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The Harley-Davidson Company’s Analysis Case Study

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Updated: May 17th, 2021

Characterizing HD’s core challenge(s), importance, urgency, etc., as of 2005

Harley-Davidson’s challenges are characterized by an aging consumer base in the midst of booming and affordable brands such as Yamaha and Honda. The American company, which has created a legendary pathway for the global motorcycle industry, is known for its emphasis on building customer loyalty. However, it has encountered many challenges that have created a point of weakness in the sale of its heavyweight motorcycles. With its consumer demographic gradually aging, its competitiveness has greatly fallen, especially amongst the younger riders.

There is a need to expand its overseas market with a view of improving profitability. Besides, Harley-Davidson has to come up with new brands that are more desirable and affordable for customers of all age brackets. In the accomplishment of this task, the company should not underestimate the performance and consistency of the Japanese stocks that are offered at a comparatively low price.

With the drastic decrease in the stock price by about 17-percent following the altered sales projection in 2005, the company needs to implement an alternative marketing strategy. The urgency of this decision has become a hot topic amongst the firm’s sales analysts. The aging consumer demographic makes the need to reintroduce new brands little by little to meet ridership demands inevitable.

Qualitatively deconstructing HD’s world with PEST, PORTER, and CRACK

PEST Analysis

Political – The Harley-Davidson brand is widely regarded as an icon amongst the American people. The company has ventured into other markets in Asian countries such as China and India, whose operating conditions are deemed indeterminate. It had also gained about 11-percent of the European market by 2004. However, ecological apprehensions that have risen in such markets have grown into political subjects, challenging its future sales projections.

Economical – The Harley-Davidson Company is currently facing various economic headwinds that have hit its business hard. Although the company survived various harsh economic times, including the great depression, it is still miles away from selling 275,000 units in the home market. This target was only achieved in 2006 after the company reviewed its sales strategy. The stiff competition from foreign European and Japanese motorbike manufacturers has led to a loss of about 80% of the US market. These companies offer enormous discounts that have been backed by the US strong dollar. Due to the company’s need to protect its traditional brand and image, there are no noteworthy markdowns that will be given to its heavyweight motorcycles.

Social – The prime challenge is facing the company is aging consumers. In the US, most of the buyers of the Harley-Davidson brand are couples aged over forty years with an average income of approximately $78,000. The high prices of the brand have alienated the youthful generation and female riders. Research has proven that only 9% of the company’s heavyweight motorcycles are sold to women.

Technological – The difference in technology between Harley-Davidson and other brands has played a key role in the determination of the company’s success in the international market. Although new technology allows for the production of more fuel-efficient and ecologically responsive engines, many customers prefer Harley-Davidson’s exclusive V-engine design that produces a unique sound. For this reason, their brand fails to meet the standards of the European and some Asian markets. Other brands such as Yamaha, Honda, Kawasaki, and Suzuki that are more environmentally friendly have taken up a larger share of the market. With some companies producing more fuel-efficient and quieter heavyweight motorcycles, the Harley-Davidson brand still faces a significant challenge. However, it has gained access to innovative technology through the Buell Motorcycle Company, a move that is likely to improve its traditional design without alienating its customers.

Porter’s Five Forces

The intensity of competition, the threat of new entrants, and substitutions – the Harley-Davidson Company faces competition from other companies, including Suzuki, Yamaha, and Honda, that have also tapped the heavyweight motorcycle industry. All these Japanese manufacturers have differentiated products that target a broad consumer market across the globe. Such companies have gained access to enormous capital and technology; hence, breaking the huge capital investment barrier that hinders them from venturing into manufacturing heavyweight motorcycles. To sustain its business competitively amidst the three brands, the Harley-Davidson Company should be vigilant in product innovation.

Power of buyers – Harley-Davidson mostly sells its products to end consumers who are known for the loyalty to the company’s brand. This strategy creates a meaningfully low financial risk. Despite the high pricing pegged on the Harley-Davidson brand, customers have the desire for the product due to its improved quality and outstanding service experience. This situation has improved the company’s value equation.

Power of suppliers – the company uses a multiple supplier system that monitors the quality and pricing of its motorcycles and spare parts. However, depending on their effectiveness, the company can change suppliers without affecting its rate and quality of manufacturing.

CRACK Analysis

Competitive angle – the Harley-Davidson Company has the opportunity to offer high-end differentiated products that will satisfy the desires of many customers worldwide. Currently, the giant motorbike producer is heavily sponsored by its brand enthusiasts. The company ensures customization of its products with unique accessories increases its profitability.

Relevance window – the motorcycle giant company, has a great market opportunity in the European countries. Indeed, the international leisure motorbike consumer base has outgrown its home market in the US. Nevertheless, there is still untapped potential amongst the youth and women in America where the Harley-Davidson brand is an icon.

Action for growth – the acquisition of the Buell Motorcycle Company has been a key step to innovation. However, there is a need to integrate products targeting the youth and women into the company’s production plans. The demand for lightweight and sporty motorbikes that are affordable is comparatively high amongst the younger consumers.

Clarity of vision – Being an iconic owner of one of the world’s most treasured heavyweight motorbikes, the company is now focused on the improvement of its Harley-Davidson brands with a view of satisfying the desires of diverse consumer segments.

Market opportunity – A sizeable market for the company in both the US and international arena is foreseeable. Currently, it has regained control of 48% of the US market.

Key Performance Ratios and judgment of their financial position as of 2005

Key Performance Ratios and judgment of their financial position as of 2005

In this performance ratio analysis, the current liabilities were assumed to be $1,295,441. A high current ratio shows that the company is financially secure. The 4.23 current ratio shows that the company had fair sales alongside a relative demand for motorcycles.

What are three high-level, stand-alone go-forward strategic options, with the “status quo” being one? What are the pros and cons of each? Which one do you recommend and why?

Strategy 1: Integrate consumer experiences and emotions into brand elements and mechanics – Various studies on consumer behavior show that they have a tendency to go for limited edition products. The Harley-Davidson Company adopts an exclusive culture that has been used for years to boost sales. However, it should focus the design of its motorbikes on the experiences and emotions of its consumers. The advantage of this strategy is that the company will diversify its products and supply to more lucrative markets globally. However, it can be a disadvantage to a company whose core principle is to protect originality and exclusivity.

Strategy 2: Product diversificationFor many years, the Harley-Davidson Company has depended on the baby boomers for the success of its business, alienating the youth and women who find heavyweight motorcycles unaffordable. Product diversification is one of the high-level, stand-alone strategies that will take the company to the next level. This new strategy should focus on providing product designs that are both attractive to women and affordable to the youthful generation. A major disadvantage of this strategy is that it fails to fit the culture of Harley-Davidson.

Strategy 3: Pursue both short-term and long-term partnerships with European and Asian countries – Its working capital is continually declining amidst the increasingly stiff competition from rival companies. The company has not received any support from American financial institutions. However, it has a choice to pursue both long-term and short-term financial relationships with European and Asian countries. This strategy will see its cash flow grow exponentially even during the ongoing economic downturn. The only disadvantage with this strategy is that the company will incur debts that can slow down profitability.

If HD went ahead with your recommendation, would you buy HD stock if money was available? Why or why not? (Just curious!)

Yes. For instance, product diversification will offer an opportunity for a new market niche that can attract considerable profits. Since the youthful generation and women will now gain access to limited edition motorbikes as opposed to the iconic heavyweight models, selling more differentiated, affordable, and yet unique quality brands will compete with other brands provided by companies such as Honda, Yamaha, and Suzuki.

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