1. Strong brand image.
Over 110 years, Harley-Davidson have created strong brand image in the world. It is not only because of the high quality and performance motorcycles that provides great riding experience, but also due to the special life style that it brings to its customers. It also keeps sponsor and hold national and local rallies and activities to enhance its influence.
The development of Harley-Davidson is also the development of innovation. In order to keep the competitiveness, Harley-Davidson focuses on innovation of product (high performance engine and transmission, customized product), manufacturing (MAN program and SOC 3system), management (companywide employee involvement program and quality circles program), and Marketing (Harley Owner Group and SuperRide).
3. Customer Loyalty and acquisition.
One marketing strategy of Harley-Davidson is close to the customers. Thus, the company started the Harley Owner Group (705 chapters and 154,000 members in 1991)and SuperRide Program. The rallies and events that Harley sponsored or held created a social community for its customers and increased the customer loyalty and acquisition.
The strong brand image gives Harley opportunity to charge premium-price. Compare with its competitors, Honda, Kawasaki, Suzuki and BMW, in superheavyweight market, Harley’s price is higher, and the market share was keeping increasing to 62.3% in 1990. Harley also set lower price for entry level motorcycles in order to gain new customers, and these new motorcyclists could trade up to a more expensive model later.
5. Advanced manufacturing techniques.
The MAN program and SOC system help Harley reduce manufacturing cost, inventory level and lead-time while keep the high quality. So that it increase the company’s profitability and competitiveness.
6. Strong financial position.
Harley-Davidson went public on American Stock Exchange in 1986, raised an additional $65 million and obtained over $90 million. The great financial position gave them the chance to buy Holiday Rambler Corporation.
Weakness of Harley-Davidson
1. Lack of global expansion
Although 31% of Harley-Davidson motorcycles exported into oversea market and the revenue from these markets increased over fourfold from 1986 to 1990, the markets were highly centralized in Europe and Japan. With the globalization, Harley-Davidson cannot overlook the markets in Asia and Latin America. 2. Narrow product line
Harley-Davidson made a correct decision that is focused all its efforts on the superheavyweight market to carry them through hard times, and it indeed had 62% market share in superheavyweight market segment. However, in long run, the narrow product line limits its customers. That means its products are only for those who like superheavyweight motorcycles. It will be the weakness in the competition with major motorcycle manufacturers, like Honda, Yamaha, and Kawasaki. Just like super sport car manufacturers, Lamborghini, Ferrari and Aston Martin, they are very successful and focused on limited customers, but they all finally were acquired by major auto manufacturers, like Volkswagen.
3. Low Purchase frequency
The period from 1983 to 1990 was the rapid evolution time for Harley-Davidson, the sales increased drastically. However, the market may be saturated in next several years, and due to the low purchase frequency, Harley-Davidson may soon reach its bottleneck
2. What are the opportunities and threats of Harley?
Reflecting on this case study, it is clear that Harley Davidson is
faced with many opportunities and threats. One of the most apparent threats is competition amongst other well-established motorcycle manufacturing companies. According to Exhibit 7, in 1989 Harley-Davidson had only around 14% market share, compared to the leader, Honda, with almost 30% (Jennings 65). According to Chopper Exchange, in 2012 Harley’s market ownership increased to 35%. Looking at this change in market share over the years proves that there is a lot of shifting that takes place in this market segment. Harley needs to make sure they are continuing to be innovative in order to maintain their leadership. Another threat to Harley-Davidson is that they, “have such a hard-core image… that it [is] turning off a lot of people” (Jennings 64). There is a strong culture behind this company and at times it can come off as intimidating to new riders. Even though a customer might be able to afford an expensive bike, if they do not like the image a certain brand portrays they will take their business elsewhere. Finding a balance between branding to intense and casual riders has proved to be difficult for Harley-Davidson.
One final threat to this company is certain legislation. According to this case study, “the company faces increasing legislation on motorcycle helmets and noise abatement” (Jennings 66). Certain riders will be very turned off from riding their bike if they are now forced to wear helmets. Also the loud sound Harleys make is an important part of their brand and overall image. If some of these laws take effect Harley will have to find a way to successfully incorporate the new legislation into their existing products. Although there are some major threats to Harley-Davidson, there are also some major opportunities. One major opportunity would be to expand their product selection. Although currently women only account for 6% of motorcycle sales this number is on the rise (Jennings 64). Harley needs to begin targeting this demographic by producing a new product that is geared towards not only men. In addition to women they could also work on expanding their overseas sales.
In 1990 almost 31% of their total sales were from outside the United States. There is clearly a demand for this product around the world, and tapping into this consumer base will be vital for future expansion. Another opportunity would be to increase Harley-Davidson events. Living in Milwaukee it is obvious that major Harley events have a larger following, for example Harley Fest. Riders come from all over the world in order to take part in this occasion. This is not only amazing promotion for the brand, but it is also a great time to introduce new products and strengthen the Harley culture. Another reason why these events are so important is because, “many motorcycle owners do not use their bikes very often” (Jennings 65). With more motorcycle events ridership would increase and people might be more inclined to purchase this product.
3.List the changes made by the company in manufacturing, human resources, marketing and finance during the initial turnaround. What was the relative importance of each of these for achieving the turnaround of the company?
The manufacturing changes Harley Davidson implemented were the just in time manufacturing program and a statistical operator control system. Harley named their new just in time manufacturing program MAN (Materials As Needed). This new system eliminated the excess of costly parts and handling systems, made set up time more efficient and generally solved other problems. MAN consisted of containers that moved from where the parts were made and where they were going to be used. The statistical operator control system (SOC) was implemented for continuous process improvements that help bring down costs. The SOC involves teaching machine operators to use statistics to analyze measurements for parts to make sure they are completely accurate. SOC finds errors in production early so they can be corrected before too many parts are produced. Before these changes were in place, there was no organization and parts were over ordered and often just sitting they’re for long periods of time. These manufacturing changes helped increase efficiency and reduce costs so Harley can better model their products.
Human Resources Changes
Harley decided to make changes because they recognized the importance of employee involvement, so in 1978, Harley was one of the pioneers to begin an employee involvement program. Part of this program consisted of quality circle programs. This allowed employees in the company to share ideas, solve difficult problems, and improve quality of their work. To gain a larger market share, Harley understood that they needed completely motivated employees to support and believe in their products. In turn with this employee involvement program was credited for a “36 percent reduction in warranty costs, a 46 percent increase in defect-free vehicles received by dealers since 1982, inventory turnover up 500 percent, and productivity per employee up 50 percent.”
Harley also realized that they had become too concerned with the internal structure of their company and had to become more customer oriented. They focused all of their efforts on the superheavyweight motorcycle and began a “close to customer” motto. The first thing they began was actively seeking and discussing motorcycle improvement issues with customers. Second, they began the Harley Owner Group (HOG) to bring Harley riders together in an attempt to expand the social atmosphere of motorcycling. Third, Harley began a Demo Ride program where new Harleys were brought to events and rallies and people with their motorcycle license were encourage to ride them. By allowing people to try their new products, Harley was able to help negate any poor preconceived notions people had about their products.
Fourth, Harley invited many manufacturing publications to their plant and write articles on quality improvement programs. Finally, Harley increased its sales force so that they can properly train their dealers on how to sell Harley products. These marketing changes were very important for the success of Harley. Many people thought that Harley’s had many defects that made them stay far away from the product. By understanding their customers better, and allowing them to test the products for themselves, Harley was able to move through all of the clutter, to become a more respected and reliable brand.
Regardless of the efforts Harley was taking for quality improvement, Citicorp (company’s bank) how the economy and what would happen to Harley when the tariffs on Japanese bikes were removed in 1988. Citicorp decided to recover its loans and no longer be a source of money for Harley Davidson. They almost had to file for bankruptcy, but several banks agreed to pay off Citicorp and refinance Harley. Harley went public in 1986 in efforts to raise an additional $65 million. Harley also purchased Holiday Rambler Corporation, which was the largest privately held recreational vehicle company in the United States. By 1987 the company was doing so well that they asked to remove the tariffs on Japanese bikes a year early than expected.
4. Summarize Harley-Davidson’s marketing mix. Are all of the elements consistent with the overall marketing strategy?
Product: Since 1903, Harley-Davidson was the industry leader in the production and sales of the heavyweight motorcycle through the 1950’s. When the American Machine and Foundry purchased Harley-Davidson in 1969, they tripled their production in units to meet the increase in demand. Over time the quality worsened to the point that half the motorcycles were missing parts by the time they arrived to the dealers. Product design stayed stagnant while falling far short of the performance quality of rival Japanese products. When Vaughn Beals took control of Harley-Davidson, product quality, innovation, and performance began to rise. Harley-Davidson’s creation of new models would keep the company afloat through the 1980’s. Realizing the need for product expansion, motorcycles were critiqued by current or potential customers regarding performance, comfort, and visual appeal. Harley-Davidson even went to the extent to customize a motorcycle for sale specifically for women. Once the 1990’s began, Harley-Davidson began returning to prominence by focusing on the production and sale of superheavyweight motorcycles. They also realized the growing demand for their motorcycles in international markets and began developing warehouses and joint ventures abroad.
Refocusing the company’s strategy of producing superheavyweight motorcycles for a niche market was essential for the rebirth of the Harley-Davidson brand and bringing in new demographics of customers. Price: Harley-Davidson has maintained a steady price level for their motorcycles for decades. At different times since the creation of Harley-Davidson itself, the company has offered to take any Sportster sold in trade on for a bigger Harley-Davidson in the future. Harley-Davidson’s mindset for purchasing these less expensive bikes is with this transaction, the owners will look to purchase a bigger or more expensive Harley-Davidson motorcycle as loyal customers and proud members of the Harley-Davidson family. Prices for Harley-Davidson motorcycles can be directly compared with the competitors product pricing. While competitively pricing Harley-Davidson motorcycles with the competition, Harley is attempting to take customers who might be leaning to purchasing a cheaper, lesser-known substitute and converting their business into generating a larger market share of sales.
Promotion: Vice President of Marketing Kathleen Demitros discussed how the “hard-core image” of Harley-Davidson motorcycles and their riders were turning potential customers away. She stated that equilibrium must be found to balance the company’s public image through advertising while growing personal relationships with Harley riders. What resulted from this decision was an increase to print advertising in magazines to reiterate how personal it is to own a Harley-Davidson motorcycle. The advertisements were to show all non-Harley-Davidson owners that ownership of a Harley-Davidson motorcycle develops into a proud part of your life. What resulted was the Harley Owner Group had 650 chapters and 134,000 members in 1990 while expecting to grow 15% by the next year. One last promotion that has stayed constant throughout the ten years Harley-Davidson and its’ owner group involvement has been the continued support and donations totaling to over $8.6 million to the Muscular Dystrophy Association during widespread Harley-Davidson rallies and reunions (Jennings 64).
Place: Up until 1990 when Harley-Davidson’s overseas motorcycle sales were about 31% of the company’s overall sales, Harley focused most of their marketing, promotions, and customer feedback improvement within the United States. Since then Harley-Davidson has worked extremely hard to develop a European parts and accessories warehouse in Germany, this has cut overhead and shipping times dramatically. Harley-Davidson even entered a joint venture with a Japanese distributor that had bought all the rights for distribution within Japan. From the years 1986 to 1990, Harley-Davidson’s revenue from international operations grew from $40.9 million to $175.8 million (Jennings 59). By redirecting the company’s view of focusing more on the international market compared to mostly domestic view has allowed for Harley-Davidson to gain international market share as well as diversify their sales and marketing portfolio to many countries.
5. What should the company do to continue to grow in market value, market share, sales, and revenues?
In order for Harley-Davidson to increase their market value and thus, their market share and revenues, they must diversify and expand internationally. Currently, they are primarily marketing towards bearded males with a rugged tough man appearance. Being a luxury product and having a large price tag, there is a limited target market for this consumer demographic. In order to increase sales, it would be beneficial for Harley to market their products towards the affluent professionals who are looking for a fun hobby. This demographic could include business professionals, doctors, dentists, lawyers, and others who may have a large disposable income and be in need of a stress relieving hobby. In order for this to work; however, Harley-Davidson must invest in their product.
With quality concerns constantly popping up, Harley must invest heavily in order to make sure that their product is the highest quality motorcycle in the market, in order to justify charging the highest prices in the market. To achieve this improvement in quality, Harley must focus on their operations and supply chain. By improving their operations, not only will the quality of their finished product increase, but they will be able to minimize their costs that come along with the manufacturing process. In order for their manufacturing process to be able to produce a high-quality finished product, they must have an effective supply chain that can deliver quality materials and products the right place, at the right time, cost effectively.
In order for Harley to steal market share and become more competitive in the industry, it is crucial that they invest in expanding internationally. There are many large markets that are developing and have fast-growing middle and upper classes who are looking to purchase luxuries that they have not been able to afford in the past. Some of these markets include China, India, and Brazil. In order for Harley to have long-term success in the motorcycle market, they must become a world-wide powerhouse, and not just an American powerhouse.