This section of the report is concerned with understanding the proper position of Harley Davidson Inc. so that they can formulate strategic options for the business. It first recognizes the changes that are happening in the surroundings and exactly how these changes have an impact on H-D and its own business activities and second the tool strength and features of H-D.
1. 1 THE ENVIRONMENT
In order to comprehend the surroundings which H-D manages in the next frameworks are used with the aim of helping to identify key issues and troubles and ways of coping with difficulty and change.
1. 1. 1 PESTLE ANALYSIS
In 2009 H-D stood to get from the Economic Stimulus Bundle, transferred into legislation by the Barack Obama Administration. "The federal stimulus package provides taxpayers breaks if they buy a new car, light pickup truck, RV, or street motorcycle. "(Wachter, 2009). Furthermore, Coachman business also a company of leisure vehicles, and a competition of H-D was eliminated from the brand new York STOCK MARKET.
According to the Datamonitor statement "the Bike Industry segment has already established economic growth for days gone by 3 years, and has only recently been experiencing decline. In 2007 it declined 2. 3%, yet is forecasted to recover 4. 3% by 2012. An monetary factor in favor of H-D, despite this decline, is that the U. S. industry made total earnings of $10. 2 billion in 2007, of which 98. 8% were of motorcycles (not scooters, minibikes, etc. ). Furthermore, within the U. S. overall economy H-D holds the majority of bike sales. Therefore, even while industry development is declining, H-D sales and other street motorcycle sales remain carrying on to increase. " (DataMonitor 2007). Figure 1 shows motor bike industry progress versus sales.
11 Figure 1
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The Motorcycly Industry Council (MIC) discloses that leisure product market sectors are facing steep drop however the motor bike section though declining, is not doing this at a steep rate. Tim Buche, Leader of the MIC says " Overall motorbike sales were down 7. 2%, not nearly as sharp a decline as much other consumer products in today's overall economy/" (Wasef, 2009).
Socially H-D has a competitive border which is owed to its customer bottom part, strong brand commitment and demographic styles such as the increse in female operators. "This devotion is indicated in the average age of H-D consumers. H-D average consumer buying years 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 uploaded the largest benefits in owernship, the era that is on the border of the baby boomer section will be the key catalyst of growth for the industry" (Koncept 2007).
One social factor which may negatively have an impact on the sales of H-D motocycles is the stigma that has been mounted on these leisure vehicles. Alot of individuals think that motorcycles are dangerous and this notion is strengthened because of the higher rate of bike fatalities and crashes. H-D stands the chance of escaping this stigmatisation if the general public views their bikes as "cruisers" and not "speed bikes".
Technologically H-D can take advantage of antilock brake systems. Antilock brakes may help riders avoid fatal crases relating to a study done by the insurance industry.
1. 1. 2 PORTER'S FIVE FORCES MODEL
"H-D operates within the Recreational Vehicles industry along with five other major opponents: Winnebago, Polaris, Thor, Arctic Kitty and Marine Products. The most notable performers within the industry and maintain 92% of the market share by volume with a market capitalization of 64. 653 Billion of a total Industry of 7 Billion" (Yahoo Money, 2009). "Other businesses in different sectors that are immediate product rivals include Honda Motor Company Limited, Yamaha Motor unit Co, Ltd. , and Suzuki Motor unit Company" (Datamonitor, 2007).
"The presence of these large multinational corporations with exceptionally high assets boosts the amount of rivalry within the industry. Due to the small amount of material rivals, the market's revenue is shared between fewer companies and enhances the amount of rivalry for bottom line revenue. This rivalry pushes most competitors to try and diversify their business models through geographical extension or vertical enlargement, leading to interests and investments in a variety of other segments such as the automobile, watercraft, commercial and farming equipment areas. " (Datamonitor, 2004).
Threat of Substitutes
"The Recreational Vehicle industry faces threats from the auto Industry, from open public vehicles options and from Bicycles. The menace is largely reliant on the indispensability of motorcycles and other lifestyle products to the finish consumer "(Datamonitor, 2008).
In most developed countries, motorcycles are leisure items and are not essential and are therefore largely dispensable or substitutable by more "practical" items such as vehicles or more "affordable" means of vehicles such as bicycles. This lack of necessity increases the threat of substitutes which is one of the major reasons why the exterior market goes into decline during economical recession.
Overall, buyer vitality is low due to ecological competitive advantage of product differentiation which is impossible for other brand opponents to match.
Large multinational companies such as Harley-Davidson can obtain materials from numerous international suppliers and face low switching costs scheduled to minimal product differentiation. This existence within the international market boosts Industry market leaders' electricity. Overall, supplier ability is modest.
Threat of New Entrants
Overall, this risk is moderate due to high setup costs, high brand reputation, customer loyalty and high research and development costs.
1. 2 RESOURCES Durability AND CAPABILITIES
HD has a formal composition that works for the company: decentralized, expert clubs and leadership circles that value staff source. Programs they use to plan, report and track inventory and development include their Text message, Vibration Tech & PdM technology systems, as well as their web-based HD Circulation supplier network that provides vendors with an abundance of information about source and demand within the company.
The "Harley Triangle" provides a basis for tracking and monitoring the firm's physical resources. Location and Sophistication of management and the knowledge of manufacturing employees and other employees is the key in accessing recycleables, procurement and upkeep related to making equipment. HD crops are streamlined and well-maintained, which really is a core learning resource for HD.
Harley-Davidson has many technical resources: including many different 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, gives HD a significant competitive advantage. Employees and suppliers know their type is valued and take delight in their work. People involved are interested in the brand which adds invisible value to the business.
Employee and supplier, as well as management's ideas are huge resources for HD, as these folks know the business enterprise and know its probable. Since there are such a variety of inputs, HD's capacity to innovate and create/develop new product is not at the mercy of stagnation or groupthink. However, HD will try to stay true to its niche market, and this creates some limitations for impressive ideas.
Reputation with customers, brand name, perceptions of product, and reputation with suppliers are all very beneficial to HD's operations, and keep customers loyal to the product. Interactions and interactions are stressed at HD in order to ensure quality craftsmanship and mutually beneficial contribution in all phases of creation.
Purposely Integrated Technological Resources
HD means that all operations and activities throughout its value string are integrated using web based Text message systems, barcodes, and accounts that allow its JIT inventory circulation. This allows creation to flow effortlessly.
Foundations - unique skills and understanding of firm's employees and practical expertise
HD also ensures that its employees are trained for any areas of their job, integrating staff knowledge to be able to ease soft flow, maintenance and transitions. These employees are interested in their careers, and transfer that passion to their work in a functional, professonally executed manner. HD empowers their employees, and in turn HD employees add value to the company.
HD's JIT inventory take system means which it will need to have streamlined manufacturing ability. HD does indeed this by making sure quality inputs into its creation plants, flow production methods, and well-maintained equipment. HD manufacturing plants are capable of producing many different models and base their inventory from customer take demand, minimizing costs across the mother board as well as inventory finished products that sit down unsold in warehouses (of which HD has very few).
JIT inventory management needs good travel flow logistics. HD gets the capability to reduce lead times and ensure pull delivery through its private fleet of pickup trucks and agreements with
distribution suppliers such as UPS.
Harley Davidson is America's motorcycle giant. For a long time the baby boomers have carried the Harley brand to success but in these tough financial times have tightened the belts of America. No more are people spending money on leisure vehicles vehicles like vessels, 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 marketplace 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 established in society, the average time of a Harley Davidson owner is 47. 3 years old. This quantity has continually risen throughout the years, even with Harley's Iron 883 cycle that was a success in younger public. Most Harley's have a basic price of around $25, 000 while the Iron 883 starts at around $8, 000, which is more appetizing to the younger audience.
Harley recently released their new market strategy that is concentrating on women and minorities. They can be carrying out this to grow their market platform and grow the company to help survive the current current economic climate. The issue with part of this way is the fact part of it generally does not fit the Harley culture. Women are either into the biker lifestyle or they aren't, they tend to not need a craving to find something risky to find yourself in that men do in the center of their lives. That is an investment in creation that may come back again to haunt Harley. If they're to grow the business Harley, should do so without needing in to spend too much capital in new operations and production. Harley must go back to their core and expand by finding new riders who could become area of the biker lifestyle and culture.
The Harley Davidson bike has been an American icon since 1903. Harley has generated one the most unique reputations within the American street bike business. The motorcycles have transformed into a lifestyle, somewhat than mere travel. Using the motorcycle's image, Harley Davidson became market for recreational vehicles; constituting a sense of 'liberty' and 'leisure' to travelling. Often complementary to other recreational vehicles, such as motor homes, watercraft, ATV's, snowmobiles, etc. , Harley Davidson has taken benefit of their exceptional culture and also have used it to build sales.
However, irrespective of Harley's reputation and history, an monetary downturn shows that Harley Davidson, Inc. must restructure their market. Financial crisis' has slowed consumer spending, ultimately leading to low sales motorcycles and recreational vehicles. Due to the monetary conditions, Harley Davidson's 2008 earnings fell 30 percent, reducing shipments by 8 percent (Yahoo! Fund, 2009). The demand for heavyweight motorcycles has decreased considerably, not only in the US market but also worldwide.
During the first quarter of previous year's one fourth, Harley's worldwide retail sales lowered 12 percent while US sales dropped 9. 7 percent (Clutch and Chrome, 2009). A slow-moving 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, needs to be changed to squeeze in other dynamic civilizations to increase market size. Also, increasing market size will allow more investment in research and development to use competitive advantages within the market. Harley Davidson already comes with an upper hand in terms of brand uniqueness and plainly stands out from the ordinary motorbike. An already attractive product allows R&D to function at an ideal rate.
Harley Davidson, Inc. presently runs internationally in approximately 30 countries. The demand in foreign countries has required management to apply their authority and marketing skills to international markets. The monetary slump has forced Harley Davidson to restructure its international management team and prospect. More experience and expertise into a country's culture and legal requirements are crucial. A global management team must be comfortable and assured when functioning with or in international countries. Understanding international business tactics and ethics is an essential quality when endeavoring to expand. Harley needs to create country structured teams that are decided to make sensible social decisions.
Closely executing legal measurements, geographic barriers, social obstacles, and investment funds will favorably position Harley Davidson, Inc. for future potential clients.
Harley Davidson, Inc. 's previous CEO explained, "International markets are a great opportunity, we have to grow these to diversify our earnings basic" (Rovito, 2009). A fresh CEO has been appointed and is expected to bring global and making experience. Keith E. Wandell is well attuned to international sales as well as manufacturing experience. Both of these qualities are just what Harley Davidson needs to be able to reconstruct their international market segments. This may be a making point for Harley's offering approach.
Building manufacturing plants in bigger international markets will help relieve shipping bills, taxes, tariffs, and will be able to accurately respond to the specific demand. Starting making plants in other countries could create numerous job opportunities. Properly trained professionals would give a domestic leadership trend that is optimally changed to the proper culture. Not merely would this create more jobs for all of us management, but also generate more revenue for international economies as local people will be needed for production. Although a long-term goal, the production of manufacturing plants would be a plausible and positive future management decision as market segments expand as time passes.
Many consumer tendencies research studies indicate that consumers are extremely likely to purchase products that exist as limited editions. One technique Harley-Davidson can use in order to foster progress is release a a limited release street bike, co-created by consumers within the promotional mixture. Harley-Davidson can use this promotional strategy to get consumers included, appeal to their desires for rarity, and increase sales.
While Harley-Davidson has released several limited model motorcycles in the past, this advertising can be adapted into a fresh strategy. The new limited edition motor bike would require the engagement of consumers to help co-create the merchandise. Harley-Davidson's research and development division would design three different motorcycles and then they would be submitted to the HD website. Then, consumers would be able to sign on and vote for their favorite street bike. The winning street motorcycle would then go into limited production. Those who voted could have first priority to buy the bike. Owners would then get an all-inclusive visit to the Harley Davidson Sturgis Rally. This advertising would be relatively inexpensive, yet impressive. The designers could design the motorcycles in a way that reuses as many existing parts as is feasible, while still creating a distinctive style. This design process would lower development costs for the limited release motorcycle.
A limited model motorcycle release of this characteristics would be an effective strategy because consumers are flocking to brands that are "playing hard to get. " Now as part of your, rarity is important for the high-end luxury sector, affluent 30-40 season olds, baby boomers, technology X and Y, and 'creative course' consumers (Kasriel, 2007). This trend has shown that successful offering involves building a niche market somewhat than appealing to the masses. The planet is becoming saturated with products that are extremely similar to one another, and the quest 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 motor bike is the perfect way for consumers to do that.
HD stock price is at its minimum average price market value in years. HD working capital is constantly decreasing, while although HD cash flow is increasing on the every year basis, they still cannot find funding to aid company progress from American institutions.
With foreign operations increasing in size, as well as capital ventures and human relationships with suppliers overseas HD can invest its extra cash into human relationships with strategic companions in Europe and/or Asia as well as buying and building after interactions with franchises and other sellers in those countries. Since HD does not have the working capital to financing growth, yet they certainly have a confident cash flow, HD must put their excess the cash move to work in order to create capital.
Due to strong currency movements in these countries and weakening prices of the American Dollar and an available cashflow, HD should follow other short-term ventures and long-term partnerships in the European Union and China. In this way HD can possibly augment its cash flow exponentially through the current economic recession and increase its current percentage while also increasing its working capital.
H-D does not have the capital means or financial structure to support future growth in the current economy. As previously stated HD is not a daily use product, but instead a lifestyle product that depends on its dedicated customer foundation and their degrees of throw-away income. HD combined with the rest of the recreational vehicle industry is reduced lifestyle product. The merchandise offered by the industry are meant to bring thrills to their owners. Harley Davidson's most effective asset is there brand culture created by their strong concentrate on the customer. Instead of focusing on expansion HD should look to support their brand image while restructuring their product offerings to better fit with current market demand. Harley must look for ways to keep business businesses running without betraying the brand legacy they have got built. With their current loyal customer base maturity, the average age of a Harley rider has ended 47 years of age; HD needs to focus on something differentiation strategy that falls under its current convenience of production. The largest future problem Harley Davidson encounters is a lack of capital to perform business operations. They must be conventional about expenses while finding the right places to get and drive their products. The customer is king for HD and operations need to keep to reveal that.
Currently HD is in the center of a restructuring process because of their production systems. After this is complete HD must find the production capacity level that will fit the movement of products in the market. HD has created an atmosphere of customization and personality for its riders. Limited edition motorcycles have been a hit on the list of riders. They may be quick to sell out to get or auctions. Coming out with these lines creates a excitement for Harley Davidson that no commercial or advertizing campaign can because people want to get their practical these exclusives. This also allows HD to utilize the possessions they curently have instead of investing to make new ones. Other Investments Harley has that are underutilized is there rider classes and trip planning accessories. Working out courses eliminate the intimidation that may come along with the HD culture and allows newcomers to be familiar with the new easy riding bicycles in HD's arsenal. This must continue as each rider has their own personal style.
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