Harley Davidson is a luxury motorcycle company that has successfully maintained its operations in the motorcycle market for many decades. While Harley Davidson has managed to survive the economic downturn of 2007, the company is struggling with three strategic issues; one of which deals with the way the company’s products are viewed, and the other two deals with difficulties managing the firm’s target market.
General Environment Analysis
The external environment of a firm includes, “…the industry in which a firm competes as well as those against whom it competes” (Hitt, 2014, p. 38). Specifically, the general environment is, “composed of dimensions in the broader society that influence an industry and the firms within it” (Hitt, 2014, p. 38).
In regards to the business environment of Harley Davidson, the following segments will be discussed: economic, political, sociocultural, and technological.
Economic Forces
As the largest heavyweight motorcycle manufacturer, Harley Davidson is capturing half of the U.S. market in addition to one-third of the global market. Being that motorcycles are considered a luxury good, Harley Davidson primarily competes on quality and design rather than price.
Since the September 11th terrorist attacks, gas prices have continued to rise impacting sales, cost of production, and Harley Davidson’s overall profits.
Political Forces
Laws exist to govern levels of pollution, plant emissions, and the working environment. These environmental protection laws create addition pressures for Harley Davidson and other firms in the industry.
Sociocultural Forces
While aging population growth and income growth possess opportunities, Harley Davidson may run into an issue when trying to appeal to younger-generations. Marketing to multi-cultural and multi-generational audiences will help attract a more diversified audience in terms of ethnicity, gender, and age.
Advancements in technology have allowed Harley Davidson to utilize computer-based inventory control systems. Additionally, computer-based inventory control systems make communication across continents easier and cheaper than ever before. Technology directly impacts design and has helped Harley Davidson create higher quality, more efficient and comfortable motorcycles.
SWOT Summary
Dominating the motorcycle industry for decades, Harley Davidson maintains a strong presence in the American market. Its mission is to, “fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles, branded products and services in selected market segments” (Harley Davidson, 2015, p. 1).
This analysis examines Harley Davidson’s business structure, operations, history, and products.
Strengths
In addition to maintaining a superior product line, excellent supply chain management and strong financial position, Harley Davidson facilitated creative design and engineering technology. The company became more selective by phasing out weak models, limiting sales and promotion, and becoming more selective in targeting specific customer segments.
Harley-Davidson’s motorcycles are known for their traditional styling, design simplicity, durability and quality. The company achieved industry recognition for its high quality, best design, robust performance and unflinching customer confidence, loyalty and trust of its products and services.
The Harley-Davidson brand has significantly contributed to the success of the company by building strong market recognition and a loyal customer base. (p. 2).
Harley Davidson takes pride in its relationships with employees, suppliers and customers.
Weaknesses
One of Harley Davidson’s weaknesses is its dependence on the U.S. market. GlobalData (2014) noted:
Harley-Davidson focuses predominantly on the US and generates a major part of its revenue from that market, which could increase its business risk. Of the total revenue generated by Motorcycles segment, the US contributed approximately 67.7%, followed by EMEA with 14.6%, Japan with 4.2%, Canada with 3.9%, Australia with 3.7%, and Other foreign countries with 5.9%.
Any adverse conditions in the US economy could adversely affect the company's results of operations. (p. 2).
The company’s lack of presence in outside markets can causes steady loss of market share.
Opportunities
It is noted, “The company's presence in emerging economies such as India could prove to be very beneficial to the company” (GlobalData, 2014, p. 2). Presence in emerging economies such as India, Brazil, Vietnam, Thailand, and Taiwan offer huge potential for growth.
Regarding its focused research and development activities GlobalData (2014) explained:
Continuous research and development activity enables the company to maintain a leading position in custom and touring motorcycle market and develop products for the performance segment. Focused R&D activities enable the company to offer innovative products and improve its operational performance. (p. 3).
Threats
Harley Davidson relies on a single supplier for certain raw materials. It is explained, “In case of a delay in receiving the raw materials, product delivery to its customers could also get delayed, which impacts its business and customer relations” (GlobalData, 2014, p. 3).
Regarding its competitive landscape, “The company’s failure to address and respond to these competitive pressures worldwide would have a material adverse effect on its market share” (GlobalData, 2014, p. 3). Finally, in regards to new emission standards for two wheelers GlobalData (2014) explained:
Harley-Davidson could face increased challenges in its two-wheeler business due to the stringent emission standards. According to Dealernews.com, motorcycle industry stakeholders in Europe announced plans to increase €3 emission standards to more stringent €5 standards by 2015. It also proposed the introduction of more stringent emission test cycle, and €5 standard for motorcycles by 2015. Such implementations might require the company to redesign its vehicles, which could result in increased operating costs.
Harley Davidson faces threats of procurement of raw materials, competitive landscape, and new emission standards for two wheelers.
Corporate-Level Strategy
To help ensure a high-quality product, Harley Davidson has learned to efficiently implement a system of controls and assign resources. A corporate level strategy “specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets” (Hitt, 2014, p. 167).
Harley Davidson carved out its strategy by selecting a direction to sustain its unique brand by diversifying the company from its competitors. In choosing this strategy Harley Davidson inherited risks that were carefully monitored and accepted by corporate leaders.
Acquisition or Merger Strategy
It is noted, “evidence suggests that using merger and acquisition strategies in ways that consistently create value is challenging” (Hitt, 2014, p. 196). Considering the history of Harley Davidson, following an acquisition or merger strategy would not be a good idea.
In the case recommendation was made to pursue an acquisition, Hitt (2014) advised of the following problems:
Among the problems associated with using an acquisition strategy are (1) the difficulty of effectively integrating the firms involved, (2) incorrectly evaluating the target firm’s value, (3) creating debt loads that preclude adequate long-term investments (e.g., R&D), (4) overestimating the potential for synergy, (5) creating a firm that is too diversified, (6) creating an internal environment in which managers devote increasing amounts of their time and energy to analyzing and completing the acquisition, and (7) developing a combined firm that is too large, necessitating extensive use of bureaucratic, rather than strategic, controls. (p. 219).
As a firm conducts business in a larger variety of regions throughout the world uncertainty increases. First, differences in the broad business environment across countries make it difficult to utilize experience of doing business in a particular location. In other words, when information is limited, management is more likely to be surprised by circumstances or events.
Environmental conditions also impose more uncertainties for international managers verses domestic managers. Finally, uncertainty stems from differences in currencies across countries and regions.
Cooperative Strategy
It is explained, “A cooperative strategy is a means by which firms collaborate for the purpose of working together to achieve a shared objective” (Hitt, 2014, p. 265). If Harley Davidson formed a strategic alliance, competition would be reduced, competitive capabilities would be enhanced, strategic flexibility would be built, and access to resources would be gained.
Recommendations
Utilizing its increased marketing efforts, Harley Davidson can further increase its customer base by marketing untapped segments such as, women or the younger generation. Strategic alliances, joint ventures and concentric diversification enable entry into foreign markets, sharing of costs, resources, and assets, and knowledge of local conditions.
Additional recommendation includes the expansion of European and Asian markets.
References
GlobalData. (2014). Harley-Davidson, Inc. - Financial and Strategic Analysis Review. Callisto.ggsrv.com. Retrieved 14 April 2015.
Harley Davidson. (2015). Company History and Background. H-dsn.com. Retrieved 14 April 2015.
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