Different Strategy Development At Harley Davidson Business Essay
|✅ Paper Type: Free Essay||✅ Subject: Business|
|✅ Wordcount: 3740 words||✅ Published: 1st Jan 2015|
Harley-Davidson used Myerson game theory to gain a competitive edge over its Japanese competitors. This theory is concerned about the interrelationships between the competitive moves by a set of competitors. Hence the move by Harley to partition the US government to impose a 40% tax on imported motorcycles.
Harley-Davidson has been a major US maker of motorcycles and the country’s top seller of heavyweight motorcycles. With a product offering of in excess of 30 models of touring and custom built Harleys, through a global network of more than 1,300 dealers. The company manufactures and markets five families of motorcycles: Touring, Dyna, Softail, Sportster, and VRSC. Additionally, their strong applied research and development strategies have allowed them to manufacture three-wheeled motorcycles. Harley sells attitude and culture with its brand-name products which allow customers to feel a greater part, ownership, belonging and empowered when they use their products. Harley’s distribution network allows for their products to get to the market quickly.
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This strategy has determined Harleys’ future opportunities and strategies for example, their entry into the India market. Their design and manufacture of motorcycles which appeal to women coupled with their additional and diverse product line in clothing suited for bikers as well as other products which can appeal to a diverse market which includes persons who do not own and may never own a Harley.
Their acquisition of Buell Motorcycle Company was also a strategic move as it allowed the company to enter a segment of the market which was untouched by them, through Porter’s low cost strategy, low maintenance motorcycles which were appealing economically and environmentally. As a result Harley was poised to enjoy economies of scale since they were able to increase production while lowering the cost per unit of production as Harley and Buell was able to enjoy synergies from the acquisition as surplus engines from Harley was able to be utilized by Buell. By acquiring Buell, Harley was able to build rather than buy market share.
However, as a result of the global recession of 2008 the synergistic alignment enabled the company to continue to manufacture their low-cost single-cylinder Buell Blast. Harley benefited from the integration as they were better able to respond to the market need and demands. As they were/are able to adapt to market changes and improve efficiency in the manufacturing, design and safety features.
Consequently, Harley divested MV Augusta which they acquired in 2008, this divestment can be credited to the effects of the recession as the company was also experiencing a financial crisis. By selling title and ownership they were poised to focus and implement strategies which would allow them to maintain competitive leadership.
Through Ansoff’s product-market growth strategy matrix, Harley-Davidson penetrated new markets as they sought to expand by partnering and engaging with dealers throughout the world, to capture new markets with the Buell product offering.
Through the acquisition of MV Augusta Group Harley-Davidson was further allowed to capitalise on Ansoff’s product development strategy where they entered new markets with a new light weight motorcycle. This product was particularly appealing to women cyclists since they were better able to independently control the machine.
To survive the depression of the 1930’s Harley-Davidson diversified to motorcycle engines in order to capture new untouched segments of the market. Diversification according to Ansoff refers to a strategy by which is pursued by an organisation through its new product offerings which allows them to enter new markets.
This strategy enabled Harley-Davidson to increase their market power and gain greater efficiency as sales increase there was more profits which enabled them to invest in more efficient technology, research and development.
In 1907 Harley captured the emergent market being the police department as they were venturing into motorcycle patrol as a result they were able to penetrate this market which in the past did not exist.
Had a displacement of 45 cubic inches (742 cc) and produced about 22 horse power
The Knucklehead was mainly developed and used during the wars.
This vehicle engine was 60 cubic inch (990 cc) and 74 cubic inch (1200cc), which produced 50 and 55 horse power.
Displace 74 cubic inches (1200 cc) and produced 60 horsepower.
The Evolution was the first motorcycle in a series which manifest improved quality after the acquisition of AMF. These vehicles did not leak oil and the displacement was 81.8 cubic inches (1340 cc) and produced 70 horsepower.
TWIN CAM 88
The Twin Cam 88 has an engine of 88 cubic inches (1450 cc) displacement, producing 80 horsepower. These engines remain air cooled and overhead valves are used.
This engine is presently being used in only one Harley product, the VSRC. It is 60 degrees, with overhead cams, fuel injected and only 69 cubic inches (1130cc) production 115 horsepower.
Through the process of diversification Harley-Davidson was able to reengineer their products to meet and satisfy the changing needs and demands of the market and as a result they have been able to penetrate and capture new markets which were once untapped.
Harley have been able to overcome their once tarnished reputation of unfair business practice as a result of their application to the US Tariff Commission for a 40% tariff to be imposed on imported motorcycles into the US.
Harley utilizes personnel selling and advertising for their promotional mix in getting the product to their customers. They also target various segments of the market by advertising in national magazines such as Road & Track, Popular Science, and Fortune as well as specific motorcycle magazines such as Easy Rider. Additionally, Harley uses personnel at their 595 dealerships located throughout the United States to get the product to the consumer as a when they are required. Harley uses publicity and public relations to gain a more positive
image for the company. Celebrities such as Jay Leno and Wynonna Judd are engaged in the company’s promotions enjoying riding motorcycles and wear Harley-Davidson apparel.
The conduct of a SWOT analysis would reveal Harley’s customer loyalty to the company’s brand which was strength for Harley and a threat to their competitors. Harley offers all its products on-line where they can be delivered through-out the world. Online skilled rider courses are also offered, parts are customized to suit the needs and taste of their individual customers thus creating the ultimate ride.
Their Corporate-level strategies focused on the strategic scope of the entire enterprise. Harley’s strategies included the company’s decision to enter niche markets, acquisitions and the entry into new geographic markets with new and innovative products. This also includes their staffing issues were 440 employees were retrenched, their decision also to outsource also contributed to the company’s cost leadership position. In addition, their market diversification to strategically penetrate the India market over a period of twenty to five years which were protecting their local Indian Tata Nano market. Their corporate strategies implemented under the company’s leadership of Richard F. Teerlink the former CEO, Harley has also been able to sell gift items suitable for women, men, youths making them a one-stop gift shop.
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The underlying premise of Harley’s focus strategy is that the firm is better able to serve its segment than its competitors serving a broader range of customers since they are better positioned to determine, anticipate and satisfy the changing needs of their customer. Harley has been able to differentiate them based on meeting customer needs through their differentiated, low costs and competitive pricing for specialty goods.
Their corporate strategies represent the long-term direction for the organization which has been to become the top motorcycle manufacture in the world.
Why have Harley-Davidson been more or less successful in their strategic planning approach?
Growth/Share (BCG) Matrix
Issues addressed as part of a company’s corporate strategy includes diversification, acquisition, strategic alliances, and formulation of new business ventures. The corporate strategies implemented at Harley incorporate their plans for the entire organization and change to be industry specific market such as manufacturing motorcycles that are light-weight and suited for women. The BCG matrix classifies business-unit performance on the basis of the unit’s relative market share and the rate of market growth.
Products and their respective strategies fall into one of four quadrants. The typical starting point for a new business is as a question mark. If the product is new, it has no market share, but the predicted growth rate is good. What typically happens in an organization is that management is faced with a number of these types of products but with too few resources to develop all of them. Thus, the strategic decision-maker must determine which of the products to attempt to develop into commercially viable products and which ones to drop from consideration as Harley did with the Buell Blast. Question marks are cash users in the organization. Early in their life, they contribute no revenues and require expenditures for market research, test marketing, and advertising to build consumer awareness.
If the correct decision is made and the product selected achieves a high market share, it becomes a BCG matrix star. The Harley-Davidson company is made up of multiple business units, its corporate strategy focused on decisions which can increase sales and allow the company to gain competitive advantage by maximizing the potential of their core competencies and the resources both financial and non-financial.
As stars have high market share in high-growth markets they generate large cash flows for the business, however they also need large inputs of finances to maintain growth. They required large expenditures for advertising, research and development continuously improve the product which would enable it to establish a dominant position in the industry. The company’s strategic arrangement with the US Army together with the exceptional features and capabilities RoadKing and Sportser allowed the company to gain high market share and high market growth.
The diversity of their products is considered in terms of its related and unrelated diversification. However, performance at the business level of the company suffered leading to workers striking as a result the company was then sold to thirteen investors strategically lead the company.
The “Fat Boy” though in the 1990’s was a market leader and cash cow for Harley however, its market share was high and low-growth as the product reaches its maturity stage of the product life cycle. This product was a well-established product with wide consumer acceptance and as a result sales revenues were high.
The strategy for such products is to invest little money into maintaining the product and divert the large profits generated into products with more long-term earnings potential, i.e., question marks and stars which Harley did with their FXR models.
Dogs are businesses with low market share in low-growth markets. These are often cash cows that have lost their market share or question marks the company has elected not to develop. The recommended strategy for these businesses is to dispose of them for whatever revenue they will generate and reinvest the money in more attractive business such as into the Fat Boy.
A more stringent approach, but still one with weaknesses, is a competitive assessment. A competitive assessment is a technique for ranking an organization relative to its peers in the industry. The advantage of a competitive assessment over the BCG matrix for corporate-level strategy is that the competitive assessment includes critical success factors, or factors that are crucial for an organizational to prevail when all organizational rivals are competing for the same customers.
Porter’s Diamond suggests that the reasons are inherent why some countries are more competitive than others, and likewise why some industries within particular nations are more competitive than others. This is evident in Harley’s case as the US army chose to support their local industry to supply them with motorcycles during the world war. They also have what appears to be a lifelong contract with the police department to sell motorcycles to them.
Trade embargo was also imposed by the US government to protect Harley from competitive rivalry from their greatest competitor Japan and this helped Harley in building brand. Harley also created a false demand for their product by creating an artificial shortage.
Global sourcing refers to purchasing services and components from the most appropriate suppliers around the world regardless of their location.
Harley source it component parts where the cost is cheaper and more affordable and as a result they were able to provide motorcycles at affordable and cost efficient prices. Due to global sourcing of component parts Harley was able to ensure that parts were always available when and where they were required.
The internationalization is potential of Harley is clearly determined and measured by the following factors. Harleys market has been diverse, comprising of a wide global demographic, their products have been design for the comfort, safety and enjoyment of both their male and female customer base. Harley has developed and implemented a differentiated strategy where their prices and product offerings have been attractive and affordable to all income brackets.
The company has had the favor of the US government and the loyalty of their customers, based on the support which they have given to the US during the war. However, countries such as India have imposed tariffs to protect their own local industries from large multi-national companies. However, to strengthen their competitive ability, Harley diversified its products to attract new markets, acquired other companies which allowed them to gain financial strength by capitalizing on the financial resources and gaining access to markets which the company were unable to before.
Internationalization according to Barlett and Ghoshal relates to the different structures for multinational companies. Harley’s global strategy and its sources of competitive advantage that Harley gets from being a transnational company are its efficiency through its manufacturing processes which enable it to enjoy economies of scale and develop a reputation to be envied by its competitors.
The internationalization of Harley’s motorcycles has an uncertain relationship to financial performance as foreign exchange rates may fluctuate resulting in a lost to the company if the exchange rate is decreased in the company which they export to.
To acquire and maintain first-mover advantage Harley has been able to continuously revitalise its products to meet and satisfy the changing need and taste of their customer base. Through research and development the company has been able to keep one step ahead of their competitors, placing at a better off than their competitors as a result of being first to market with a new innovative product.
Harley’s global strategy works because they have a strong global distribution network which ensures an efficient and speedy distribution of motorcycles to customers. With the emergence of the internet a customer can stay in Trinidad and purchase a motorcycle from anywhere in the world.
Harley’s growth strategies are designed to expand performance which is usually measured by the degree of sales, profits, product mix, market coverage, market share due to trade embargoes.
Diversification strategy involved the company entering different markets by adding different products to its marketing mix. Harley’s products are targeted towards all members of the family and are related to existing product offerings.
Harley’s retrenchment strategies involve a reduction in the scope of the organization’s staff number by 440 in 2007 and the sale of assets associated with discontinued product or service lines, as a result Harley sold MV Agusta in 2010.
The functional-level strategies of all organizations are concerned with the coordination of the functions of the organization which are marketing, finance, human resources, production, research and development, etc. This area upholds and contributes to individual business-level strategies and the overall corporate-level strategy as it ensures that set goals and objectives are achieved.
At Harley employees’ involvement are critical to the accomplishment of the company’s vision and mission and as such Harleys has cultivated the creativity of their employees. Employees are not treated as machines but allowed to be innovative and involved in the creative development of the company. This Accenture Human Capital Development Framework (HCDF) was first implemented in 2004 and reintroduced in the company in 2006. Harley also partnered with the union and this strategy allowed for change to be flexible, this was a key component in motivating employees and encouraging them to buy-in to any change in strategy which management wished to implement at Harley. The strategy resulted in a motivated workforce who felt a sense of belonging and ownership. The company encouraged a democratic style leadership instead of a dictatorship, through greater employee participation and collaboration as stated by: Teelink (2003)
“The biggest takeaway [to my experience in a circle organization] is that … [positive] change will happen as long as you don’ try to force it your way. If you lead participative change, it will work.”
Harley fosters a culture of team-building which ensures that employees are focused and motivated towards achieving the corporate goals and objectives of the organization.
Employees are also motivated and encouraged to produce as they have stock ownership this strategy gives employees a sense of belonging and that they are very important and involved in the organization and are willing to embrace changes within the organization without resistance.
These initiatives were adopted because the company’s new management recognized that to survive in a highly competitive and global market it was critical to make the company a continuous learning and improving organization where communication is open and free throughout the hierarchy of the organization. Employees must recognize and fully comprehend their job functions and its importance to the efficiency in the manufacturing process as well as to the long-term survival of the company.
Harley made significant progress at surpassing their internal benchmarks with the implementation of HCDF as employees’ performance and output improved and increased. Thus performance can now be measured by a balance scorecard.
Balanced Scorecard is a system used to measure a companyHYPERLINK “http://www.coursework4you.co.uk/essays-and-dissertations/analysis-of-companies/analysisofcompanies.php”‘HYPERLINK “http://www.coursework4you.co.uk/essays-and-dissertations/analysis-of-companies/analysisofcompanies.php”s activities in terms of its vision and strategies, as a gives managers a comprehensive view of the performance the business. This approach to strategic management was developed in the early 1990s by Kaplan and Norton. This system allows organization to visually clarify their vision and implement strategies which can improve organizational functions.
Harley’s study the logistics of building and selling motorcycles in the early 1980’s, when it was near bankruptcy. Harley’s balance scorecard review the procurement process, inventory stock theory and practice, and the parts marketing process to ensure a holistic, end-to-end supply chain management to supporting the company vision which ensures that the company’s products reached its customers. Through performing a thorough study of their entire supply chain, Harley Davidson’s logistics personnel have been able to define, measure, and improve their processes in order to improve efficiency in manufacturing process. A prime corporate decision was introduced to reduce the number of suppliers from 500 to 200. A smaller supplier base made quality improvements easier to implement and facilitated the detection as there was increase standardization of process and procedures, tracking, and resolution of quality problems.
The success of Harley can be contributed to the executive management team which has taken strategic initiatives such as the investment in their human resources, by empowering them to address the weakness associated with the Company. This investment has also given Harley a competitive advantage in the motorcycle industry. The Company has exploited the opportunities in its external environment to create new revenue streams for itself.
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