Executive Summary
The rate at which the world economy is growing is making companies to adopt management strategies which will enable them to increase their global market share as well as remain competitive and profitable in the global market. This paper will therefore discuss the various ways in which companies are shifting from their traditional means of production so that they can manage to catch up with the advanced means of production which will enable them to increase their productivity and competitiveness.
The paper will focus on the operations of Harley-Davidson and the manner in which the company has been able to cope with the growing competition in the motorcycle industry. The paper will also illustrate the complexity that is associated with the global market and how it has influenced the performance of Harley-Davidson. The paper will show the manner in which Harley-Davidson has adopted different management strategies that have enabled it to recover from the effects of the 2008 financial crisis.
The paper will also stipulate the inefficiency that is associated with Harley-Davidson production process. It will also show the various strategies that Harley-Davidson should adopt in order to increase its competitiveness in the global market. The paper will also demonstrate how Harley-Davidson understands the competitive nature of the global market and how the company has been able to emerge as one of the most profitable companies in the America.
Introduction
With the rate at which the world economy is growing, companies are being forced to look for strategies which will enable them to increase their market share and hence remain competitive and profitable. Many organizations are being driven out of business because of their inability to adopt the production processes which are being adopted by the modernized companies.
Therefore, in order for organizations to boost their competitiveness, they are implementing strategies aimed at improving their marketing, management, and manufacturing techniques (Dess, Lumpkin, & Eisner, 2009).
With the complexity that is associated with the global market, businesses are implementing measures to enable them learn about effective business management strategies so that they can manage to keep producing products which meet the needs of their customers. Technology is changing together with the global market trends thereby making the tastes and preferences of consumers to change considerably.
As a result, organizations are being forced to design products which meet the tastes and preferences of the modern consumer (Elliott & Percy, 2007). However, they will find this strategy possible if they take time to learn about the needs of the modern customers. Organizations are therefore shifting from their traditional ideas and focusing on developing products that rhyme with the tastes of the consumers in the modern world.
The companies that have been resistant to change are finding it difficult to catch up with those companies which have incorporated technology in their production process. Though shifting from the traditional means of production is an expensive undertaking, it is worthwhile if a company wishes to remain in business for a long time.
There are many companies which have been able to shift from their traditional production processes and they have hence been able to satisfy the needs of their consumers. An example of a company that has been able to shift from traditional means of production is Harley-Davidson.
The company has been in existence since 1963. Since then, the company has been known to provide its customers with products that meet their specifications. The company’s main activities include the manufacture of motorcycles (Gamble & Schafer, 2012). It has therefore been able to design motorcycles tailored for specific markets.
The main classes of motorcycles that the company has been able to produce successfully include cruiser, touring, and performance motorcycles. These classes of motorcycles have been able to meet the different riding needs of the customers (Gamble & Schafer, 2012).
This paper will therefore carry out a case study analysis of Harley-Davidson and illustrate the various management strategies that the company should adopt to enable it to remain a dominant player in the motorcycle industry. The paper will also discuss the various challenges that the company has encountered while trying to take its operations to the international market as well as the effects of the global recession on the profitability and competitiveness of the company.
Harley-Davidson Contemporary Strategy Analysis
Company overview
The revenues of Harley-Davidson declined significantly as a result of the economic recession that hit the US major markets between 2008 and 2009. The effects of the economic recession declared many people jobless while the purchasing power of the consumers also reduced significantly. The international market was also hesitant to purchase products from the US thereby reducing the number of motorcycles that Harley-Davidson sold to the overseas markets (Stermer, 2007).
The effects of the global recession made the demand of motorcycles to reduce by 12.7 per cent. This reflected a 15.1 per cent reduction in the revenues that the company had made the previous year. This is an indication that the stability of the financial market plays a very important role in ensuring that the sales of a company remain constant. With the credit crunch that was encountered in 2008, Harley-Davidson was forced to finance its operations using loans (Schembri, 2009). This made the liquidity of the company to go down significantly.
Harley-Davidson as a very profitable company
Though Harley-Davidson is one of the most profitable companies in the world, the company has not been effective in its production processes. Since its establishment, the company has always been faced with the problem of insufficient production capacity. It has therefore not been able to meet the demands of its customers. This is a major weakness for any business enterprise. Customers of a company should not be made to wait for a long time for the products they demand to be processed (Schembri, 2009). However, Harley-Davidson has been unable to meet the demands of its customers. The delay in the production process has therefore made the company to lose a large number of customers. Harley-Davidson customers are forced to look for other companies that have the ability to supply the products that they demand in time (Stermer, 2007). Therefore, to be able to retain its customers, Harley-Davidson needs to increase its production capacity to enable it supply its customers with high quality products when they demand them.
Consolidating plants
It is important for an organization to ensure that its manufacturing plants are consolidated at a common location in order to reduce the costs of production and also to improve the efficiency of the production process (Smit, 2000). However, the manufacturing operations of Harley-Davidson are dispersed. For example, the company manufactures its engines in Milwaukee and Wisconsin while the engines are assembled in York, Kansas City and Missouri (Fred, 2008).
Therefore, in order for the company to cut down on its costs of production, it needs to develop a single facility which can manage to merge the engine manufacturing and assembly operations. This way, the company can be able to achieve a cost leadership advantage thereby enabling it to increase its market share significantly. However, because of the company’s inability to keep its costs of production down, Harley-Davidson has been unable to expand the sales of its high-priced motorcycles outside the US market.
Participating in riding activities
In order for motorcycle companies to improve the riding experience of their customers, it is important for the managers and employees of different organizations to participate in organized riding activities together with their customers. This gives the customers a feeling that the products they purchase will meet their needs (Hitt, Ireland, & Hoskisson, 2010).
As a result, Harley-Davidson participates in HOG activities to enable it communicate with its customers (Cooney, 2005). This way, the managers and the employees are able to interact with their customers thereby convincing them about the importance of purchasing motorcycles from the company. These kinds of activities therefore serve as marketing tools for the company.
Efficiency in the manufacture of different types of products
A company should be efficient at manufacturing all types of products which can enable it to capture a substantial share of the market (Hopkins, 1999). However, Harley-Davidson is only efficient at manufacturing super heavy motorcycles but it is not able to design small bikes. This is an indication that the company is weak in terms of implementing certain production processes.
In addition, it has been noted that the company is not able to incorporate research and development in its production process. The company also limits its ability to invest in new technology. The recent drop in the market share of Harley-Davidson can therefore be attributed to the technological backwardness of the company (Neghina , 2009). Technological backwardness is therefore a major issue that the company needs to address in order for it to increase its market share.
Importance of technology
In order for a company to emerge successful in the global market, it needs to make use of the advancements in technology to enable it design products that are appealing to the customers’ eyes. Technology also facilitates the manufacture of quality and efficient products. It is therefore important for Harley-Davidson to invest in up-to-date means of production to ensure that the products it produces are efficient and that they respond to the needs of the customers.
For example, it is true that the market share of Harley- Davidson motorcycles in Europe was the lowest in the year 2007 compared to the market share of Honda, Kawasaki, Suzuki, Yamaha and BMW (Hopkins, 1999).
This is because the customers in Europe are more sensitive to technology while the consumers in the US market believe that Harley-Davidson incorporates the American culture in its manufacturing process. Therefore, in order for Harley-Davidson to increase its market share in the European region, it needs to make use of technology to enable it customize motorcycles for the European market.
New Models
A company can secure a significant market share by providing its customers with new models. Once new products are introduced in the market, the existing customers are the first to purchase the new models (Hitt, Ireland, & Hoskisson, 2010). Harley-Davidson is well known for introducing new models in the market. As a result, it is able to increase its sales revenue and market share. However, this is not a very effective strategy because not all customers stand ready to replace their old models.
Therefore, the introduction of new models alone may not enable the company to increase its revenue and market share to the levels that is desires. To increase its market share therefore, it is important for the company to ensure that the new models it introduces into the market incorporate the latest technology. This would motivate the customers to purchase the products and hence boost the company’s profitability.
Emphasis on comfort
The products that consumers purchase should be able to offer them comfort. It is therefore important for companies to design products which offer customers comfort while using them. Companies should therefore customize their products in a way that meets the specifications of the customers (Schembri, 2009).
To increase the sales of its motorcycles therefore, Harley-Davidson customizes products for the customers who need certain specifications. Customers are therefore able to gain maximum satisfaction while riding the motorbikes. This strategy has enabled the company to win over a significant number of customers.
Distribution networks
The distribution network of products plays a very important role in determining whether an organization can manage to deliver products to its customers on a timely basis and at an affordable price. The channels of distribution used determine whether the customers can manage to gain access to the products that a company produces.
Therefore, it is important for an organization to ensure that the distribution network it adopts makes it easy for the customers to access the products at a cheaper price. It has been noted that Harley-Davidson competitors implement distribution networks which are less costly and more efficient in Europe.
As a result, the competitors have been able to acquire a larger market share in Europe because of the efficacy of their distribution networks (Cooney, 2005). Therefore, in order for Harley-Davidson to market its products in Europe successfully, it needs to carry out a study about the European market and determine which distribution network to implement.
After sales services
There are certain services that a business is supposed to offer in order to make people trust in the products that the organization produces. To ensure that customers keep coming back for more products, the management of Harley-Davidson ensures that the customers are accorded pre and after sales services. This way, the customers are able to get all the information and help that they need to begin using the products.
In addition, Harley-Davidson offers test-ride services as well as rider instruction classes. The company also rents motorcycles to its trusted customers (Stermer, 2007). As a result, the company has been able to win the confidence of the customers thus making the customers to trust in the products that the company manufactures. This state of affairs has led to an increase in the market share of the company especially in the US.
Addressing complexity
The process of manufacturing motorcycles is complex. To address this complexity, Harley-Davidson created the Harley-Davidson University whose goal was to ensure that the employees within the organization became competent in dealing with all the products that the company manufactured. Since then the company has been able to boost the knowledge of its employees by showing them how they can come up with high quality products that would meet the needs of the customers.
The company has therefore been able to manufacture motorcycles which are very competitive in the world market. It is therefore the responsibility of an organization to invest in projects which can boost its production potential. Customers are therefore confident in the motorcycles that Harley-Davidson manufactures because they are sure that the motorcycles are manufactured by experts.
Diversification of business practices
Before the credit crunch which hit the US market in 2008, Harley-Davidson used to give financial services such as supplying credit, insurance and extended warranties to its dealers. This activity used to generate huge profits for the company. For example, the profit that was generated from this activity was approximately 12 per cent of the total revenue. However, the credit crunch made it difficult for the company to securitize its customers loans (Neghina , 2009).
Therefore, it is true that though diversifying in various profit generating activities in a business enterprise is a commendable idea, it is important for an organization to ensure that it can manage to secure its customers from uncertainties. This way, the customers would be confident in the operations of the company and hence trust in the products it produces.
However, the inability by Harley-Davidson to secure the loans of the customers made the customers believe that the company was not strong enough to address their needs. This state of affairs made many people to stop believing in the quality of the products that the company offers thus leading to a reduction in the company’s sales.
Expanding operations to overseas markets
Any company that wishes to gain recognition in the global business environment should expand its operations to overseas markets. This would increase the market share of the company and its sales revenue. However, Harley-Davidson has concentrated so much on the American market.
The European market share is very small. To make it easy for Harley-Davidson to acquire a substantial portion of the European motorcycle market, the company should establish headquarters in Europe which would be responsible for monitoring all the activities that the company undertakes in the region.
The company should also expand its overseas dealership network. For example, Harley-Davidson made $1.75 billion non-US sales in 2008. These sales reflected 31 per cent of the revenue that the company had earned globally (Elliott & Percy, 2007). This is an indication that the markets which are based out of the US also have potential to make the company become competitive.
Company operations should rhyme with objectives
It is the duty of every manager in any organization to ensure that the operations that the organization undertakes are in line with its objectives. For example, Harley-Davidson engages in practices such as Just-in-time scheduling, Total Quality Management, Computer Aided Manufacturing, and devolution of responsibilities to ensure that its productivity and efficiency remain high (Hopkins, 1999).
Such practices are effective in that they make it possible for the manager to detect any flows within the organization and hence implement corrective measures before any serious damage can be realized.
Positive relationship between employees and managers
The manner in which employees relate with their managers determines whether the productivity of an organization rises or falls. The most successful organizations are known to facilitate effective communication between the employees and the managers. The employees are given the freedom to express their opinions on how they feel that their organization should be operated.
Therefore, to ensure that the employees remain motivated, Harley-Davidson ensures that the managers and the employees are able to exchange ideas freely regarding how the productivity of the organization can be improved. This process has been effective in fostering cooperation between the employees and the managers thereby enabling the organization to increase its productivity and efficiency.
Understanding competition
Any company that wishes to succeed in the global market should understand what is meant by competition and how it can cope with it. For example, Harley-Davidson is well known for increasing its product range and geographical scope to capture a large market. However, the major challenge that is facing the company is the rate at which its products are being imitated by its competitors.
In addition, competitors such as Honda, BMW, and Suzuki are known to share technology, marketing skills, engineering capabilities, and distribution knowhow thereby making it difficult for Harley-Davidson to successfully diversify the products that it offers to its customers (Hitt, Ireland, & Hoskisson, 2010). This scenario is more prevalent in the European market because this is where Harley-Davidson has less impact.
Conclusion
From the analysis therefore, it is evident that Harley-Davidson is one of the most successful motorcycle companies in America. Though the company is one of the most profitable companies in the world, there are various key measures that the company should implement to enable it compete effectively in the global market.
The company should ensure that it embraces technology, foster positive relationship between the employees and the managers, diversify its products range, expand operations to overseas markets, give the customers pre and after sales services, lower costs of production, seek loyalty from customers, and ensure that it offers the consumers new products and models. This way, the company will be able to increase its competitiveness in the global market.
Reference List
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