Porter’s Five Forces Analysis done on Harley Davidson Essay
Porter’s Five Forces Analysis done on Harley Davidson
Harley Davidson remains as a dominant force in the heavy weight motorcycle industry; upholding 50% share in the heavy weight motorcycles. This year they celebrate their 110th Anniversary proudly as the only major motorcycle manufacturer to completely focus on motorcycles. (Melief, Bundgaard & Hathaway, 2006) Other major players in the Motorcycle Industry are, Honda, Yamaha, Suzuki that also have their other major product lines inclusive of cars, watercraft, musical equipment and etc.
Assessment of Strengths and Weaknesses of Current and Potential Competitors Porters Five Forces Analysis Source: Vector (2012) Internal Rivalry The heavyweight motorcycle market is justly concentrated with four major companies manufacturing these vehicles. Harley Davidson being one of the most experienced within the industry, Honda, Suzuki and Yamaha are the competitors that are all from Japan. Over the past few years many market for heavyweight motorcycles has increased annually, but experts are predicting even though the market is growing it will slow down in the years to come.
(Melief, Bundgaard & Hathaway, 2006) The Competitive challenge is high in motorcycle industry. Most of the time motorbikes are counted as a luxury product and pricing the products can be complex. (Oxbridge Writers, 2012) Harley Davidson offers spare parts, extended warranties, and innovative and environmental friendly motorbikes for their customers, this singularizes them from their competitors. Japan’s companies have marked their success by establishing a strong competitive place in the market using cheap prices as their strategy.
This affects customers perception on Harley Davidson’s place in the market and their prices. However, those having a predominant place in this sport do have conflicting interests, i. e. Yamaha and Honda have diversified into musical instrument and other motor vehicles. . (Oxbridge Writers, 2012) This results Harley-Davidson in differentiating themselves as a loyal, specialized Motorbike Company and getting more customers. Harley Davidson has traditionally been the prevailing competitor in this market with taking over 50% of the market share.
With time it has fallen to below 50 % due to other companies expanding their heavyweight motorcycle production and growing in the market, focusing on American Consumers. (Melief, Bundgaard & Hathaway, 2006) This is because other products from competitors are becoming less distinguished and is similar to Harley Davidson Products. Recalling, back to the past it was easier to acknowledge Harley Davidson motorbikes for their unique style, but currently Japanese Manufacturers are merging popular designs to their products.
As a result motorbikes from manufacturers are becoming more similar over time. This forces Harley-Davidson to focus more on their branding to maintain the customers. This can be an advantage to them, since Harley is known internationally for their brand, many people would prefer a Harley over a Honda or Suzuki. But can also be a downfall since Japanese companies has been improving their products with time. Threat of New Entrants This industry has a very high entry barrier, as it requires high capital to enter to the market.
Similar to most manufacturing industries there are significant economies involved in building motorbikes. (NCCU, 2012) The manufacturing price of a similar product is extremely high in this industry even for a small scale. This is basically one of the main reasons there are only four major players in the industry. There are some small-scale motorcycle creators whose business s fully focused on reputation and appeal to motorcycle devotees, to build utterly customized bikes. They do not produce enough motorbikes to threaten the major players in the industry.
They do not affect the position of Harley Davidson in the market but can be an added advantage since it increases interest of motorbikes in the public. Threat of Substitutes and Complements Heavyweight motorcycles are a luxury item for the majority of consumers, so there are very less similar substitutes for heavyweight motorbikes that could seriously affect the market and consumers. (Melief, Bundgaard & Hathaway, 2006) The Japanese manufacturers focus their designs more on smaller, quicker motorbikes that is the closest substitute followed by cars and scooters.
Heavyweight bikes portray a certain persona, which is a part of the buyer’s influences on choosing a motorbike. Smaller bikes are for different riding styles and purposes. They are designed for a different seating position unlike the heavyweight motorbikes. Passenger cars can be a substitute for heavyweight motorbikes but it is a weak substitute. (NCCU, 2012) Motorbike consumers rarely purchase Harley’s to fulfill transportation wants. Harley Davidson bikes are more of a luxury item than a necessity to travel. Motorbikes maybe easy to travel in heavy traffic and consume less gasoline compared to a car.
If a consumer choses a motorbike for the above mentioned reasons, it would be more reasonable to buy a lighter motorbike, which would be easier to handle and fuel efficient than a heavyweight motorcycle. The most profound complement for a heavyweight motorbike is gasoline/petrol. If fuel prices were higher consumers would not consider purchasing a heavyweight bike, because most journeys taken by the bike on such a bike is highly discretionary and will be used for pleasure rather than for transport necessities.
Nevertheless, most of the heavyweight bike consumers are willing to pay between $8000 and $30,000 for this luxury vehicle, they would not mind paying just a little extra for fuel. Bargaining Power of Suppliers According to Melief, Bundgaard & Hathaway (2006), “Harley Davidson operates nearly every stage of the production of a motorcycle, taking raw materials such as steel and basic electrical components and shipping completed motorcycles to its extensive independent dealership network.
Because there are many suppliers of all inputs that Harley Davidson requires for its manufacturing operations there is very little that any single supplier can do the exact rents from Harley. ” This phrase proves that even if one supplier tries to escalate its profits/prices it would not be much of a deal for Harley to switch suppliers without interruption in production. “Preferred suppliers” approach reduced the number of suppliers Harley Davidson worked with and improved the quality of the suppliers as well; these long-term contracts and relationship protected Harley Davidson from supplier price increase.
(NCCU, 2012) This also grew trust between the suppliers and Harley and their suppliers gained more profit as Harley improved their business. Bargaining Power of Consumers Similar to the Suppliers, Harley Davidson’s customers are of large population of individual consumers, making it difficult to badly affect Harley Davidson’s financial situation by refusing to corporate. (Melief, Bundgaard & Hathaway 2006) Even though Harley’s dealerships are individually owned and operated the companies’ customers are officially their licensed dealers.
But the sheer number of dealers that Harley has all over the world makes situation for dealers not much better than individual riders. Harley needs their customers to buy the product in order to gain profit; since Harley is aging they also need to gain more new loyal riders. Each Harley Davidson purchase is by an individual; even though one person would not drastically affect the financial earnings of the company it is essential to sell the individual experience to each customer to reach more Markets and combine these sales to improve financial strength. (NCCU, 2012)