HarleyDavidson Case StudyPedroDiazCaliforniaBaptist University Harley Davidson Case Study Harley-Davidson,Inc., May 2012 prepared by Robert M. Grant covers the life of Harley-DavidsonInc.
from its founding in 1903, by William Harley and brothers William, Arthur,and Walter Davidson, up until 2012. Harley-Davidson,Inc. released their characteristic two-cylinder, V-twin engine in 1909 and by1953 they “became the sole survivor of the 150 US motorcycle producers that hadexisted in 1910” (Grant, 2010).In 1969, Harley-Davidson began to face direct competition with Honda when Hondaintroduced it’s take on a motorcycle that boasted “huge technical” advances(Grant, 2010). From 1981-2008, Harley-Davidson was bought out from AMF andbegun to drastically cut costs. They introduced a just-in-time productionmethod, inspired by the Japanese, they called it “MAN” (Materials-As-Needed)(Grant, 2010).
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They went public in 1986 and grew to over 60% market share in1990. Sales soared in the 90s and Harley was challenged to satisfy demand. By2004, sales exceeded 300,000 – a tenfold increase on 1983 (Grant, 2010). Harley’s growth trend was abruptlystopped by the financial crisis of 2008 as customers defaulted on their loanpayments, orders plummeted, and inventory piled up. Keith Wandell was broughtin as the new CEO of Harley-Davidson on May 1st, 2009 and he had toact quickly to begin to turn things around for the company and itsshareholders. During 2010 and 2011, Wandell lead a “comprehensivetransformation strategy which included a rethinking and restructuring ofHarley’s manufacturing operations, the transformation of its productdevelopment system, and a drive to build distribution and grow sales in theemerging markets of Asia and Latin America” (Grant, 2010).
By the end of thefirst quarter of 2012, Harley had shown an increase in year-on-year revenue of16.7% and a growth in net income of 44.3% (Grant, 2010). Harley-Davidson’s Strategy and Rationale Harley-Davidson Inc. has a focused differentiationstrategy. They focus on selling Heavyweight cruiser motorcycles to customerswho probably consider their motorcycle a luxury product. Harley-Davidsonpractically created the heavyweight market in the US and their design focusedon “styling over either comfort or speed” (Grant, 2010). Harley differentiateditself by building a product and selling it as a lifestyle, not justtransportation.
Harley represented values such as individuality, freedom, andadventure (Grant, 2010). The culture and brand that surrounds Harley Davidsonand each of their customized motorcycles continues to be one of their greatestassets. Harley successfully differentiated based on customers’ psychologicaland social needs by creating an experience where “you don’t just fit in. Youbelong” (Grant, 2010). Harley-Davidson created value fortheir customers by taking the customers on a journey and inviting them to bepart of an exclusive club. To increase their involvement with their customersand the customer riding experience, Harley created an exclusive group calledthe Harley Owner’s Group (HOG) in 1983 (Grant, 2010). Harley owners continuallyreinvested into more Harley products like apparel, bike upgrades, andcustomizations. Resources and Capabilities vs Honda Harley-Davidson Inc.
‘s key strengthsare their brand and customer loyalty, distribution and their productdevelopment system, MAN (materials as needed). Their key weakness is theirresearch and development for new products and international markets. Asmentioned in this case, Harley’s brand and customer loyalty is its greatestasset. Harley is one of the oldest motorcycle companies around; having beenestablished for over 100 years, the brand continues to appeal to a certainlifestyle.
Dealers “play a pivotal role in delivering the experience” (Grant,2010). Harley’s dealers continue to play a large part of the strategic prioritywith over 90% of Harley dealerships in the US being Harley exclusive (Grant,2010). The final key strength of Harley Davidson is their “MAN” system ofproduction that was modeled and inspired by the Japanese Just-in-time (JIT)system and production scheduling program (Grant, 2010). Harley’s MAN systemallows for reductions in inventories and costs and improves quality control (Conrad, n.d.
). Honda’s key strengths are theirability to have product diversification with more research and developmentspending which allows for international exposure and product development. Hondabenefits greatly from sharing its R&D across all their products like carsand bikes. They are highly diversified and offer a similar style cruisier tocompete with Harley at a lower price with more advanced technology (Grant,2010). Harley has lower production volumeand lacks buying power when compared to Honda. “Harley’s low production volumesrelative to Honda and the other Japanese manufacturers imposed significant costdisadvantages, especially in the purchase of components” (Grant, 2010). Hondahas also started to establish its presence in international markets gatheringmarket share before Harley.
International markets are also very different whencompared to the US markets. Europe, Harley’s focal point of overseas expansionambitions, has a very different motorcycle market with “70% of the heavyweightmotorcycle market being for performance bikes, while touring and cruiserbikes accounted for just 30%” (Grant, 2010).Threats to Continued Success Harley-Davidson faces many threatsto continued success including brand degradation, aging customer market,international expansion challenges, and lack of intellectual & productinnovations. Their branding is being threatened by the increases of demand andsales which is causing some customers to lose that sense of exclusivity. Ifthey lose their brand they lose their arguably strongest asset.
But they arefacing difficult decisions as their target customer market begins to grow olderand their sales start to drag with the more conservative behaviors that old agebrings. Harley also faces challenges with low innovation in intellectualproperty and products to expand to the EU and Asia market places, who prefersporty, light weight, low-priced, and technologically advanced motorcycles.Harley currently has low market-share in Europe and Asia because they are notinnovating enough. The case notes that “between January 2000 and April 2012,Harley was awarded 188 US patents” while “over the same period Honda wasawarded 10,982 US patents, Suzuki 625, and Kawasaki 2,002” (Grant, 2010).
Wheninnovative competitors began to imitate Harley-Davidson, they lost somecompetitive advantage, especially in Europe and Asia. Sustain and Enhance CompetitivePosition Harley-Davidson can sustain andenhance its competitive position by focusing on making smaller, more affordablebikes for a younger generation, continuing to transform and evolve their brand,and increasing sales in the European and Asian market. They need to increaseproduction volume to obtain more cost advantages, increase intellectualproperty to make imitation more difficult, and invest more into research anddevelopment to continue to expand in overseas markets.
Conclusion Inthe US, Harley-Davidson is a large market leader for heavyweight bikes but theyface many threats from competitors and market trends. Heavyweight cruisermotorcycles are on the decline and Harley will need to address how that factrelates to their brand and current product line. Harley needs to focus oninternational expansion and product differentiation to continue growth in theevolving motorcycle market landscape. References Conrad, B. (n.d.). The Advantages of Just-in-Time Inventory Systems.
Retrieved from Chron: http://smallbusiness.chron.com/advantages-justintime-inventory-systems-20997.html Grant, R. M. (2010, May).
Case 7: Harley-Davidson, Inc., May 2012. In R. M. Grant, Contemporary Strategy Analysis (Eighth Edition ed., pp. 520-537).
West Sussex, United Kingdom: John Wiley & Sons Ltd. Jurevicius, O. (2013, October 21).
VRIO Framework. Retrieved from Strategic Management Insight: https://www.strategicmanagementinsight.com/tools/vrio.html