Stategic Plan Executive Summary –Harley Davidson Strategic Plan The motorcycle industry is a consolidated industry. The U. S. and international heavyweight motorcycle markets are highly competitive. The major players, such as Yamaha, Suzuki, and Honda, generally have financial and marketing resources that are substantially greater than the non-major players. Competitions in the heavyweight motorcycle market are based on several factors; price, quality, reliability, styling, product features, customer preference, and warranties.
Harley’s first segment is motorcycle and related products business which includes designing, manufacturing, and selling heavyweight touring and custom motorcycles products, parts, and accessories. The custom products charge a higher price because of its features, styling, and high resale value. Their target market is mainly in the United States. By the end of 1997, they have an approximate 48. 3% share in the United States market, 6. 1% share in European, and 16. 5% share in Asia/Pacific. New competitors have entered the marketplace because demand for the motorcycles has exceeded production.
The demand is prospected to grow in the future, and the switching cost is low. The company should continue to build their enterprise. Since the industry does not have significant economies of scale, growth-via-acquisition strategy could be used. Harley-Davidson can merge or acquire weaker rival or smaller players. Taking over the weaker and smaller players will increase the entry barriers (echeat, 2008). Company Background The Harley-Davidson company was created 1903. The company was acquired by AMF Inc, which favored short-term profits instead of investing in research, development and retooling.
Harley-Davidson’s focus was on sales, while competitors were continuously improving the quality of their motorcycles (echeat, 2008). This resulted in a downturn of the company with weak profits. Harley-Davidson Inc. acquired the Buell Motorcycle Company during 1993. This investment offers Harley-Davidson the possibility of gradual entry into the sport and performance motorcycles market (echeat, 2008). “Harley-Davidson Inc. operates in two business segments: Motorcycles and Related Products and Financial Services. These two segments offer different products and services, and they are managed separately.
However, the financial service works as a complementary for the Motor Company “(echeat, 2008, p. 1). Harley-Davidson’s customers are primarily middle aged married males with some degree of education. The majority of buyers purchases a motorcycle for recreational purposes and is experienced motorcycle riders. Harley riders are loyal to the Harley brand, quality, and style. Since the consumer switching cost is not high the consumer has medium to high power to choose the product and the supplier has medium to low power (echeat, 2008).
The power of a threat of substitute products is medium since there are other products, such as bicycles and recreational cars that serve similar customer needs. Since most Harley motorcycles purchases are for recreational purposes all other recreational entertainments are possible substitutions (echeat, 2008). “Every country has environmental control requirements relating to air, water, and noise pollution. This affected the way Harley-Davidson had to run business operations. The company had to ensure that the facilities and products complied with all applicable environmental regulations and standards.
Certain levels of cost are required for the company to deal with this issue” (echeat, 2008, p. 1). Vision Statement “Harley-Davidson is an action-oriented, international company. A leader in its commitment to continuously improve the quality of profitable relationships with all of its stakeholders. Harley-Davidson believes the key to its success is to balance stakeholder interest through the empowerment of its employees to focus on value-added activities” (Marketline 2008, pp. 11). Mission Statement
The mission statement for Harley-Davidson is as follows: “We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments” (H-D Student Center, 2008, p. 1, pp, 10). Values Statement The Harley-Davidson value system consists of five company-wide written values they are (1) tell the truth, (2) be fair, (3) keep promises, (4) respect individuals, and (5) encourage intellectual curiosity.
These values are universal in the company and govern their relationship with employees, investors, buyers and dealers (Mission Statement, 2008). “By listing values, defining them and then defining some of the key behaviors that exhibit that value in practice, Harley gives staff and clients something tangible with which to work. At the same time this effort shows that the company is serious enough to put their beliefs in writing” (Mission Statement, 2008, pp. 5). Using these principles Harley-Davidson’s organization can expand revenues, increase the size of operations, and gain more market presence.
The following chart provides an analysis of the anticipated behaviors resulting from exhibiting the company’s stated values. In addition, the chart provides insight into how the anticipated behaviors will help support the firm’s chosen grand strategies: concentric diversification and turnaround. Values Analysis ValueAnticipated Employee BehaviorsHow it Supports Harley-Davidson’s Grand Strategies: Concentric Diversification and Turnaround Tell the TruthFocusing on open, honest communication with all stakeholders. Addressing all employee and customer concerns.
Turnaround Grand Strategy: Help to differentiate Harley-Davidson from its competitors and maintain its good reputation which leads to referrals which equates to revenue. Be FairBeing ethical in all business dealings. Treating everyone fair and equitability. Interacting professionally with all customers, suppliers, industry officials, and one another. Turnaround: Sets the company apart from unethical competitors, while helping to strengthen the image of the organization. Concentric Diversification: This value provides Harley-Davidson with a reputation as being an honest and respectful organization with employees, customers, and suppliers.
Keep Promises. Simple keep the promises you make and communicate “why” if the promise cannot be kept. Keeping costs down, keeping schedules, maintaining good quality, and delivering on promises made. Turnaround: By reducing expenditures through shortening job completion timeframes the employee will be helping Harley-Davidson to attain higher profits – resources that can be reinvested in recovery activities designed to improve the company’s competitive position. Respect IndividualsRespect everyone. Do not look down on anyone. Everyone has value.
Customer Intimacy Encourage Intellectual CuriosityEncourage the desire to learn more. Continuous learning and improvement. Innovation If used effectively, Harley-Davidson’s mission, values, and vision statements will help the firm achieve its desired end-state by guiding Harley-Davidson through all the necessary steps to create, select, and implement a successful strategic plan. By creating the correct long-term objectives, strategies, and action plans will enable Harley-Davidson to realize its vision of remaining the leader in all aspects of motorcycle products and services in both the USA and foreign countries.
Harley-Davidson’s vision, mission statements, and values will help leadership and all affected stakeholder create the appropriate strategy to help Harley-Davidson to attain its goals and objectives. Environmental Analysis Strategic Imperatives In creating an effective strategy for the Harley-Davidson Company (H-D), the company’s external environment was scanned to identify multiple opportunities for and threats against the company in the next five to ten years. In addition, the firm’s internal environment was analyzed to determine current strengths and weaknesses.
A host of internal and external factors influence a firm’s choice of direction and action and, ultimately, its organizational structure and internal processes (Pearce & Robinson, 2004). A company must ensure the company has the right skill set and the right employees in the right positions. Employees value education and training, in part because they lead to increased compensation and job security. Providing such opportunities often increases productivity and decreases turnover. Harley-Davidson incorporates this operating strategy in the company’s strategic planning process (Pearce & Robinson, 2004).
Harley-Davidson’s strategic decision makers frequently include an employee development objective in their long-range plans. Harley-Davidson Company actively seeks good employee relations. In fact, the company takes proactive steps in anticipation of employee needs and expectations are characteristic of strategic planning. Harley-Davidson believes that productivity is linked to employee loyalty and to appreciation of managers’ interest in employee welfare. They, therefore, set objectives to improve employee relations.
Employees are demanding pay increases, better benefits and incentive plans including flexible hours, telecommuting, lump-sum employee profit sharing, vacation and sick plans, in addition to opportunities for advancement and training (Pearce & Robinson, 2004). Harley-Davidson invested in its people in order to keep momentum high. The Accenture Human Capital Development Framework enabled the company to take stock of its Human Resource (HR) activities and create a comprehensive human capital strategy for the future (Scott et al, 2006). Harley Davidson risked losing its competitive edge.
The company still had aggressive growth strategies, including achieving greater penetration into markets outside of the US. As a result Harley-Davidson took stock of the state of its HR function and begins using the function to more effectively support the performance of its employees (Scott et al, 2006). If Harley-Davidson was to implement its new strategies and remain on its growth path, it had to bring its workforce along in the right way. The challenge was determining what steps to take, both immediately and in the longer term, to ensure that its people continued to perform as well as the company’s products (Scott et al, 2006).
Remote Environment Political Changes As Harley-Davidson learned with their move into China, it takes more than a desire or financial ability to open shop in another country. It took years of discussions with the Chinese government and the helpful persuasion of some American diplomacy to open the first dealership in that country (Clutch & Crome, 2008). Harley-Davidson’s legal team were in talks with officials in the Indian government for some time, trying to find the government’s flexibility over the emission standards for high-end motorcycles and discuss a reduction in customs duty on the bikes (Clutch & Chrome, 2008).
Although its bikes meet air emission standards for both the United States as well as Europe, there were none in place for high-end motorcycles in India. “This left Harley-Davidson in the position of having to convince the Indian government to specify emission standards before making a financial commitment to creating a dealer network, and all the support it would require to operate in India” (Clutch & Chrome, 2008, p. 1). As part of Harley’s strategic plan opening the Indian market has been a high priority for Harley-Davidson.
Owning 62 percent of the American market of motorcycles in the 850cc or more categories is certainly impressive enough. But the company experienced slow or declining sales in the United States at the end of 2007 which continued into 2008. Robert W. Baird & Co analyst Craig Kennison surveyed 86 Harley dealers across North America for their assessment of business trends in the first seven weeks of 2008 (Clutch & Chrome, 2008). Sales were slightly below dealer expectations with 35% of the dealers stating new motorcycle sales were better than expected.
Many dealers were frustrated by the late delivery of models such as the Rocker, new for 2008. Forty-eight percent of the dealers said they were selling new Harleys for below the manufacturer’s suggested retail price – a nagging problem that recent production cuts haven’t fully addressed (Clutch & Chrome, 2008). The economy is impacting the inventory levels at some dealerships. Twenty-eight percent of the dealers said it had become more difficult for customers to obtain motorcycle financing. Half of the dealers said that Harley should offer more sales incentives, and they complained that interest rates were too high.
One reason to look abroad to sell it’s wares, those opportunities are wide open, unlike the American marketplace that’s not only saturated by Harley’s product but also from the growing competition in the cruiser niche. Other reasons to look to foreign markets would be the reported global revenues of $5. 34 billion in 2005 with a net income of $960 million. Aside from traditional sources such as motorcycle, parts and apparel sales, it also licenses its logo which was worth $41 million of revenue in 2004, or almost 5 percent of net income (Clutch & Chrome, 2008).
The direction and stability of political factors are a major consideration for companies creating company strategies. Political factors define the legal and regulatory parameters within which firms must operate (Pearce & Robinson, 2004). Political constraints are placed on firms through fair-trade decisions, antitrust laws, tax programs, pollution and pricing policies, administrative jawboning, and many other actions aimed at protecting employees, consumers, the general public, and the environment. Since such laws and regulations are most commonly restrictive, they tend to reduce the potential profits of firms (Pearce & Robinson, 2004).
However, some political actions are designed to benefit and protect firms. Such actions include patent laws, government subsidies, and product research grants (Pearce & Robinson, 2004). In 1909 Harley-Davidson introduced the V-Twin engine, which is still in use to this day, a more powerful engine and topping a previously unheard of speed of 60 miles an hour. As a demand for the bikes grew, other companies were formed. By 1911, there were 150 companies in the US that built motorcycles (Freeessays, 2008). Police departments and the military made heavy use of the bikes.
During World War I, Harley-Davidson bikes were called into service and by the end of the war; the US Military used over 20,000 of them. Major achievements in design ensued, and a Harley-Davidson bike was the first motor vehicle to win a race with an average speed of over 100 miles per hour. But the great depression devastated the motorcycle industry (Freeessays, 2008). Only Harley Davidson and Indian motorcycles survived the 1930’s largely due to use by police departments. Again, World War called over 90,000 motorcycles into action in the 1940’s. After the war, the company expanded (Freeessays, 2008).
Indian Motorcycles closed in 1953 and left Harley-Davidson the sole US manufacturer of American made motorcycles. In 1965 the company made its first public offering on the stock market, and in 1969 merged with AMF. The merger bolstered Harley’s growth with financial strength of AMF (Freeessay, 2008). The 70’s saw a decline in the market. A flood of imports from Japan and quality problems created major problems for the company. In the1980’s, 13 members of HD management purchased the company from AMF and brought a return to quality and implemented new management and manufacturing techniques ( Freeessay, 2008). It accomplished this turnaround by being one of the first US companies to use Just in time inventory policies, statistical processes and employee involvement programs. In 1982, the company convinced the International Trade Commission (ITC) that the glut of imported Japanese bikes were a threat of injury. Additional Tariffs were imposed on the imports for five years. In 1995 the company expanded its international operations in Windsor, England to manage the European market” (Freeessay, 2008, p. 1).
Technological Changes Harley-Davidson plans to tap into the huge Indian market by importing their product instead of building factories in the country. Other major motorcycle manufacturers such as Suzuki, Yamaha and Honda are not only looking to sell more bikes to India’s consumers but have invested considerably into existing factories within the country (Clutch & Chrome, 2008). “Interestingly enough, other high-end motorcycles have failed to gain a foothold with the Indian consumer and not from the lack of enthusiasm.
When BMW announced they were entering the India market the press and motorcycle reviewers were excited and local riders looked forward to the opportunity of buying one. But with a higher price tag than it’s competition, BMW only managed to sell the initial delivery of 100 motorcycles” (Clutch & Chrome, 2008, p. 1). The Royal Enfield’s Bullet 500 Although not blamed for the motorcycles nearly non-existent sales numbers, BMW imported their motorcycles to the Indian market, just as Harley Davidson plans to.
Not only would Harley-Davidson compete with smaller 125cc – 500cc motorcycles built for India’s rugged roads, the American legend would face a British icon, The Royal Enfield. The first Royal Enfield was built in England during the early 1900’s with the most popular model, the Bullet appearing in 1931 (Clutch & Chrome, 2008). “Consistently large orders from the Indian government led to setting up of a factory in India in 1955 to build the motorcycle. Even after production stopped in England, the motorcycle continued its popularity and production in India.
The Bullet today is faithful to that classic design of the 50’s albeit with several design and quality improvements” (Clutch & Chrome, 2008, p. 1). As with most things in business, timing can be everything. When Harley-Davidson first pursued selling its Hogs in India, the motorcycle market was growing at double-digit rates. Recently, the market has slowed leaving many other manufacturers who had invested heavily in factories and dealership networks across India scrambling to retain market share (Clutch & Chrome, 2008). However, the Milwaukee motorcycle company has a marketing advantage over other manufacturers that can’t be bought or created.
They have the Harley-Davidson mystique and brand recognition that has managed to carry quite a premium in every foreign market the company has entered (Clutch & Chrome, 2008). Harley-Davidson has a contingency plan the company has the financial fall-back of merchandising and selling its brand, giving it resources beyond any competitors (Clutch & Chrome, 2008). Harley-Davidson’s (HD) operating philosophy is to maintain continual expansion, but in order to accomplish this task Harley-Davidson needed to invest in its people in order to keep momentum high.
The Accenture Human Capital Development Framework enabled the company to take stock of its Human Resource (HR) activities and create a comprehensive human capital strategy for the future (Scott et al, 2006). To avoid obsolescence and promote innovation, Harley-Davidson must be aware of technological changes that might influence its industry. Creative technological adaptations can suggest possibilities for new products, for improvements in existing products, or in manufacturing and marketing techniques. A technological breakthrough can have a sudden and dramatic effect on a firm’s environment (Pearce & Robinson, 2004).
It may spawn sophisticated new markets and products or significantly shorten the anticipated life of a manufacturing facility. Harley-Davidson must strive for an understanding of both the existing technological advances and the probable future advances that can affect their products and services. This quasi-science of attempting to foresee advancements and estimate their impact on an organization’s operations is known as technological forecasting. Technological forecasting can help protect and improve the profitability of firms in growing industries.
It alerts strategic managers to both impending challenges and promising opportunities (Pearce & Robinson, 2004). Because the attention to growth had effectively forced the HR function to focus almost solely on recruiting, other critical HR practices especially performance reviews, career development and succession planning were not prioritized. This created a potentially difficult engagement situation for newer employees who had not had the benefit of years of immersion in the Harley-Davidson culture that veteran employees enjoyed.
Without the processes and programs in place to help people continually improve and grow, Harley-Davidson risked losing its competitive edge (Pearce & Robinson, 2004). The company still had aggressive growth strategies, including achieving greater penetration into markets outside of the US. As a result Harley-Davidson took stock of the state of its HR function and begins using the function to more effectively support the performance of its employees. If Harley-Davidson was to implement its new strategies and remain on its growth path, it had to bring its workforce along in the right way.
The challenge was determining what steps to take, both immediately and in the longer term, to ensure that its people continued to perform as well as the company’s products (Scott et al, 2006). Demographic Changes. Harley-Davidson has a customer base with certain similarities and taste in motorcycles if nothing else. But the story now being promoted is the male baby boomers are aging enough with the first wave moving into their sixties, that buying a new Harley may not on their list of things to do.
News stories suggest hip and knee replacements are pervasive and make you think once you hit sixty, the whole world falls apart (Crowe, 2008). Obviously, most sixty plus riders aren’t going to be putting their knees down unless they’re changing their oil, but is that a problem for Harley-Davidson? That sounds like the huge baby boom generation won’t be buying sport bikes as often but you can ride a big Harley just as well as a Gold Wing and I don’t see any suggestions of Honda losing touring bike sales in an aging market. Some older riders will eventually stop riding and younger riders will pick it up.
But, still, this is an aging market a problem. (Crowe, 2008). This could be a problem if Harley-Davidson focuses on serving only the male, primarily white, baby boomer market but recently Harley-Davidson has been trying to attract more women riders, just like all of the other companies and motorcycle accessory manufacturers. Other company’s seems to be coming out with riding gear aimed specifically at women and they’ve also been looking into ethnic markets where Harley-Davidson has been a bit weak. Blacks and Hispanics are not seen as often in the Harley crowd and H-D wants to change that.
This is exactly like the auto manufacturers who are more recently targeting cars and trucks to those groups (Crowe, 2008). “Harley has promoted a “Harley-Davidson lifestyle” for a long time, a semi fictional series of images that play in the minds of potential customers to get them to walk into the local Harley-Davidson dealer so they can join in. Does this lifestyle fit the needs or desires of the groups they want to attract? Probably not without a little tweak here and there or even some major revisions and maybe that’s what they need to do (Crowe, 2008). Maybe there s not one story or image that will appeal to enough customers to keep things going and they may have to diversify that image to fit smaller groups. Someone interested in the urban biker scene is unlikely to find a Harley to his liking which is where some Buell derivation might fit (Crowe, 2008). The Vrod family is more likely to attract the drag racing or horsepower and performance crowd. The big Harley Touring rigs always have a market for long range riders and the softail or FXR models appeal more to the chopper or custom type of customer” (Crowe, 2008, p. 1). Although Honda used to have their “You meet the nicest people on a Honda” campaign many years ago, no one tries to fit everyone into a Honda lifestyle because there isn’t one. Honda covers all the bases and as a result sells a lot of bikes. Harley can appeal to most of those same riders, too, as long as they don’t try to force a “one size fits all” strategy on those riders. Harley may have to adapt in the future but not simply because their primary market is aging but because there are fewer homogenous markets for anything anymore (Crowe, 2008, p. 1). New Motorcycle LoansAs low as 6. 59% *Interest rate determined by Beacon Credit Score.
Up to 100% financing, maximum term 65 months. For 66-71 months add . 50%, 72 months available for $15,000. 00 or more add . 75%. Used Motorcycle LoansAs low as 6. 84% *Interest rate to be determined by Beacon Credit Score. Up to 100% NADA Retail + Tax + Title. Terms vary based on age and mileage of vehicle. Social and Cultural. The social factors that affect an organization involve values, attitudes, opinions, and lifestyles of persons in the organization’s external environment. These attributes are developed from cultural, ecological, demographic, religious, educational, and ethnic conditioning (Pearce & Robinson, 2004).
Like other forces in the remote external environment, social forces are dynamic, with constant change resulting from the efforts of individuals to satisfy their desires and needs by controlling and adapting to environmental factors (Pearce & Robinson, 2004). Employees are demanding pay increases, better benefits and incentive plans including flexible hours, telecommuting, lump-sum employee profit sharing, vacation and sick plans, in addition to opportunities for advancement and training (Pearce & Robinson, 2004). Although overall workforce performance was igh in comparison to other motorcycle companies, Harley-Davidson executives knew the company could benefit from a heightened focus on more strategic HR initiatives, such as employee engagement, workforce adaptability and workforce proficiency. To further improve these critical human capital capabilities, HR executives knew they would need to improve their people programs and processes. “Although Framework results revealed that the organization was performing above the average in seven of the 13 human capital processes, executives weren’t surprised to learn that there was room for improvement in six processes”(Scott et al, 2006, p. ). Harley-Davidson needed to address career development, workforce planning, rewards, and recognition, employee relations, human capital strategy, and human capital infrastructure which consisted of HR information systems and transaction processes such as payroll and benefits administration. Harley-Davidson focused on the career development, employee relations, human capital strategy and human capital infrastructure processes first (Scott et al, 2006). All of these processes were less mature and strongly linked to both financial performance and employee engagement.
Many of them were also linked to other critical human capital capabilities the company wanted to improve, including workforce adaptability and workforce proficiency (Scott et al, 2006). External Environment Industry Trends A host of external factors influence a firm’s choice of direction and action and, ultimately, its organizational structure and internal processes (Pearce & Robinson, 2004). A company must ensure the company has the right skill set and the right employees in the right positions. Employees value education and training, in part because they lead to increased compensation and job security.
Providing such opportunities often increases productivity and decreases turnover. Harley-Davidson incorporates this operating strategy in the company’s strategic planning process (Pearce & Robinson, 2004). Harley-Davidson’s strategic decision makers frequently include an employee development objective in their long-range plans. Harley-Davidson Company actively seeks good employee relations. In fact, the company takes proactive steps in anticipation of employee needs and expectations are characteristic of strategic planning.
Harley-Davidson believes that productivity is linked to employee loyalty and to appreciation of managers’ interest in employee welfare. They, therefore, set objectives to improve employee relations. Employees are demanding pay increases, better benefits and incentive plans including flexible hours, telecommuting, lump-sum employee profit sharing, vacation and sick plans, in addition to opportunities for advancement and training (Pearce & Robinson, 2004). Harley-Davidson invested in its people in order to keep momentum high.
The Accenture Human Capital Development Framework enabled the company to take stock of its Human Resource (HR) activities and create a comprehensive human capital strategy for the future (Scott et al, 2006). Harley-Davidson risked losing its competitive edge. The company still had aggressive growth strategies, including achieving greater penetration into markets outside of the US. As a result Harley-Davidson took stock of the state of its HR function and begins using the function to more effectively support the performance of its employees.
If Harley-Davidson was to implement its new strategies and remain on its growth path, it had to bring its workforce along in the right way. The challenge was determining what steps to take, both immediately and in the longer term, to ensure that its people continued to perform as well as the company’s products (Scott et al, 2006). Competitive Analysis. Harley-Davidson started as an idea to take the work out of the bicycle. William Harley and brother Arthur Davidson produced 3 motorcycles in 1903 in Milwaukee, WI.
In 1998, Harley-Davidson’s sales topped $2. 1 billion. America is proud of its only manufacturer of motorcycles and the #1 seller our favorite heavyweight motorcycles (Clutch & Chrome, 2008). “H-D is still headquartered in Milwaukee, Harley-Davidson (NYSE: HDI) offers 24 models of touring and custom cycles. Harley-Davidson markets motorcycles and branded products with an attitude through a worldwide network of 900 dealers. Through Eaglemark Financial Services, Harley-Davidson offers financing, insurance and credit card programs to customers.
Competition: Honda, Kawasaki, BMW, Titan Motorcycle” (Clutch & Chrome, 2008. p. 1). Harley-Davidson is the 100-year-old, leader in manufacturing and selling motorcycles. Good relationships, continuous improvement, employee and management involvement, team building or employee training and empowerment are not just words out of a management book for Harley-Davidson (Bnet, 2008). Only by adopting those management techniques and building a solid base between the management and the Unions/employees made it possible for Harley-Davidson to improve its management processes.
While management’s responsibility is to build relationships with the employees, marketing’s responsibility is to build relationship with the potential and existing customers. The realization of the importance of customer feedback led Harley to develop new marketing techniques (Bnet, 2008). Local Competitor Analysis Chart Product/Service/ValueH-DHondaSuzuki Financial and marketing resources heavyweight motorcycle products and servicesYes. Leader in heavyweight motorcycle industry. Yes. Goldwing motorcycle is a big seller.
No. Currently does not manufacture heavyweight motorcycles. Strong foreign marketing strategies No. Poor foreign marketing strategies. No. Some presence but far behind Harley-Davidson. Yes. However, primarily focuses on sports motorcycles. Products and services appeal to diverse customer base No. Customer base consists primarily of middle ages men. Need to expand customer base to include women, sports riders, and additional motorcycle products and services. No. Current customers are men who can not afford a Harley-Davidson.
No. Current customers are young sports riders. Competitive pricing? No. Harley-Davidson’s are expensive. Yes. Not the same brand, quality, or recognition as Harley-Davidson. Yes. Not the same brand, quality, or recognition as Harley-Davidson. Sports bike. 2007 Revenue Growth 2008 Revenue Growth 2009 Revenue Growth6. 0% 11% 17% 7. 0% Predicting 32% growth in next three years (Visordown News, 2008). -10. 0% Community ReputationHigh. Good reputation through word-of-mouth referrals but relatively low sales in foreign countries.
Medium. Some recognition as a heavyweight motorcycle manufacture. Medium. Some recognition but as a sports motorcycle. Internal Environment The strengths and weaknesses in Harley-Davidson’s operating environment can be viewed in terms of its overall competitive position, reputation, relationships with suppliers, creditors, and its relationship with customers. Strengths include Harley-Davidson’s ability to attract and retain capable employees in addition to a strong financial foundation (Marketline, 2008).
The competitive position of Harley-Davidson in the United States is a current strength. Currently Harley-Davidson does not possess a strong competitive position in the foreign market industry this is a major weakness and threat from the competition (Marketline, 2008). Additional threats, Harley-Davidson has a decreasing cash flow and an over dependence on the United States market. Regulatory compliance and economic slowdown in The United States and Eurozone are also threats and opportunities for Harley-Davidson to address in its’ long term planning (Marketline, 2008). According to the Organization for Economic Cooperation and Development (OECD), GDP growth in the US and Eurozone is expected to slowdown in 2007. While the GDP growth of the US economy is forecast to slow down from an estimated 3. 6% in 2006 to 3. 1% in 2007, the GDP growth in the Eurozone is forecast to decline from an estimated 2. 2% in 2006 to 2. 1% in 2007. More importantly, the US has seen 17 successive interest rate hikes over the past few years leading to the current high of 5. 25%. The WTI oil prices crossed $78 a barrel in July 2006.
A weak economic outlook for the US and Eurozone, two key markets for the company, would put pressure on the revenues of Harley-Davidson” (Marketline, 2008, pp. 86). Harley-Davidson could potentially improve the competitive position of the company through strengthening product differentiation, brand recall, and the attainment of profitable business contacts using enhanced marketing efforts, the formation of strategic alliances with similar firms (horizontal integration) that supply Harley-Davidson with inputs (vertical integration) (Pearce & Robinson, 2004).
Harley-Davidson currently possesses some weaknesses and strengths in terms of its relationship with customers. Harley-Davidson has used consumer surveys and environmental scans to focus on what the consumers want. Harley-Davidson knows customer satisfaction translates to customer demand, a key factor that drives company revenues (Marketline, 2008). The most influential tool used to measure customer satisfaction is personal recommendations and repeat business, both of which have shown some favorable results for the company in 2007.
However, Harley-Davidson could benefit from the development and use of a formalized metric to determine changing customer satisfaction levels as a means to increase customer demand for Harley-Davidson’s products and services (Marketline, 2008). Over the next three years (2008-2010), Harley-Davidson’s goal and objective is to increase its foreign market share by 20 percent and maintain a 95 percent or higher customer satisfaction ratings of both new and existing customers (Marketline 2008).
Harley-Davidson has strengths and weaknesses in terms of its employees’ skills, experience, education and availability. “Operational excellence involves employees and suppliers continuously pursuing process improvements and innovation (Marketline, 2008). “Over the last several years, Harley-Davidson has made considerable strides in manufacturing efficiency and automation and believes there continue to be opportunities for improvement in these areas and across other parts of the organization.
The Company also expects that other factors such as increased production, quality, product mix and pricing for features will continue to have a positive impact on margins” (Marketline, 2008, p. 2). As Harley-Davidson executes its plans, the company believes its business model will continue to generate cash permitting it to invest in the business, fund future growth opportunities and return value to shareholders. The Company’s expected annual capital expenditures are provided under “Liquidity and Capital Resources” (Marketline, 2008). Even though Harley-Davidson’s sales fell 7. % to $1. 39 billion due to a 14. 2% decline in United States retail sales the foreign sales increased by 45. 9%. Exports account for 27% of overall shipments. For Q1, the company expects to ship between 68,000 and 72,000 Harley-Davidson motorcycles, compared to 67,761 units Q1 of 2007 (Destanova, 2008). The chart below shows Harley-Davidson’s 2007 earning for both import and export sales and revenues. Sequential Earnings Growth | Quarterly Earnings by Year | Quarterly Earnings Growth by Year Source: Company filings Q1:March Q2:June Q3:September Q4:December
Long-Term Objectives Establish long-term mutually beneficial relationships with its suppliers. Through these relationships Harley-Davidson is able to gain access to technical and commercial resources for application directly to product design, development, and manufacturing initiatives. Sell/discontinue operation of the transportation vehicles segment which will lead to cash flow for the company. Harley-Davidson’s long-term objectives address market share growth, increased customer satisfaction, product expansion, and an inclusive work environment.
Following the analysis of Harley-Davidson’s remote, industry and operating environments, Harley-Davidson created three long-term objectives that aligned with the potential opportunities in the external environment and strengths in the internal environment. These objectives also help measure the success of the strategic plan. The long-term objectives address market share growth, customer satisfaction, and employee engagement/involvement. 1. Attain market share growth, as measured by the company’s total sales, of 40% in year one and 25% each year thereafter for a period of three years.
Harley-Davidson is currently limited by lack of demand for heavyweight motorcycles in the foreign market. In times of slow industry growth, Harley-Davidson can increase market share growth through investing in marketing activities to improve brand recall and to attain an increased number of profitable business contacts (Destanova, 2008). 2. Attain stronger presence in various demographics by offering motorcycle products and services such as wearing apparel etc. by partnering with other companies that can offer other recreational amenities.
This action will increase consumer satisfaction, as measured by customer satisfaction surveys, of 95% or higher each year for a period of three years (Destanova, 2008). Existing customers affect the motorcycle industry through repeat purchases. Since Harley-Davidson currently relies primarily upon word-of-mouth recommendations, improved customer satisfaction with Harley-Davidson’s services would most likely translate to improved recommendations and increased frequencies of company recommendations (Destanova, 2008). 3.
Increase employee engagement as measured by the LEAN organization’s Web Site for “Team Based Business Improvements Plans (TBBI’s). Each organization will be accountable to have at least one team based project and reach a level two maturity stage by year end. Level two teams achieve a cost savings of 10% or greater in year one and each organization has to implement two TBBI’s for years two and three TBBI’s for year three. Since employee engagement is associated with treating employees like partners providing ownership and accountability this is the right strategic plan for Harley-Davidson to implement.
If employees feel engaged there is inclusion, which improves employee productivity and morale. This process also includes additional training and development to ensure the employees possess all the necessary skill sets to perform their jobs at a high level of accomplishment (Destanova, 2008). Strategic Analysis and Choice SWOT Analysis Based on the SWOT analysis: strengths (S), weaknesses (W), opportunities (O), and threats (T) of the company’s external environment, a SWOT chart can be populated as follows: SWOT Table
Strengths •Long term agreements with suppliers •Cash flow pay back debt and have cash available •Solid relationship with employees •Strong community interactionWeaknesses •Poor marketing strategies foreign market •Generating new customers •Buyers getting older Opportunities •Increase market share moderate/high growth in motorcycle industry. •Create plan for generating new customers (female, youth, sports, etc. ) •Introduce H-D line of products enhance company’s image. •Increased environmental awareness Joint venture/Acquisition Threats •Competition. •Price (Harley’s expensive). •Losing customers, catering to one demographic (middle aged males). SWOT Matched Pair Analysis Following the SWOT analysis, Matched Pair analysis (MPA) was used to create action pairings between the various SWOT results. Analysis of these pairings can then provide Harley-Davidson with valuable information to be used in the analysis and choice of one or more grand strategies. Internal factors —-> External factors | | /Internal Strengths:
S1 Long term supplier agreements S2 Cash flow debt payback S3 Strong employee relationships S4 Strong community interactionInternal Weaknesses: W1 Poor foreign marketing strategies W2 Generating new customers W3 Baby Boomers getting older/reduce repeat customers External Opportunities: O1 Grow market share motorcycle industry O2 Create plan for generating new customer demographics O3 Joint venture/Acquisition S1/O2 Develop long term supplier agreements S2/O1 Develop new line of motorcycle products
S3/O3 Saturate market with name recognition/employee partnership W1/O1 Develop effective foreign market strategies W2/O2 Develop a marketing strategy for women and youths W3/O3 Develop plan to offer lightweight motorcycles in addition to heavyweight motorcycle. External Threats: T1 Competition may enter market T2 H-D’s too expensive T3 Primary customer middle aged male S1/T1 Acquisition of another company could increase cash flow S2/T2 Reduce H-D pricing remain competitive S3/T3 Develop strategic plan for expansion products/employees
W1/T1 Introduce H-D products to foreign markets in one year W2/T2 Develop products for multiple demographics (women, couples, youth) less expensive W3/T3 Tailor products to appeal to existing/new customers SWOT/Matched Pairs Conclusion In supporting the company’s mission and vision of fulfilling dreams through the experience of motorcycling, by providing motorcyclists and the general public an expanding line of motorcycles and branded products and services in selected market segments the SWOT and MPA analysis highlighted several viable action pairings (Pearce & Robinson, 2004).
First, by using market development which ranks second only to concentration as the least costly and least risky of the 15 grand strategies Harley-Davidson can market its present products, often with only cosmetic modifications, to customers in related in market areas by adding channels of distribution or by changing the content of advertising or promotion (Pearce & Robinson, 2004). Market development allows firms to practice a form of concentrated growth by identifying new uses for existing products and new demographically, psychographically, or geographically defined markets (Pearce & Robinson, 2004).
Harley-Davidson can invest in foreign marketing activities as a means to reduce the threats of increased competitor density and to improve Harley-Davidson’s competitive position and brand recognition. Entry into foreign market will also mitigate the threat of pending restrictive environmental regulations. Another action pairing would be to form additional strategic alliance with key suppliers to reduce costs, while improving access to a larger number of business contacts (Pearce & Robinson, 2004).
There are two prominent sources of competitive advantages they are company cost structure and its ability to differentiate the business from its competitors (Pearce & Robinson, 2004). Harley-Davidson can use differentiation as a source of competitive advantage. Following differentiation generic strategy and market development, Harley-Davidson can use marketing and other value-building activities to reduce competition, improve brand loyalty, increase revenues, and accommodate consumers regardless of price. Strategic Analysis & Choice
Based on the MPA performed above and the use of the Grand Strategies Cluster Matrix (GSCM), there appears to be at least two viable grand strategies that Harley-Davidson can implement. Due to Harley-Davidson’s weak foreign competitive position and the weak market growth, Harley-Davidson finds itself in quadrant three of the GSCM where five possible grand strategies are listed: turnaround, concentric diversification, conglomerate diversification, divestiture, or competitive position and, even more exciting, this strategy would provide Harley-Davidson with access to a rapidly growing market (Pearce & Robinson, 2004).
Plan Goals and Implementation The SWOT analysis revealed that Harley-Davidson has been focusing on the internal improvements of the company at the expense of losing market share from 77. 5% to 23. 3% (Term paper, 2008). Due to the results of the analysis Harley-Davidson saw the need to refocus on the marketing plans adopted by the company to increase future sales. It is recommended that for the next three years the company should focus on sales growth strategies.
For the first year, Harley-Davidson should focus on developing consumer base in developing countries such as India and China as these are countries that both have good infrastructure for bike production as well as newly acquired taste for luxury goods (Term papers, 2008). “The customer base could be generated by appealing to their aesthetic taste and emotional ties with owning goods that reflect the liberation attitude and the free spirit” (Term paper, 2008, pp. 5).
In the second year, Harley-Davidson should focus on the acquisition of customers from secondary circles such as the Harley club, employee’s participation, suppliers, and the general public (Term papers, 2008). Through Harley-Davidson’s reputation a referral system has been established. Harley-Davidson should capitalize on this strategy to generate more sales by taking a survey of both American and foreign consumers. This way the company could gauge the new customer profile in order to cater to their needs (Term paper, 2008).
Year three the company should capitalize on the innovation by introducing less power bikes that could cater to the class of customers who cannot afford the high price of Harley-Davidson. “Reduction in cost of production could be achieved through outsourcing to other countries like China and Malaysia. This would also enable the company to achieve higher sales growth target” (Term paper, 2008, pp. 7). ObjectivesGoalsAction ItemsTimelinesWho is Responsible
To improve the company’s foreign competitive positionIncrease company revenues by 40% in year one and 25% each year thereafter Use marketing promotions and advertising to attain increased brand recall, access to increased market, and ease of entry into foreign market. -Select a marketing consultant to work with in the creation of marketing strategies. -Develop a marketing plan. -Start implementation of marketing plan. -Revise marketing plan and implement new plan. -Revise marketing plan and implement new plan.
June, 2008 to March, 2009. October, 2008. March, 2009CEO Executive Management Team Marketing Consultant Develop a demographic entry strategy. July, 2009Marketing Consultant Get approval for new marketing campaign. October, 2009Marketing Invest resources to launch new marketing campaign. December, 2009CEO & Board To increase the frequency of customer referralsIncrease and maintain customer satisfaction at 95% or higher Implement the use of customer relationship management (CRM) techniques in everyday practice. Form a customer service team, using a combination of management and non-management staff, to brainstorm ways to improve product recognition and desire. June, 2008 August, 2008. CEO & Board Marketing Team Partner with another motorcycle company to provide greater selection of motorcycle products and services. September, 2009CEO & Team Formalize partnership. June, 2010. CEO & Board Monitor progress through the use of customer satisfaction surveys and increased sales. December, 2010 and quarterly thereafter. CEO & Board To improve employee morale/employee involvement teams Decrease employee turnover to