1. Company Overview
Harley-Davidson Motor Company (HDMC) is one of the world leaders in the production, marketing and servicing of motorcycles in the US and throughout the world. The company manufactures a range of motorcycles and has established a network of dealerships in the US and overseas, and has a series of merchandising and selling strategies, including a growing financing business. The company is headquartered in Milwaukee, Wisconsin.
In terms of distribution of revenue, Harley-Davidson’s worldwide motorcycle sales (HDMC and BMC) generated 79.9% of the motorcycles segment’s total revenue, and increased by 8.4% during 2004. In addition the parts and accessories, general merchandise and other items accounted for 20.1% of revenues in 2004, and witnessed annual growth of 8.8% expecting to increase to 26% in 2005 fiscal year results.
The company focuses on the design, manufacturing, selling and service of heavyweight (engine displacement of 651+cc) performing motorcycles, in addition to touring and custom bikes. Within the last five years the company has also moved into a wide range of motorcycle parts, accessories, clothing and collectibles. What is remarkable about Harley-Davidson is their ability to consistently be the market share leader in heavy motorcycles. As of 2004, based on retail sales of new motorcycles their market share was 49.5% in the US alone. The US is Harley-Davidson’s largest geographical market, accounting for 81.7% of revenues in 2004, followed by Europe (9.5% of revenues), Japan (3.8%), Canada (2.7%), and other countries (2.2%). The US recorded annual growth of 7.6% in 2004. Growth rates in other geographies were as follows: Europe (14%), Japan (11.1%), Canada (1.8%), and other countries (22.7%) according to DataMonitor (2005).
Another significant point about Harley-Davidson is the passion of their users, which the company openly promotes in their Harley Owners Group (HOG). The HOG has approximately 900,000 members worldwide. Started in 1983, the effort to bring Harley-Davidson owners and enthusiasts together, fostering brand loyalty in the process has been a tremendous success.
The company is managed as three functional groups, which include the Produce Products Group, the Create Demand Circle, and the Provide Support circle. The Create Demand circle is expected to generate and foster new product innovations and new product ideas and marketing; the Produce Products circle is responsible for delivery of products; and the Provide Support circle with ensuring lifetime support for customers.
2. The Case
Strategic Change 1: New Ownership
In 1965, H-D was made public and freed from family ownership. In 1969, The American Machine and Foundry Company (AMF) - a leading manufacturer of machinery, automobiles and sporting goods - acquired Harley Davidson. During the early 1970s, H-D expanded its manufacturing capacity by building a new plant in York, Pennsylvania. To meat the expansion costs, the company increased the price of its vehicles, a decision that made many customers unhappy. By the mid- 1970s, the quality of H-D motorcycles began declining as AMF kept pressing the company to increase sales volumes. Apparently, AMF wanted to make the most of the booming demand for motorcycles in the market. Thus, as against 14,000 units in 1969, H-D had to produce 75,403 vehicles in 1975. As a result, quality had to be sacrificed for quantity; productivity was the main goal. Quality experts such as Deming and Crosby have researched these principles and learned the important relationship between quality and productivity, "Productivity is a measure of output divided by the inputs required to produce it ..... for every unit of defective output produced that must be scrapped or reworked inputs are wasted. Problems intensified when high-quality, low priced Japanese motorcycles from companies such as Honda, Suzuki, and Kawasaki entered the US. H-D's market share declined sharply from 80% in 1969 to...
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