External and Micro-Analysis Frameworks for Harley Davidson - Case Study Example

International Business A Case Study of Harley Davidson Name of Student: Student No: Date: Name of Supervisor: INTERNATIONAL BUSINESS: THE CASE OF HARLEY DAVIDSON This report will analyse the External and Micro Analysis frameworks for Harley Davidson, a business that has existed for over a century. A critical analysis will be done using PESTEL, Porter’s Five Forces, a SWOT analysis, and Value Chain Analysis. PESTEL Analysis PESTEL analysis entails breaking down the forces that influence growth and development of a company into Political, Economical, Social, Technological, Environmental, and Legal factors. Political Harley Davidson requested the government under Section 201 escape clause and it adopted the safeguard policy restricting the import of motorcycles with more than 700cc engine beginning April in 1983. This safeguard entailed a tariff-rate-quota in which other nations were able to export a specified amount of motorcycles without attracting extra tariff charges. This is known as protectionism. Economic Harley Davidson’s success can be attributed to three things; management, marketing and manufacturing. When it comes to marketing, two main elements of brand knowledge are important; brand awareness and image. Harley Davidson began with a training programme for its dealers which converted them from a rag tag group, catering helter skelter to the needs of their clientele and without an established structure to complete outfits offering profession pre- and after sales service, with specialised design centres able to customise bikes. The Harley Davidson culture came alive at these distribution points enhancing their relationship with clientele. Social The Harley Davidson brand does not only offer a transportation device, but also a lifestyle. According to the Harley Davidson mission statement, there is more to them than just building, and selling motorcycles in order to realise the desires of clients; they try to give memorable experiences. These experiences may include socialising at the Harley-Davidson dealership, enjoying an early evening jaunt with local Harley Owners Group® or even conducting a cross-continental ride. They assert that the secret to the longevity of their brand and the passion it evokes in Harley owners is the very experiences that it offers. Harley Davidson has committed to creating those experiences and forging relationships with all stakeholders. Technological Harley Davidson has implemented up to date methods of manufacture which have assisted in improvement of the quality of its brand. At the start of the millennium, they were having problems meeting demand for their bikes and customers had to wait up to six months for a bike. Environmental The Harley bikes have carved a niche in the super heavyweight category with all but one of its engines being over 850cc. The Harley Experience exemplifies bikes that are big, noisy, low riding, and macho. These may not be very environmentally conscious attributes but the whole concept of the Harley Davidson is anti-politically correct and therein lies its appeal. Legal The company used its status as the only American motorcycle company in operation to lobby the government to institute legal means in order for them to gain a comparative advantage over competitors. This was done through implementing statutes that enable the government to impose tariff quotas on imported bikes. Porter’s Five Forces Analysis This tool analyses the structure of the industry. In the case of Harley Davidson and the motorcycle industry, this can be done through; Analysis of threat of substitute products Harley Davidson is the only American bike in manufacture whose policy is to sell not just the bike but the Experience. This has worked well with the American public although this success has not been duplicated overseas. In the super heavy weight division of bikes, Harley Davidson is the dominant force and no other bike has offered significant competition. Threat of entry of new competitors So far, there is no other bike manufacturer that has managed to penetrate the niche that H-D has carved for itself in the minds of consumers. Intensity of Competitive Rivalry The competition between Harley Davidson and its competitors is not direct. These competitors including Honda, BMW, and Suzuki tend to dominate in other categories of bikes such as light and middleweight therefore the intensity of competition amongst them is limited. Bargaining Power of Buyers The Harley Davidson bikes retail at a wide price range of between $6000 and $20000 although this is definitely on the high end. This means that the shopper for the H-D bike is not looking for a bargain or just any bike, but has been sold on the idea of the Experience. This reduces their bargaining power considerably. Bargaining Power of Suppliers Harley Davidson manufactures bikes in the super heavy weight category but they are not a big outfit and therefore rely very much on suppliers and other manufacturers for various aspects of engineering specs and other parts. This means that the bargaining power for suppliers is quite high as they hold the advantage over Harley. SWOT Analysis Strengths Harley occupies a unique niche in the mindset of consumers and this lends it enduring popularity. The retail experience that Harley embodies builds brand loyalty with the bikes becoming not just a means of transport but a culture or lifestyle. Weaknesses The narrow niche that Harley occupies is dependent upon the continued regard customers have for the Harley Experience. Should this interest dissipate due to generational or other change, then they will be left with nothing. The innovation at Harley is not as advanced as other motorcycle makers and this may lose them some middle class clients. Opportunities So far, no other bike maker has managed to capture the imagination of motorcycle enthusiasts and the general public as much as Harley. If they continue to grow this niche, they have a guaranteed market far into the future. Threats Generational change brought about by former Harley owners growing too old for the lifestyle. The global financial crisis may affect the spending power of potential consumers. Value Chain Analysis Inbound Logistics Developing means of winning company support from the entire company and making internal improvements was key to the improvement strategy at H-D. Management’s first task was to recognise the significance of relationships among workers. These strong relationships are one of the pillars for the development of company practises. Operations Management There has been ongoing improvement of the H-D manufacturing operations since 1981. This means constant investment both in plant, equipment, and technology. There have also been incessant upgrading of capacity to manufacture more motorbikes, especially in light of the inability of demand to meet supply. Improvements in capability include TQM, just-in-time scheduling, CAD/CAM, as well as involvement of every worker in the responsibility of producing a quality product. They have also forged closer relationships with suppliers through the Supplier Advisory Board (SAC). Outbound Logistics There is more to H-D than just building, and selling motorcycles in order to realise the desires of clients; they try to give memorable experiences. These experiences may include socialising at the Harley-Davidson dealership, enjoying an early evening jaunt with local Harley Owners Group® or even conducting a cross-continental ride. The dealerships therefore are designed to foster this Experience through pre and after sale customer interaction, customisation facilities, and sale of H-D merchandise. Marketing and Sales Harley Davidson asserts that the secret to the longevity of their brand and the passion it evokes in Harley owners is the very experiences that it offers. Like they say, no other brand inspires clients to tattoo the name on their own bodies. Thus their marketing strategy is about a selling a culture, not just a brand. Services Other services offered by H-D include the sale of parts and accessories as well as the previously mentioned merchandising. This is done through Harley Davidson dealerships as well as independent manufacturers licensed to produce H-D accessories such as clothes, gift items, and colognes. There are also Harley-Davidson Financial Services that provide credit facilities, insurance, as well as warranties to the dealers and clients. Read More