Transformation Effect Of Harley Davidson Marketing Essay

In the following paper there is a discussion about Harley-Davidson. in this paper there is a discus about how Harley-Davidson start and become the worlds finest motorcycle company. In this research there is the view of Harley-Davidson’s customers. There are some details about the transformation process of Harley-Davidson. There is a dissection about the strategy of Harley-Davidson. In this strategic process Harley-Davidson use Just in Time, Employee Involvement and Statistical Operator Control. Harley-Davidson put a lot of afford on research and development process. So there is vast explanation about the transformation effect of Harley-Davidson. Also there is competitor analysis of Harley-Davidson. In order to get a better understanding of the Harley-Davidson Corporation and broke down the company by their strengths, weaknesses, opportunities and threats. Then further analyze and explain Harley-Davidson’s sustainable competitive advantage, as well as issues and problems the company faces. After going over Harley-Davidson’s current company situation there is a research and statistics to recommend Harley-Davidson concentrates more on its international stores and transforms itself into a green corporation. And discuss the advantages and benefits Harley Davidson would obtain based on our recommendations, and also possible problems our recommendations may encounter.

2. Introduction:

Motorcycles are descended from the safety bicycle, bicycles with front and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel.

The first motorbike was built in 1868. It was not powered by a gasoline engine, but by a steam engine. Its builder was Sylvester Howard Roper. His steam-powered bike was demonstrated at fairs and circuses in the eastern US in 1867 and did not catch on, but it anticipated many modern motorbike features, including the twisting-handgrip throttle control. There is an existing example of a Roper machine, dated 1869. It’s powered by a charcoal-fired two-cylinder engine, whose connecting rods directly drive a crank on the rear wheel. This machine predates the invention of the safety bicycle by many years, so its chassis is also based on the “Bone-Crusher” bike. “Bone-Crusher’s” appeared around 1800, used iron-banded wagon wheels, and were called “Bone-Crushers,” both for their jarring ride, and their tendency to toss their riders.

The motorcycle market was timed spot on for the baby boomer generation. In 1944-46, servicemen (and women) were returning from World War II and has a thirst for life and living and wanted to do more than settle down. Motorcycles were popular in WWII and people wanted to try them, and they did and they sold in good numbers. But it was not until the 1960’s when their kids grew up that motorcycling took off like a rocket. 1962 arguably the most famous and successful motorcycle campaign was launched on earth from Honda and it changed everything. The “You meet the nicest people on a Honda” ads took North America by storm! In just 3 years (1965), the number of registered motorcycle doubled, 5 years later (1970) doubled again, and 5 more years in 1975 doubled again. It is increased from 646,000 to 5 million in just over 10 years.

3. Background of Harley- Davidson:

Harley- Davidson is one of the motorbikes manufacturers who have shown the world new patterns of motorbikes. One of the CEO of Harley- Davidson, Richard Teerlink said “There are very few products that are so exciting that people will tattoo logo on there body”. So this statement means Harley- Davidson is one of the bike which carry prestige and honour. This was not too easy to become a market leader. There is a servable history behind the Harley- Davidson. The journey start 1901, William S. Harley, age 21, completes a blueprint drawing of an engine designed to fit into a bicycle. After that two years later 1903 Harley- Davidson start there final journey by named Harley- Davidson Motor Company. In that year William S. Harley, Arthur Davidson and Arthur’s brother Walter later joins their efforts came into the public by manufacturing dikes. After sold 50 motorcycles in 1907 company decided to go for incorporation by having a full-time employee. The big success came from a race. Walter Davidson’s win a race by a Harley- Davidson bike in 1908, by this racing purpose they innovated a finest process of speeding dike. Walter Davidson scores a perfect 1,000 points at the 7th Annual Federation of American Motorcyclists Endurance and Reliability Contest. Three days after the contest, Walter sets the FAM economy record at 188.234 miles per gallon. Word of Harley-Davidson’s extremely tough motorcycle spreads rapidly and people were showing there interest towards Harley- Davidson.

Harley- Davidson becomes the world’s largest motorcycle company in the early 1918. The market demand was too high and Harley- Davidson produced large amount of 28,000 motorcycles within this year. But the second post world war company sales was declined and there trying to expend there market in Europe. Harley- Davidson become the market leader in the mid of 1950, they caper 60% of market share that time. In the year 1970 this successful market leader was bankrupt. But Harley- Davidson don’t had to wait too long to get its old position back. They take there position during 1989. Still Harley- Davidson is one of the market leaders of the motorcycle industry.

4. Part 1:

Critically evaluate the transformation process undertaken by Harley-Davidson. Analyze the contribution that the transformation made to the success or failure of the organization. A key component of your analysis would be to critically compare and contrast the response of Harley Davidson with a competitor.

4.1. Transformation Process:

Harley-Davidson is the spirit of America. Harley-Davidson was not the same the way it is now. They have come across a long way to build their position into the market. They were dealing with the competitive market over 100 years. Within these 100 years Harley-Davidson transformed many time in many way. Beginning of the history of Harley-Davidson they always manufactures luxuries motorcycle till now.

Harley-Davidson transformed into a niche player despite increasing sales. But Harley-Davidson’s overall market share was declined and they having problem with there capital for new produce and production process. So they decided to go public for raising capital after 60 years of the company private ownership. Harley-Davidson was takeover by AMF which was needed and Harley-Davidson expecting friendly takeover. AMF’s CEO, Rodney Gott said “There was a motorcycle crazy. You could sell anything you could produce. We wanted to meet this demand”. To follow this strategy AMF double there production process and they include so many new inexperienced employees which came into bad quality of product, many quality issues were overlooked. Harley-Davidson faced threat in the year 1980. There profitability was down and AMF was looking for a buyer. Vaughn Beals was the CEO of that time and he able to raise only a small fraction of the $81 million buyback. Rest on as debt took by the top managers of Harley-Davidson. Harley-Davidson new owner pare down the costs and cut back motorcycle production. They only focus on the survival in the market.

Honda is become the market leader within time, it was becoming the ultimate choice for the consumer. Honda is one of the reasons that Harley-Davidson transformed. There was some difference between Honda and Harley-Davidson. Harley-Davidson always prefers to produce heavy bike but on the other hand Honda like to produce light bikes. 5% of Honda’s motorcycles failed to pass final quality inspection but over 50% of Harley-Davidson’s motorcycle because of productivity failure and unskilled employees. So they have to think other way.

Vaughn Beals the legendary CEO and the Harley-Davidson management team realized they have to change and modified the whole manufacturing process. Harley-Davidson was trying to follow Japanese production management process. Japanese were too good in management process. So Harley-Davidson follows the Just in Time (JIT) inventory practice, employee involvement and statistical operator control (SOC).

4.1.1. Just in Time Practice (JIT):

Just-in-time’ is a management philosophy and not a technique. JIT is a Japanese management philosophy which has been applied in practice since the early 1970s in many Japanese manufacturing organizations. It was first developed and perfected within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer demands with minimum delays. Taiichi Ohno is frequently referred to as the father of JIT. It originally referred to the production of goods to meet customer demand exactly, in time, quality and quantity, whether the `customer’ is the final purchaser of the product or another process further along the production line. Harley-Davidson follows the Hondas JIT inventory control practice. By practice this JIT Harley-Davidson hoping low the inventory levels would make quality problems more apparent and force employees to take action.

4.1.2. Employee Involvement:

In the process of employee involvement Harley-Davidson show some brave things. Harley-Davidson gives the authority to the employee for decision making. Those employees were encourage to contribute to the decision making process. In this process they can improve the product quality. Workers were required to participate in the newly formed quality circles that were made directly responsible for motorcycle quality.

4.1.3. Statistical Operator Control (SOC):

In Statistical Operator Control process Harley-Davidson took the advantage of research and development. In this SOC process Harley-Davidson employees were thought to see how quality problems developed and how they could be traced and corrected during the production process. Top management of Harley-Davidson expect that process improvements utilizing tools that track conformance to specification. It coupled with employee incentive programs and it would generally improve product quality.

4.1.4. Research and Development:

The position Harley-Davidson is standing now only reason is research and development and big change came after 1983. Harley-Davidson put a lot of afford on this section. Harley-Davidson believes they can improve the quality bye research and they do improve a lot within a century. Harley-Davidson turned twice a year for prior to the introduction of MAN. In this new system inventory turned into 17 times increase in a year. The productivity improvement was up to 50%, work in progress were reduced by 75%, scrap and rework went down by 68%, US revenue were increase over 80%, international revenue reach to 1.7 times and operating profit reached by $59mellion. Most amazing thing was earlier market share was dropping but now it increase by 91%.

During this time one of the founder’s grandsons Willie G. Davidson decide to be loyal and hard core to the customers. He decides to inform the customer about the struggles, challenges and the struggle the Harley-Davidson company made. To follows this Harley-Davidson decide to go public in 1989 through a well receive IPO. Teerlink become the CFO for six year and chairman. By this time Harley-Davidson boom into the New York Stock Exchange. After going public under Teerlink leadership Harley-Davidson began to transform itself from an informal to a formal organisation by highlighting organisational and individual learning at all levels through a program interims of the leadership institute.

4.2. Transformation effect of Harley-Davidson:

Harley-Davidson had to go throw long way for this transformation. Some of the decisions were futuristic and some of them are not match with Harley-Davidson. Harley-Davidson established an image towards the customers that was “Raw Power”. Harley-Davidson V-twin engine make the major revolution in heavy bike industry. It introduced in 1909. Sound of V-twin’s engine is most powerful and aggressive and its ability to deliver broad but low torque power. Harley-Davidson’s heavy use of chrome, its low profit appearances, the styled till friends and the cop of the front fork also highlighted the firm’s unique image. The Harley-Davidson dike is not look different its sound different. With this bikes Harley-Davidson adopted an “Image and Lifestyle” to market. Mostly over 35-44 age group was Harley-Davidson’s real customer. In 1950 Harley-Davidson target young generation. They also concentred about the advertising with the leather clad rider, military dispatch riders or a police officer on motorcycle. Harley-Davidson become a part of American iconography and was associated with the US flag and the bald eagle, Americans national symbol. This association resulted in unprecedented brand loyalty into the US customers and it still continues this days.

Japanese are always successful in machineries. They enter the US market in 1950 with attractive motorcycles. They were more attractive towards young generations. They were very unique with light motorcycles. Those light motorcycles are more low-priced and faster then Harley-Davidson motorcycles. In1965 they are successful in market and Honda is one of them. Ever one out of two motorbikes was sold into the market was Honda. Other Japanese firms Yamaha, Suzuki and Kawasaki were also dominate the motorcycle market for a short period of time. Harley-Davidson faced lots of trouble into the market because of those Japanese motorcycles. There was a time Harley-Davidson’s managers only think about servable into the market. But they overcome those problems and still leading the market because the transformation process was right and they were brought the change whenever it was needed to the company.

4.3. The Competitor of Harley-Davidson:

There was no ultimate competitor for Harley-Davidson. Because there was not that much company present for the heavy motorcycles manufactures. But some of them are really closes competitor like Victory Motorcycles. Victory Motorcycles is growing at close to ten times the industry rate. Victory is the motorcycle division of Polaris Industries that is more commonly known for its ATV’s and snowmobiles.   “People who choose to ride our bikes love them it is something we have known for a long time and were happy this information is finally public.” said Mark Blackwell, Vice President of Victory Motorcycles and International Operations for Polaris Industries.   Black well goes on to state that more consumers desire an American heavyweight cruiser that has a more modern design and function. He adds that the test ride program is really helping to open people’s eyes. J.D. Power and Associates (2006) reveals that, in its ninth model year by Victory Motorcycles.  

5. Part 2:

If you were a senior manager in the organization, what would you have done differently? Evaluate the circumstances of the company and justify the stand that you have taken.

A company can never gain success from the first day. It has a long servable history behind. Harley-Davidson is one of the successful motorbike companies who have come across long way by defeating rivals. Harley-Davidson’s mission statement was “We fulfil 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”.

There is some decision made by Harley-Davidson’s managers that was good for the organization and there is other option too that did not took by Harley-Davidson’s managers. By using SWOT analysis there is some extra initiative they should do.

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis has two main categories:

Internal factors – The strengths and weaknesses internal to the organization.

External factors – The opportunities and threats presented by the external environment.

5.1. Strengths of Harley-Davidson:

High cash flows.

Harley-Davidson has a market cap of about more than $17 billion followed by Polaris Industries which has a market cap of about $1.5 billion

Harley-Davidson represents 50% of the US markets and about one third of the worldwide market.

Harley-Davidson having the highest market cap in the recreational vehicles industry.

They have made $13 billion worldwide motorcycle market.

5.2. Weakness of Harley-Davidson:

Luxury motorcycles.

Product which do not necessarily attract the middle class population or the younger generation.

Dominant target customers are baby boomers who are ageing out.

5.3. Opportunity of Harley-Davidson:

With HOG looking to target different markets, it foresees a lot of potential in international markets.

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

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

Women and younger riders are increasing becoming interested in bikes.

Market share increasing in Europe and Asia for the last couple of years.

Increasing demand in US markets for bikes.

Customers value quality parts.

5.4. Threats of Harley-Davidson:

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

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

The European Union’s motorcycles noise standards are more   stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand.

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

Environmental protection laws.

Shifts in buyers needs and tastes.

Customer loyalty in European and Asian Countries.

Costs could become expensive from international importing.

As a manager they should have take some decision that not taken by Harley-Davidson previous manager.

Harley-Davidson is one of the companies that have huge cash flow within few years of starting business and they captor a huge international market. This are the good sign for a company but Harley-Davidson’s manager can use this strength more appropriate. Though Harley-Davidson has the international market demand but it is only spared in European market. Harley-Davidson should look after other region or the world. They did not try to captor African or Asian market. But there is a great demand of Harley-Davidson motorcycle in the Asian and African market. Especially in Asian community like to be a part of Harley-Davidson. Harley-Davidson can use the celebrity to there motor bike advertisement for make it more popular in Asian youth. Because of Asian young community like to follow there favourites celebrity. So they could use this strategy to extend the Harley-Davidson market.

Harley-Davidson’s manager should care about the product price. Harley-Davidson always only manufacture luxuries product and price of this product is too high. Only for this reason they don’t have attractive to middle class people. Young generation also not really attractive towards Harley-Davidson reason is same high price. There is another reason that some people not really attractive to Harley-Davidson are made of heavy instrument. So Harley-Davidson’s manager should make some effort able and light motorbikes for the young generation. As a manager they should look forward to this matter.

Harley-Davidson is one of the organisations that have many loyal customers. It took a long time to reach there. The customers are having Harley-Davidson tattoo on there body. It is not easy to get this success. Because people didn’t make tattoo on there body for any other organization.

Harley-Davidson manager has to be more specific to there customer and to be loyal. They have huge amount of customer in US. But main problem is Harley-Davidson’s customer’s age group is 35-44, it is not quit good for an organization like Harley-Davidson. It means they don’t have expectancy in young generation. So Harley-Davidson future could be in danger. As a manager they should try to find the reason to be more acceptable to young generation. Harley-Davidson is famous for its engine sound but there is some allegation to them that they pollute the environment by doing noise pollution. As a responsible manager of a company they should do something innovative. There is no way to change the engine sound or mute it because it is one of the unique things of Harley-Davidson motorcycles. So we can take other good initiatives for better environment and Harley-Davidson can work for tree planting or work for greenhouse affect. Harley-Davidson taking initiative to expending market in Asia and there starting with India which is good for future. But Harley-Davidson is a US based motorcycle company, so there manager should be careful about the product quality because Harley-Davidson is providing custom made product. It Harley-Davidson fail to provide best service in India they will not able to stay in Asian market. Because Harley-Davidson is an expensive motorcycle and people have too many choices in market which is cheap and already have a good reputation in market. So as a manager they should careful about the best service.

6. Conclusion:

Harley-Davidson is one of the motorcycle company which is strongly maintain there position in market. They have been maintaining there market situation more then 100 years. They have been focused on market 1908. Some people worked hard for Harley-Davidson to reach there. Michael Leichter (2004) one of the photographer of Harley-Davidson motor cycle and he is a biker too. The said it was a dream to become a part of Harley-Davidson. Aric Herrmann (2004) is one of the artists of Harley-Davidson. By his art into the bike body he makes Harley-Davidson look better. Paul Yaffee (2004) designer works for design the bike. Reck Hatch the Harley-Davidson legend those entire people work herd for Harley-Davidson. Along with male rider Harley-Davidson has 40% of women riders which is good news for Harley-Davidson. One of the women biker Arrie Jensen she said she want to take control of the bike. So it means women are moving towards be a rider. This is the first time some motorcycle organisation making a culture. Harley-Davidson making a total different life style, sound and looks. Harley-Davidson has a unique relationship with there customer mostly American people. Harley-Davidson’s logo makes them more unique because of American flag and eagle. Harley-Davidson faced bank racy 20 years ago and it named brand and logo named beside McDonald, Coca-Cola and Microsoft throughout the world.

7. Reference:

Harley-Davidson: The Spirit of America (Movie Documentary)

Harley-Davidson: Preparing for the Next Century (Case)

http://www.totalmotorcycle.com/future.htm#1800s

http://www.harley-davidson.com/wcm/Content/Pages/H-D_History/history_1900s.jsp?locale=en_GB

http://www.youtube.com/watch?v=cigIxEy-9fI

http://www.ifm.eng.cam.ac.uk/dstools/process/jit.html

http://www.fundinguniverse.com/company-histories/HarleyDavidson-Inc-Company-History.html

stock:Harley-Davidson_(HOG)/Filing/10-K/2009/F1265463 Harley-Davidson 2008 10-K Report, Annual Earnings

http://www.oppapers.com/essays/Harley-Davidson-Swot-Analysis/144651

http://www.oppapers.com/essays/Swot-Harley/225653

External Analysis of Harley Davidson Inc