“Victory Motorcycles is a motorcycle manufacturer based in Spirit Lake, Iowa, United States, which began production of its vehicles in 1998. Its parent company, Polaris Industries, created the firm following the modern success of Harley-Davidson. Victory’s motorcycles are designed to compete directly with Harley Davidson and similar American-style motorcycle brands, with V-twin engines and touring, sport-touring, and cruiser configurations. The first Victory, the V92C, was announced in 1997 and began selling in 1998. Victory has been modestly profitable since 2002.” Strategic Thinking
The decision for Polaris to diversify its operations into motorcycle production by creating the Victory Motorcycle brand was founded in the Resource Based View (RBV) of strategic thinking. The company’s idea for diversification was sound; however, their understanding of the market dynamics and market geography may have been limited.
In 1993, when Polaris’ General Manager for New Products, Matt Parks, noticed that the wait time between the ordering and delivery of a Harley-Davidson was lengthy, he realized that there was an opportunity available for Polaris. The opportunity was not without risk though as Harley commanded much of the market share due to its brand name recognition and the fact that it was virtually the only American-made motorcycle available for purchase. Parks and his associate, Bob Nygaard, Polaris’ Snowmobile, Division General Manager, realized that the barriers to enter this market and take advantage of Harley being at the limits of its production capacity would be high. Some of these barriers included adequate production facilities, design capability, and distribution, all of which existed and were under-utilized Polaris resources. In addition, start-up costs were expected to be high.
At the core of Polaris’ strengths were its strong manufacturing capabilities. In 1954, Polaris Industries began by producing snowmobiles. They built a high-quality snowmobile and had loyal customers, but the snowmobile market, by definition, is seasonal. As a result, the company was not utilizing their resources year round. To address this seasonality, the company diversified into all-terrain vehicles (ATVs) in 1985. Similarly, in 1992, Polaris again diversified its product line to include personal watercrafts (PWCs). Shortly thereafter, they began researching their next product expansion. Their production of snowmobiles, ATVs and PWCs ran by season, and did run collectively year round; however, Polaris had not maximized their use of all company resources. The company didn’t have enough work to keep all of its work force employed year round, yet were still required to hire seasonal workers to meet peak demand production. It was evident to Polaris’ management team that company resources could handle more production capacity.
Along with its strong manufacturing capabilities, Polaris had robust engine production and injection molding facilities. They also had an established dealer and service network with over 2,000 locations. Polaris had the strategic assets to consider expansion into motorcycle manufacturing, and the existing infrastructure to help keep their initial outlay costs down. Therefore, in considering the expansion into another product line (i.e., motorcycle production), capital expenditures for another new product line wouldn’t be too cost prohibitive. As with any expansion, costs were a major concern. These were perhaps more important in this decision as Polaris was planning to compete directly with Harley-Davidson (and to some extent, the Japanese motorcycle manufacturers). At the heart of their decision, the core competencies that Parks and Nygaard wanted to exploit was Polaris’ manufacturing ability and cost control, as they thought Harley was most vulnerable in these areas.
The studies of the external market and of Polaris’ facilities demonstrated that the capability and the demand were...