HARLEY DAVIDSON: Preparing for the Next Century
Harley Davidson (HD) was established in 1903 by Harley, Arthur and Walter Davidson, and till date has proven to be an undisputed leader in the US heavyweight motorbike industry. The case discusses its strategies of sustaining a large market share as the motorbike Enterprise enters the 21st Century. During the first three decades, HD prioritized quality of its product by employing research and development (R&D). The Company was distinctively known for its “V-twin” engine. It targeted elderly males, characterized by power and toughness, to ride its heavyweight bikes. However, in 1950s, its market share received a threat from Japanese companies who completely transformed the demographics and size of US motorbike industry by offering a “family-oriented” model. This lead to a decline in HD’s market share and depicted its image as a “niche” player. Consequently HD had to consider some important modifications to take over the market, again. In 1960’s the firm went public for the first time. It started imitating the Japanese production methods to penetrate the non-traditional market segment. In addition to that, to create a socially responsible image of the company, in 1983, it formed Harley Owners Group (HOG). Later, during the last decade of the 20th Century, it acquired Buell Corporation to introduce a sportster line for young enthusiasts. As the US motorbike giant entered the 21st Century, it launched some enticing projects including ‘Rental programmes’ and ‘Rider’s edge’ to occupy the largest market share. Despite of the ultimate bankruptcy situation it faced in 1970s, Harley Davidson has been able to outshine the motorbike industry with its consistent efforts and a unique brand positioning.
Harley Davidson’s Competitive Advantage:
For a company to sustain profits higher than the Industry average, it is very crucial to design a business strategy that provides it with a competitive advantage. Harley-Davidson has attempted to achieve competitive advantage by reducing production cost and differentiating its products from its competitors. The Company modified its entire manufacturing system by implementing Just-in-Time (JIT) inventories and Total Quality management. These processes were implemented to free up much cash by reducing Work-in-Process (WIP) inventory; which in return lead to a decline in the total cost of production. It also allowed the work force to identify a quality problem and fix it timely. We can track Harley Davidson’s progress against its competitors by analyzing and comparing its annual reports with those of its rival. According to 2011’s annual report (Appendix), Harley-Davidson's gross margin was reported as 33.37%, compared with that of Honda at 27.3% and Suzuki at 3.5%. It shows that Harley enjoys a Cost-based competitive advantage over Honda and Suzuki because it retains more on each dollar of sales to finance its expenses. Moreover, the Company had a net profit margin of 12.85% which is again higher than its rivals (Honda and Suzuki had 6.31% and 1.51% respectively). Thus, it is evident that Harley is a highly cost-efficient enterprise in comparison to its industrial competitors. (Appendix A) Harley Davidson is also maintains a “Differentiation advantage” in the Motor-bike industry by offering distinctive product features and performance. As mentioned in the case (Pg#2), features like V-twin engine, styled tail fenders, front fork and thump sound provided attached a unique recognition to HD heavyweight bikes. Moreover, Harley-Davidson offers bikes at prestige pricing and quality which satisfy customers’ psychological and social needs. The Company typically targets “baby boomers”, who can afford high-end and expensive bikes. Majority of its customer base lives in North America. As mentioned earlier, Harley Davidson differentiated itself from Japanese invaders by forming a Company sponsored, social organization known as,...
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