Harley Davidson - Exercise 2 PDF

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Summary

Mandatory exercise...

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1. What is Harley-Davidson's strategy? How successful has this strategy been?

Harley-Davidson’s strategy is to focus on its traditionally styled, technologically old, cruiser motorcycles. Because Harley-Davidson cannot compete with Honda, Yamaha or Suzuki on technology or on the size of sales, it has to compete on what makes its competitive advantage : the Harley-Davidson experience. On this part it is a success. Indeed Harley-Davidson uses its tangible (equipment, financial resources, etc...) and intangible (the brand's history and image) resources in order to create organisational capabilities. These capabilities are used for Harley-Davidson's strategy : selling the Harley-Davidson's lifestyle and experience. The competitive advantage of the firm is sustainable. It still exists through time and is still what makes a great part of the company's value. Arie de Geus said that "Long-living companies are those that build strong communities, have a strong sense of identity, commit to learning, and are sensitive to the world around them". HarleyDavidson matches all of thoses criterias, that is why the company still exists since 1903. However the competition imitates this Harley-Davidson’s style. Harley-Davidson’s strategy is also to expend its customer base. This part is a failure. The target of customers has evolved, but the core remains white middle-aged males for its vast majority. Harley-Davidson also wants to increase its international sales : the objective in the 10-year strategy is to increase the international sales by 50%, however according to table 3 from the case the international sales are slowly increasing. In order to reach the 50% objective the company must change its production capacities and abroad sales capacity. Indeed if we look at the sales of heavyweight motorcycles between 2008 and 2017, HarleyDavidson's sales have been decreasing from 235 000 units sold in 2008 to 147 000 sold in 2017 in the United States. The only sales that have been increasing for Harley-Davidson on this period are the ones made in Asia-Pacific. However this is a moderate increase: from 25 000 units sold in 2008 to 30 000 in 2017, with a summit in 2016 with 33 000 units sold.

2.What resources and capabilities are needed to compete within the motorcycle industry? In relation to these resources and capabilities, how does Harley-Davidson compare with other leading motorcycle companies?

In order to compete within the motorcycle industry you need:

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A good customer relationship. Harley-Davidon has one of the best, or maybe the best, customer relationship in that industry. The company really puts an emphasis on the importance of this relationship. On that point they are better than the competition. To develop new products. When it comes to develop new products Harley-Davidson is far behind the competition. For instance between 2000 and 2016 there has been 238 US patents for Harley-Davidson against 12,228 for Honda. Harley-Davidson is not a company that innovates a lot Manufacturing and distribution capabilities: It comes from the size of the company. The size of the company has an impact on the distribution and manufacturing capabilities. HarleyDavidson is able to answer its product’s demand, however it would be impossible for them to manufacture and distribute millions of motorcycle as Honda does. A wide network of dealerships. In the USA Harley-Davidson has a small but very efficient and dedicated network of dealerships. On that point they do as well and maybe even better than the competition. A good brand image. Harley-Davidson surely has the best brand image in the motorcycle industry. This company is not selling motrocycles, it is selling a way of life, an experience, a mindset. Harley-Davidson understood the role of social and psychological factors. Most buying is influenced by social and psychological motivation. We can use Abraham Maslow hierarchy of needs here. The esteem needs are on the top of this hierachy. Buying a HarleyDavidson means becoming part of a family, in a way you buy an esteem that you could not have otherwise. A diversity of products. A motorcycle company should have a wide range of products in order to increase its sales and not being trapped into the failure of a new product for instance. On that point Harley-Davidson is far behind the competition. Know-how. This company has been existing since 1903, they have know-how about motorcycles. On this point they surely are as good as the competition. However they use an old technology compare to the competition. It does not from a lack of know-how but from a lack of financial resources that prevent them to invest in R&D.

3.Assess Harley’s efforts to grow sales by (a) expanding into smaller motorcycles and (b) expanding internationally.

Introducing motorcycles that are radically different from Harley’s traditional designs is at the heart of the 10-year strategy. The street 500cc and 750cc models that have been introduced in 2015 are completely different from the historical Harley’s heavyweight motorcycles. The problem is that Harley-Davidson is not historically competitive on this part of the market. Its brand image has been associated with its cruiser motorcycles, not with lightweight motorcycles. For the same price one can buy a Honda Shadow Phantom or a Yamaha Bolt. In the Table 3 of the case we can see that since 2015 the sales of sportster and street motorcycles of Harley-Davidson have not increased, they have even slightly decreased. Growing sales by expanding into smaller motorcycle has been a failure. The company has also intriduced electric motorcycles. However this is still a niche market. HarleyDavidson maybe hopes to have a first-mover advantage on this market, however for the now it has

not been paying of. They are facing the market's uncertainty: they introduced a new product without really knowing the potential of this market. For the international expending Harley-Davidson has increased its number of dealership in AsiaPacific (from 201 to 276) and in Latin America (from 32 to 58) between 2008 and 2017. Between 2006 and 2017 its unit shipments outside the USA have increased from 76,000 to 96,000, with a pic at 100 300 in 2016. On this point Harley-Davidson has succeeded even though progress still has to be made if the company wants to reach its increase of 50% sales abroad in the 10-year plan...