This report aspires to judge the strategic options available to the Harley Davidson organization. Harley Davidson Inc. has two functional segments, motorbike and financing. Harley Davidson Financial Services (HDFS) offers loans, pattern insurance and protection plans to meet the needs with their owners, whilst the street bike portion designs, produces and trading markets primarily heavyweight touring, custom and performance motorcycles. It also manufactures street bike parts and accessories, products and apparel. The company is the only major American developer of motorcycles and operates internationally, with sales generally in North America, European countries, Asia/Pacific and Latin America.
Although in the past the company has experienced expansion and prolonged success, attributed to its brand commitment, in 2009 2009 Harley Davidson (H-D) was required to shut down and combine factories due to the ramifications of the recession and the fall of the US housing marketplace.
Strategic options can only be developed after the company's strategic position is well known. Thus the first section of the article uses tools and principles to find out H-D proper position. In light of the company's strategic position proper options are then created; this is offered in section 2. The third portion of the statement then uses the success requirements model offered by Johnson, Scholes and Whittington in commercial strategy, as a basis to judge the strategic options provided and recommendations are created.
THE STRATEGIC POSITION OF HARLEY DAVIDSON INC.
This section of the report can be involved with understanding the tactical position of Harley Davidson Inc. so that they can formulate proper options for the company. It first identifies the changes that are taking place in the environment and exactly how these changes affect H-D and its own business activities and second the resource strength and capacities of H-D.
1. 1 THE ENVIRONMENT
In order to understand the surroundings which H-D functions in the next frameworks are used with the purpose of helping to identify key issues and challenges and ways of coping with difficulty and change.
1. 1. 1 PESTLE ANALYSIS
In 2009 H-D stood to get from the Economic Stimulus Program, exceeded into legislation by the Barack Obama Administration. "The national stimulus package provides taxpayers breaks if they purchase a new car, light vehicle, RV, or bike. "(Wachter, 2009). Furthermore, Coachman business also a supplier of leisure vehicles, and a competitor of H-D was eradicated from the brand new York STOCK MARKET.
According to the Datamonitor report "the Motorbike Industry segment has had economic growth for days gone by three years, and has only been recently experiencing drop. In 2007 it dropped 2. 3%, yet is forecasted to recuperate 4. 3% by 2012. An economic factor in favor of H-D, despite this decline, would be that the U. S. industry generated total profits of $10. 2 billion in 2007, of which 98. 8% were of motorcycles (not scooters, minibikes, etc. ). Furthermore, within the U. S. market H-D holds the majority of motorcycle sales. Therefore, whilst industry expansion is declining, H-D sales and other motorcycle sales remain carrying on to increase. " (DataMonitor 2007). Amount 1 shows street motorcycle industry expansion versus sales.
11 Figure 1
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The Motorcycly Industry Council (MIC) discloses that leisure product market sectors are facing steep decline however the street bike section though declining, is not doing so at a steep rate. Tim Buche, Chief executive of the MIC says " Overall motorbike sales were down 7. 2%, not nearly as razor-sharp a decline as many other consumer products in today's economy/" (Wasef, 2009).
Socially H-D has a competitive border which is owed to its customer base, strong brand loyalty and demographic developments such as the increse in feminine operators. "This commitment is suggested in the common age of H-D consumers. H-D average consumer buying era is 42 yrs. old and increasing (Gauvin 2005). H-D aspires to increse it consumer demographics, however "although the younger technology below 35 years has put up the largest gains in owernship, the technology that is on the edge of the baby boomer section will be the primary catalyst of development for the industry" (Koncept 2007).
One sociable factor which could negatively impact the deal of H-D motocycles is the stigma that has been mounted on these leisure vehicles. Alot of folks believe that motorcycles are dangerous and this idea is strengthened due to the higher rate of motor bike fatalities and accidents. H-D stands the opportunity of escaping this stigmatisation if the public views their bikes as "cruisers" and not "speed bicycles".
Technologically H-D can take good thing about antilock brake systems. Antilock brakes may help riders avoid fatal crases regarding to a study done by the insurance industry.
1. 1. 2 PORTER'S FIVE Pushes MODEL
"H-D operates within the Recreational Vehicles industry along with five other major competitors: Winnebago, Polaris, Thor, Arctic Pet cat and Sea Products. The top performers within the industry and hold 92% of the marketplace share by amount with a market capitalization of 64. 653 Billion of a complete Industry of 7 Billion" (Yahoo Financing, 2009). "Other firms in different business that are immediate product competitors include Honda Electric motor Company Small, Yamaha Engine Co, Ltd. , and Suzuki Electric motor Corporation" (Datamonitor, 2007).
"The presence of these large multinational organizations with extremely high assets boosts the amount of rivalry within the industry. Because of the small volume of material competitors, the market's revenue is shared between fewer organizations and enhances the degree of rivalry for bottom line revenue. This rivalry causes most competitors to try and diversify their business models through geographical enlargement or vertical development, leading to pursuits and investments in a number of other segments like the automobile, watercraft, commercial and farming equipment areas. " (Datamonitor, 2004).
Threat of Substitutes
"The Recreational Vehicle industry encounters threats from the auto Industry, from general population transportation options and from Bicycles. The risk is largely dependent on the indispensability of motorcycles and other lifestyle products to the end end user "(Datamonitor, 2008).
In most developed countries, motorcycles are leisure items and aren't a necessity and are therefore typically dispensable or substitutable by more "practical" items such as cars or even more "cost effective" means of transport such as bicycles. This insufficient necessity escalates the risk of substitutes and it is one of the major explanations why the exterior market goes into decline during monetary recession.
Overall, buyer electric power is low due to sustainable competitive benefit of product differentiation which is impossible for other brand opponents to match.
Large multinational organizations such as Harley-Davidson can acquire materials from many different international suppliers and face low turning costs due to minimal product differentiation. This presence within the international market boosts Industry leaders' electric power. Overall, supplier electric power is moderate.
Threat of New Entrants
Overall, this danger is moderate credited to high set up costs, high brand reputation, customer devotion and high research and development costs.
1. 2 RESOURCES STRENGTH AND CAPABILITIES
HD has a formal structure that works for the company: decentralized, expert teams and command circles that value employee insight. Programs they use to plan, survey and trail inventory and creation include their Text, Vibration Technology & PdM technology systems, as well as their web-based HD Distribution supplier network that provides vendors with a wealth of information about supply and demand within the business.
The "Harley Triangle" provides a basis for tracking and monitoring the firm's physical resources. Location and Class of management and the experience of manufacturing staff and other employees is the main element in accessing recycleables, procurement and maintenance related to processing equipment. HD vegetation are streamlined and well-maintained, which is a core tool for HD.
Harley-Davidson has many technological resources: including a variety of brand name Patents, Trademarks, and Copyrights which protect its reputation and image.
Trust, Knowledge, Managerial capacities, as well as organizational culture are HD's key, most effective human resources. The company culture, as recently discussed, offers HD a major competitive edge. Employees and suppliers know their insight is respected and take delight in their work. People included are passionate about the brand and this adds invisible value to the company.
Employee and dealer, as well as management's ideas are huge resources for HD, as these folks know the business and know its potential. Since there are such a number of inputs, HD's capacity to innovate and create/develop new product is not subject to stagnation or groupthink. However, HD does indeed make an effort to stay true to its market, and this creates some limitations for ground breaking ideas.
Reputation with customers, brand, perceptions of product, and reputation with suppliers are all very beneficial to HD's businesses, and keep customers faithful to the product. Interactions and romantic relationships are pressured at HD in order to ensure quality craftsmanship and mutually beneficial contribution in all phases of development.
Purposely Integrated Technological Resources
HD ensures that all procedures and activities throughout its value string are integrated using online Text message systems, barcodes, and information that permit its JIT inventory circulation. This allows production to flow easily.
Foundations - unique skills and knowledge of firm's employees and efficient expertise
HD also means that its employees are trained for all aspects of their job, integrating staff knowledge to be able to ease easy flow, maintenance and transitions. These employees are interested in their jobs, and copy that passion to their work in a functional, professional manner. HD empowers their employees, and in turn HD employees add value to the company.
HD's JIT inventory take system means it must have streamlined manufacturing expertise. HD does indeed this by guaranteeing quality inputs into its creation plants, flow creation methods, and well-maintained equipment. HD processing plants can handle producing many the latest models of and bottom their inventory from customer take demand, lowering costs round the panel as well as inventory finished products that remain unsold in warehouses (of which HD has very few).
JIT inventory management needs good transportation circulation logistics. HD gets the capability to reduce lead times and ensure pull delivery through its private fleet of vehicles and contracts with
distribution suppliers such as UPS.
Harley Davidson is America's motor bike giant. For years the baby boomers have carried the Harley brand to success however in these tough monetary times have tightened the belts of America. No longer are people spending money on leisure travelling vehicles like watercraft, ATVs, RVs, and motorcycles. The top problem with all of these products is that they are not made for daily transportation; they are simply vacation and joy vehicles. The market for potential buyers who can afford the products is shrinking just because a buyer must have a high throw-away income to buy recreational vehicles. Most clients must already be proven in society, the average era of a Harley Davidson owner is 47. three years old. This amount has continually gone up throughout the years, even with Harley's Iron 883 motorcycle that was successful in the younger audience. Most Harley's have a foundation price of around $25, 000 while the Iron 883 begins at around $8, 000, which is more appetizing to younger audience.
Harley recently announced their new market strategy that is concentrating on women and minorities. They can be doing this to increase their market basic and grow the business to help survive the current market. The issue with part of the approach is the fact part of it does not fit the Harley culture. Women are either into the biker lifestyle or they aren't, they tend to not have a craving to find something dangerous to get into that men do in the middle of their lives. This is an investment in production that will come back to haunt Harley. If they're to grow the business enterprise Harley, should do so without requiring in to commit too much capital in new operations and creation. Harley must go back to their core and expand by finding new riders who could become part of the biker lifestyle and culture.
The Harley Davidson motor bike has been an American icon since 1903. Harley has generated one the most unique reputations within the American street motorcycle business. The motorcycles have transformed into a lifestyle, somewhat than mere transport. Using the motorcycle's image, Harley Davidson became a market for recreational vehicles; constituting a feeling of 'flexibility' and 'leisure' to vehicles. Often complementary to other recreational vehicles, such as electric motor homes, vessels, ATV's, snowmobiles, etc. , Harley Davidson has considered benefit of their exceptional culture and have used it to produce sales.
However, irrespective of Harley's reputation and history, an monetary downturn shows that Harley Davidson, Inc. needs to restructure their market. Financial problems' has slowed consumer spending, eventually resulting in low sales motorcycles and recreational vehicles. Because of the economic conditions, Harley Davidson's 2008 revenue fell thirty percent, decreasing shipments by 8 percent (Yahoo! Funding, 2009). The demand for heavyweight motorcycles has slipped dramatically, not only in the US overall economy but also worldwide.
During the first 1 / 4 of previous year's one fourth, Harley's worldwide retail sales lowered 12 percent while US sales fell 9. 7 percent (Clutch and Stainless, 2009). A slow domestic market then forces someone to direct a give attention to international potential clients to start future long-term opportunities. The "American aspiration, " associated with Harley's, must be changed to squeeze in other dynamic cultures to increase market size. Also, increasing market size will allow more investment in research and development to apply competitive advantages within the marketplace. Harley Davidson already has an upper submit terms of brand uniqueness and obviously stands out from the ordinary street motorcycle. An already attractive product will allow R&D to function at an optimal rate.
Harley Davidson, Inc. currently manages internationally in roughly 30 countries. The demand in international countries has obligated management to apply their leadership and marketing skills to international market segments. The monetary slump has pressured Harley Davidson to restructure its international management team and prospect. More experience and expertise into a country's culture and legal requirements are essential. A worldwide management team needs to be comfortable and confident when working with or in foreign countries. Understanding international business methods and ethics is an essential quality when wanting to expand. Harley needs to create country based mostly clubs that are decided to make wise social decisions.
Closely executing legal sizes, geographic barriers, ethnical obstacles, and ventures will favorably position Harley Davidson, Inc. for future prospects.
Harley Davidson, Inc. 's past CEO mentioned, "International market segments are a great opportunity, we have to grow those to diversify our income basic" (Rovito, 2009). A fresh CEO has been appointed and is expected to bring global and manufacturing experience. Keith E. Wandell is well attuned to international sales as well as making experience. These two qualities are precisely what Harley Davidson needs in order to reconstruct their international markets. This could be a making point for Harley's offering approach.
Building manufacturing crops in bigger foreign markets can help relieve shipping expenses, taxes, tariffs, and you will be able to effectively react to the special demand. Starting making plants in other countries could create numerous job opportunities. Properly trained professionals would provide a domestic leadership trend that is optimally adjusted to the correct culture. Not merely would this create more careers for all of us management, but also make more income for foreign economies as local people will be necessary for creation. Although a permanent goal, the creation of manufacturing plants will be a plausible and positive future management decision as market segments expand over time.
Many consumer habit research studies reveal that consumers are extremely likely to acquire products that are offered as limited editions. One technique Harley-Davidson may use to be able to foster development is release a a limited model motorcycle, co-created by consumers within the promotional blend. Harley-Davidson can use this promotional technique to get consumers involved, appeal with their desires for rarity, and increase sales.
While Harley-Davidson has released several limited release motorcycles before, this advertising can be designed into a fresh strategy. The brand new limited edition bike would require the involvement of consumers to help co-create the product. Harley-Davidson's research and development team would design three different motorcycles and they would be published to the HD website. Then, consumers would be able to sign on and vote because of their favorite motorcycle. The winning motorcycle would then get into limited production. Those that voted could have first priority to acquire the street motorcycle. Owners would then get an all-inclusive trip to the Harley Davidson Sturgis Rally. This campaign would be relatively inexpensive, yet impressive. The designers could design the motorcycles in a manner that reuses as much existing parts as possible, while still creating a distinctive style. This design process would lower development costs for the limited model motorcycle.
A limited release motorcycle release of the characteristics would be a powerful strategy because individuals are flocking to brands that are "playing hard to get. " Now more than ever, rarity is very important to the high-end luxury sector, affluent 30-40 12 months olds, baby boomers, generation X and Y, and 'creative course' consumers (Kasriel, 2007). This style has shown that successful advertising involves building a niche market alternatively than attractive to the masses. The entire world is now saturated with products that are extremely similar to one another, and the search for rarity has been motivated by the sensation that one products can help us to stand apart from the masses. A restricted edition Harley-Davidson street motorcycle is the perfect way for consumers to do just that.
HD stock price reaches its lowest average price market value in years. HD working capital is constantly decreasing, while although HD cash flow is increasing on a every year basis, they still cannot find funding to aid company development from American establishments.
With foreign businesses increasing in level, as well as capital investments and associations with suppliers abroad HD can spend its unwanted cash into romantic relationships with strategic companions in Europe and/or Asia as well as investing in and building after associations with franchises and other merchants in those countries. Since HD does not have the working capital to funding growth, yet they certainly have a confident cash flow, HD must put their excess the cash movement to work in order to create capital.
Due to strong currency styles in these countries and weakening worth of the American Buck and an available cash flow, HD should pursue other short-term assets and long-term partnerships in europe and China. In this manner HD can possibly augment its cash flow exponentially during the current economic downturn and increase its current percentage while also increasing its working capital.
H-D doesn't have the administrative centre means or financial composition to aid future growth in today's economy. As previously stated HD is not a daily use product, but instead a lifestyle product that relies on its loyal customer bottom part and their degrees of disposable income. HD along with the remaining recreational vehicle industry is a premium lifestyle product. The products provided by the industry are designed to bring thrills with their owners. Harley Davidson's most effective asset is there brand culture created by their strong focus on the customer. Instead of focusing on growth HD should look to support their brand image while restructuring their product offerings to raised fit with market demand. Harley must look for ways to keep business businesses running without betraying the brand legacy they may have built. With their current loyal customer base ageing, the average era of a Harley rider is over 47 yrs. old; HD needs to focus on a product differentiation strategy that falls under its current convenience of production. The biggest future problem Harley Davidson encounters is too little capital to run business operations. They need to be traditional about expenses while discovering the right places to get and force their products. The customer is king for HD and functions need to keep to mirror that.
Currently HD is in the middle of a restructuring process for their production systems. After this is complete HD needs to find the production capacity level that suits the motion of products on the market. HD has generated an atmosphere of customization and individuality because of its riders. Limited model motorcycles have been popular on the list of riders. They are quick to market out in stores or auctions. Coming out with these lines creates a buzz for Harley Davidson that no commercial or advertizing advertising campaign can because people need to get their practical these exclusives. This also allows HD to use the property they curently have instead of making an investment to build new ones. Other Property Harley has that are underutilized are there rider training courses and trip planning accessories. Working out courses get rid of the intimidation that may come along with the HD culture and allows newcomers to become acquainted with the new even riding bicycles in HD's arsenal. This must continue as each rider has their own personal style.
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