Strategic Management For Harley Davidson Marketing Essay

Harley-Davidson, Inc. employs about 9,000 people worldwide. Its corporate headquarters are located in Milwaukee, Wisconsin. The Company’s domestic production facilities are in the Milwaukee area and Tomahawk, Wisconsin; York, Pennsylvania; and Kansas City, Missouri. Harley-Davidson offers factory tours at three of its production facilities for a behind-the-scenes look at the manufacturing process.

Vision

We fulfill dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality. www.harley-davidson.com

Harley-Davidson Mission Statement

We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.

Harley-Davidson Dealerships

Since we welcomed our first Harley-Davidson dealer into the family in 1903, we’ve built a network of dealers in more than 60 countries determined to fulfill the dreams of customers around the world.

Harley-Davidson (NYSE: HOG) is the largest manufacturer of heavyweight motorcycles in the world by market share, capturing half the U.S. market and a third of the global market.[1] As a luxury good, Harley competes primarily on design and quality, rather than price, which keeps margins high; gross margin during 2009 was 31%, as opposed to 34.5% in 2008.[2][1]

Harley’s past growth and continued success is closely tied to its customers brand loyalty; Harley is arguably the only company whose customers have been known to regularly tattoo its trademark on their bodies. Despite this rebellious image, the average Harley customer is an upper-class 47-year-old white male, and has been getting older at a rate of 6 months every year for the last 20 years.

Despite brand loyalty, the company had to shut down and consolidate factories in 2009 due to the effects of the recession and the fall of the U.S. Housing Market. About 15% of Harley’s business used to be writing loans to its motorcycle buyers. The company’s finance arm has since collapsed.

Global Customer Focus

Harley-Davidson has a strategy in place to expand our global presence and reach new demographics in the U.S. and in international markets. Currently, a majority of our customers reside in the U.S.; however, international retail sales have been growing as a percent of total sales. In fact, we believe that by 2014 over 40% of our retail sales will occur outside the U.S.

Harley-Davidson is currently executing a multi-generational and multi-cultural marketing strategy in the U.S. The success of this strategy is measured by internally monitoring market shares within targeted customer segments of Core (Caucasian men 35+), young adults (men and women 18-34), women (Caucasian women 35+) and diverse men and women (African-American and Hispanic 35+).

Motorcycle registration results show Harley-Davidson is the segment leader in U.S. on-road motorcycle registrations, both in terms of heavyweight (651cc+) registrations and all displacement (all cc) registrations, across our targeted demographic customer definitions including:

Core Customers

Young Adults

Women

Diverse Customers

Main Personalities Of harley Davidson

Competitors (current and past)

Major Competitorshttp://cdn.wikinvest.com/i/px.gif

Harley-Davidson maintains a large margin in its dominance in the U.S. Heavyweight Motorcycle market as compared to its major competitors. While the United States is HOG’s most important market, the company sells motorcycles in many other markets worldwide. The two most important are Europe, where the company has grown market share from 9.8% in 2005 to 10.7% in 2007, and Canada where HOG had a 39.0% market share for 2007, up from 32.7% in 2005. Worldwide, Harley has a dominant worldwide market share of 33% in what is a growing industry.

Harley-Davidson’s main competitors include:

Honda Motor Company (HMC): headquartered in Japan, Honda is the world’s fifth largest automaker and largest motorcycle producer by FY2009 sales.

Suzuki Motor (SZKMF): a Japan-based manufacturing company, Suzuki operates in four business segments. The Two-wheel Vehicle segment is engaged in the manufacture of two-wheel vehicles, as well as the manufacture of parts for two-wheel vehicles and the sale of two-wheel vehicles in domestic and overseas markets. The Company has 141 subsidiaries and 37 associated companies.

Yamaha Motor (YAMHF): Yamaha Motor is the world’s second largest producer of motorcycles (after Honda). It also produces many other motorized vehicles such as all-terrain vehicles, boats, snowmobiles, outboard motors, and personal watercraft.

Kawasaki Heavy Industries (KWHIY): Kawasaki is a global manufacturer of transportation equipment and industrial goods. KHI manufactures ships, rolling stock, aircraft and jet engines, gas turbine power generators, environmental and industrial plants, and range of manufacturing equipment and systems. KHI also produces consumer products, such as Kawasaki-brand motorcycles and personal watercraft.

http://www.wikinvest.com/stock/Harley-Davidson_%28HOG%29#Major_Competitors

recent issues

economic crisis of 2008/2009

product

Harley-Davidson offers products to complete the entire riding experience, including motorcycles, MotorClothes® Apparel and Accessories, and Genuine Motor Accessories.

price

harley bikes are highly priced. they target a certain group

target market

future

Introduction

Each industry aims to exercise an individualistic, effective and efficient business strategy that will allow them to always retain a positive and progressive position in the competitive market, particularly in the international market. The purpose of this report is to evaluate the strategic options available to the Harley-Davidson company. This report will entail the use of different strategic analytical tools such as the swot analysis, porters five forces analysis, a pest analysis, a strategic capabilities analysis and recommendations to relevant issues of the company.

brief Company Overview

The Harley-Davidson company is based in Milwaukee, Wisconsin United states of America and was founded in 1903. It sells and produces heavyweight motorcycles, as well as motorcycle accessories, parts and allied services. Harley Davidson is the parent company for the group of Companies together with the Harley-Davidson Motor Company, Buell Motorcycle Company and Harley-Davidson Financial Services. The company offers over 35 models of customized motorbikes via a worldwide network of over 1,500 dealers. The company also produces motorcycles under BUELL.

Furthermore, Harley-Davidson operates its company by means of two particular segments that is Motorcycles and Related Products, and Financial Services. The Motorcycles and Related Products segment engages in the manufacture, design, and sale of primarily heavyweight touring, custom, and performance motorcycles primarily in North America, Europe, the Middle East, Africa, the Asia/Pacific, and Latin America. It also provides a line of motorcycle parts and accessories, including replacement parts, and mechanical and cosmetic accessories; general merchandise, such as apparel and accessories; and related services. Financial services include instalment lending for its new and used motorcycles. The Financial Services segment also provides motorcycle insurance and property/casualty insurance, as well as sells extended service contracts, gap coverage, and debt protection products to motorcycle owners. Harley-Davidson sells its products through independent dealers and distributors.

The reputation and popularity of these Harley-Davidson motorcycles is indisputable. Now, after more than a hundred years of existence, Harley-Davidson motorcycles have become an attraction in every road around the world

SWOT Analysis

In this academic report, the analysis of the Harley-Davidson company will be executed via several marketing tools. Herewith, Harley-Davidson will firstly be inspected using the SWOT Analysis. The root purpose of the internal and external analysis is to further comprehend issues that can affect the said business and to position itself to manage threats derived from an examination if the external environment and take advantage of opportunities. Additionally it helps in pinpointing threats and weaknesses that can gravely affect the company’s strategic capabilities.

Environmental Analysis

Strengths

Domestic market share. There are approximately 70% market share in relation to the market for heavyweight motorcycles.

Has a strong brand and is well established in the consumer’s mind with the image of “freedom and strength.”

Company reputation strong and durable long-term relationship with employees.

Core competencies in developing and designing heavyweight motorcycles of quality

Customer loyalty first and foremost strength of the company (Once a customer buys a motorcycle, jacket, scarf, etc become a part of it).

Customer “bonding”-H.O.G., charity- The company admits SNBC (Breast Cancer Network of Strength).

Residual Value

Dealer Networks – Strong marketing and distribution channel in the U.S.

Harley Davidson Shipping

Annual CVO(custom vehicles operation) models Custom Motorcycles is a significant amount of revenue for Harley Davidson

Cutting dealer inventory as opposed to lowering prices which diminishes residual value

Strategic Alliance with Michelin Tires Excellent relationship with the supplier, so that the integrity of the work and performance is achieved without the expense of quality.

Has its operation in the manufacture of motorcycles, and is also active in providing financial services.

BRAC (Buell Riders Adventure Group), formed to support the brand and engage customers leverage their standard of fidelity.

Strong image with respect to the goodwill of the factors (the company has its employees to join with communities to lend a hand.)

It is also compatible with the MDA (Muscular Dystrophy Association) and has done so in many ways helped the association with regard to research and development, providing financial resources.

Environmental Analysis

Weaknesses

Customer age is increasing (dying breed)

Union IAMAW

Weak balance sheet: Debt-financial services arm HDFS ($3 billion)

High Costing Product- Higher overall unit costs relative to key competitors

Lack of adequate global distribution capability

Untapped markets in different demographics

Plagued with internal operating problems or obsolete facilities-Facility shutdowns

Short on financial resources to grow the business and pursue promising initiatives

No clear strategic direction

Poor market techniques that’s not attracting new international customers

Environmental Analysis

Opportunities

Openings to win market share from rivals

Expanding the product line to meet a broader range of customerneeds-Younger generation, Buell line

Using existing company skills or technological know-how to enter new productlines or new businesses-New CEO Keith Wandell(from Johnson Controls)

Expanding into new geographic markets-HD in India 2009. India is a large untapped market for motorcycles

More international growth (currently 30%)

Falling trade barriers in attractive foreign markets

Acquiring rival firms or companies with attractive technological expertise or capabilities-Chopper models?

Entering into alliances or joint ventures to expand market coverage or boost its competitive capabilities

Creating more strategic alliances with supply chains

The demand for Harley Davidson is the highest in the international market, the international market for bicycles is much larger than the US market

Even in regions where the econ my is at a low level, Harley may take the opportunity by the thought of customers in that situation, a bicycle is a cheaper way to travel which would be more favourable for the harley

Environmental Analysis

Threats

International duties and tariffs that amount to 100% of the price of the bike-Restrictive trade policies on the part of foreign governments.

Increased standards in the European Market.

Costly new regulatory environmental regulations

Global Market Leaders: Honda, Yamaha, Suzuki, Kawasaki

Some of the competitors of the company is using more resources in marketing THEIR PRODUCT LINE (bicycles) and is a threat because it can change your risk factor for having a diversified product line

Slowdowns in domestic market growth because of the low cost of making a bike and the higher profit margin, it is clear that more competition can participate especially those already in the car manufacturing market

Dying breed of customers – the averga age of purchasing customers are age 42 and growing

PEST ANALYSIS

Political

Harley-Davidson faces a favorable political environment in 2009. This year, motorcycles are added into the economic stimulus package, passed into legislation by the Barack Obama Administration, that offers tax deductions to buyers. This stimulus allows customers to receive deductions for their purchases on the 2009 tax returns, which in turn gives buyers an incentive that might push them from the “on the fence buyer” to customer status (Wachter, 2009).

Another political byproduct that may favor Harley-Davidson is the extensive consumer protection law passed last summer. “…the regulations have squeezed the brakes on sales of all-terrain vehicles and small dirt bikes intended for use by children 12 and under. Since the new rules went into effect Feb. 10, an expensive inventory of them has piled up as shoppers across the country are turned away without their new rides.” (Cate, 2009). This restricts their competitors and eradicates substitutes and or any opportunity cost that can propel consumers to spend more cash on Harley-Davidson’s motorcycles.

Economical

According to the Datamonitor report in 2010, Harley-Davidson a US-based motorcycle manufacturer, has reported a net income of $88.83 million, or $0.40 per diluted share, for the third quarter ended September 26, 2010, compared to $26.48 million, or $0.24 per diluted share, for the third quarter ended September 27, 2009. For the third quarter of 2010, net revenue from motorcycles and related products were $1.09 billion, compared to $1.11 billion for the third quarter of 2009. Net income for the first nine months ended September 26, 2010 were $193.31 million, or $1.29 per diluted share, compared to $163.58 million, or $0.93 per diluted share, for the nine months ended September 27, 2009. For the first nine-month period of 2010, net revenue from motorcycles and related products were $3.26 billion, compared to $3.52 billion for the same period of 2009.

These figures are definitely going to change in the future. There are only a few companies operating within the motorcycle industry with fair to moderate competition. Based on the Porters five forces analysis there are only a few companies are unlikely to occur because of high barriers of entry into the market. Hence, Harley-Davidson will continue to lead in the industry because of its sustainable advantage of product differentiation. Economically Harley-Davidson is in a position for business. Furthermore, within the U.S. economy Harley-Davidson holds the majority of motorcycle sales. Therefore, even while industry growth is declining, Harley-Davidson sales and other motorcycle sales are continuing to increase.

Social

As previously mentioned, social factors play a large role in the external industry in which Harley-Davidson operates. While buyer power is weakened due to large product differentiation, most loyal customers to Harley-Davidson has a defined lifestyle-brand image that characterizes its buyers. Even with moderate switching costs, buyers are not likely to switch to substitutes because of these social factors. Other competitors such as Yamaha, Winnebago, and Honda Manufacturers such as Honda offer competitive but different lifestyles which define the buyer. In this way competition is weakened due to differences in lifestyle and strong brand loyalty.

Technological

Harley-Davidson’s rivalries are all continually trying to innovate their products in order to gain competitive edge.

Surprisingly, Harley-Davidson and other Motorcycle manufacturers do not take advantage of the technology currently in use that grants their bikes more economical gas mileage. With new technologies emerging for optimal engine performance, this may be a strategy that Harley-Davidson should meld into their motorcycles. “MAST, Inc. has developed an oil sensor device to provide simple, easy-to-use monitoring of the basic properties of engine oil, and allow vehicle owners to change the oil at intervals that optimize engine performance” (Mircromem, 2009).

Harley-Davidson’s Pest Analysis synopsis

In 2009 Harley-Davidson was experiencing positive outcomes in the Political Environment due to the economic Stimulus that permitted tax breaks to consumers. Although the market has recently faced economic recession, motorcycle sales are staying comparatively stable when compared to substitutes. This may be due to the sound social aspect of the industry that relies on certain lifestyle factors and a strong brand loyalty. In a Social aspect, Harley-Davidson is on top of the game because of demographic trends with the increase of female riders and their customer base. Furthermore, technologically Harley-Davidson needs to take advantage of developing mechanisms that will increase its sustainability and keep them at a competitive edge in the industry.

Porters Five Forces Analysis

Internal Rivalry

Firstly, there are only four major companies producing motorcycles, so the market is concentrated. Yamaha, Suzuki and Honda are the other three main participants in addition to Harley-Davidson. These competitors are more diversify and they posses larger financial and market resources. This is a threat to Harley-Davidson as rivalry is fierce. Normally, Harley-Davidson has been in control of the market in excess of 50% in the past. However, presently the market share has decreased by 50% due to rivalries expanding their range of heavyweight motorcycle production and strategically altering their marketing and altering their style of motorcycles. Harley-Davidson is increasingly relying on their brand name to sustain and build its customer volume.

Potential Entrants

The heavyweight motorcycle industry is extremely capital concentrated. As with other industrialized industries, there exist major economies of scale. On a small scale, overlooking marginal costs as production increases can be unfavorable because the capital requirements for manufacturing a similar products is very high. Noteworthy economies of scale are the major reason why there or only for main participants in the motorcycle market. Nevertheless, there are several small-scale manufactures that construct customized motorcycles but they don’t produce a large enough amount to threaten the business of Harley-Davidson.

Substitutes

Firstly, it is unmistakable that Harley-Davidsons’ motorcycles are luxury items, so there are few close substitutes for heavyweight motorcycles. Yamaha, Honda and Suzuki all manufacture motorcycles, which are smaller and quicker and act as a substitute for Harley-Davidson bikes. These motorcycles require a different riding style and their brand names are not as admired as ‘Harley-Davidson’. On the other hand, these heavyweight motorcycles project an elite and classy image that is a driving force in a consumer’s decision to purchase.

Power of suppliers

Harley-Davidson functions on almost every point of production from basic necessary raw materials to the shipping of completed motorcycles to its range of dealers. Since there are an extensive range of merchants existing so if one supplier makes a decisions that is not beneficial to the business of Harley-Davidson they can simply switch from one supplier to the next without affecting business production.

Power of Customers

Harley-Davidson’s customers are individual consumers, this means if they refuse to oblige, they still will not be able to affect the financial positioning of the company. Furthermore, the number of dealers around the world are less and they are reliant in individual customers. This also means that this cannot affect Harley-Davidson’s economic position as a business.

Supplier Bargaining Power

WEAK

Potential New Entrants

WEAK

Substitute Products

MODERATE

Buyer Bargaining Power

STRONG

Rivalry among Competing Sellers

FIERCE

Strategic capabilities analysis

Driving Forces

Emerging internet capabilities and applications

Increase in globalization

Motorcycle industry’s long-term growth rate

Changes in buyer demographics

Expected product innovations

Foreseeable marketing innovations

Anticipated changes in cost and efficiency of production

Growing buyer preferences for differentiated products

Regulatory influences and government policy changes

Changing societal concerns, attitudes, and lifestyles

Analyze Your Findings.

Identify Corporate Level Strategy.

Directional Strategies

Harley-Davidson is equally committed to a corporate vision that mandates how they run their business. Their vision states:

Harley-Davidson, inc. Is an action-oriented, international company, a leader in its commitment to continuously improve our mutually beneficial relationships with stakeholders (customers, suppliers, employees, shareholders, government, and society). Harley-Davidson believes the key to success is to balance stakeholders interests through the empowerment of all employees to focus on value added activities.

Organizational Wide Strategies

Social Responsibilities/ Ethics

Strategy, Ethics, Social Responsibility, CultureEfforts to employ ethical strategy and observe ethical principles in operating the business

Making charitable contributions

Actions to protect or enhance the environment

Actions to create a work environment that enhances the quality of life

Actions to build a workforce that is diverse

Identify Business Level Strategy.

Functional StrategiesGoals (detailed in the vision/mission statement):

Become the most globally recognized and sought after brand in the industry

Proactive to improve key business relationships

Empower all employees to focus on value added activities

Challenges:

Decline in US economy

Decline in domestic and international sales ripples across all product lines

Increase quality issues with Buell and MV AgustaAging Target Audience (average age of HOG® is 47)

Younger (next generation) customer base with sufficient disposable income at “pre-family” stage may be in short supply

Recommendations

Summary

H-D continues to be a power-house in the industry but needs to divest itself from unprofitable brands and product line models

Early Implementation of Three-Part Strategy in Slowing Economy and general slow down of motorcycle sales1) Invest in H-D Brand

2) Get cost structure right

3) Obtain funding for H-D Financial Service

Recommendations

Our recommended new vision statement is as follows:

Harley-Davidson’s vision is to become the most globally recognized and sought after brand in the industry.

We will be proactive in nature and a leader in our commitment to continuously improve our mutually beneficial relationships with customers, suppliers, employees, shareholders, government, and society. Harley-Davidson believes the key to success is to balance stakeholders interests through the empowerment of all employees to focus on value added activities.

Short Term Recommendations & Objectives

Reduce production to reflect the current downturn in World Wide sales of motorcycles in general.

Evaluate all Brands and model lines for consideration of stopping production on poor selling models and brands and or divesting itself from poor performing Brands

Reduce the number of man hours to match new production numbers. Achieved by reducing labor force or reducing the working hours per week per employee

Renegotiate Labor contracts and wages

Functional StrategiesTo be the most recognized and sought after brand, H-D must address the quality issues that exist in its product lines. Therefore, the following recommendations are strongly suggested:

Improve product quality

Grow customer base

Build organizational capacity

Becoming a Great Place toWork or listed in Fortune Magazine’s Top 500 MostAdmired Companies

Spinning off HD Financial Services by 2011

Long Term Recommendations & Objectives

Re-evaluate the demand and marketing efforts for the Buell and MV Agusta brands

Establish a 3 year plan to evaluate MV Agusta technology, sales and production to include:Integrate the MV Agusta technology to improve the Harley-Davidson Brand

Use the MV Agusta dealer network to distribute the Buell and Harley-Davidson Brands

Eliminate cross-over motorcycle models that compete with each other under the Buell and MV Agusta brand names

Closely monitor production numbers and dealer sales-eliminate poor selling models

Consolidate manufacturing plants and raw material purchasing

Consider selling either brand if deemed or proven to be unprofitable

Harley-Davidsons finance needs to be evaluated for long term profitability. Serious efforts should be made to outsource the financing of new motorcycle purchases by consumers. This would reduce overall risk and allow Harley-Davidson to concentrate on dealer financing and reallocate resources to more profitable sectors

CONCLUSION

In conclusion based on the analysis and case study done it can be derived that the Harley- Davidson company doesn’t really have the capital means to support future sustainable growth in the current economy. Harley-Davidson is a premium lifestyle product that relies on its customer base and their disposable income. Their most valuable asset is the culture of their brand while restructuring their product to better fit with the present market demands. Harley needs to look for ways to find new strategic ways of operation without disregarding the brand heritage that they have built over the years. Furthermore, with their existing customer base aging Harley needs to focus mainly on product differentiation strategy that falls under their current production competency. The biggest future problem Harley Davidson faces is a lack of capital to run business operations. They must be conventional about expenditures while finding the right places to invest and propel their products. The customer is most important to the Harley Davidson Company and they need to continue to reflect that.

Bibliography

De Wit, Bob and Meyer, Ron (2005) Strategy Synthesis. Second edition. London: Thomson Learning. Print ISBN 1 86152 965 1.

Johnson, Gerry; Scholes, Kevan; and Whittington, Richard (2005) Exploring Corporate Strategy. Seventh edition. Harlow, Essex: Pearson Education. Print ISBN 0 273 68734 4. Available through Voyager (UH LIS main catalogue) as an electronic resource.

Mintzberg, Henry; Ahlstrand, Bruce; and Lampel, Joseph (1998) Strategy Safari: The Complete Guide Through the Wilds of Strategic Management. Harlow, Essex: Pearson Education. Print ISBN 0 273 65636 8.

Mintzberg, Henry; Ahlstrand, Bruce; and Lampel, Joseph (2008) Strategy Safari: The Complete Guide Through the Wilds of Strategic Management. Second edition. Print ISBN 0 273 71958 0.