Harley Davidson Company
Harley Davidson Company
Harley Davidson Inc is a company that has been in existence for over 100 years. The company is made up of several other subsidiary companies such as the Harley Davidson Motor Company, Harley Davidson Financial Services and Buell Motorcycle Company. These companies work together in the motorcycle industry with the motor cycle companies dealing with the production and marketing of the motorcycles while the financial services deals with providing financial services to the customers and dealers of the company. Harley Davidson Company has undergone various challenges in its internal and external environment such as the World War I and II, the Great Depression and other internal challenges such as the labor strikes and change in ownership.
An analysis of the company portrays several strengths, weaknesses, opportunities and threats that the company faces. The company can use the findings of this analysis to develop a grand strategy that can help the company survive the future. The various stakeholders of the company are mostly the customers, the suppliers, dealers, employees, the shareholders and the management of the company. These are the people that are affected by the activities of the company and that also have expectations from the company.
The company’s financial performance has been improving during the current financial year due to the restructuring changes that are ongoing. It has reported profits in its operations and also an increase in sales. The strategic issues that the company is facing have also challenged its performance. The shifts in the customers’ tastes and preferences for example have affected the sales of the company’s motorcycles. A grand strategy that focuses on growth through an increase in marketing and an improvement of the company’s product and manufacturing processes can help the company survive the current environment.
Companies strive to excel in all manner of situations and overcome the challenges that they face in order to succeed and become competitive. Harley Davidson Inc is once such company. It has been surviving for about 107 years since it was founded in 1903 (Harley-Davidson, n.d). The company has its headquarters in Milwaukee, Wisconsin and was founded by three brothers Arthur, Walter and William Davidson together with a partner, William Harley. The company consists of several subsidiary companies which operate in three continents.
The companies include Harley-Davidson Motor Company (HDMC) which deals with the production of motor vehicles together with Buell Motorcycle Company (Buell) (Harley-Davidson, 2010). Harley-Davidson Inc also includes Harley Davidson Financial Services (HDFS) which provides financial services to the dealers and customers of HDMC’s products. It also provides insurance policies and programs to the companies and its customers. HDMC sells motorcycles, together with the accessories and spare parts which it also produces. Harley-Davidson is also involved in other activities such as racing and in the production of bicycles and motor vehicles.
The company which has been in existence for years now has survived several political and economical challenges such as the World War 1, the Great Depression, the World War 2 and other company trials such as labor strikes and change in ownership. Despite the many challenges it has undergone over its existence the company has been able to survive. The company’s sales have gone off severally, its quality has also been affected but it has been able to regain both the sales and the quality of its products. It has remained tough in the manufacturing of motorcycles and this has made its brands the most sought after all over the world (Davidson, Thompson, & Barger, 2006).
The company has also faced competition from other companies based in the U.S and in other countries such as Japan but it has been able to retain and maintain its market share. Further more; the founders of the company were named American heroes through their innovation with the company receiving several awards for its involvement in the two World Wars and other racing events (United States Department of Labor, n.d). This paper discusses Harley Davidson Company providing a SWOT analysis of the company, a description of its internal and external environment, a financial assessment of the organization as well as summarizing the major strategic issues that have faced the company. It also discusses the next grand strategy that the company can undertake in the future to improve its performance.
2.0 Harley Davidson
William Harley, Arthur Davidson and Walter Davidson pooled their resources in 1903 to produce their first practical motorcycle (Harley-Davidson, n.d). The three men were assisted by William A. Davidson on a part time basis and by 1905 they had produced eight machines and they hired their first employee then. William Davidson quit his job in 1907 at the Milwaukee Road railroad and joined the Motor Company (Harley-Davidson, n.d). The Harley Davidson Company was later incorporated in September 1907 with the stock of the firm being split into 4 among the four founders. At that time the staff of the company had more than doubled from 18 employees in 1906. The size of the company had also doubled by then and dealer recruitment had begun targeting the New England Region.
In 1908, the company was able to sell its first motorcycle for police duty in Detroit Police Department and a year later they started motorcycles spare parts. In 1912, the company started building its six storey headquarters at Juneau Avenue in Milwaukee (Harley-Davidson, n.d). The building would also become its main factory with a separate parts and accessories department. During the same year the company made its first sales outside the U.S when it started exporting motorcycles to Japan. Its dealership network also grew to become over 200 dealers. A few years later, the company formed a racing department with Engineer William S. Harley who was assisted by William Ottaway. It also started publishing its first magazine, The Enthusiast which became the first motorcycle magazine all over the world (Harley-Davidson, n.d).
In 1917, when the World War I started, the company was asked by the military to produce motorcycles to be used during the war. The company produced over 20,000 motorcycles to be used specifically by the military for the war (Speed Ace, n.d). The involvement of the company in producing motorcycles for the military enabled it to survive the war. By 1920 the company had become the largest motorcycle manufacturer in the world due to the number of motorcycles it produced and the size of its facilities. It was operating in over 67 countries and had over 2000 dealers all over the world (Harley-Davidson, n.d).
In the year 1941 when the World War II started, the company suspended the production of civilian motorcycles and started producing more military motorcycles (Harley-Davidson, n.d). The company also developed specific models for the army and in 1943; the company received the first of its 4 Army –Navy Awards for its excellent performance while producing motorcycles for the army. The company had produced over 60,000 models for military use (Harley-Davidson, n.d). When the war ended, the company wasting no time it resumed the production of civilian motorcycles.
In the year 1952, the company was charged with restrictive practices after they applied to the US Tariff Commission for a 40% tax to be imposed on the imported motorcycles (Speed Ace, n.d). In 1953, as the company was celebrating its 50th anniversary, an attractive logo was developed that would depict the engine that had brought the company that far (Harley-Davidson , n.d). During the same year, Hendee Manufacturing Company, the Indian Motorcycle Company in the U.S, went out of business leaving Harley Davidson as the sole U.S motorcycle manufacturer over the next 46 years.
The year 1969 was not a great year for the company as the American Machine and Foundry (AMF) acquired the Motor Company and made some changes that affected the company for years to come (Masker, 2007). AMF worked to streamline the production activities of the company and reduced the workforce in a bid to reduce the costs of the company. These changes were beneficial to the company in the short term but they became very damaging to the future of the business and in its long term.
The reduction in the workforce led to a labor strike that affected the performance of the company. Furthermore the changes that had been done led to a reduction in the quality of the motorcycles that were produced over the years. The sales of the company were affected and the company almost went bankrupt. It was during this time that the Japanese manufacturers caught up with the company with their better quality, technology and increased stock.
The regime by AMF lasted until 1981 when the company was bought back by 13 senior executives who were led by Vaughn Beals and Willie G. Davidson. The group bought the company for about $80 million and they were they able to set up the company to its load of recovery (Masker, 2007). Soon after in 1986 the company was listed in the American Stock Exchange and started to trade publicly in the year 1969. A year later the company was listed in the New York Stock Exchange and it petitioned the International Trade Commission to terminate a five year tariff on heavy weight motor cycles. This was seen as a major step for the company as it boldly stated it was in a position to compete fairly in the market.
In 1993 the company celebrated its 90th anniversary with over 100,000 people parading their motorcycles in Milwaukee, Wisconsin (Harley-Davidson, n.d). The company also purchased a minority interest in Buell Motorcycle Company which was manufacturing American sport motorcycles. In 1998 the company opened a new assembly facility that was to be the first of its kind outside the United States. The facility was opened in Manaus Brazil when the company was celebrating its 95th Anniversary and at the same time it bought the remaining interests in Buell Motorcycle Company of 49% (Harley-Davidson, n.d).
The company has continued to expand its production facilities in Milwaukee, Tomahawk, Wisconsin, and New York and in Pennsylvania (Davidson, Thompson, & Barger, 2006). The company has also been developing more products and improving its products with the latest technology. The company has also developed a Harley Davidson Museum which showcases the motorcycles that the company has developed over the years and other historical items that the company has maintained in its archives. The museum building cost the company over $75 million and is situated in Milwaukee (Rovito, 2006).
2.2 SWOT Analysis
The SWOT analysis is a framework that is used to audit an organization and its external environment. The results of the analysis help in the planning of any strategic decisions towards the future of the company. The analysis involves identifying the internal and external factors that favor the organization and that also form an unfavorable environment (Stahl & Grigsby, 1997). The strengths of the company include those attributes that help the company to achieve its objectives while the weaknesses are the internal attributes that derail the achievement of the company’s objective and that also harm the company. The opportunities that are in the external environment include conditions that help the company to achieve the objectives. The threats on the other hand, include the conditions that are in the external environment and that challenge the company and affect it in a way that it may not be in a position to achieve its objectives.
The Harley Davidson Company has several strengths that make it very competitive and profitable. The company has been in existence for over 100 years, and during this time it has established brand loyalty with its customers for its products. This is the major strength of the company as the products of the company are viewed as a culture and not just products. Most of the customers of the company are male and are in the middle-aged age bracket. They normally use the motorcycles for recreational purposes rather than for transport. The main qualities that the customers look for in the company’s product are the brand quality and the style.
The company is able to provide these qualities and hence maintain its customers. The computer switching costs are high and once a customer buys a product from the company, they get trapped in buying more of the company’s products. The complementary products that come with the motorcycles also encourage the consumer loyalty. Once a customer purchases a Harley motorcycle, they proceed to buy accessories such as jackets and bandanas from the company.
The company has also expanded its operations in different regions within the United States and also in other countries outside the United States. Some of the production plants are located in areas such as York, Kansas City, Tomahawk, and Milwaukee among others (Harley-Davidson, Inc., 2009). The different manufacturing plants have helped in reducing the costs especially in transport. The company has also diversified its activities and acquired several companies in different industries.
The company acquired Buell Motorcycle Company which was also in the production of Motorcycles in East Troy, Wisconsin (Wheelen & Hunger, 2002 ). It also acquired the company Eagle Mark in 1995 which was providing financial services to manufacturers of leisure products as well as their dealers and customers. The company acquired Eagle Mark so that it would provide retail financing to its customers, insurance and contracts for servicing.
Eagle Mark Company has also been offering planning services on behalf of the North American Dealers in motorcycle floor planning. The two companies have been working together complementing each others activities. The diversification of the company in the motorcycles, related products and the financial services has helped the company to diverse its risks in the industry and in business.
Over the years the company has maintained strong relationships with its suppliers. The strong relationship with the suppliers has given the company access to resources that it needs in its production processes as well as the design and development of its products. It has then been able to increase the quality of its goods and improve the features of the brands in a bid to remain competitive. The production process is also reduced in terms of time as the suppliers are able to deliver the suppliers on time reducing the lead time. This leads to a reduction in costs and saves time for the company. The company operates its business in three continents and in various countries all over the world. However it has not been able to increase its foreign sales which are mostly carried out outside the U.S.
The major weaknesses that the company has experienced within its internal operations include the weak marketing strategies that it has applied especially in its foreign markets. The company has experienced low foreign sales over the years as compared to its competitors. In 2009, the international sales only made up 33% of the total unit sales of the company (Pravda.Ru, 2009). The number of dealers in international markets are also very few and this has contributed partly to the low market sales of the company’s products as most of the customers in the market can not access the company’s products through this dealers.
The labor conflicts that the company has experienced in some of its plants over the years have been affecting the performance of the company. Dissatisfied workers of the company have held strikes that have contributed to losses for the company as it has had to shut down the production plants during these times. The company has also had to lay off workers during the strikes in a bid to cut down its operation costs as a result of the strikes in other production plants. The labor conflicts have also reduced the investor confidence in the company as the prices of the company’s shares have been affected.
The external environment of the company has several opportunities that can benefit the company and improve its performance and market share. The shifts in the trends in the customers’ preferences and tastes in the market are producing an opportunity that the company can exploit to its advantage. The customers’ preferences and tastes have changed especially among the young and hip crowd of customers who the company was once targeting as its sole customers.
These customers have shifted their preferences to sporty motorcycles for their recreational purposes. Harley-Davidson Company does not engage in the production of sporty motorcycles; however the increased demand for these kinds of motorcycles is providing an opportunity for the company to develop them and target this new market. The company can grab this opportunity and develop these sporty motorcycles and hence gain from the high demand.
The need to restructure the company’s business structure after the company’s subsidiaries have experienced a decrease in performance is providing an opportunity for the company to concentrate in its brands and grow. The new structure of the company will ensure that all the resources of the product are put into good use to help develop the company and expand its operations into other markets. The company will also be able to focus on the development of the products and also develop new products that can help increases the market share in different parts of the world.
The company has faced several threats in the market that have undermined its performance. One of the major threats that the company has faced include the competition in the market. The company has faced a lot of competition from other international companies and manufacturers especially in the heavy weight motorcycles market. Some of the major competitors include Yamaha, Suzuki, and Honda among others. The increased competition has led to decreased sales of the company’s products especially in the foreign markets. The competition between these companies is based on the price, quality, and features of the products, the preferences of customers and the reliability of the products among other factors.
The switching costs for the manufacturers in the industry are also quite low. With the increased growth in demand and the potential of the market, new competitors are entering the market and increasing the competition. The existence of substitute goods such as cars for transport and other recreational activities has also threatened the existence of the company and the sales. Consumers have a wide variety of products to substitute the motorcycles with and the increase of competitors is also leading to an increase in more brands in the market. This poses a big threat to the future of the company in the market of its products.
The changes in customers’ demographics are also threatening the business in terms of sales. The percentage of males who have been purchasing the company’s products especially the motorcycles is declining. The percentages of women who are purchasing the products are however increasing. During the years 2003 and 2004 the percentage of sales that were purchased by men made up 89% with the rest being female. While in the years 2005 and 2007, the percentages had reduced to 88% among the male customers and 12% among the female customers (Harley-Davidson, n.d). The ages of the customers who have been purchasing the products of the company have also been increasing. By 2008 the median age of the customers had risen to 47 from 45 in the year 2004.