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International Business Strategy

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HARLEY DAVIDSON AND THE INTERNATIONAL MARKET FOR LUXURY GOODS Once a company decides to expand in emerging international markets, it faces a stream of decision making sequences and marketing strategies. The criteria to select entry market exclusively depends on country infrastructure, political risk, market access and potential, shipping considerations, foreign exchange, service requirements, timing, product fit and factor cost, conditions etc. Type A company: Identifying a country

Since the appeal of developing economies is their rapid growth, I have identified India as a new market for Harley Davidson, the Milwaukee- based motorcycle manufacturer.

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Importance of location India is the second-largest motorcycle market in the world Twelfth largest economy in the world, fourth largest (GDP $3. 528 trillion, 2009) by purchasing power parity. Rising middle class and significant investment in construction of new highways have opened the door to leisure motorcycle riding. Company’s objective

To import its motorcycles, accessories, riding gear and evaluate how best to evolve its approach to the new market. To find local dealer, partners who can share the passion and commitment to building customer relationships, the Harley-Davidson brand and business in India for the long term Company’s strength: • Global leader in cruising and touring motorcycles with sales in more than 70 countries • Good marketing division, dealer promotions, customer events, magazine, direct-mail, advertising and public relations.

• HOG (Harley Owners Group) having 7, 50,000 members world wide.

Weakness: • High price, costly bikes in this category • Required production is not met, analyzing the future of Heavyweight motorcycle market • Harleys average buying age is 42 years old and increasing Factors affecting attractiveness: Rapid development of India’s economy and physical infrastructure Establishment of dealer financing relationship to ensure dealers can provide the full Harley-Davidson selection, experience and support to customers Women and younger riders are increasingly becoming interested in bikes. Factors affecting risks:

Small, inexpensive bikes used as basic transportation. Noise pollution, Environmental laws, Lack of prescribed emission norms for motorcycles with an engine capacity more than 500cc. Tariffs on imported motorcycles as high as 60 percent coupled with tax rate of 30 percent. Automobile market dominated by Japanese and Indian manufacturers. Hero Honda, Honda, Suzuki, Kinetic, LML India, Royal Enfield, TVS Motor, Yamaha and Bajaj Auto are major players. Existing prospective customers for super bikes with large engine facility around 1,000cc that ranges from Rs9 lakh to Rs12 lakh in India.

Type B company: Harley Davidson has been operating in UAE since 1989 at two locations, Abu Dhabi and Dubai as the leading dealership in the Middle East. Evaluation of company’s decision: Identifying UAE as global market for Harley Davidson is very much justified and appropriate. Reason: UAE has liberal environment towards foreign cooperation, investment and modernization Free trade zone for manufacturing and distribution in which all goods for re-export or transshipment enjoy a 100% duty exemption. Factors affecting attractiveness:

Recognition as high income developing economy by the International Monetary Fund The GDP per capita ($ 38,283 based on PPP) is currently the 14th in the world and 3rd in the Middle East. Factors affecting Risks: The cloudiness of public sector and private company financial data hampers risk analysis. Though diversified, the economy is still dependent on Abu Dhabi’s oil revenues, high rise in the Oil prices Regional geopolitical volatility Company’s strength Abu Dhabi store offers a full line of motorcycles, spare parts, accessories and high quality lines of Harley-Davidson clothing.

Harley shipped 32 percent of its motorcycles overseas in 2008, up from 27 percent in 2007. Weaknesses: Vehicles are more oil consuming Price competitiveness, financial position, global expansion and market share is less as compared to Honda and Yamaha. Performance in the target country Quality of product and service, professionalism of workforce and management has attributed to the success of Harley-Davidson of U. A. E. Increasing fan community in the UAE, new boutique at Dubai Mall

Revealing their 2010 product line-up, with nine new motorcycle models the most outgoing new-product introduction in the history of the company. Recommendation for Type B Company: • Since Dubai and Abu Dhabi are gifted with elite class people with great passion for luxury and recreation, Harley Davidson has golden opportunity here, provided right advertising , promotions like Bike expo and marketing mix is in place • Domestic political and economic stability for investors. • Extensive road network connecting all major cities and towns Conclusion/ Recommendation for Type A company:

To understand the potential location company representatives should attend trade shows and missions, conduct market assessment, find distributors or agents, locate potential end users , learn a great deal about competitors technology, pricing, market penetration and technological information. 1) Brand promotion: Selection of Indian brand ambassador (a film actor with International recognition) can add local iconic image to the company’s product and easy acceptance. 2) Market Penetration Expand the HOG (Harley Owners Group) to Asian countries Customer satisfaction to the Asian customers similar to U. S customers ) Product Development Expand the motor cycle segments to younger generation and females New environmental friendly hybrid bikes, low cost (INR 4 – 14 lakh like Sportster 883) street bikes, Energy efficient bikes for the developing countries 4) Government cooperation: Starting new plant in India and negotiations with the Government for emission norms, duties and concessions MoU (Memorandum of Understanding) between Harley-Davidson and Indian banks to provide easy financing options as EMI (Equated Monthly Installment) to help Motorcycle enthusiasts buy Harley-Davidson products. 5) Concentric Diversification

Bringing new types of recreational vehicles is the best choice. 6) Harleys can be imported as CKD (Completely knocked down) unit which attracts 60% duty as compared to 110% for CBU (Completely Built Unit) 7) It may tie up with home grown cult bike maker Royal Enfield to sell bikes in India. ———————————————————————————————————— Bibliography: Strategic management case analysis by Hari Prakash. N. V http://en. wikipedia. org/wiki/Harley-Davidson www. dancewithshadows. com/autoindia/harley-cruisers-india-launch/ http://www. harley-davidson. ae

Cite this International Business Strategy

International Business Strategy. (2018, Feb 25). Retrieved from https://graduateway.com/international-business-strategy/

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