Harley davidson case study - Motorcycle Essay Example

Executive Summary
“Harley-Davidson is the iconic American motorcycle manufacturer - Harley davidson case study introduction. Founded out of a small shed in 1903 by William S. Harley and Brothers Arthur and Walter Davidson in Milwaukee, Wisconsin. The Motor Company produces traditional cruiser motorcycles utilizing air-cooled V-Twin engines. When Harley and Davidson produced and sold their first motorcycle in 1903, they were one of many small motorcycle marques springing up across the country. Flash forward more than a century and the Harley-Davidson brand is so rooted in American culture that the history of the company intertwines with the history of America itself. “ Harley- Davidson a brand that say I’m an American with its strong image they summarize what biking is and isn’t. They produce quality products that are reliable and durable.

With so much more to offer Harley-Davidson cannot compete with the Japanese in terms of market share in Europe they only have 6.4% which is excruciating for a company who consider their product as a luxury item with all top of the line parts, brand image ,and all the thing they offer to the consumers. That’s why we look for alternative that could be beneficial to Harley-Davidson which is Market penetration, market development, and product development in Europe. We generated this idea ease them and with employees who know what their job is and make the necessary adjustment in their product or service need not worry of what will happen.

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Situational Analysis
Environment
The Environmental Protection Agency (EPA) regulates automobile and motorcycle emissions. Future revisions could negatively impact the motorcycle industry. Steel prices increased 57% and aluminum increased by 24%, the cost increases on to consumers, thus raising the price of the product, in retrospect it will decrease the sales of the company. The environmental protection laws create on additional pressure for companies. Human resource legislation mostly in favor of the employees also does have an impact on the profitability of the company. The internationalization of the business of the company is concerned the moving of production facilities to those locations The motorcycle industry has contracted greatly since the mid-1980s.

Real gross domestic product (GDP) growth, which measures the value of all domestic goods and services, for 1998 has been in the range of 3.0 – 3.5 percent, which is above the long-run average of 2.5 – 3.0 percent that has observed since the early 1970’s. Although GDP growth began to slow in 1998, and this has led many to question whether or not the U.S. was heading into a recession in 1999, particularly given the worldwide slowdown due to the Asian economic crisis. Some estimates put the effect of the Asian crisis on the U.S. economy as a one percentage point reduction in the growth rate for 1999.

The forecast for the U.S. economy in 1999 is stable economic growth, a slight rise in U.S. unemployment rates, a slight rise in inflation, and a rise in long-term interest rates. Although this is worse than observed in 1998, given the uncertainty and instability that permeated the U.S. economy in the fall of 1998, the outlook could have been much worse.

The demographic profile of motorcycle buyers has changed over the years (see exhibit 1 page 355 for the Heavyweight motorcycle registrations in three global regions), in which Europe has the largest number of people registered, which is 270,500. According to the Motorcycle Industry Council, 61% of buyers are over 35 years old whereas in 1980, only 27% has reached this age.

A. Industry
The motorcycle industry consisting of five major manufacturers: one American (Harley Davidson), and four Japanese (Honda, Yamaha, Kawasaki, Suzuki) and some European companies (mainly BMW of Germany and some other Italian companies). Most companies market their motorcycles and accessories on a worldwide basis, handling international trade through foreign distributors and domestic sales through franchised outlets. The entry of the Japanese products backed by huge marketing programs caused the demand for motorcycles to expand rapidly.

The company faces well-financed competitors in the industry and because of it the growth of rivalry is high. Most of the competitors of Harley-Davidson have larger financial and marketing resources and are more diversified. And the Strategic alliance between Suzuki and Kawasaki in the areas of product development, design, engineering, and manufacturing of motorcycles, this alliance strengthened both companies’ global motorcycle businesses. Furthermore, Honda, the main competitor of Harley-Davidson in U.S eats up some market share of Harley-Davidson.

The Japanese Big 4 members (Honda, Yamaha, Kawasaki, and Suzuki) have dominated the motorcycle industry over the years. Entry barrier is very high in this segment, because this involves a lot of capital investment and the industry is on a maturity stage. The economies of scale are low in this segment, which is the reason why there are only five major players.

Harley Davidson’s customers are largely individual consumers, making it difficult for them to seriously affect Harley Davidson’s financial situation by refusing to cooperate. Since Harley Davidson dealerships are independently owned and operated the companies customers are technically its licensed dealers, but the sheer number of dealers that Harley Davidson has throughout the world makes the situation for dealers not much better than individual riders.

B. Organization

“Harley-Davidson Inc, often abbreviated H-D or Harley, is an American motorcycle manufacturer. Founded in Milwaukee, Wisconsin, during the first decade of the 20th century, it was one of two major American motorcycle manufacturers to survive the Great Depression.[5] Harley-Davidson also survived a period of poor quality control and competition from Japanese manufacturers.[6] The company sells today only heavyweight motorcycles with over 700 cc, designed for cruising on highways. Harley-Davidson motorcycles, or “Harleys”, are noted for the tradition of heavy customization that gave rise to the chopper style of motorcycle.[7] Except for the modern VRSC model family, current Harley-Davidson motorcycles reflect the styles of classic Harley designs. Harley-Davidson’s attempts to establish itself in the light motorcycle market have met little success and have largely been abandoned since the 1978 sale of its Italian Aermacchi subsidiary. Harley-Davidson sustains a large brand community which keeps active through clubs, events, and a museum.” Mission Statement

“We fulfill 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.”

Proposed Mission
“Constantly renewing ourselves and offer the best motorcycle experience without compromising the quality, to be branded as the best motorcycle available in the world “

Value Statement
“These are our values. They are the heart of how we run our business. They guide our actions and serve as the framework for the decisions and contributions our employees make at every level of the Company.” Tell the Truth.

Be Fair.
Keep Your Promises.
Respect the Individual.
Encourage Intellectual Curiosity.
Harley- Davidson mission and vision statement really express who they are as a company and want to become. A company who would provide high quality product that would reflect someone’s character through their product. To have employees who delivers good service to customers and be trust worthy. And to market their product as a luxury item.

C. Market Strategy

Harley-Davidson focuses on a niche market, in which efforts and resources on a narrow, defined segment of a market. However, the niche market also has its setbacks, the chances of achieving a high profit level is reduced due to the small scale of the market. Even if the Harley-Davidson can charge a high price for its product in its niche market, the lack of customers will affect the total profit achieved. Operating in a niche market does not allow a business to spread its risk due to the specialized nature of the market. Due to this, a decline in interest among customers may threaten a business’s existence. If there is an increase in interest in the product by customers, it may attract larger businesses into the market. When times are changing rapidly, it is unlikely that businesses in a niche market will make high profits in the long term, unless the business can quickly and effectively react to changes. In general Harley-Davidson target men who are from the upper middle or upper class men who would love to go on long bike rides.

Segmentation

Harley-Davidson targets Caucasian males from ages 35 -50 with enough purchasing power to be able to afford high-end motorcycles.

Positioning
Harley-Davidson has successfully captured the market by positioning itself has a luxury good with a strong history and culture. Problem found in Situational Analysis
A. Statement of the Problem

What is the best way for Harleys to improve their market share particularly in Europe? A.1.

Evidence of problem
Harley- Davidson dominates North America but has the smallest market share in Europe and is fourth place when it comes to the Asian/Pacific region which is dominated by Japanese brands. Europe 270,500 potential customers that Harley could have but have not yet tap in to properly for them to serve.

A.2. Effects of the problem
If Harley-Davidson cannot come up with a better solution to increase the sale in that countries they will lose millions or even billions of profit they could have earned.

Strategic Alternatives for Solving Problem
SWOT Analysis

Strength
Product quality
Brand recognition
Trademark licensing
Supplier relationship
Biking experience

Weakness
Price factor
Brain drain
Reliant on few suppliers
Market share is low in other countries
Ongoing capacity constraints

Opportunities
The international market is now larger than the U.S
Customers value quality parts
Women and younger riders are increasing
Industry registrations of heavyweight motorcycle are increasing.

Threats
Harley ongoing capacity constraints
Loss in Domestic market share
Competitors of Harley Davidson
Environmental protection laws
Recession

A. Description of Strategic Alternative (1)
MARKET PENETRATION, MARKET DEVELOPMENT,
AND PRODUCT DEVELOPMENT IN EUROPE
We suggest that the company would invest in shipping their Sportster line of motorcycles Europe. We suggested this because Sportsters line of motorcycles is one of their best sellers and given that the international heavy weight marketing increasing, and the market of Europe, specifically, is increasing as well, and Harley-Davidson’s market share in Europe is the lowest of all three global regions. Therefore, they have to enhance their position in the market in Europe. However, the researchers suggest that if such will be implement purge company must abide to the motorcycle laws of Europe by altering their engines so that it will have less carbon emissions and by requiring their buyers to wear helmets when driving.

The new set of motorcycles would still have the signature Harley-Davidson look and functionality, however its engine will just be adjusted so that it may become a lot more eco-friendly since the European commission has set emission standards. Implementing such will allow market penetration and market development, and product development. The Researchers also suggest that the company would invest in new apparel designs fit for the European market. This will allow horizontal diversification in the company’s offerings. To be specific, here is the 7p’s:

Product
The improved Sportsters of Harley-Davidson and new designs for the apparel will be the products, specifically marketed towards Europeans aging from 18-30 years old. The products will fall under specialty consumer goods. Accessories for the motorcycles will also be available for sale in the future so that the buyers can embellish their bikes. The company will also provide warranty and extended are services for the motorcycles.

Price

The standard retail price will depend upon the model of the motorcycles and the design of the clothes. Payment methods for the items will be through cash, check, and credit cards. There will also be consumer loans available; however, it can only be for the motorcycles. Volume discounts will also be available for the dealers of the bikes, provided that they will sell it at standard retail price.

Place

The company will distribute these items through their own stores and other dealers. There will be people in-charged to contact the dealers and do inventory management on their own store. There will also be intensive distribution of the products to help the company gain noise again in the market.

Promotion
The promotional strategy to be used is the push strategy. Trade sales promotions will also be applied in this alternative. Moreover, there will be sales promotion directed to consumers, sales people and resellers. Moreover, there will be a special introductory price upon the launching of the products in Europe. The advertisements to be made for the new product line will be through print and media, such as newspapers, magazines, billboards, and TV commercials. These ads will provide awareness, information, and stimulation of purchase. The task approach method will be applied for the managing of the expenditure of these advertisements. As for public relations, the will be a news conference to announce their new products and to create noise so that the company may get their game up again.

People

Harley-Davidson needs to hire new employees to help the company understand the European market more. These specialists will aid in the designing, manufacturing and advertising of the new products. The company will also have to get new suppliers for their new items. There must also be researchers hired for the studying of this alternative. Furthermore, this alternative will result to the attraction of new customers, specifically the European market.

Process
The customers will be informed about the product, as well as the services that the company offers alongside the products, such as the materials used, its quality, the specifications, the functions, price ranges, warranties etc.

Physical Evidence
The clothes can of course be tried on inside the stores. The motorcycles will also be in display and the company can provide test drives as well. Brochures and pamphlets will also be used to inform the public about these products. Information’s such as the available items for sale, motorcycle specs and the like.

1. Benefits of Alternative 1
Implementing this strategy would allow the company to increase their profits and gather new clients. Moreover, it will also help the company gain security in the long run because they will not focus on niche markets anymore. Increased market share will also allow the company to get a lead against their competitors. The social responsibility that the company involves in can also help improve the image of the company in the public.

2. Costs of Alternative 1
The downside of the application of this alternative course of action would be the amount of cost and time the company has to incur in researching, manufacturing, distributing, and marketing the new motorcycles and apparel.

B. Description of Strategic Alternative (2)
Media Promotion, Improve Website Add More Information
The promotion of Harley-Davidson towards Europe isn’t that good. Their website http://www.harley-davidson.com/en_AP/Content/Pages/home.html international website lacks information not like Harley-Davidson USA that has everything you would want to know about Harley and their products & services. Harley should make their website more exciting or different by adding new feature like virtual simulation of what it’s like to have a Harley- Davidson motorcycle. Explain why Harley is the best choice for them in terms of motorcycle.

A.2.a. Benefit of Alternative 2

The benefit of the second alternative is that it will cater customers who are not in the U.S give them a look inside of what Harley-Davidson really is. Internet is a big part of anyone’s life these days it could really help Harley increase viewers, increased viewer traffic, and provide the necessary information to their customers. It is a good way to rely info with less man power.

A.2.b. Cost of Alternative 2

The worldwide web isn’t that expensive it is more about the credibility of the people who would order Harley’s motorcycle thru the net there might be people who are phony and won’t pay. The company may ask the consumer to pay down payment but still not a good guarantee.

C. Description of Strategic Alternative (3)

Create Partnership with Local Company or Suppliers

Partnering with local company and supplier is a good strategy for Harley it would easier for them to adjust to the market of Europe. With the help of local company and supplier, Harley –Davidson can picture what is it like to be a company in Europe.

a. Benefit of Alternative 2
The cost of the motorcycle would be cheaper and it would increase their chance for the European to buy their product. A boost in patronage, Local residents will link your business’ name to the partnership and the good works that are being achieved. Improved standing in the community. The partnership could improve your standing among business peers and your local Chamber of Commerce, as well as your local council and MP, who also have a stake in seeing business and community partnering to the mutual benefit of the area. A visible demonstration of your firm’s values and care for the community, this sort of commitment to the local community will set your business apart from competitors in the area.

b. Cost of the Alternative 3
Investing to other companies is expensive the responsibly that Harley- Davidson would shoulder. Not all partnership works the mission and vision of the other company might not be in line with Harley and it would cost internal disagreement.

Selection of Strategic Alternative and Implementation
A. Statement of selected strategy
We choose alternative 1 market penetration, market development, and product development in Europe. Harley-Davidson is a well off company. However, they problems when it comes to their market share. Though they successful in North America, they still have to maintain what they are doing there. Nevertheless in Europe, they have to find ways to gain more of their market. Through the product development of Sportsters, that will be shipped to Europe (market development), and through more extensive public relations events done, Harley-Davidson would be able to increase their market share in the said Continent. B. Justification for selection of Strategy

Europe has the most numbers of people that could be Harley’s customers.in Europe they only have 6.4% of the total market share in the motorcycle industry. It is too bad is they can’t increase the sale in Europe because it could give Harley big profit. The alternative 1 could pull things up for Harley-Davidson. As for the two remaining alternative they could also help Harley- Davidson but not as proficient as alternative1.

C. Description of the implementation of Strategy
1st have a meeting with the employees and get ideas, a different point of view on the situation. Conduct survey In Europe figure out what they want and don’t. 2nd analyze the ideas in the 1st step pick the best once that fit to the situation. 3rd gather facts, or information of the idea that was chosen and try testing it if it works or not. 4th develop a market strategy by focusing the younger Europeans that would like to buy, plan for the 4p’s. 5th projection of the business where would they after a few years or even just a year. 6th have a product/ develop a product that has character. 7th after the product development, tests it to the market if it be a hit or miss. 8th if all goes we promote the product.

Summary
Harley- Davidson is a company who been thru a lot now they have to apply whatever they learned from those experience and adopt some of it in Europe if needed make more research about that country. The suggestion we pick for Harley- Davidson is good match for what they are going thru right now. Market penetration, market development, and product development in Europe this project will take time before it could be implemented but the result and combination of other alternative that Harley-Davidson could come up with; this will be a huge success for them to finally match up with their competitors head on in Europe.

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