Executive Summary:
The world is changing more and more, rapidly and
consequently industries and firms specifically Harley Davidson- Bahrain is
changing faster than ever. Industries are changing so fast that researchers
call them high velocity market, such as telecommunications, cars and motorbikes,
biotechnology, and pharmaceuticals. Meeting the high velocity change presents
the firm with a choice of whether to react, anticipate, or lead the market in
terms of its own strategies. To primarily react to changes in the industry
would be defensive strategy used to counter, for example, unexpected shifts in
buyer tastes and technological breakthroughs.(Joel Makower;Journal of Management Development vol 7, no.3 1998 ,pp32,33) The react to change strategy would not be as effective as the
anticipate change strategy, which would entail devising and following through
with plans for dealing with the expected changes. However, our group project
which is Harley Davidson motorbike ideally strive to be in position to lead the
changes in high velocity markets, whereby they pioneer new and better
technologies and products and set industry standards. Being the leader and
pioneer of change Harley Davidson focus on an aggressive , offensive strategy
that includes rushing next generation products to market ahead of rival such as
Honda, Yamaha, Polaris and Kawasaki and being continually proactive in shaping
the market to one’s own benefit.
Harley Davidson has effectively capitalize on the growing
importance of information technology to ensure that information needed to formulate,
implement and evaluate strategies where and when needed. Technological forces
represent major opportunities and threats that are being considered by Harley
Davidson in formulating strategies. These technological advancements developed
by Harley Davidson can dramatically affect organizations’ products, services,
markets, suppliers, distributors, competitors, customers, manufacturing
processes, marketing practices, and competitive position. (Giesen, Edward, Eric Riddleberger, Richard Christner and Ragna Bell, “
When and How to Innovate Your Business Model, “Strategy and Leadership 38 no.4
2010)
In practice, Harley Davidson critical decisions about
technology too often are delegated to the lower organizational levels or are
made without an understanding of their strategic implications.
Harley Davidson pursues
strategies that take advantage of technological opportunities to achieve
sustainable, competitive advantages in the marketplace.
Introduction:
Harley heritage is symbolic of the American dream. Harley’s
workers and customers relate to and find motivation in this American dream that
became a reality. An extension of this concept of family is also a key to
Harley’s success. The HOG (Harley Owners Group) is a worldwide family of Harley
owners that is a million strong. When one purchases a Harley, one becomes part
of a family of owners that rides together
and parties together, in locations on nearly every continent. Indeed the Harley
Web site beckons riders to share adventure.( Mabey C, Management Works, The Evidence, July 2010, pp. 26-9)
Aside from the shared
experience many Harley riders treasure taking in the back roads and the beauty
of scenery unique to each locale. Nostalgia is also a badge of Harley’s
success. Its unique “potato-potato-potato” sound created by its famous V-twin
engine is still heard in rumblings of its motorcycles on the road today, and
its legendary styling, overseen by “Willie G. Davidson, himself an icon, has
created continuity crowd over the decades.
Harley Davidson real key to effective strategic management
is to accept the premise that the planning process is more important than the
written plan, that the company is continuously planning and does not stop
planning when the written plan is finished. If the company is not planning on a
continuous basis –planning, measuring, and revising the written plan can be obsolete
the day it is finished, the reason why Harley Davidson is an excellent company
for fostering innovations. (Padilla, J; Chan,
A Strategic Management, 2nd edition, 2011, pp 165)
Mission Statement, Vision Statement, and Values.
Harley Mission
Statement is:
“ We fulfill dreams through experiences of motorcycling , by
providing to motorcyclists and to the general public an expanding line of
motorcycle, branded products and services in selected market segments”.
The Philosophy is what helps set Harley apart from
competitors. According to Harley it takes more than just building and selling
motorcycles to fulfill dreams of its customers. It takes unforgettable
experiences and Harley is dedicated to creating experiences, and developing
relationships with all stakeholders. Harley believes that what sets it apart from
the crowd, and why its brand is legendary.
Harley Vision statement is:
“ Harley Davidson is an action oriented , international
company, a leader in its commitment to continuously improve its mutually
beneficial relationships with stakeholders. Harley Davidson believes the key to
success is to balance stakeholders’ interest through the empowerment of all
employees to focus on value added activities”.
Harley also emphasizes the importance of its five stated
Values: 1) Tell the Truth; 2) Be Fair; 3) Keep your Promises; 4) Respect the
Individual ; and 5) Encourage Intellectual Curiosity. According to Harley , it
Values represent the heart of how it runs its business . The Values guide their
actions and serve as the framework for the decisions and contributions its
employees make at every level of the company < Harley” Davidson states that the values are more than
just a list of “ feel good” buzzwords; they reflect how Harley employees relate
to each other and to all of their stakeholders, including customers , dealers,
and suppliers.
The Mission Vision of Harley Davidson provides managers with
a unity of direction that transcends individual, parochial and transitory
needs. It promotes a sense of shared expectations among all levels and
generations of employees. They consolidate values and across individual and
interest groups. They project a sense of worth and intent that can be
identified and assimilated by company outsiders. They affirm Harley Davidson’s
commitment to responsible action, which is symbiotic with its nee to preserve
and protect essential claims of insiders for sustained, growth and
profitability.
Organizational Structure:
Harley Davidson organizational structure consists of
executive vice presidents and senior vice- presidents, who oversee key
functional areas. These vice presidents are members of a group of leaders known
as the Senior Leadership Group consists of a broad group of leaders
representing key functions and individuals in the Motor Company, Buell and
HDFS, certain senior officers of the Motor Company (senior vice president,
manufacturing; senior vice president , product development ; and senior vice
president and chief financial officer) and certain other Harley Davidson
executives (executive vice president and chief financial officer ; executive vice
president , chief organizational transformation ; and executive vice president
, general counsel and secretary).
Harley Davidson has the Matrix Structure with many offices
in other countries particularly Bahrain. It is being used more frequently by US
businesses including Harley Davidson because firms are pursuing strategies that
add new products, customer groups and technology to their range of activities.
For matrix structure to be effective, organizations need participative planning,
training, clear mutual understanding of roles and responsibilities, excellent
internal communications and mutual trust and confidence, an advantage strategy
for the company. (Padilla, J; Chan, A
Strategic Management, 2nd edition, 2011, pp 23)
Harley Davidson operates in two segments: (1) financial
services and (2) motorcycles and related products.
The Financial Services
The financial services segments includes the group of
companies doing business as Harley Davidson Financial Services (HDFS) , which
provides wholesale and retail financing and, as agent provides insurance and insurance related programs primarily to
Harley-Davidson and Buell dealers and their retail customers. HDFS conducts
business principally in the United States and Canada. HDFS’s 2012 operating
income decreased 61.0 percent. Billionaire Warren Buffet’s Berkshire Hathaway
invested $300 million in Harley Davidson. Harley says Berkshire and Harley’s
biggest shareholder, Davis Selected Advisers, L.P., are each committed to
buying $300 million in senior unsecured notes, due in 2014. The money will be
used to support Harley’s finance company and its ongoing motorcycle lending
activities. (Padilla, J; Chan, A
Strategic Management, 2nd edition, 2011, pp 23)
Projected financial statement analysis is a central strategy
implemented by Harley Davidson in most of its affiliates worldwide especially
in Bahrain because it allows examining the expected results of various actions
and approaches. This type of analysis can be used to forecast the impact of
various actions and approaches. (Padilla,
J; Chan, A Strategic Management, 2nd edition, 2011, pp 89)
Cost distributions among R&D activities in Harley
Davidson are determine by R&D budget allocations commonly used 1) financing
as many project proposals, 2) using percentage of sales method, 3) budgeting
the same amount that competitors spend for R&D or 4) deciding how many
successful new products are needed and working backward to estimate the
required R&D investment.
Production/ operations activities often represent the
largest part of the organization’s human and capital assets. Harley Davidson’s
major cost of producing a product are incurred within the operations, so
production /operations can have great value as a competitive weapon in a
company’s overall strategy. Strengths and weaknesses in the five functions of
production can mean the success of Harley Davidson. (Yukl G. Leadership in Organization, 6th edition, page 76-77,
Prentice and Hall, 2012)
Many production/operations managers in Harley Davidson are
finding that cross training of employees can help the firm respond faster to
changing markets. Cross training of workers can increase efficiency,
productivity and job satisfaction.
Harley Davidson invests in Research and Development because
they believe that such investment will lead to a superior product and will give
competitive advantages. Research and Development expenditures are directed at
developing new products before competitors do, at improving product quality, or
at improving manufacturing processes to reduce cost.( Holbeche, L High Performance Organization Checklist, pp67-2, 2011,
Roffey Park Institute). Harley Davidson effective management of Research
and Development requires a strategic and operational partnership between
R&D and other vital business functions.
R&D in Harley
Davidson take two basic forms: 1) internal R&D , in which Harley
Davidson operates its own R&D
department, and /or 2)contract R&D in which HD hires independent
researchers or independent agencies to develop specific products.
According to Michael Porter, the business of a firm can best
describes as a value chain in which total revenues minus total cost of all
activities undertaken develop and market product yields value. Harley Davidson
strategy includes obtaining raw materials, designing products, building
manufacturing facilities, developing cooperative agreements, and providing
customer service.
The Value Chain analysis aims to identify where low cost
advantages or disadvantages exist anywhere along a value chain from components
parts to customer service. VCA being used by HD enable the firm to better
identify its own strengths and weaknesses, especially as compared to
competitors’ value chain analyses and their own data examined over time.
Substantial judgment may be required in performing a VCA because different
items along the value chain may impact other items positively or negatively, so
there exist complex interrelationship. This strategic action of HD attempts to
attach cost to each discrete activity. (Padilla,J
Chan,A Strategic Management, 2nd edition, 2011, Prentice Hall)
Motorcycles and Related Products:
The motorcycle and related products segments of Harley
Davidson includes 1) Parts and Accessories (P&A); and 2) General
Merchandise; 3) Licensing; and ; 4) Motorcycles. The major P&A products are
replacements parts and mechanical and cosmetic accessories. Worldwide P&A
net revenue comprised 15.4 percent, 15.2 percent and 14.9 percent of net
revenue in the motorcycle segments in 2010, 2011, and 2012. Worldwide General
Merchandise net revenue, which includes apparel and collectibles, comprised 5.6
percent, 5.3 percent and 4.8 percent of net revenue in the Motorcycle segment
in 2010, 2011, and 2012 respectively. With regards to licensing , the company
creates an awareness of its most significant brand, Harley Davidson , among its
customers and the non-riding public through a wide range of products by
licensing the name “Harley Davidson” and other trademark owned by the company Licensed
products include T-Shirts, jewelry, small leather goods and toys. Although the
majority of licensing activity occurs in the United States, Harley continues to
expand these activities in international markets, such as into India in 2010,
Royalty revenues from licensing, included in motorcycles segments net revenue,
were $45.4 million, $46.0 million and $45.5 million in 2010, 2011, and 2012
respectively.
Harleys are sold under the brands of Harley Davidson Motor
Company, Buell Motorcycle Company, Cagiva, and MV Agusta which was acquired by
Harley-Davidson in 2008. The motorcycle segment designs, manufactures, and
sells at wholesale primarily heavyweight (engine displacement of 651+cc)
touring, custom, and performance motorcycles. Harley Davidson, which is the
only major American motorcycle manufacturer, conducts business globally, with
sales primarily in North America, Europe, and Asia/Pacific. (Padilla,J; Chan, A; Strategic Management, 2nd edition,
2011, Prentice Hall,pp23,34)
Harley’s worldwide motorcycles sales generated approximately
80 percent of the total net revenue in the Motorcycles segment during each of
the years 2010, 2011, and 2012.
According to Padilla, J.http//joepads@blogspot.com, June, 2012, the
company manufactures five families of motorcycles; 1) Touring, 2) Dyna, 3)
Softtail 4) Sportster, and 5) VRSC. The engines range in size from 883cc’s to 1803cc’s.
Harley heavyweight class of motorcycles is divided into four segments: standard
performance, touring, and custom. The standard segment emphasizes simplicity
and cost, and the performance segment emphasizes handling acceleration. The touring
segments for the company focus on comfort for long distance travel. Harley
Davidson pioneered this segment of the heavyweight market. Harley’s custom
segment gives owners the opportunity to customize their bikes. Limited edition,
factory custom motorcycles are sold through its Custom Vehicle Operation (CVO)
program. Motorcycles sold through the CVO program are available in limited
quantities and offer unique features, paint schemes and accessories.
Buell motorcycle products emphasize innovative design,
responsive handling, and overall performance. Buell manufactures four families
of motorcycles: 1) Sport bike; 2) Street, 3) Adventure, and 4) Blast. The Blast
features a smaller 492cc single –cylinder engine, ideal for many new riders, MV
motorcycle products emphasize exquisite design and high performance, Buell is
active in the racing community and gains publicity from those efforts. . (Padilla,J Chan,A; Strategic Management,
2nd edition, 2011, Prentice Hall,pp 122-123)
The heavyweight (651+cc) motorcycle market is highly
competitive. Harley Davidson’s major competitors are based outside the United
States and generally have financial and marketing resources that are
substantially greater than those of Harley-Davidson. They also have larger
worldwide revenue and are more diversified than Harley Davidson. In addition to
these larger established competitors, Harley Davidson has competitors
headquartered in the United States. These competitors generally offer
heavyweight motorcycles with traditional styling that compete directly with
many of Harley Davidson’s products. These competitors currently have production
and sales volumes that are lower than Harley-Davidson’s and have considerably
lower U.S. market share than Harley Davidson.
Harley actively promotes the motorcycling lifestyle in the
form of events, rides, rallies, and Harley Owners Group (HOG) . Harley
considers the availability of financing through HDFS as a competitive
advantage.
In the United States, Harley Davidson competes most heavily
in the touring and custom segments of the heavyweight motorcycle market, which
accounted for approximately 84 percent, 80 percent, and 79 percent of total
heavyweight retail unit registrations in the United States during 2010, 2011,
and 2012 respectively. The larger displacement custom and touring motorcycles
are generally the most profitable for Harley Davidson.(Padilla, J; Chan,A Strategic
Management, 2nd edition, 2011,pp 167-169, Prentice Hall)
Harley Davidson has approximately 686 independently owned
full service dealerships in the United States. The marketing efforts are
divided between dealer promotions, customer events, and advertising through
national television, print, radio and direct mailings, as well as electronic
advertising. Harley Davidson also sponsors racing activities and special
promotional events, and it participates in all major motorcycle consumer shows
and rallies. On an ongoing basis Harley-Davidson promotes its products and
lifestyle through The Harley Owners Group (HOG) which was founded in 1983 and
currently has approximately 1.1 million members worldwide. HOG is the
industry’s largest company sponsored motorcycle
enthusiast organization (www. Hog.com). The Buell Rider’s Adventure Group
(BRAG) formed in recent years has grown approximately 10,000 members. Both
HOG and BRAG sponsor events, including national rallies and rides, across
United States and around the world for motorcycle enthusiasts. Harley faces the
competitive forces from companies such as Honda, Suzuki, Kawasaki and Yamaha to
maintain its dominant overall market share in the US Heavyweight Motorcycle
market.
To reach out a current non-riders as well as expert riders,
Harley Davidson created its Academy of Motorcycling in 2000. The Academy’s
Rider Edge program offers a series of rider education experiences that provides
both new and experienced riders with deeper engagement in the sport of
motorcycling by teaching basic and advanced motorcycling skills and knowledge
in a way that is fun and engaging. The course are conducted by a network of
select Harley-recycle is Davidson dealerships nationwide enabling students to
experience the Harley Davidson lifestyle, environment, people and products as
they learn. The company website, www.
Harley-davidson.com is also used to market its products and services. The
website features an online catalog that allows retail customers to create and
share product with list, use a dealer locator and place catalog orders. (p2, FMC Quality Circle published February
5, 2011).
The average US retail purchaser of a new Harley Davidson
motorcycle is a married man in his mid to late forties (nearly two thirds of US
retail purchasers on new Harley Davidson motorcycles are between the ages of 35
and 54) with a median household income of approximately $87,000. Nearly three
quarters of the US retail sales of new Harley Davidson motorcycles are to
buyers with at least one year of education beyond high school, and 32 percent
of buyers have college/graduate degrees. Approximately 12 percent of US retail
motorcycle sales of new Harley Davidson motorcycles are to female buyers. (McInerney, V and Barrows,N Strategic
Management , pp231-234, 2nd edition,
2002, Prentice Hall).
The European heavyweight motorcycle market is roughly 80
percent of the size of the US market. Traditional US style touring motorcycles
represent less than 5 percent of the European heavyweight motorcycle market.
Harley- Davidson continues to expand its product offerings to compete in the
standard and performance segments with motorcycles such as Harley- Davidson’s
XR1200 and Nighster, the Buell 1125R and MV models. Harley Davidson’s
traditional Harley-Davidson products compete primarily in the custom and touring
segments.
In addition to Europe and the United States, Harley Davidson
also competes in Canada, Japan and Australia. In Canada, the company’s market
share based on registrations was 41.9 percent, 39.0 percent, and 38.2 percent
in 2010, 2011, and 2012 respectively. In terms of non-US distribution, Harley
Davidson has 71 full dealerships in Canada, 383 in Europe, 201 in Asia Pacific
and 32 in Latin America. The MV brand, which has added in 2008, distributes its
motorcycles and prints and advertising (P&A) to independent dealers
primarily through subsidiaries located in Germany, Switzerland and the United
States. In Italy and France, MV distributes its products to independent dealers
directly> MV’s network of approximately 500 independent dealers is primarily
located in Europe with approximately 40 independent dealers in the United
States.( www. Harley-davidson.com)
Most Harley competitors are diversified in the automotive
market. Harley’s suggested retail pricing for its motorcycle is generally
higher than its competitors’. Harley financial services operations face
competition from various banks, insurance companies, and other financial
institutions that have access to additional sources of capital at more
competitive rates and terms.
Harley competitors include Honda, Yamaha and Suzuki is also
more diversified than Harley in terms of product offerings. Both focus on ATVs,
scooters, and marine and watercrafts in addition to various motorcycle product
lines. Currently Yamaha has seen decreasing motorcycle sales in Japan, the
United States which are the second and third largest. Honda’s sales are favorable,
particularly in Asia, and it is looking to increase in India. Honda is planning
for growth in Asia, continued recovery in Europe, and for the probable downturn
in the United States. Honda produces a number of products other than
motorcycles, most notably the Honda and Acura brand automobiles. All terrain
vehicles (ATVs), generators, personal watercraft, snow-blowers, and scooters
are also sold under the Honda brand. (Padilla,J
Chan,A ; Strategic Management, 2nd edition, 2011, Prentice Hall,pp 145-146)
Like Honda, Yamaha and Suzuki are also more diversified than
Harley in terms of product offerings. Both focus on ATVs, scooters and marine
and watercraft in addition to various motorcycle product lines. Currently,
Yamaha has seen decreasing motorcycle sales in Japan, the United States and Europe,
but is faring better in Southeast Asia and Latin America. Yamaha recently has
undertaken temporarily factory shutdowns in Japan and bonus reduction, at least
through 2010. Suzuki which also sells automobiles operates in more than 190
countries. Suzuki’s motorcycle product lines include cruisers, motocross, off
road, scooter, street and touring models. Kawasaki’s motorcycles production is
a part of its consumer products and machinery division. Polaris based in Minnesota,
is one of the world’s top makers of snowmobiles and off road vehicles and it is
also known for its Victory cruiser and touring motorcycles. Polaris’s plan is
to achieve $3 billion in overall sales in 2009.
BMW and Triumph are also competitors of Harley Davidson, and
both have a cachet attached to their brands. BMW (Bayerische Motoren Werke) , a
top German automaker, also includes motorcycles as part of its product
offerings. The 2010 figures indicate that BMW motorcycle sales broke the
100,000 unit mark for the second year in a row. BMW also offers leather suits, gloves,
boots, and other motorcycling apparatus.
Different strategies offer different degree of
differentiation. Harley Davidson is pursued only after a careful study of
buyers’ need and preferences to determine the feasibility of incorporating one
or more differentiation features into a unique product features the desired
attributes. (Stern, S The Next, The Next
Big Thing, Management Today, April 2009,pp 89-90) A differentiation strategy allows HD to charge
a higher price for its product to gain customer loyalty because consumers may
become strongly attached for the differentiation features. The most effective
designed by HD can be hardly duplicated by the competitors. To the extent that differentiating
attributes by HD to copy, a differentiation strategy will be especially effective,
but the sources of uniqueness is time consuming, cost prohibitive and simply
too burdensome for rivals to match. (Worall,
L and Cooper C. The Quality of Working Life 2012: p23-25, Prentice and
Hall)
In the final analysis, ethical standards come out of history
and heritage with Harley Davidson. Employees, customers and shareholders have
become less and less tolerant of business ethics. Consumers across the country
and around the world appreciate Harley Davidson that do more than is legally
required to be socially responsible. The company, HD adheres to all laws and
regulations which is the primary objective of the business. Harley Davidson is
one company that is socially responsible and proactively conserve and preserve
the natural environment. Business ethics, social responsibility and
environmental sustainability are interrelated and key strategic issues facing
all organizations. (Stern, S The Next,
The Next Big Thing, Management Today, April 2009,pp 50-53)
HD provides a full transparency to all stakeholders. It does
an excellent job on this. The reward of long term performance with long term
pay , rather than an annual incentives. Conclusion:
All firms have a strategy,
even if it is informal, unstructured and sporadic. The old saying “ If you not
know where you are going, then any road will lead you there”, accents the need
for organizations to use strategic management concepts and techniques.( Rose Goes
Green in Pursuit of Profit, bbc. .co.uk 15 January
2011,hhtp//news.bbc.uk)
Harley Davidson take
a proactive rather than a reactive approach and strive to influence ,
anticipate and initiate rather than responds to events. It represents a logical
systematic and objective approach for determining the HD future decisions. HD
take time to think about their businesses , where they are with the business,
and what they want to be as organizations-and then implement programs and
policies to get from where they are to where they want to be in a reasonable
period of time. It is known and accepted fact that people and organizations HD
plan ahead. (Stewart R. , The Reality of
Management 3rd edition
Butterworth-Heinemann 1999, p125-128)
HD successful implementation depends on cooperation among
all functional and divisional managers in an organization. Marketing
departments are commonly charged with implementing strategies that require
significant increases in sales revenue in new areas and with the new models.
Finance and accounting department must devise strategy implementation
approaches at low cost and minimum risk to the firm. Research and Development
have to transfer complex technologies or develop new technologies to
successfully implement strategies. The nature and role of these functional
departments coupled with the management activities largely determine HD success
in motorbike category. (Padilla J, Chan
A; Managing People, Pearson, 2010, pp 231-232)
Recommendation:
Harley Davidson should provide a framework for collecting
and evaluating economic, social, cultural, demographic, environmental,
political, governmental, legal, technological, and competitive information. It
should mobilize and empower their managers and employees to identify, monitor
,forecast and evaluate key external forces .They should ensure development of
an effective external audit system that includes using information technology
to devise a competitive intelligence systems that works.(http//joepads@blogspot.com, January 2011)
Systematic methodologies for performing strength-weakness
assessment must be developed and evaluate internal strengths and weaknesses in
order to effectively formulate and choose among alternative strategies., pp 99(Gratton, L Living Strategy; Putting People at the Heart of Corporate
Purpose , Financial Times Prentice Hall , 2010)
Harley Davidson should
strive to create a work environment in which change is recognized as necessary
and beneficial so that individuals can more easily adapt to change.
Organizational change should be viewed as a continuous process rather than as a
project or event. The new continuous organizational change philosophy should
mirror the popular “continuous quality improvement philosophy”. ( (http//joepads@blogspot.com, March 2011)