harley davidson inc Essay Example For Students

harley davidson inc Essay HARLEY DAVIDSON INC. MOTORCYCLE INDUSTRYINTRODUCTIONThe purpose of this report is to develop a strategic corporate objective for HarleyDavidson Inc., a publicly traded, employee owned manufacturer of heavyweight motorcycles, recreational and commercial vehicles, military defense items, and small engines, distributing its products to domestic and international markets targeting all men and women of all ages. INDUSTRY AND COMPETITIVE MARKETThe industry under study is the motorcycle industry consisting of five major manufacturers: one American (Harley Davidson), and four Japanese (Honda, Yamaha, Kawasaki, Suzuki) and some European companies (mainly BMW of Germany and some other Italian companies). Most companies market their motorcycles and accessories on a worldwide basis, handling international trade through foreign distributors and domestic sales through franchised outlets. Industry sales of motorcycles were shrinking in the early l990s because of the recession and the competition from computers and electronic products decreasing consumers discretionary income. Sales of accessories and parts make up 36% of total retail sales and is a viable area for producers to explore because people want something to differentiate their bikes. Previously, motorcycles were viewed as a cheap means of transportation. By 1992, they came to be viewed as a recreational, or a luxury item. This new perception of motorcycles led to the introduction of more expensive models with higher prices. This led to the introduction of consumer financing, one of the fastest growing service areas in the motorcycle industry. MISSIONHarleys strategic objective is to continue to provide safe, high technology heavyweight bikes and keep customer satisfaction at high levels. This quality vision more than doubled Harleys market share and increased its brand loyalty. EXTERNAL PLANNING PREMISESCUSTOMERSThey can be divided into 2 categoriesmen and women. Men.A. Men under 30. This group accounts for 44% of all sales. Therefore, a great opportunity exists here because of the groups size. This groups members buy motorcycles for their transportation and recreation needs. Men in this group buy more of mopeds, scooters and entry level lightweight road bikes. B. Men between 30 and 50. This age group makes up 45k of buyers another large area providing opportunities for firms. The motorcycles most frequently purchased are the heavyweight tourers and cruisers. Many buyers are married couples looking for an alternative to taking the car out for weekend drives to the country. C. Men over 50. This group accounts for about 11% of motorcycle sales. The heavyweight touring class and the middleweight road bike categories account for most of the sales here. Women. This group is a segment that is growing at a fast rate, thereby representing an opportunity area. Firms to be successful here are to provide smaller, easier to handle, comfortable, and good quality bikes to build up brand loyalty. PRODUCTSThree types of products/services are being offeredmotorcycles, accessories, and financing services, all related to the sale of the main product motorcycles. Motorcycles: It includes mopeds or scooters (with engines under 125cc which are used as an alternative to walking), accounting for about 17% of total motorcycle sales; lightweight motorcyclesroad bikes, dirt bikes, dual purpose bikes (with engines ranging from 125cc to 499cc), accounting for 51% of sales; sport motorcyclesstreet bikes, and superbikes (with engines ranging from 450 to 749cc) accounting for 13% of sales; heavyweight motorcycles cruisers, tourers (ranging from 750cc to 1500cc) accounting for 19% of sales. Accessories: Aftermarket accessories, such as saddle bags, higher windshields, customized seats, and clothing items are produced or contracted to be produced by all leading manufacturers. Since these items realize high profits and strengthen customer relations and customer loyalty, this area is providing an opportunity for companies. To succeed here, firms provide a wide product line, of stylish items, and aggressively advertise/market them. Financing Services: As prices of motorcycles increased well above the reach of many motorcycle enthusiasts, manufacturers begun to set up consumer credit arrangements falling into 3 categories consumer, dealer, and corporate financing. Financing services are vital for success in the industry and firms unable to provide them will lose market share. To succeed here, firms are to provide a wide variety of flexible (in terms of maturity and payment arrangements) plans. MARKETSAlthough motorcycles are sold internationally, 3 main geographic markets comprise the bulk of motorcycle salesNorth America, Asia, and Europe. The largest is the North American Market (USA and Canada account for about 60% of this market) accounting for 60% of worldwide motorcycle sales. With the baby generation aging, opportunities exist for the penetration of new markets. The Japanese marketaccounting for a great chunk of the Asian Marketis an untapped one for foreign manufacturers. Government regulations and trade policies make it difficult for foreign manufacturers to enter though. Most Asians consider motorcycles as a basic means of transportation. Major target areas include China, Korea, Taiwan and Vietnam. The European Market is another market with great potentials since Europeans have a higher disposable income and enjoy a higher standard of living. Eastern Europe is not offering a good deal mainly because of its unstable political and economic environment. To succeed in these markets, firms are to modify products to meet local needs, provide after sales service, expand distribution networks, create strong customerCOMPETITIONCompetition in the motorcycle industry consists of only a handful of producers worldwide. The Japanese producersHonda, Yamaha, Kawasaki, and Suzukiare producing a full line of motorcycles ranging from scooters to heavyweights, and together control the largest share of the market. Their wide product line though has also created some customer complaints to them (especially true for Honda and Kawasaki) for low quality service. This significantly decreased their market shares. Japanese companies success began with copying other products, but evolved to depend on innovative designs and technology. Harley Davidson is producing heavyweight motorcycles emphasizing good quality product and after sales service, thereby building up brand loyalty. Leonardo Da Vinci EssayAlternative 3, which is the one that I recommend, capitalizes on Harleys strengths. The company is to produce only heavyweight motorcycles, thereby focusing its RD on producing safe, good quality products. The company is to guarantee a high resale value and provide good after sales service. Also its decision to stay with FMCO financing gives the company an additional financial advantage to be used in targeting specific marketing niches. Customers under 30 years of age are to be provided with safe, stylish, high quality products at reasonable prices, thereby increasing brand loyalty. Safety issues are not being focused by the Japanese and that gives Harley a competitive edge here though they can provide their products at lower prices. Customers from 30 to 50 years of age are to be provided with high performance, safe products, building up Harleys brand loyalty that is considered the strongest, especially in the domestic market. Customers over 50 years of age a re to be provided with comfortable, easy to handle bikes to increase their convenience. Foreign bikes are lacking this key and are expected to be outperformed by Harley. Harleys line of accessories (more emphasis on clothing) is to be expanded by providing a wider product line. That by itself would advertise its products and increase brand loyalty. Its plan to focus on the domestic market with 60% emphasis and on the foreign market with 40% emphasis is both good and bad. It is good in the sense that international demand for Harley products is increasing and that would increase the companys revenues since it will expand its distribution network, provide after sales service, and appear there with an already established brand loyalty. It is bad though to expand with 40% emphasis in the foreign markets because Harley is not strong in meeting consumer demand that is expected to grow even more and dissatisfy both domestic and foreign customers. Surely, Harley can solve this problem by get ting loans, thereby expanding its plant capacity and meeting this increased demand. The future cash flows that will arise due to increased sales will be used to repay these loans and maintain the companys good credit rating. SWOT ANALYSISHarleys high RD accounts for innovative designs providing Harley with unique product designs that set Harley apart from its competition. In order to achieve that, Harley is to increase its RD to improve product designs, quality, and safety. It is also to offer a guaranteed resale value (that most Japanese firms are lacking), offer a high quality after sales service and, therefore, build up its brand loyalty. Harley also, provides a wide variety of stylish accessory products and aggressively market them. Harley due to its lack of capital, avoided forming its own subsidiary providing financing servicessomething that Honda and Kawasaki have already done, and that is a wickeness for the company. That lack of capital also makes the company unable of producing the amount of products needed. There are some oportunities for the company, For example the expansion of its markets o Asia and Europe. In addition, of having its own financial services is a profitable expansion. Some of the threats are the tarrifs that might exist in other markets, and the immitation of Harleys products from other competitors. STRATEGIESThe strategies that the company might use have to do withe expansion to other markets like Asia, or Europe in order to increase sales and market share. In addition the creation of its own financial services could bring more profit. Harley should give a lot more emphasis to the male customers and also increase the emphasis on the foreign market close to 40%.IMPLEMENTATION ISSUESSome of the problems that the previous strategies may face depend on the lack of capital. Of course a loan could be beneficial since the returns from the sales would be enough to pay back the loan. In addition, exports in Europe are not that easy since the products are going to be taxed more, since they come from a country outside the Europian community. In the future a subsidiary in one of the European community countries would relax the tarrifs. TOWARDS THE FUTURETowards the future the company is expected to do very well and increase its market share. The management objectives is expected to be the same as the current ones. Therefore the company is expected to manufactore only heavyweight motorcycles, but with the use of some loans will be able also to icrease sales in Asia and Europe. I ) DECISION CHARTKind of DecisionsAlternative 1Alternative 2Alternative 3Product Kind*Lightweight, sport,*Sport and heavyweight *Heavyweight motorcyclesand heavyweight motorcycles. only. motorcycles.*Expand the line of acces- *Expand the line of accesso-*Stay with current sories to include more ries giving increasing em-line of accessories items. phasis on clothing. *Financing Services*Financing services through*Financing services throughthrough FMCO a wholly-owned subsidiary. FMCO. Consumers*Target all customers*Concentrate on males*95% emphasis on male cus-from young to old. (90% emphasis) tomers and 5% emphasis on*10% emphasis on females females. Ownership*Keep as is*Keep as is*Keep as isMarkets*70% emphasis on*Equal emphasis on the *60% emphasis on the dome- the domestic anddomestic and foreign stic and 40% emphasis on30% on the foreign markets. the foreign market. markets. Management*Keep as is*Keep as is*Keep as isCategory: Law