Strategic Management Case Study: Harley-Davidson, Inc Essay Example

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STRATEGIC MANAGEMENT CASE STUDY 12

Strategic Management Case Study: Harley-Davidson, Inc

Table of Contents

3Executive summary

4Introduction

4Management strategies

6Five force analysis

6Rivalry

6New entrants in the market

7Substitute products

7Bargaining power of suppliers

8Bargaining power of the buyers

8Internal analysis and the challenges facing Harley Davidson Company

10Recommendation and Conclusion

12References

Executive summary

This report is about Harley Davidson Company based in the United States of America. The company is ranked among the most successful in the motorcycle manufacturing industry. It specializes in the manufacture of heavy weight motor cycles and it has been dominant in the market for over a century. The report therefore analyzes the strategic management practices that the company has been using to achieve these results. The five forces analyses are discussed in the report for the purpose of analyzing the internal and external market environment of the company. The challenges facing the company in its operations are also discussed in the report exhaustively.

Introduction

Harley-Davidson was founded in the United States of America in the twentieth century as a motor cycle manufacturing company. The company has been profitable in the United States with little competition within the country. This is attributed to the quality of the motorcycles the company has been manufacturing. Since it started manufacturing the heavy motor cycle, the company has experienced enormous growth and expansion. A part from a little competition in the United States in the manufacture of heavy motor cycles, the company has recently been facing international competition. The motor cycle manufacturers in Japan have been quite aggressive and have proved to be a force to reckon. The main competitors for the company internationally include companies like Suzuki and Honda. The company has however been strong in terms of working on strategies enabling it to outwit its competitors. The strategic management of the company and the five forces analysis will be discussed in details.

Management strategies

The strategic plans of the company are mainly guided by its mission, vision, objectives and the core values. The vision of the company is to fulfill dreams inspired by many roads of the world by providing remarkable motor cycles and extra ordinary customer experiences and fuel the passion of freedom for customers to fulfill their own identity. The mission of the company is to ride with the customers and apply deep connection in every market to provide superior values to all the stakeholders (Harley- Davidson, 2012). The company specializes in the manufacture of heavy weight custom cruiser and touring motorcycles and also original spare parts and accessories for the motorcycles. This has made the company quite popular due to the quality of the motorcycles that are manufactured. The company is also dedicated to serve all its clients both locally and internationally. The company opened a new branch in Latin America, Florida, and USA in 2009. This was mainly in recognition to the growing opportunity in the area and the need to fulfill the dreams of the clients and respond to them better. Harley Davidson strategic plans include opening new markets and expand existing ones (Marketing weekly, 2011 p. 592). In its strategic plans, the company aims at ensuring that the sales are increased by more than 40% outside the USA by the year 2014.

Harley-Davidson Company has a wide range of customers for its products. It includes individuals companies, public companies and the government. This is considering that the company supplied its motorcycles to the United States Army marines during the Second World War. To date, the company is still a client of the USA government. The objectives and strategies of the company to be the best have paid off in terms of customer satisfaction. The company also works with other companies for the purpose of promoting its products and increasing the sales. In 2009, the company worked with Brewster fashions and Fathead for the production of images to popularize the company. This strategy posted good results and increased the passion of the customers towards the company.

Anywhere in the USA it is not possible not to see the image of the company’s brand printed on clothes or stickers on trucks or even the motor cycles (Fathead, 2009, p 40). The strategy of satisfying the clients through the delivery of quality products and services is thus working for the company as it continues to attract more and more clients. The company also relies on a strategy that it recently launched of ensuring that the sales people are able to carry out their duties effectively. The company trains the sales people who sell its products for the purpose of ensuring that the customers are well treated and served. Improvements have been made in this area over the years and more sales are being registered. The company has thus been able to achieve its objectives through proper and well guided strategy of customer satisfaction.

Five force analysis

Rivalry

The company enjoys a lot of support in the USA where it registers a high percentage of sales. However, in the international market, stiff competition exists and the company has been pressurized by companies from Japan. Suzuki, Honda and Yamaha are the biggest rivals to the company in the international market. The use of modern technology is being injected in the market by the Japanese firms in their manufacturing process. This is quite a challenge for the company as changes continue to take place. Although the company is still a powerful in the market the competition is stiff. This is considering that Suzuki joined forces with another leading company in Japan while Honda is still considered to be the largest motorcycle company manufacture in the world. This has thus put a lot of pressure on the company. The consumption of fuel by the motor cycles manufactured in Japan is also low compared to the ones from Harley-Davidson. Japanese-made bikes are small with engine capacity of 50cc or 100cc. However with the current strategies the company is gaining international market share and it is set to beat its rivals.

New entrants in the market

Due to the current situation, the competition among the motorcycles manufacturing companies is already high. The top companies are aggressive to acquire new markets including Harley Davidson. The threats to new entrants locally and internationally are quite low as no investor is currently planning to enter into the market (Barret, 2012). This can also be attributed to the high capital cost that will be required by any new entrant in the market in order to present any meaningful challenge in the industry. The global economic crisis is also a factor that plays a big role to any new investor. The company therefore is not threatened by any new entrant in the market at all. Locally, any new entrant in the market will face an uphill task due to the loyalty and recognition that the company enjoys. It has been a local brand since 1903 and its customers love it (Barret, 2012 p3). It is thus evident that it will be quite difficult for a new entrant to topple the company from the local top rank.

Substitute products

The company manufacture heavy weight motor cycles compared to most of the companies. These types of motor cycles are durable and can be used in tough terrains. Self-image congruence has direct positive impacts on purchase intention (Wang, 2011 p.58). The company therefore faces very little threat of substitution of it products in the market. This also considering that the client of the company is the USA Marines who require heavy weight motor cycles. However on the other hand, the competitors are manufacturing light weight motorcycles with low fuel consumption rate and also low pricing. This may attract some of the customers who are new with motorcycles and do not necessarily care about the quality. However the chances of substitution are still low considering that most of the clients are decided when going to make a purchase for the motorcycles.

Bargaining power of suppliers

As a manufacturing company of motorcycles and accessories, Harley Davidson requires raw materials from various suppliers. Most of the raw materials required include metals as most of the parts are manufactured by metals. The company has contracted several suppliers for the purpose of ensuring a steady supply of raw materials that will encourage high rates of production. The bargaining power of the suppliers ids low and this works in favor of the company. This has been made possible due to the good reputation the company enjoys and the availability of many suppliers. The company also has a right of choosing the lowest bidder during the tendering process. The quality of the goods can be influenced by the suppliers due to their pricing. Suppliers can exert power over firms and industries by raising prices (Barnart, 2005 p1).

Bargaining power of the buyers

One of the main pillars of the company on its strategic plan is customer satisfaction. The company has been able to achieve this objective and it has won the loyalty of the customers. The company enjoys a huge support from the customers and thus a high bargaining power over the local customers. This is with the knowledge that the buyers can either increase or reduce the profits of an organization. The presence of powerful buyers reduces the profit potential in an industry (Potter, 1998, p1). However, in the international scene, the bargaining power of the buyers is high considering the competition that increases the options for the buyers. The price of the products in the international market is thus dependant on that of the competitors and the wish to lure more clients compared to the competitors. This makes the bargaining power of the buyers almost equal to that of the company.

Internal analysis and the challenges facing Harley Davidson Company

The company is financially stable and has a high capability in terms of its marketing strategies. The company values the customer a lot and it has set up websites that is responsible for collecting data and other concerns raised by the customers. Rewards are also available to the loyal customers for the aims of promoting sales and customer loyalty. The finances of the company as of the company amounts to billions of dollars. The main challenges that face the company includes the change of customer requirements since most of the current motor cycle rider prefer sporting motorcycle. This is a challenge since the company is currently not manufacturing sporting motorcycles. The mater is further complicated by the fact that the competitors have taken advantage of the situation and most of them including the Japanese manufactures are manufacturing the light sporting motorcycles.

The changing demographic change of Harley Davidson customers is major challenge facing the company. Its current customers are becoming older and there are not adequate younger ones that are replacing them. The median age of Harley motorcycle riders was 35 years in the year 1987, but in 2005, it increased to 47 as most of the core customers of the company, the baby boomers become older (Mitchell, 2002). The sales of the company have been influenced by this demographic change as baby boomers are quickly getting closer to their climax spending years. In addition, younger generation prefers sporting bikes other than heavy weight motorcycles manufactured by Harley Davidson. The present economic depression is another challenge facing the company (Noria Corporation, 2010). The company’s dealers around United States and overseas are experiencing sales drop radically as individuals are scaling back their costly purchase and as access to credit has become increasingly difficult. The company is also facing stiff competition from the Japanese manufacturers who are selling their products at cheaper price.

Foreign competition from Japanese manufactures and penetration into Chinese market is another key challenge facing the company. China is the largest motorcycle market in the entire world. The manufacturing industry of motorcycle in China comprises of hundreds of diverse corporations that work together on the design and manufacturing of motorcycles (Noria Corporation, 2010). The challenges that Harley Davidson Inc faces as it attempts to penetrate into the Chinese market entail high custom duties that are exposed on overseas motorcycles, riding limitations in majority of highways and big cities as well as competition from the small low price domestic motorbike manufacturers. The strategy of China has often been to market to the US, but not to buy motorcycles from the US. So as to safeguard domestic manufacturers China does not want overseas companies to go into its markets if it cannot get some manufacturing and marketing tips from them. This has made it very difficult and costly for Harley Davidson Inc to market its products in this region.

Recommendation and Conclusion

It is recommended that the company should put in place more emphasis on its international approach. This will ensure that the company is able to compete effectively with the international competitors. It is also important for the company to ensure that it is flexible enough in its methods of manufacturing and put into consideration the factor of age and requirements for the sporting motorcycles. In conclusion, Harley Davidson Company is quite successful in the sector. Its main strategies of customer satisfaction have worked best for it and the company has won a lot of loyalty by its customers. The company however faces a lot of international competition but huge local support. This is mainly based on its strategies. The company also has a lot of potential as most of the conditions favor it.

Harley Davidson Inc is a leading manufacturer of super and heavy weight motorcycle in the United States. Although competition is fierce due to several motorcycle manufacturing companies, especially Japanese Suzuki, Honda and Yamaha companies, Harley Davidson Inc is successfully competing amongst biggest corporations due to its strong brand image, the distinctive Harley Davidson style and its outstanding quality. In order to overcome the challenge of competition from Japanese manufacturers, Harley Davidson Inc must keep making attractive motorcycles to attract consumers who are faced with a high number of alternatives.

The company needs to focus on manufacturing cutting edge motorcycle designs that will persist to be attractive to present Harley owners and still bring in novel riders in Harley ownership group. The company is also required to reinforce its brand name so as to further distinguish its products from those offered by its competitors. The company is required to focus on maintaining average consumer preference for and good opinion of Harley Davidson brand. Harley Davidson is required to make more effort to demonstrate customers that Harley Davidson bike is still the excellent motorcycle one can own and the excellent motorcycle for the price charged. To overcome the challenge of demographic changes, the company needs to create a novel brand that will target what the younger generation actually wants through undertaking ample product development.

References

Poter, M. (1998). Bargaining powers of buyers, Mars Newsletter. Retrieved on 15 May 2012 From, <http://www.marsdd.com/entrepreneurs-toolkit/articles/bargaining-power-of- buyers>.

Barnat, R. (2005). Bargaining Power Of Suppliers. Canadian school of management

Wang, x. (2011).Purchase intentions. Journal of Global Marketing, Vol. 24 Issue 1, p58-68, 11p.

Harley-Davidson, (2012). Retrieved on 15 May 2012 from, <http://www.harley- davidson.com/en_US/Content/Pages/Company/company.html?locale=en_US&bmLocale =en_US>

Marketing Weekly, (2011).
Recreational Vehicle Companies; Harley-Davidson Opens New Latin America Headquarters, journal of
Business And Economics—Marketing And Purchasing, P 592.

Fathead, (2009).
Fathead LLC; Fathead(R) Prepares for a Thrill Ride with Harley-Davidson Motor Company, Journal of Transportation, p 40.

Noria Corporation, (2010). Harley-Davidson facing a number of challenges. Retrieved on May 1, 2012 from< http://www.jsonline.com/story/index.aspx?id=594619>

Mitchell, D., (2002). Harley-Davidson chronicle-An American original. New York: International Publications.

Barret, R. (2012). Harley tops in shopper treatment, The sentinel journal, p3.

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