Case Study for Harley-Davidson Essay

1. 0 Introduction This report is to discover and solve the problem caused by the internal and external of the company. Harley-Davidson is a famous motorcycle manufacturer. But within high competition, Harley finds that it is lack of technology advantage, inapposite strategy for development, and gets more competition by analysing its capabilities and resources and its competitive environment. To solve these problems, Harley has to take three steps which is mention in recommendation. 2. 0 Company Profile Harley-Davidson is a major US maker of motorcycles and the nation’s #1 seller of heavyweight motorcycles.

The company offers 35 models of touring and custom Harleys through a worldwide network of more than 1,500 dealers. Harley models include the Electra Glide, the Sportster, and the Fat Boy. (From BaiduBake) 3. 0 Harley-Davidson Performance Harley-Davidson was founded in 1903. During 1903 to 1981, Harley-Davidson was stepping into maturity. It gained great market share in US. But Honda had replaced Harley as market leader in heavyweight motorcycles in the US, by the end of 1970s. In 1981 Harley-Davidson took new production methods and developed new spirit of cooperation between workers and management.

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Harley-Davidson got back to US market. (See table 8. 2) This table shows that Harley-Davidson current performance is good in domestic market. It almost gets 50% market share in US. But it also reveals its weakness on international expansion, especially in Europe. Harley-Davidson has only about 7% market share in Europe. This means most of the European market share is hold by its competitors such as Honda or BMW. 4. 0 Harley-Davidson Strategy 4. 1 Porter’s Generic Strategies Cost leadership: This strategy emphasizes efficiency.

By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. (From Market Planning & Strategy) Differentiation: Differentiation is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product.

This specialty can be associated with design, brand image, technology, features, dealers, network, or customer service. (From Market Planning & Strategy) Focus: In this strategy the firm concentrates on a select few target markets. It is also called a segmentation strategy or niche strategy. It is hoped that by focusing marketing efforts on one or two narrow market segments and tailoring marketing mix to these specialized markets, to better meet the needs of that target market. (From Market Planning & Strategy) Harley-Davidson focuses on its heavy-weight motorcycle market.

Harley’s competitive advantage lay with heavy-weight bikes. Its big, throaty and V-twins had closely linked to Harley’s image since its early years. This impression not only influence the company’s marketing but also to its strategy. Beside image influence, customer’s different demand also affects Harley’s strategy. These customers between 30 to 40 years old show more interests in its heavy-weight motorcycle. And the younger people prefer Harley’s competitors’ products as its high technology engine and more fashion design. This may be caused by Harley’s old-style image.

But it majorly shows one of the weaknesses for the younger customers. Harley’s technical development can not satisfy customer’s demand. Harley hardly gains tech advantage to compete its competitors such as Honda and BMW. So at present Harley-Davidson has to focus on heavy-weight motorcycle as its good image and customer base. But the case shows that Harley-Davidson trend into differentiation strategy in future development. 5. 0 Industry Environment 5. 1 Porter’s Five Forces Porter’s Five Forces of Competition frame work views the profitability of an industry as determined by five sources of competitive pressure.

These five forces of competition include three sources of “horizontal” competition: competition from substitutes, competition from entrants, and competition from established rivals; and two sources of “vertical” competition: the bargaining power of suppliers and buyers The ideal industry is very attractive in terms of growth and profitability but with high barriers to entry, is not faced with competition from substitutes from other industries, has weak suppliers, has weak customers, and has relatively few firms within the industry, who avoid competing on cost and price, and where demand exceeds supply. (Byars, Rue & Zahra, 1996)

Bargaining Power of Buyers: Customers are becoming increasingly powerful due to * Increased price competition within motorcycle manufacture or with Harley-Davidson. * Customers may access to substitutes. The major buys of Harley-Davidson are those people around 40 ages that like 70s design. The classic design creates some loyal customers, and it’s also a product advantages compare to its competitors. Beside, Harley-Davison provides great after-sale service and expends its relationship with its buyers like HOG. Hence, Harley-Davidson’s buyers won’t easily switch to its competitors, although the switch cost is low.

Threat of New Entrants: If an industry earns a return on capital in excess of its cost of capital, that industry acts as a magnet to firms outside the industry. The new entry of other company such as Big Dog has already started to challenge Harley’s market position, and even start to encroach Harley-Davidson’s domestic market share. Bargaining Power of Suppliers: Analysis of the determinants of relative power between the producers in an industry and their suppliers is precisely analogous to analysis of the relationship between producers and their buyers.

The key suppliers in this industry are the manufacturer produce motorcycle parts. Supplier will enhance its bargaining power by increasing prices or decreasing quality per part, so that to influence the motorcycle firms’ competition advantage and company profit. Threat of Substitute: Motorcycle companies face the competition from new energy motorbike such as electric motorbikes. As increasing prices of petro and eco-awareness rise, customers may be interested in these products. Although at present, new energy products have its own weakness, this threats should not be ignore.

Rivalry among existing firms: The competition in motorcycle industry is obvious high. Strong firms compete in this industry such as Harley-Davidson, Honda and Yamaha. Actually it creates barriers to the new entrants. But from the other side, this high competition will influence the profit between companies like decreasing price to win more customers. 6. 0 Internal Environment 6. 1 Resources and Capabilities The financial shows that Harley’s revenue is still growing in recent years. But this financial report doesn’t show that Harley put effort on R&D development.

Compare to its competitor Honda which had spend 3,698 million dollar to develop R&D. (See appendix 1 and appendix 2) Harley has great relationship with dealers. Harley brought out dealer development program to increase support for dealers while imposing higher standards and after-sales service. Harley gives the central role of dealers in the relationship between Harley and its customers, dealer relations continued to be a strategic priority. Compare to Honda, this relationship with its dealers can be an advantage. 6. 2 Porter’s Value Chain Analysis

This is Porter’s model, and ties up with his 5 forces model. The 5 Forces was concerned with analyzing the industry as a whole; the Value Chain model attention shifts to the specific business within the industry. Value is defined in terms of what customers are prepared to pay for the product or service. The value chain refers to the internal processes through which the business generated value, and the associated costs. For example, so although an airlines has a different value chain from college, there are certain value creating and cost incurring activities that can be analyzed.

In this sense Porter is offering a model or map of business in which the aim is create value greater than the costs of so doing (margin). (Hill, Jones & Galvin, 2004) Primary activities: Refer to “the physical activities involved in the physical creation of the product and its sale and transfer to the buyer as well as after sales assistance” Inbound logistics refer to the inputs related to the product. In Harley-Davidson’s case, this related to receiving motorcycle components from the manufacturers. The per component price affect final price of motorcycle. Operations, this refers to the process of turning inputs into outputs.

It means Haley-Davison operate the process that to assemble components to produce its motorcycles. The more efficiency production-line will reduce the cost of operation Outbound logistics: This refers to the physical outputs from operations. This means that Harley-Davidson deliver motorcycles to its dealers. Marketing & Sales: This is persuading customers to buy the product and marking the product available. In marketing mix terms, Harley-Davidson’s products have modest prices and traditional design compare to its competitors and it’s active to expand relationship with customers.

Harley-Davidson also trains its dealers so that to increase the sales. Service: This refers to activities that enhance the value of the product. This relate to Harley-Davidson’s after-sales service like repairing or dealer training and it also connect to service that to develop relationship with customers like HOG. Support Activities: This refers to the activities that support each of the primary activities. Infrastructure: This includes the processes of management, planning and control. In Harley-Davidson this refers to control cost and product quality to gain competitive advantage.

HRM: this refers to employee relations. The relationship with employee is a key aspect. In an effort to engage and motivate the entire plant workforce, Harley-Davidson developed a novel operating structure different from anything else within the company. Harley-Davidson’s belief in the effectiveness of non-hierarchical, team-based structures in fostering motivation and accelerating innovation and learning is evident throughout the company. Technology: This is the technological leadership. This means that Harley-Davidson’s technology development for its motor engine.

Harley-Davidson puts a lot of efforts to its technology, although it still falls behind its competitors. Procurement: the processes for purchasing inputs. This relate to buy develop equipment for the technological requirement. Compare to Honda, Harley has more advantage on marketing and provide service for its customers. Its relationship with dealer make Harley gets closer to its customer. Beside this, Harley directly expands its relationship with customers through HOG to better service customer. Honda doesn’t have deep relationship as Harley. 7. 0 Recommendation

What threats does Harley-Davidson Face? Harley has experience and brand advantage compare to its competitors. But Harley also gets weakness. * Technological threats from competitors Honda, Yamaha and Suzuki had long been offering V-twin cruisers styled closely along the lines of the classic Harleys-but at lower prices with more advanced technologies. These products with low price and newer technologies are encroaching Harley’s loyal customers. And it also create barrier to Harley’s international expansion. * Threat from suppliers Honda, BMW and Suzuki are the important producers of automobiles.

These companies can benefit from sharing technology, engineering capabilities, and marketing. They can organize a strategy alliance to indirectly influence the suppliers to increase the bargaining power with Harley. * Strategy weakness Harley focuses on provide heavy-weight motorcycle to the market. But its competitors like Honda produce various products for its customers such as small engine and simply design motorcycle for ladies. This means Harley can’t satisfy a lot of customers’ demand such as woman or young. Otherwise as the increasing price of petro, customer will be more interest in competitor’s low engine motorcycles. Threat from new entrants Some new company has enter the market and started to provide retro-styled cruiser bike to challenge Harley market position such as Polaris and Big Dog. Harley needs to take some steps to enhance its competitive position. First, Harley should put effort on its tech development to reduce the distance with these companies which have high technology advantage such as BMW and Honda. Second, Harley needs to expand its relationship with suppliers or consider new suppliers to avoid competitor influence Harley’s suppliers.

Third, Harley has to change its strategy, to provide more kinds of products to satisfy customer’s demand. With high technology and various products, the threat from new entrants will be reduce. 8. 0 Conclusion Harley-Davidson is still falling behind its competitors although it has been growing in recent years. Harley-Davidson focuses on producing heavy-weight motorcycle and it’s very successful in the market as it has great experience and the product match to company image. But this strategy limits Harley’s expansion, both domestic and international.

From external environment, the increasing competition affects the company and brings out some important problems like the threat from the competitors and the bargaining from the suppliers. From the internal sides, it shows that Harley is doing well in marketing and service. The lack of technology has become a serious weakness for the company compare to its competitors. To overcome these barriers that mention before, Harley need to take three steps which are developing technology, building good relationship with suppliers, changing company strategy to enhance its competitive position.

Table of Contents Topic Page No 1. 0 Introduction——————————————————————————–1 2. 0 Company Profile—————————————————————————1 3. 0 Harley’s Performance——————————————————————–1 4. 0 Harley’s Strategy————————————————————————–2 5. Porter’s Generic Strategy———————————————————–2 5. 0 Industry Environment——————————————————————3 5. 1 Porter’s Five Forces—————————————————————-3 6. 0 Internal Environment——————————————————————–4 7. 2 Resources and Capabilities———————————————————4 7. 3 Porter’s Value Chain—————————————————————5 7. 0


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