Case Brief: Harley-Davidson

 

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Case Brief: Harley-Davidson

In the modern society, it is important for any company to determine how to improve on their market share. This involves implementing effective marketing strategies and identification of the market niche. Harley-Davidson is one of the leading motorcycle manufacturing companies that have identified the suitable market niche, which influences the prices and their product features. Therefore, the most important factors that affect the company decisions include social and economic aspects of their business environment. The company engages in the study of the social aspects to determine the demographic composition and identify suitable customers and their mindset. This strategy is important as it helps in understanding the company’s primary consumers in the market better. Another critical analysis includes the economic factor that plays a significant role in influencing the consumer’s decision to purchase Hurley Davidson motorbikes.

According to the social analysis, the company identified an important demographic segment where, most motorcycle riders tend to be 29-55-year-old males. This factor is important because it narrows down the target market for a particular group of consumers. Identification of the company's potential clients is necessary as it enables the company to fulfill the needs of its customers, which is important for the company to succeed. In addition, identification of target consumers plays an important in providing the company clear focus and ability to manage their consumers by providing them with suitable products. The demographic analysis also plays an important role in enabling the business to prioritize resources, which is important in precision planning that involves the psychological analysis to determine the consumer behavior.

The company also engages in economic analysis to determine the purchasing power of their consumers. This is important because in such an industry products are viewed as luxury items rather than necessities. Therefore, in case of economic difficulties such as the 2007 economic crisis, the industry as a whole suffered from decreasing demands, because the ability of customers to buy their products was reduced. Besides, the firm suffered from serious losses due to the reduction in the level of sales. For example, in the post-great depression era (the 1930s) all of the corporations operating in the motorcycles industry have gone bankrupt except for two; Indian motorcycle and Harley-Davidson.

Another major challenge that Hurley-Davidson Company faces comes from the competitors. Competition within the industry exists between already established firms and the new entrants. Determination of potential competitors is necessary because of their impact on the company's market share. Such incident happened when foreign competitors were introduced to the American market when Kawasaki and Honda entered the market and managed to gain a great deal of the domestic market share (moderate effect). Therefore, the industry is attractive to newcomers; however, some entry barriers must be overcome to do so, such as coming up with a differentiated product.

Honda and Kawasaki are the primary competitors for Harley-Davidson. These two companies have high potential and invest heavily in R&D, which could be used to introduce new products and thus gain above average returns.

Important value chain activities include operations and marketing. Operations include R&D where it helped Harley-Davidson improve its quality control and operations’ efficiency and effectiveness. In addition, enhancement in the manufacturing process and employee involvement are considered part of the operations activities. As of marketing, aggressive management of its brand name through careful patenting and licensing activities as well as managing and developing product brand are examples of important marketing activities. The third type of activities is follow-up services, all of which Harley-Davidson has developed to become core competencies and thus established an ability to create customer value. These areas turned to be Harley-Davidson’s competitive advantages; namely brand name, manufacturing simplicity, and dedicated product following.

Harley-Davidson’s revenue between 2007 and 2009 fell by 30% compared to 2006’s $6.2billion revenues. Two years later, it grew by 11%. Harley-Davidson’s operating margin has quadrupled since 2009 when it was only 4%. These numbers suggest that Harley-Davidson had a very tough time between 2007 and 2009, but sales are picking up. However, Harley-Davidson’s financial position needs improvement as its capital currently is based on debt. This is evident in its debt-to-equity ratio of 1.6, which is more than three times what it historically used to be for Harley-Davidson. Nevertheless, it is not a major concern for the firm’s managers because it has the necessary current free cash flow to meet short-term liabilities. Its quick ratio of the year 2011 of 1.53 shows the firm’s ability to pay off current obligations without relying on sales of inventory.

Strengths: brand name, manufacturing simplicity, and dedicated product following. This makes it hard for new, foreign competitors to enter the market.

Weaknesses: financial position in terms of variable costs and long-term debt. This makes it challenging for the firm to strengthen its operating margin.

Opportunities: Economic growth where luxurious products’ sales tend to increase. This represents a chance for increased sales.

Threats: Foreign competition in light of cheap resources available overseas might pose a market share loss threat.

 

The company heavily relies on its brand name, manufacturing process and product follow up services. These factors provide it with a competitive advantage against its rivals such as Yamaha and Honda, which are one of the leading manufacturers of both cruiser and sport bikes. In addition, product following has helped Harley-Davidson company to excel over the years as it is considered a valuable and unique organization culture. Also, it has helped the company establish close relationship with its consumers and promote the brand name. These marketing and customer relationship techniques have helped the company to acquire above average returns on its sales.

Harley-Davidson’s current business level strategy is based on differentiation strategy. This involves focusing on the demands of the chosen target market with an eye on differentiation rather than low cost. Harley-Davidson operates in two distinctive divisions; motorcycles and related products, where most of the revenues and financial services come from. Consequently, it has a dominant business diversification strategy and transnational strategy when it comes to meeting the demands of tis clients in the international market.

 

In conclusion, the firm’s main problems are foreign competition and tackling international markets effectively and efficiently. Harley-Davidson should thoroughly study and analyze the global markets, which it wishes to penetrate. Without enough research that can provide the company with quality background information about markets abroad, the firm is at risk of failing globally. In addition, it should capitalize on its competitive advantages domestically to gain above average returns compared to existing rivals or prospective competitors. Therefore, Harley Davidson Company should formulate effective organizational and business structure and strategy, which can provide it with market advantage.