might be more powerful and perform better in fulfilling an organizations needs. Usually this type of configuration can be time consuming and does require lots of labor hours.
v The Ideal ERP System: An ideal ERP system is when a single database is utilized and contains all data for various software modules. These software modules can include:
v Manufacturing: Some of the functions include; engineering, capacity, workflow management, quality control, bills of material, manufacturing process, etc. this is also important for Harley Davidson.
v Financials: This system perform Accounts payable, accounts receivable, fixed assets, general ledger and cash management, etc.
v Human Resources: Benefits, training, payroll, time and attendance, etc
v Supply Chain Management: Inventory, supply chain planning, supplier scheduling, claim processing, order entry, purchasing, etc
v Projects: Costing, billing, activity management, time and expense, etc all the activities done by this system.
v Customer Relationship Management: Sales and marketing, service, commissions, customer contact, calls center support, etc done by this system.
v Data Warehouse: Usually this is a module that can be accessed by organizations customers, suppliers and employees.
(Please refer: http://www.tech-faq.com/erp.shtml)
ERP Improves Productivity
Harley Davidson needs efficiency and development, growth and increment in production but this system will be sole the every problem. Before ERP systems, each department in an organization would most likely have their own computer system, data and database. Unfortunately, many of these systems would not be able to communicate with one another or need to store or rewrite data to make it possible for cross computer system communication. For instance, the financials of a company were on a separate computer system than the HR system, making it more intensive and complicated to process certain functions.
Once an ERP system is in place, usually all aspects of an organization can work in harmony instead of every single system needing to be compatible with each other. For large organizations, increased productivity and less types of software are a result.
(Please refer: http://www.tech-faq.com/erp.shtml)
Implementation of an ERP System
Implementing an ERP system is not an easy task to achieve, in fact it takes lots of planning, consulting and in most cases 3 months to 1 year +. ERP systems are extraordinary wide in scope and for many larger organizations can be extremely complex. Implementing an ERP system will ultimately require significant changes on staff and work practices. While it may seem reasonable for an in house IT staff to head the project, it is widely advised that ERP implementation consultants be used, due to the fact that consultants are usually more cost effective and are specifically trained in implementing these types of systems. Harley Davidosn is not a small organization it so big that's why implementation of ERP will take more than one year
One of the most important traits that an organization should have when implementing an ERP system is ownership of the project. Because so many changes take place and its broad effect on almost every individual in the organization, it is important to make sure that everyone is on board and will help make the project and using the new ERP system a success. Usually organizations use ERP vendors or consulting companies to implement their customized ERP system. There are three types of professional services that are provided when implementing an ERP system, they are Consulting, customization and support services include both support and maintenance of ERP systems. For instance, trouble shooting and assistance with ERP issues.
(Please refer: http://www.tech-faq.com/erp.shtml)
Advantages & Disadvantages of ERP
There are many advantages of implementing an EPR system; here are a few of them:
* A totally integrated system
* The ability to streamline different processes and workflows
* The ability to easily share data across various departments in an organization
* Improved efficiency and productivity levels
* Better tracking and forecasting
* Lower costs
* Improved customer service
While advantages usually outweigh disadvantages for most organizations implementing an ERP system, here are some of the most common obstacles experienced:
Usually many obstacles can be prevented if adequate investment is made and adequate training is involved, however, success does depend on skills and the experience of the workforce to quickly adapt to the new system.
* Customization in many situations is limited
* The need to reengineer business processes
* ERP systems can be cost prohibitive to install and run
* Technical support can be shoddy
· ERP's may be too rigid for specific organizations that are either new or want to move in a new direction in the near future.
(Please refer: http://www.tech-faq.com/erp.shtml)
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