Harley-Davidson: Strategic Competitiveness, Case Study Example

Context

At the top of America’s most powerful American brands, Harley Davidson has reached its iconic status through its high-visibility, long-term campaign that has been characterized by a simple message of value for its clients. In light of this view, there is no brand that exemplifies a non-traditional route direction to brand excellence than the Harley-Davidson motorcycle, an American freewheeling symbol of the road (Baskin, 2013). Twice, in the past decade, at the brink of bankruptcy, the company has undergone significant changes, fueling a great deal of demand. As an American business and cultural icon, Harley-Davidson has managed to survive and thrive from many decades. Through recession, depression, and the two world wars, increased government regulations, high technological advancements, Chinese competition, and the world wars, the company has continued to maintain its operations in most locations as other motorcycle firms fail.

With approximately 6000 employees, nine production facilities, and over 1400 Franchises, Harley Davidson has managed to survive the economic downturn of early 2008. The company is not yet out of the woods as it is struggling with three key issues: (1) the company products are viewed as leisure items. The other concerns are similar in nature as they confirm that the company is finding it hard to manage its target market as the demand for its products continue to change (Pacheco and Demczuk, 2015). Collectively and individual, the highlighted issues are posing significant challenge to the success of the company. In light of this view, there is the need for the company its ability to create value for its customers and give its stakeholders what they need.

While goals are being set, there is an increased need for the company to adopt a sustainable change. Presently, the average age of a Harley-Davidson is increasingly approaching 50. Currently, the price of a Harley-Davidson bike is more than the price of a mid-sized equipped car, a factor which places the company’s products product beyond the reach of the young population.

Social Responsibility

The company has over the years increasingly become sensitive towards the interests of environmentalists as a group of its stakeholders. As stakeholders, these environmentalists are of great significance since they continue to push the business towards contributing to environment conservation and protection. Partly, the Harley-Davidson Foundation addresses the interests of these stakeholders. For instance, the Foundation has over the years continued to give financial support to charitable organizations, which have initiated environmental conservation programs. As part of the company’ corporate social responsibility efforts, Harley-Davidson has also initiated strategies such as the creation of sustainability strategy through maintaining partnerships with organizations such as the Nature Conservancy with an aim of supporting environmental conservation initiatives. Besides, the company has also implemented new technologies with an aim of ensuring there is an optimal efficiency, which minimizes the environmental impact of its business practices to the environment.

External Analysis

Competitive and environmental forces that impact the organization

Critical factors in competing successfully in the industry

Internal Analysis

PESTLE Analysis

The importance of the Harley-Davidson PESTEL analysis is that it highlights major opportunities for global growth as well as product improvement based on external factors within the macro-environment. Currently, company stands at the bastion of the chopper motorcycle culture, with annual revenues which exceed 5billion USD. Currently, the company is considered to be a stable and profitable business. This analysis will show that the company has significant opportunities to improve its resilience and grow its business. On the other hand, the PESTEL analysis shows the need of a strategic adjustment basing on the external factors within the company’s micro environment.

Political Factors

Political environment plays an important role in Harley-Davidson’s business. The influence of the government is evaluated under the PESTEL/PESTLE Analysis. External factors affecting Harley-Davidson’s macro-environment include free trade agreements {threat and opportunity}, e-commerce support {opportunity}, and security {opportunity}.  The free trade agreements encourage the expansion of business; e-commerce promotes marketing of business products while security enhances business transactions in a peaceful environment. Therefore, the external factors are favorable for Harley-Davidson macro-environment.

Economic Factors

For Harley-Davidson business to thrive in the market place, the economic aspect of the macro or remote environment must be addressed. The external economic aspects appropriate in Harley-Davidson’s business include: economic stability of leading markets, the economic development in developing countries, and stable accessibility to credit.

Social/Sociocultural Factors

Sociocultural changes can greatly impact the macro or remote environment of Harley-Davidson’s business. This leads to the consideration of the social conditions based on PESTEL Analysis. The social cultural external conditions include: the increased consideration of leisure activities {opportunity}, growth in the number of women participating in chopper biking {opportunity}, increased awareness on green technology (threat and opportunity).

Technological Factors

The emerging technologies have been regarded as the company’s most essential aspects of business operations.  The most significant technological factors for the company include the ever-increasing availability of green technologies, the moderate R&D investments as well as the ever-increasing computing technologies in vehicles.

Environmental Factors

The company’s management also understands the importance of addressing environmental issues to attain a competitive edge in the marketplace. The key ecological factors that the company needs to put into consideration include the low-carbon lifestyle, issues that revolve around climate change, as well as the ever-increasing interest in business sustainability.

Legal Factors

There is the need for Harley-Davidson to meet the outstanding legal requirements. Currently, the ley legal factors that the company needs to put into consideration include the expansion of the existing emissions regulations, the need to adopt environment protection laws, as well as the closing the loopholes that exist in the international patent laws.

Competitive advantages and related strengths of the organization

With regards to the strategic issues at Harley-Davidson, there is the need for the company place an emphasis on guidelines provide by the Institute for Fluid Power Drives and Control (Baskin, 2013). For the company to be able build a loyal customer base, the strengths should be regarded as the most important factors of creating a strong brand image. These factors should be comprised of both the long-term as well as the short-term goals to keep them profitable and significant to the company.

As an advantage, the company should take is the large and ever-increasing market of young riders and women. In their report, Pacheco and Demczuk (2015) confirmed that the company has, over the years, continued to increase its 12 marketing efforts towards young riders and women. With respect to the positive outcomes of this approach, there is the need for the company to continue utilizing these marketing efforts with an aim of achieving growth in these demographics (Das & Ara, 2014). Another important opportunity that the company could make use of is the ever-increasing strong demand of Harley motorcycles, overseas. With respect to this view, the company has established at least 100 dealerships oversees with an aim of increasing the international sales.

Lastly, a strategic threat to the company is that the company’s bikes are considered to be luxuries and that with the recent recession, consumers have less disposable income. Besides, the ageing population serves as an eminent threat to the company as the company’s customer base of comprised of middle aged men. Basing on the fact that the company has begun to make marketing efforts to other market segments, this threat could be minimized.

Competitive Deficiencies and Related Weaknesses of the Organization

One of the greatest company weaknesses that must be minimized is the company’s effects of the past marketing approaches towards the middle-aged men (Catulli, Cook & Potter, 2016). Despite the fact that these efforts have been made in advertising approaches that have been aimed at the new markets, the company’s efforts need to grow and continue to maintain and achieve success. The decreasing liquidity ration as well as the falling sales is another weakness that needs to be minimized. If the company addresses this weakness, the result will initiate a positive response for the company in the future.

Factors to Be Addressed by the Organization to Maintain its Competitive Advantage

One of the most significant marketing strategies that the company has adopted in the recent past was the creation of the Harley Owners Group, commonly known as HOG. The relevance of the approach is that it allows the company owners to network as well as share experiences through rallies, rides, as well as other related events Pacheco and Demczuk, P. G. (2015). Another effective and promising strategy that the company created was the Rider’s Edge. Rider’s Edge provided lessons both for the advanced as well as basic skills of motorcycling (Baskin, 2013). In this strategy, 35 percent of the students were young adults and 37 percent of those who have enrolled are women. The adoption of this approach is an indication that the company’s strategy serves as an effective marketing tool for the newly targeted segment.

In the early 90s, the company also started to purchase an interest in the Buell motorcycles with an aim of breaking into the motorcycle racing market (Zarco & Ben-David, 2015). The intention behind this move was to produce Buell racing motorcycles, which were manufactured with the company’s engines for performance. Due to low levels of profitability, the relationship did not last (Zarco & Ben-David, 2015). As a result of this factor, the company went through reconstruction process, exiting the relationship it had with Buell. Later in 2009, the company announced its intentions of expanding into the Indian market as a part of its international expansion strategies Pacheco and Demczuk, P. G. (2015).

SWOT Analysis

Strengths

This section will highlight the company’s key strengths.

• With regards to the financial analysis, Harley-Davidson has over the years calculated the overall majority in controlling the motorcycling market. By the year 2011, Harley-Davidson has gained control of over 70 percent of the motorcycles markets (heavy bikes) across the globe (Baskin, 2013).
• Harley-Davidson is characterized by a dual income source. While one of the income sources come from the manufacture of motorcycles, the other is derived from providing financial services (Hitt, Ireland & Hoskisson, 2012). With respect to this view, it is worth noting that the company’s business is conglomerate and diversified in nature as it operates in two entirely different industries.
• Harley-Davidson is in good business terns with its suppliers and as a result the raw materials of the company’s products are of high quality, a factor the company an additional competitive edge.
• Harley-Davidson is the only brand which manufactures heavyweight motorcycles not just in the US, but across the globe as well.
• The company has a strong brand, which has established the image of strength and freedom in consumer’s mind.
• Harley-Davidson’s Buell Riders Adventure Group was formed with an aim of supporting the brand as well as engaging customers to leverage their fidelity standards.
• The company has a strong long-term relationship with its employees.
• The company has been enlisted in the fortune 500 companies.
• Customer loyalty has been considered to be greatest strength to the company.

Weaknesses

This section provides a discussion on the company’s weaknesses

• Despite the fact the company is well known for its high quality motorcycles, its products are quite expensive when compared to competitors, who tend to sell low-priced motorbikes.
• Despite the fact that the company still stands out in the US, it has increasingly continued to lose its Europe market. As depicted in Pacheco and Demczuk, P. G. (2015), there will be a decreased demand of heavy bikes as the company is experiencing a constant mismatch of supply and demand, which tends to disturb the manufacturing process.
• The company lacks a steady market, especially in the European market.
• Poor techniques of marketing adopted by the company.
• The company’s Bikes have significantly been associated with hooliganism and crime.

Opportunities

This section highlights the key opportunities for the company.

• The company has an increased demand of its motorbike in Europe. For this reason, there is an opportunity for expansion into the European market.
• Women and young people have emerged as the new target market for the company’s products.
• The international market is broader when compared to the US market.
• The company has an opportunity even in regions with low levels of economy since bicycles are generally considered to be cheaper means of transportation.

Threats

This section provides an analysis of the threats that the company faces.

• Since Harley is an international company, it is worth noting that it is basically exposed to many threats when compared to other small companies.
• Recently, people are increasingly buying their means of transport that are economical, cheap and not very glamorous. None of mentioned aspects represents the company’s products. With respect to this view, it is worth noting that, in future, the company will be left with a very narrow target market.
• Over the years, the motorcycle industry is facing increased competition. With respect to this view, the market is increasingly demanding for cheaper motor cycles. With respect to this view, there will be a need for the company to reconsider its prices.
• The increased environmental concerns also are forcing to adopt environmentally sustainable manufacturing approaches to remain active in the industry.
• The European market continued to put in place stiff standards for foreign companies.
• Due to the high costs of production, the company has very low profit margin in most of its product.

Conclusion

With regards to the company’s SWOT analysis, it is worth noting that the company can take advantages of the opportunities that have been identified in the market by utilizing its strengths to its advantage. The company can significantly increase its marketing efforts by increasing the customer base through reaching out to the untapped market. For instance, in the year 2000, 15000 motorcycles were purchased by women in a year. Within five years, the sale of these motorbikes jumped to over 3000 motorcycles in a year (Catulli, Cook & Potter, 2016). By 2006, the women accounted for at least of all bikes in the US, not including the accessories as well as merchandise. The dramatic increase of the company’s sales accounted to at least 3000 million USD for the company, and this trend is expected to increase.

Financial Analysis

Amid disappointing sales, the company stock price has decreased by a third from 2014, while its market in the US slipped to 52% in the third quarter from its initial 56%, two years before.  With respect to this view, it is worth noting that the recent recalls have not helped in improving the company’s financial status.  As evident in the graph, the company’s shipment of motorcycle has not been steady.

Fig. 1 A graphical representation of the company’s fluctuating shipments

With Respect To The Company’s Performance, It Is Worth Noting That The Company’s Profit Ratios Have Been Constant Through 2015, Despite The Decrease From 2008. However, The 2014 Ratios Sill Show That The Company Has A Strong Position, Which Will Help In Covering Short-Term Obligations (Zarco & Ben-David, 2015). Despite The Company’s Success Over The Years, High Debt-To-Equity Ratio Was Noted. The High Debt-To-Equity Ratio Was Calculated At 3,34. This Ratio Is Considered To Be High Above The Industry Average Of .88 (Zarco & Ben-David, 2015). With Respect To This Financial Information, It Is Worth Noting That The Company Has Borrowed A Borrowed The Highest Percentage Of Its Financing When Compared To Other Companies In The Industry. For Instance, In The Year 2009, The Company’s High Debt-To-Equity Ratio Was Close To The Industry Average. Because Of The Ratios, It Is Worth Noting That The Company Does Not Exhibit Its Ability Of Generating Profits Funding It Earns From The Sales Of The Company’s Products, Stockholders, As Well As Assets. The Revenue Earned From The Sale Of Motorcycles As Well As The Related Parts Has Been On The Decline Since 2008, Thus Indicating That The Company Is Having A Slow Growth.

Business Strategy

Harley Davidson uses a combination of Low-cost Leadership and Differentiation business strategies to attain a competitive edge in the marketplace.

Low Cost Leadership

The Company has adapted a low-cost leadership to attain a competitive edge in the marketplace. Essentially, the organization seeks to distinguish itself from competitors through its perceived quality of both its products and services.

Differentiation

Over the years, the company has utilized differentiation strategy to attain a competitive edge in the marketplace. Through its unique heavy motorcycles, the company tends to stand out in the market as the only producer of these kinds of bikes

Conclusion

Despite the company’s success, Harley-Davidson will be required to take control of its future to remain successful in the increasingly competitive industry. As established in the company’s financial information, it is evident that indeed a few areas need to be addressed. Issues such as the increased debt pose a significant threat to the existence of the company. With the constantly growing loyal customers as well as the company’s strong image, it is worth noting that the company can still maintain strong sales with the help of effective marketing approaches. On the other hand, with company’s declining revenue since 2013, many projects have been put in place to ensure the company remains competitive in the challenging business environment. When effectively utilized, the company’s stability strategy will come a long way in helping the companion conduct an evaluation of its current situation, and effectively prepare for the future. As noted in the paper, the differentiation strategy has been an effective tool in helping the company to sail through the decades of harsh economic realities to its current success.  To improve its international businesses, the company could make use of the licensing agreements when entering into the foreign markets with minimum risks as well as investments. If Harley-Davidson effectively initiates a competitive strategy, it will survive the unpredictable future. Although this paper has provided a competitive analysis of the various approaches that have helped Harley-Davidson to remain successful in the harsh economic realities, there is the need of an extensive research that will provide a deeper understanding of the company’s practices to aid in improvement of the current competitive strategy.