Harley Davidson Case Analysis

SIS Harley Davidson-Case 3 I. Company Profile / Summary (Brief) Harley Davidson Inc. is an American motorcycle manufacturer. Harley Davidson specializes in the sales of heavyweight motorcycles that are designed for cruising on highways. Harleys have a distinct design and exhaust sound that have appealed to a mass market of customers all over the world. Harley Davidson has relied on a strong fan base for sales of their motorcycles and apparel. They currently offer five different models of motorcycle to try and appeal to all different types of consumers. Their specialty is the “chopper” type of motorcycle.

Harley Davidson has gone through numerous battles over the years to try and protect its name and reputation. Currently, Harley Davidson is thriving having revenue of $5. 31 billion for the year 2011. II. Situational Analysis A. General External Environment (Analysis Required to Determine DFC’s, and KSF’s) • Sociocultural • Generational issues were a big factor to the success of Harley Davidson. Now that the baby-boomer generation was becoming older, they had an issue of trying to appeal to the younger generations. • Quality control was another issue that Harley Davidson encountered over the years.

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Following the 1981 leverage buyout, Harley’s new management introduced a total quality control program. This program relied on detection of defects earlier than the preexisting program which only detected defects prior to delivery. This new program helped transfer the responsibility of quality from the managers to the workers. • Technological • There are numerous advancements in technology in the motorcycle industry throughout the years. Harley had to deal with these changes by being innovative with their products and implementing these advancements into their motorcycles.

This, in return, helped Harley create a higher quality, more efficient motorcycle. • Demographic • The population size for Harley Davidson was decreasing as the baby-boomer generation was aging. They had to find a way to appeal to a brand new customer, younger generations. • Through changes in the ethnic mix in America and culture over the past 30 years, Harley has had to adapt. Harley had to now take other cultural ideals in to consideration since the population of some races has grown over the years. • Economic • Throughout the years, there have been periods of economic growth and recession that Harley has had to ride through. There have been times that Harley has had a surplus or deficit and had to act accordingly with the times. Whether it meant that they had to be more aggressive and innovative or conservative. • The gross domestic product had an effect on Harley, as they have contributed greatly over the years to the United States’ GDP. • Global • Harley Davidson has had to look at global issues like a meltdown of a global market as it could affect the sales of motorcycles globally. • Harley also has to monitor trade policies since they are now a global industry and earn much of their revenue overseas. B. Industry Analysis (define the industry) Threat of New Entrants and Barriers to Entry • New entrants in the motorcycle industry have been limited over the years since there is a heavy brand loyalty among the existing companies. Brands like Harley, Yamaha, and Suzuki command huge brand loyalty among their respective customers. • The economies of scale help thwart off any potential entrants as each company is purchasing supplies in bulk and reducing costs through mass production of motorcycles. • Intensity of Rivalry between Competitors • Rivalry is intense between competitors in the motorcycle industry.

There are about 5 companies in the motorcycle industry, Harley Davidson included, that are giants in the industry. Every company is constantly trying to be more innovative and offer higher quality motorcycles to try and lure the competition’s customers away. • Currently, there is a growing demand for motorcycles so completion has been moderated slightly. • Product Substitution from outside the industry • There are many substitutes to the motorcycle industry that pose as a strong competitive threat. Companies like Harley have had to constantly battle the automotive industry for customers. Power of Suppliers • Like most American manufacturers, Harley has relied on competitive bidding in its search for suppliers. This helped to lower costs for Harley. • Trying to seek cooperative relations, Harley ditched competitive bidding in favor of a preferred suppliers strategy. Harley attempted to work closely with selected suppliers on product management, quality control, and cost containment problems. • Power of Customers • Buyers didn’t have as much bargaining power as the motorcycle industry had many customers. When someone bought a motorcycle, it was only one, and not a large quantity.

Buyers had power when it came to choosing which brand to buy. C. Industry Driving Forces of Change (DFC) • Changes in technology have been a driving force for change in the motorcycle industry. Companies like Harley have had to constantly adapt to technological advances regarding motorcycles. • Changes in the ethnic mix and changes in generational preference has been a force of change that Harley has had to monitor and adapt to over the years. • Product and marketing innovation has been something to drive change over the years in the motorcycle industry. Changes in the long term industry growth rate have brought changes in the motorcycle industry in the past. D. Future trends in the Competitive Environment • In the next couple of years, Harley could expect to see more innovative products and higher quality motorcycles in the industry. • Harley can expect companies trying to lower costs through production. • Technology will also drive competition in the motorcycle industry • Possible changes in the economy or culture could affect the competitive environment of the motorcycle industry. Summary: Attractiveness of the External Environment

E. Strategic Analysis of Internal Resources and Capabilities 1. Key Factors of Success in the Industry (KSF) • Harley Davidson will have to worry about keeping their customer base happy. They will want to address the basis for why customers many choose a competing company’s product over theirs. • Harley will also want to look at their important resources and capabilities that they must have to continue to be competitively successful. • They lastly need to find out what it takes to achieve and maintain a sustainable competitive advantage. Will want to keep costs low and quality high. • Product innovation and efficiency. • High quality customer service and merchandising. 2. What is Business Level Strategy? • Haley will want to have a business level strategy that creates a competitive advantage over its rivals. They have been able to achieve this successfully over the years. • Harley understands what their customers need to be satisfied. They identified the target population and how different cultures like their motorcycles. • Harley has created five different models of motorcycles to satisfy a broad spectrum of customers.

They have successfully differentiated their products to appeal to a broader group of consumers. They also have successfully retained their premium price on those products. • Through basing their different models on how the market is segmented, Harley has profited greatly over the years. • Mainly, Harley Davidson appeals to the average Harley customer with their heavyweight chopper motorcycle. Although, they do have other differentiated models to appeal to different market segments. 3. What is Corporate Strategy? Harley has learned to correctly allocate their resources and implement an efficient system of controls to help ensure a high quality product. • Through their corporate strategy, Harley Davidson has successfully kept a competitive business level strategy. 4. Resources and Capabilities Focus on KSF, CC, & SCA) a. Tangible Resources • Financial-Harley has an ability to generate funds internally through sales of apparel. Harley Davidson branded items bring in high sales yearly. • Physical-Through its connection with suppliers, Harley has convenient location of its plants and equipment as well as raw materials. Human / Culture-Through increased and successful labor relations, Harley Davidson has a reliable cast of hard working employees who are proud of the company that employs them. This, in return, raises the quality of customer service and the overall product of Harley Davidson. • Organizational-Harley has implemented an efficient reporting structure as well as a successful planning and control system to help ensure total quality management. b. Intangible Resources • Innovation-Harley has constantly innovated their product to adapt to any technological or cultural change. Reputation-Reputation is a huge contribution to the success of Harley Davidson. They have relied heavily on the brand loyalty of their customers to help keep them and attract new ones. • Ethical-Harley has a creed of ethics and they continue to follow it to help keep their name clean. • Agility / Flexibility-Harley has been quick to change with the times. Whether it was to create a new model to appeal to a different market segment or slightly change an existing model, Harley has been flexible throughout the years. c. Capabilities / Value Chain Operations-Harley’s operations are efficient so that it monitors the quality of every motorcycle to check for any problems or defects in production. • Marketing and Sales, Service-Marketing of Harley Davidson has been a strength over the years as they have a brand loyalty among existing customers because of years of offering a high quality premium for their motorcycles. • Technology-Technology has been a capability of Harley Davidson as they are always looking in to new technological advancements that could possibly help their existing models become more efficient. Human Resources-HR has been a strength for Harley Davidson as they offer benefits to their employees to help ensure a competent, hardworking staff. Summary: What is Sustainable Competitive Advantage? III. Performance Appraisal (relative to competitors) A. Profitability/Cash Flow-Over the years, Harley has been very profitable relative to its competitors. In 1983, Harley had around 23. 5% of the market share. In 1988, its share was 46. 5%. Year after year, Harley has been in the top three regarding profitability in the motorcycle industry. B.

Liquidity-Harley Davidson is a very liquid company as it has many assets and a lot of cash on hand. It wasn’t always like this, as Harley has had to work its way up to its state of liquidity currently. They have achieved this through innovation and brand loyalty. C. Financial Leverage-Harley Davidson has sufficient financial leverage as it is one of the top motorcycle providers in the industry. D. Asset Turnover-Harley has a good asset turnover ratio since they have an efficient production system in place. This system allows to gauge the demand of customers and manufacture motorcycles based on it.

E. Stock Performance-Harley Davidson stock has risen the past couple years as the motorcycle industry has recovered from the 2008 recession. Currently, Harley Davidson stock has been on the rise. Does the company offer its investors better than average returns? Does it have the resources to implement the strategy? Financial Physical Organizational Intangibles IV. SWOT Analysis (be Specific) Strengths-Harley Davidson has a competitive advantage in that its brand loyalty brings in a lot of revenue and profit from sales of merchandise and motorcycles.

Their value creation is high during production since they produce a premium product. The company’s profitability is high due to this value creation. All of the tangible and intangible resources listed above are a strength for Harley Davidson. Opportunities-Some opportunities in the environment that Harley could take advantage of to become more profitable would be changes in the younger generation’s view on motorcycles. Since Harley’s prime consumer of their motorcycles, the baby-boomer generation, is aging, they will look in to the younger generation to help prop up sales.

This is an opportunity to attract greater sales and hopefully command a larger market share in the industry. Changes in the ethnic mix will want to be something Harley monitors in the future as the population of Hispanics in America is exploding. This could potentially be a new group of consumers that bring profit to the company. Weakness-Some weaknesses of Harley Davidson that might hurt them in the future are the way they manufacturer their motorcycles. If Harley can’t lower costs or raise the quality of their product in the future, they will lose the valuable premium they currently charge their customers.

Harley will have to implement a system that ensures a high quality and efficient production of their motorcycles. Threats- Some threats that Harley Davidson might encounter is the aging of the baby-boomer generation. Since Harley has relied heavily on sales to this generation, they might find a decline of competitive advantage as younger generations prefer the sleeker, faster models of competitor brands like Suzuki of Yamaha. V. Recommended Strategy and Implementation Plan I would recommend Harley to target the younger generations as they are an untapped resource of profitability for the motorcycle industry.

Whether that be creating sleeker, faster models or changing the existing models to mimic the changes regarding the motorcycle industry. Harley will also want to make sure its workers remain content and happy as this will guarantee a higher quality of service. Harley should also constantly monitor any technological innovations as they need to remain flexible and be able to change with the times quickly. The more likely Harley can adapt to change, the better off they will be. They should also keep with their total quality management system intact as it helps them manufacturer their motorcycles at a lower cost.

Lastly, I would remember that Harley Davidson has been around for more than 100 years. It is a staple of American business. They should continue operating like they have been all these years, but also not be afraid of change as it can be beneficial to a sometimes stale product. Harley has and will forever be a household name in America and will command a lot of respect regarding its name. What Harley needs to do is find a way to lower costs while providing many products that is attractive to the many different market segments out there.

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