Harley Davidson: Preparing for the Next Century BUSI 615 40 Professor David Houghton By Brian Lynch Since the founding of Harley-Davidson in 1903 by Arthur and Walter Davidson and William Harley, the company has a rich heritage and a loyal following. The company has proven to be resilient and innovative throughout the years. They have made their fair share of mistakes, especially while under the ownership of AMF, whose decisions almost destroyed Harley-Davidson. They have also made an inspiring come back, recapturing their share of the market and more.
Harley-Davidson has managed to attract all sorts of riders including motorcycle “rebels”, women and blue and white color workers. In fact, in our church small group there are two Harley enthusiasts. All of the history, resolve and innovation that has made Harley a house hold name will be needed to get then through the challenges they now face. Harley-Davidson faces two main interrelated problems in their future. One is slowing sales, according to John Morgan, from Ryan Beck & Co “. . . heavyweight motorcycle registrations exhibited robust growth from 1996 to 2000.
However, growth in the touring and cruising market slowed considerably in the second half of 2002 and throughout 2003 and 2004” (Nolan & Kotha, 2007). This suggests that Harley-Davidson’s market may be maturing. That is, the market had essentially reached a state of equilibrium marked by the absence of significant growth or innovation. The second is the aging of the baby boomers that made up a large portion of Harley customers. “The median age of the Harley customer, which was 35 in 1987, was now closer to 47” (Nolan & Kotha, 2007) External Environmental Factors affecting Harley-Davidson
The world in the year 2007 would not be recognized by the founders of Harley-Davidson. Technology is advancing at a quicker pace than ever before, changing the decision making dynamic for managers. They have to decide to be a market leader, embracing or creating cutting edge technology or use more tried and true technology. Economics will also play a large role the future. In 2007, msnbc. com reports that the growth rate was only 2. 2 percent for all of 2007; this is the worst growth rate in the past five years.
They explained “the economy has been subject to something of the perfect storm here. It has been hit by the housing slump the credit squeeze, the subprime slime and stock price declines on Wall Street” (Economy nearly stalled, 2008). Of particular interest to Harley would be that consumer spending had only increased 2. 9 %, the smallest rise since 2003. The sale of goods abroad also slowed down to a rate of 7. 9%, the smallest increase since 2005. Despite this concerning news, White House officials assure producers that we are not heading for a recession only a slowing period.
The ethic responsibility to reduce or remove our footprint on the earth, now known as green initiatives, has also changed drastically over recent years. There are corporate incentives as well as increased legislation to encourage or ensure companies to think green. Harley will have to consider these as the move to the future. Internal Environmental Factors affecting Harley-Davidson Harley-Davidson’s mission statement is: We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.
From their mission statement it is clear that they value ownership, the first part “we ride with our customers” portrays am image of not just Harley builders but of Harley owners. This has been the case since taking the company back from AMF. Between 1970 and 1980, under AMF’s leadership, “Harley-Davidson’s share declined by over 80%” (Nolan & Kotha, 2007). The buyout by Harley CEO and managers put control back into those who value the heritage of the company and what it can offer. I believe the first part of the mission statement says we will never sell out again.
The middle states that they will “apply this deep connection in every market we serve” which seems to acknowledge that they do not serve every market. However in the markets they do serve they desire a relationship that evident in Harley riders. This is most evidenced by the participation in the Harley-Davidson Owners Group (H. O. G. ). “The HOG worldwide membership had grown to 900,000 at the end of 2004 . . . in contrast Honda’s Gold Wing Road rides had 75,000 members” (Nolan & Kotha, 2007). The final part of the statement is just a reassurance to nvestors that profitability is a key concern. Historically Harley-Davidson to be a Niche Marketer, which is they had focused in on one particular aspect of the market. Kotler and Keller identified the following characteristics of niche marketing; customers have a distinct set of needs, they are willing to pay more to the firm that best suits their needs, it is not likely to attract competitors, gains economies through specialized products and it has a size, profit and to grow. Almost all of these hold true for the “heavyweight” segment of motor cycles that Harley-Davidson produced.
The organization of the company decentralized, which is decision making authority is distributed throughout the company. One of the key elements of the “productivity triad” program is employee involvement. “First, line workers were encouraged to contribute to the decision-making process” (Nolan & Kotha, 2007). Further under Teerlink’s leadership, two senior VP positions (in marketing and operations) were replaced with teams, a create-demand team and product-support team, thus pushing decision making authority lower in the company.
S. W. O. T. Analysis Strengths Brand Recognition and Customer Loyalty: Teerlink stated, “There are very few products that are so exciting that people are willing to tattoo your logo on their body” (Nolan & Kotha, 2007). Also, in 2004, 42% of new Harley-Davidson purchasers owned a Harley previously. Management Style: Involving all Harley-Davidson employees in the company and providing continued training on their job as well as giving them an overall picture of the company will only add strength in the future.
Financials: Despite a recent slowing in sales, the financial statements indicate the company has strong profitability ratios. In fact ROE has increased every year since 2000. Market Share: In 2004 Harley had 48. 9% of US and Canada market. Weaknesses Market Segment: Harley has its primary market in the heavy motorcycles where the average age of riders is 35 to 54. Because they have not successfully attracted younger riders the average age of their rider has risen to 47. Opportunities International Sales: Primarily in Europe where in 2004 Harley only had 9% of the market.
Market Segment: Expand the customer base within the United States to continue to appeal to women and new efforts to attract younger riders. Technology: Harley should take advantage of new technology to continue to streamline their operations. Go Green: Look for opportunities to improve the image of the company to be environmentally responsible. Threats Competitors: Honda, Kawasaki, Yamaha and Suzuki produce motorcycles that have captured the younger motorcycle demographic that Harley will need to breach if they are going to reverse the ageing trend of their riders.
Alternative Strategies Marketing to Children – Harley should aggressively peruse marketing Harley-Davidson accessories to children age 4 to 10, including toys and clothing. This would include a national advertising campaign and moving accessories to main stream distributers, not just Harley shops. They are going to have problems going after younger riders because “Harley’s close association with boomers could make the brand harder to sell to younger riders when they have the cash to splurge. Kids want something different . . . (Nolan & Kotha, 2007). This would allow baby boomer to share their passion with their grandkids and develop the brand a new following without sacrificing core values or alienating current riders. Go Green – Harley cannot produce environmentally friendly bike, like hybrids, without sacrificing the brand image so instead they should boast that motorcycles are inherently beneficial to the environment because their fuel economy is better than most cars. Perhaps a campaign with a slogan like: “Would you rather carpool or ride a Harley”.
In addition they should offset their power consumption at the factory with alternative power like solar and wind. . Recommendations Expand current toy and children’s clothing line, advertise nationally and sell through select chain outlets. Continue to target younger riders by developing performance sports bikes that cost that do nos contradict the brand image. Expand the riders Edge and rental Programs: Less than 14% of dealers participate in these programs because of startup fees and state licensing issues.
Harley-Davidson should share these costs with the dealers and offer performance based incentives for the dealer that do well with the programs. Continue to market to women riders by developing bikes ergonomically designed for them and by sponsoring more women events and market main stream “soccer moms” on Harleys. Go after the European market again by marketing to children and create the same brand recognition and heritage. Bibliography Keller, Kevin, and Philip Kotler (2008) Marketing Management (13th Edition) Alexandria, VA: Prentice Hall, Print.
Nolan, Richard , and Suresh Kotha. “Harley-Davidson: Preparing for the Next Century. ” Harvard Business School 9-906-410 (2007): 1-17. Print. “Economy nearly stalled at end of 2007 – Stocks & economy- msnbc. com. ” Breaking News, Weather, Business, Health, Entertainment, Sports, Politics, Travel, Science, Technology, Local, US & World News- msnbc. com. N. p. , n. d. Web. 21 June 2010. <http://www. msnbc. msn. com/id/22912358/ns/business-eye_on_the_economy//>.