Harley Davidson was seen in America as a company that produced motorcycles with “raw power.” The company was founded by Arthur and Walter Davidson and William Harley in 1903. In 1918, Harley Davidson had become the largest motorcycle producing company in the world. Their production totaled 28,000 motorcycles. Production continued to increase with the onset of World War II and the military use of Harley’s motorcycles. The mystique of the product had a tough sense to it with famous actors such as James Dean and Marlin Brando sporting the bikes. After World War II, foreign competitors became interested in the motorcycle market. Japanese competitors entered the market in 1959; Harley Davidson executives did nothing to counter the advance of the competition. Harley Davidson’s share of the industry began dropping while Japanese competitors introduced high quality products. The confidence in Harley’s reputation was causing the firm’s market share to decline steadily.
Harley Davidson lacked resources to finance new products and designs to expand their production. They were taken over by AMF, a heavy-industrial conglomerate. At this time there was high demand for motorcycles in the U.S. The AMF team thought that they would be able to sell anything they produced, even without taking quality into consideration. After the take over, production was increased drastically at the cost of the quality of the product. AMF began spending large amounts of money on Harley’s manufacturing plants. Production increased from 15,475 units in 1969 to 70,000 units in 1973 due to these new expenditures on capital. To make things worse for Harley, the Japanese firm Honda introduced the “Goldwing.” This was the first introduction of a foreign “heavy weight” motorcycle that would directly compete with Harley’s market share. With Harley Davidson’s share of the heavyweight market beginning to decrease, the quality of their products also decreased because they were becoming outdated compared to the new advanced Japanese products. Vaughn Beals was brought into the picture by Harley executives to lead the firm.
Vaughn Beals Saves the Day
Vaughn Beals’ ideals were different than those of AMF its top management. It became clear that AMF did not have the same amount of concern for Harley’s success as Beals, so AMF began looking for a buyer. With Harley Davidson’s profitability down, Beals and some other Harley Davidson managers orchestrated a highly leveraged buyout. This large amount of debt for the buyout forced Harley Davidson’s managers to adopt a new strategy: survival. Vaughn Beals realized that his firm needed to change to become a more competitive force within the motorcycle industry.
Many things at Harley Davidson were going wrong. The motorcycles were being made at a low level of quality and the focus was too much driven by quantity rather than quality. The organization was formed around the traditional top thinks and everybody acts. It was very apparent that if nothing changed, Harley Davidson’s reputation would be forever tarnished due to low quality products.
Forces for Change: Competition (chapter 19)
Competition for business is changing. Competitors can come from across the ocean or from across town. For Vaughn Beals, his main force for change was the Japanese competition that was continuing to decrease Harley Davidson’s share of the market. He realized that something had to be done. While visiting the Honda plant, he learned many things that the Japanese did better than Harley Davidson. “The differences between Harley Davidson and Honda were striking. For example, only 5 percent of Honda’s motorcycles failed to pass final quality inspection; over 50 percent of Harley’s failed during the same test” (Buller & Schuler 2006).
Instead of allowing manufacturers to keep producing the products at a high pace, with little attention to quality, Beals and his top...