A strategic analysis of Harley Davidson Inc.

 

1.0 Introduction

Harley Davidson was established as early as 1903 making it one of old motorcycle household names. As much as the entity went through many challenges in the 1950s, it managed to come out successfully and after the postwar era the company gained its affluence which was increased by the increased demand of motorcycles by the youths. The company is therefore categorized under the heavyweight motorcycle sector where it competes with other motorcycle companies such as Honda and Yamaha (De Wit and Meyer, 2012).  The company is well known in offering recreational motorcycles as opposed to transportation. The company operates with revenues which are beyond 5.5 billion US dollars which makes the company to be profitable and stable in its operations. The company allows customers to model the motorcycles based on their individual preferences and tastes and needs. This has enabled the company to grow its businesses yearly with minimal impacts to the environment (Mitchell, et al., 2015). This paper gives a strategic analysis of Harley Davidson where it analyses its external context as well as the internal situation using various models.

 

2.0 PESTEL analysis

The framework gives an overview of the various issues and conditions that show factors without the firm that impact its operation by showing whether these factors create threats or opportunities to the company (Thompson, 2017).

2.1 Political Factors

Harvey Davidson operates in the USA where the state operates under the agreement of free trade which has facilitated the expansion of the company to reach the global market. This issue of free trade threatens the businesses of Harley Davidson due to the increased influx of products which are cheaper hence compete with the company’s products (Badkar, 2019).  The e-commerce on the hand has enhanced the operations of the company since it assists the business to access a huge customer base through online media (Hills and Sarin, 2015).

2.2 Economic factors

The economic stability of the markets in various nations such as China, US and Japan has enabled the company to grow its businesses in the developed and developing markets where there is demand of heavyweight recreational motorcycles. This stability has also supported the competitors in the industry hence threatening Harley Davidson. Since the exchange rates of the US dollar has always been high gives the company a better chance to obtain its raw materials for production from its suppliers as well as export its products which enables it to generate bigger profit margins (Housing Industry Association, 2014).

2.3 Societal considerations

The social cultural factors such as increased attitudes towards green technology, increased interests of women in riding motorcycles and increased attitudes towards recreation and enjoyment has created great opportunities in the motorcycle industry (Campbell, 2018).  This has enabled Harley Davidson to target women as their potential customers since most women want heavyweight and luxurious motorcycles for their transport. The company has also made efforts towards the creation of engines that reduce emissions to the environment (Lynch, 2018).

2.4 Technological disruption

Technological innovations have taken root in the transport and recreational sectors that in the contemporary society most transport companies use computing technology in vehicles and automobiles such as motorcycles. This means that the company has to keep up with costly technology demands  (Thompson, 2017).

2.5 Ecological issues

In the contemporary society individuals are interested with products which are eco-friendly. This has put pressure on Harley Davidson to provide products and that are eco efficient in order to minimise carbon emissions (Hunger and Wheelen, 2010).

2.6 Legal considerations

Hills and Sarin (2015) note that some of the legal factors such as the environmental protection laws such as the conservation of trees and the strengthening of the emissions regulations  such as emission of carbon dioxide have created opportunity for the expansion of Harley Davidson. It is also noted that there are loopholes in the international patent laws which threatens the operations of Harley Davidson since its gives rooms for other companies to imitate the products of the company.

 

3.0 Porter’s five analyses

This framework concerns itself with the analysis of the market factors that may impact the business operations in Harley’s and affect how this affect strategy. The framework highlights five issues which are buyer’s influence, suppliers power, threat posed by substitutes and new entrants, and competition.  Harley Davidson can therefore apply this model to develop a strategic position within the recreational vehicle industry as well as explore the profitable opportunities within the sector of whole consumer goods (Housing Industry Association, 2014).

3.1 Risk posed by new entrants

This force is considered as low since the number of new brands entering into the industry are very few due to lack of enough capital to build the plant as well as obtain the raw materials for production. New entrants bring innovation into the industry as well as establish novel ways of doing things which creates pressure on Harley Davidson through reduced costs as well as provision of new value propositions to the customers (Mitchell, et al., 2015).  Harley Davidson can therefore overcome this issue through the innovation of new products and services. The company should also aim at building the economy of scale as a way of reducing the cost of production per unit as well as engage in research and development so as to define their standards (Doole, 2016).

3.2 Bargaining power of the purchasers

The buyers in the motorcycle industry are perceived as people with power since companies in this sector depend heavily on a given demographics. Harley Davidson has for a long time depended on the baby boomers as their major clients and now that they are aging the company is therefore forced to change its designs so as to fit the millenials who are the potential customers in the market. This force is therefore considered as a high force since it controls the operations of this industry (Krider and Putler, 2015).

3.3 Influence of suppliers

Suppliers have a lot of influence on this company because the existing suppliers usually have long duration contracts with the company and the contract cannot be terminated anyhow. The suppliers are given more power and there is the creation of trust between the company and the suppliers hence the increased quality of the suppliers. This force is considered as of medium since both parties have equal powers which are brought forward through the signing of the contracts (Hunger and Wheelen, 2010).

3.4 Threat of surrogate products

The products which can substitute the heavyweight motorcycles of Harley Davidson include scooter bikes, cars and sport bikes. Since the baby boomers who are the great buyers of this product are aging leaving the millennials to take over, the company is faced with a very big challenge since the millennials are much into the sport bikes as opposed to heavyweight motorcycle hence qualify this issue as of high (Teece, 2010).

3.5 Rivalry from existing participants

In the heavyweight industry there are major participants who include Harley Davidson, Honda, Suzuki and Yamaha, Ducati and Kawasiki. In the motorcycle industry there are two categories that the competitors belong to. Harley Davidson and Ducati are categorized as companies that focus on experience while Yamaha and Honda have always focused on innovation (Massa, et al., 2011). since Harley Davidson need individuals with experience to ride on the heavyweight cruisers which are loud and meant for showing off, its competitors are using technology to produce motorcycles which are easy to use and effective for commuting (Crooks and Provan, 2019).  These companies are therefore categorized as performance focused and they include Yamaha and Honda which perform better in foreign countries like in Japan and China where most people are interested with sport bikes which are easy to operate, pocket friendly and effective for transportation. This has reduced the market share of Harley Davidson that in 2019 the market share was 17% while that of the competitors was 83 %. This force is therefore considered as a medium force since the company has the opportunity of being creative and innovative so as to continue gaining a competitive edge in the market (Lynch, 2018).

 

4.0 ANSOFF Matrix

For Harley Davidson to create valid strategies that can help in mitigating the risks associated with the company, Ansoff matrix is considered as the best tool for the analysis. This analysis is therefore based on the product and growth of the company. In this analysis there are is a combination of four products which are being analyzed so as to consider the possible ways the company can grow using the market expansion, market development, product development or diversification  (Pilar, 2019).

 

Figure 1: ASNNOF Matrix analysis

 New Market Market growth

(medium risk)

Clothing and motoring gear and fashion

 

Diversification

(high risk)

None

Existing market Market penetration

(Perceived as a low risk)

Well-known brands such as Sportster, Touring, Softtail, Dyner and Street

The well-built image of Harley’ s products as being of good quality has taken root in the internet which is perceived as the best technological mode of advertisement (Krauss, 2010).

Product growth

(considered as of medium, risk)

Creating technological products in the recreational vehicle sector in an innovative way such as the electric motorcycles (Badkar, 2019).

Existing  Product New product

 

This analysis therefore indicates that for Harley to attain its growth it is essential for the company to select those strategies with low risk and medium risk such as the penetration of the existing markets and the development of the targeted markets (Rocco, 2019).

 

5.0 VRIO analysis

The products of Harley Davidson are highly valued in the market that their customer loyalty is undefeatable since they are considered as a lifestyle factor to their customers. This is a clear indication that the culture of lifestyle that the company offers to its customers cannot be imitated. The company has an intellectual property rights and a logo which is well designed that its competitors cannot manage to copy giving the users a reputation of personal value (Harley-Davidson USA, 2017). The culture of passion in which the suppliers and the customers of Harley Davidson operate in cannot be imitated by its competitors making the company to stand out as a unique entity. The company has a good knowledge of the market which is similar to its organizational competence since it offers special treatment to its suppliers, workers and clients (Edgecliffe-Johnson, 2018).

6.0 Porter’s generic strategies

The company has employed the focus differentiation strategy so as to target its segments in the market. The company sells lifestyle and not transportation and this gives its customers the opportunity to own their group club which helps them to maintain their identity in the society as well as for recreational purpose. This focus on luxury motorcycles has given the competitors of Harley Davidson the opportunity to expand its market to developing countries where individuals are interested with lightweight motorbikes which are used for transportation (De Wit and Meyer, 2012).

 

7.0 Conclusion

After an analysis of the market factors where Harley operates, capabilities of the company, its reputation and the strategy used by the company in marketing, it is clear that the company should aim at tapping the tri-motorcycle market. This will therefore attract both the baby-boomers and the millennials who are more interested with safety and control. This will help the company to gain a competitive edge in the market as it will enable the company to attract women, millennials and the baby-boomers (Thompson, 2017).

 

 

 

References

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Campbell, P. (2018) Harley-Davidson boss drives Donald Trump into a fury. Available at: https://www.ft.com/content/8d55adbe-7b87-11e8-8e67-1e1a0846c475. (Accessed on 01/05/2020).

Crooks, E. and Provan, S. (2019) Harley-Davidson sees $120m hit from tariffs this year. Available at: https://www.ft.com/content/cde6b214-23c6-11e9-b329-c7e6ceb5ffdf. (Accessed om 01/05/2020).

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Rocco, M. (2019) Harley-Davidson’s first electric motorcycle hits production snag. Available at: https://www.ft.com/content/70bc3352-eeaa-11e9-bfa4-b25f11f42901. (Accessed on 01/05/2020).

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