Harley Davidson Motor Company

Introduction

Harley-Davidson Motor Company has a century-long history. It managed to survive and remain competitive despite great changes in the industry. Moreover, its contemporary prosperity indicates that this business has successfully overcome the First, Second World Wars and the Great Depression, not even considering the lesser social and financial challenges. To identify the reasons for Harley-Davidson’s success, the history of its growth and development has to be consulted.

The Purpose of the Study

In particular, the purpose of this research paper is to detect the main competition and positioning strategies of Harley-Davidson and identify how and to what extent they have changed over time. Further, the aim is to study the company’s management style, the implemented innovations, and improved approaches. Besides, the company’s business model and the five forces analysis will be presented. Finally, the paper will discuss Harley-Davidson’s cultural values (including environmental sustainability) and will identify the ways in which these values are being publicly communicated.

Business Overview of the Company

The Ideation Phase

The Harley-Davidson Motor Company originated in 1903 when “William Harley and Arthur Davidson made the first Harley-Davidson motorcycle available to the public” (Melief, Bundgaard & Hathaway, 2006). Further, within the next 17 years, the company had been growing up to the point, when in 1920 it became the world’s biggest motorcycle manufacturer. In particular, “it was supported by over 2,000 dealers in 67 countries” (Melief, Bundgaard & Hathaway, 2006). In 1953, Hendee Manufacturing, a significant rival of Harley-Davidson, closed down its operations. As the result, Harley-Davidson remained the only U.S.-based manufacturer of heavyweight motorcycles. In general, the Ideation phase coincided with favorable historical and social conditions, which assured fast growth and development of the Harley-Davidson Motor Corporation. In particular, the beginning of the 20th century was the time of rapid industrial progress. Thus, the decision to produce vehicles was quite topical and followed the general tendency of the humanity’s development. Moreover, until the middle of the last century, the humanity experienced two world wars, whereas Harley-Davidson positioned itself as a socially responsible company. It supported the military by supplying it with motorcycles. In this way, the company introduced itself to the global society as the business associated with help and care.

The Survival Stage (Valley of Death)

Unlike the Ideation phase, the Survival stage turned out to be rather challenging for the company and almost led to the collapse. For instance, “during the 1960s, Harley-Davidson teetered on the brink of bankruptcy due to the influx of cheaper, imported bikes such as Honda, Suzuki, and Yamaha” (Wilhite, 2002). As the result, in 1969, this company was bought by an American Machine and Foundry Company (AMF), which aimed at “rescuing it from the ashes” (Wilhite, 2002). To succeed with this task, the company had to find and implement effective strategies to overcome the barriers of rivalry. In the case of Harley-Davidson, the company chose the differentiating competitive strategy. Specifically, the differentiation advantage implies that Harley-Davidson “sells the experience, not motorcycles” (Wang, 2014). Besides, it embodies “the image of American style” (Wang, 2014). What is more, this approach also presumes differentiation by pricing. The company’s pricing policy is “to target the wealthy, able to pay people”, who use Harley-Davidson motorcycles to stress their social status (Wang, 2014). Further, considering successful competition, it is necessary to observe “the value chain of motorcycle production” (Wang, 2014). For example, the Harley-Davidson Motor Company operates in accordance with the following chain: design (adherence to the old-fashioned style), purchasing the materials, manufacturing, quality control (test-drives), distribution, marketing, and customer service (Wang, 2014). The value of the product is enhanced by differentiation, increased prices, efficient communication with the community and effective brand image of quality, care and exclusiveness. As a result, the company successfully avoided the Valley of Death and moved to the Growth and Expansion stage.

The Growth and Expansion Stage

Nowadays, the Harley-Davidson Motor Company is experiencing moderations typical to the Growth and Expansion stage of development. Specifically, the main challenge of this phase is the need to attract new clients constantly. The experts offer only an ambiguous estimation of the company’s current performance. On one hand, the positioning strategies are successful. The company has a good reputation and is known for its sophisticated environmental policies, as well as profound customer services (including assistance with obtaining a loan). Without a doubt, the notion of care attracts new clients, especially due to the affordable lending, which allows expanding the customer base by involving the individuals, who otherwise would not be capable to purchase the costly vehicles of Harley-Davidson. On the other hand, the experts emphasize the lack of development. In particular, by adhering to the old-fashioned design, Harley-Davidson does nothing to surprise its loyal customers (Melief, Bundgaard & Hathaway, 2006). As a result, an individual interested in purchasing a Harley-Davidson motorcycle does not have a decent choice among the alternatives. What is more, the main Japanese competitors such as Honda, Suzuki, and Yamaha are intensively working on their development to widen their choice base, pricing, and designs. In the long run, the rivals’ approach may undermine the financial stability of Harley-Davidson. Moreover, nowadays, these competitors are known for producing similar-looking vehicles for lower prices. Given that transportation is quite affordable and well-arranged in the contemporary world, this situation should encourage Harley-Davidson to work on its development more closely. In addition, the Expansion stage of the Harley-Davidson Motor Corporation is greatly affected by the current demographics. Specifically, in many countries (including the USA) the society is aging. Therefore, the client base of the company is also becoming older. The notions of culture, history, and traditions are becoming more appreciated over time. Therefore, in order to attract new younger clients, the company should implement new branding strategies. The problem of aging customers is also relevant due to the financial prosperity of older individuals. Targeting wealthy people presumes that the Harley-Davidson Owners Group would most likely consist of older men, because, naturally, it takes time for people to gain capital. Undoubtedly, the company’s approach to providing partial loans solves this issue. Nonetheless, considering that young people usually already have one or even several loans, taking another one to purchase a luxury motorcycle is a risky decision.

The Revenue

Despite the company’s adherence to the same design for years, the present diversity of products and services is quite attractive for the new clients (Harley-Davidson, Inc., 2013). In particular, this corporation is known for producing parts and accessories, which account for a significant portion of the company’s income (16.6 % in 2013). Further, Harley-Davidson has “worldwide general merchandise net revenue” (Harley-Davidson, Inc., 2013). This segment includes motor clothes and gears and contains about 5, 6% of the general income of 2013. Moreover, the global popularity of the Harley-Davidson brand allows earning money by licensing. Specifically, “the company’s licensed products include t-shirts, eyewear, vehicle accessories, jewelry, small leather goods, toys, footwear and numerous other products” (Harley-Davidson, Inc., 2013). Given a great variety of the licensed goods, it is not surprising that the revenue obtained in this segment was $58.9 million in 2013. In addition, this corporation provides MBA training programs, vehicle service and “customized dealer software packages” (Harley-Davidson, Inc., 2013). What is more, the company’s owners decided to create the Harley-Davidson Museum with the purpose of assuring better communication among all stakeholders. As the practice reveals, this idea turned out to be rather effective and helped connect the customers with each other, as well as with the company’s managers. The aim of this museum is to introduce the 100 year-long performance of Harley-Davidson. In particular, the museum exhibits unique designs of the motorcycles, the history of the company’s development, and its adherence to culture and traditions. Therefore, the Harley-Davidson Museum is a powerful tool for advertising, as well as the means of obtaining additional capital. These goals are achieved due to the diverse infrastructure of the museum. In particular, the “130,000 square foot campus houses the Museum and archives, a restaurant, caf?, retail store and several special event spaces” (Harley-Davidson, Inc., 2013). As a result, the rich infrastructure of the Harley-Davidson Museum can easily fulfill even the needs of the most demanding customers. In such a way, the company conveys its values to the publicity to promote its goods and services.

Five Forces Analysis

Internal Rivalry

In general, the industry of heavy-weighted motorcycles is not overwhelmed with numerous businesses. As mentioned above, there are four main producers in this area (3 Japanese and 1 American). Nevertheless, today, the company shares less than 50 % of the entire area, while earlier it held more than a half of all market of heavy-weighted motorcycles (Melief, Bundgaard & Hathaway, 2006). This decline was predetermined by the lowered differentiation of products since all competitors produced the vehicles of similar design. Naturally, such an approach increases competition. Besides, the rivalry is strengthened by the phenomenon of the aging client base. Finally, due to the numerous improvements of Honda (comparing to the relative inactivity of the surveyed company), today this Japanese firm is recognized as the major competitor of Harley-Davidson.

Entry

Fortunately for the already existing companies, the entering costs are rather high. Specifically, significant manufacturing costs, which presume the need for considerable investments, are required. This peculiarity is combined with high governmental standards set for this industry. These characteristics predetermine that only a few companies may survive in the long run (Melief, Bundgaard & Hathaway, 2006).

Substitutes and Compliments

Typically, the Japanese companies produce lighter and smaller motorcycles, which is the closest substitute to the heavy-weighted ones. Nevertheless, smaller vehicles require a different riding style. Besides, they look different and produce diverse sounds, which makes the heavy-weighted motorcycles far more attractive. Further, the cars cannot be seriously considered as relevant substitutes, because they are chosen as the means of traveling, whereas the Harley-Davidson vehicles accentuate the owner’s status by providing unforgettable emotions and experiences. The main compliment of the motorcycle is gasoline. Undoubtedly, the heavy-weighted motorcycles are known to consume a lot of fuel. Nevertheless, considering the high costs of the Harley-Davidson vehicles, the accompanying expenses should not scare away the current or potential owners of these motorcycles.

Buyer and Supplier Power

Given that Harley-Davidson’s customers are independent individuals, who are not closely connected with each other, the loss of one client does not lead to the loss of the significant part of the company’s client base. Similarly, considering that Harley-Davidson operates all of its manufacturing, it is less dependent on the suppliers. Besides, the use of simple raw materials ensures an easy transition from one supplier to another in case of need. Therefore, it is appropriate to deduce that this company is not greatly affected by the buyer and supplier power.

The Innovations Implemented by the Harley-Davidson’s Management Team

Evaluating the reasons for the company’s success, it is necessary to point out effective leadership style as one of the main factors of Harley-Davidson’s popularity and profitability. A former CEO, Rich Teerlink, emphasized that ‘the command-and-control’ approach to managing the company’s staff was recognized to be ineffective. Therefore, the board of directors decided to adopt a softer leadership style. This decision helped to create “a new kind of organization that recognizes people as a company's only sustainable competitive advantage” (Harvard Business School, 2000). Nevertheless, the CEO also admits that the authoritative management style can be applicable in urgent situations, such as at the time of the pressure of deadlines and significant rivalry. Further, Teerlink speculates that “if an organization is under extreme pressure—so much so that one wrong move can mean the death of that organization—then an authoritarian system of controls may be absolutely necessary” (Harvard Business School, 2000). Thus, a justification of the proper use of the authoritarian leadership strategy is effective management of the Harley-Davidson’s staff during the times of crisis (in the 70s-80s of the past century). Moreover, effective entrepreneurship reveals that the right choice of the leadership style depends on the specific circumstances of operations. For instance, in the 1980s, the company experienced a crisis connected to the enhanced competition. Naturally, in order to remain competitive in such situations, the company needs to use its all available resources, including the well-coordinated performance of the staff. For this reason, owners sometimes choose to resort to the authoritative leadership style. Nonetheless, Rich Terlink explained that when the crisis passed and Harley-Davidson managed to regain its strong competitiveness, the workforce required a different way of managing. This new approach needs leaders who have natural charisma, “technical and managerial knowledge, and the ability to focus on the big picture” (Harvard Business School, 2000). In this way, the command-and-control system of Harley-Davidson gains managerial attitudes, which help to create a sustainable environment for the employees to collaborate and achieve common goals. The Teerlink’s idea of viewing workforce as an important competitive advantage begets its practical implementation, whereas “everybody can make contributions to the success of the company and ordinary people can achieve extraordinary things” (Harvard Business School, 2000). As a result, such an atmosphere is rather beneficial for the professional growth and development of all employees. Furthermore, the Harley-Davidson Motor Corporation is known for organizing its business performance in the form of ‘leadership circles’ (Harley-Davidson Motor Company, 2004). This organization of the workflow encourages “a highly collaborative culture and well-coordinated decision making” (Harley-Davidson Motor Company, 2004). In general, performance is divided into the three main areas: the Create Demand Circle, the Produce Products Circle, and the Provide Support Circle. The first group maintains “the marketing and sales functions for motorcycles, parts & accessories, and apparel; customer service; motorcycle styling” (Harley-Davidson Motor Company, 2004). The second one is responsible for “the engineering function; manufacturing operations; materials and cost management; styling; and quality functions” (Harley-Davidson Motor Company, 2004). Finally, the Provide Support Circle leads the multileveled communication, such as human resource management, strategic planning and business development, human resources, and legal state affairs. This sophisticated structure assures an efficient workflow, whereas all issues are being addressed by the correct department within the time frame. Besides, this innovative concept goes beyond the frames of the employee relations. Harley-Davidson endeavors to maintain mutually advantageous relations with its major “six groups of stakeholders - customers (dealers and riders), employees, suppliers, shareholders, government, society” (Harley-Davidson Motor Company, 2004). The company’s approach to building and developing productive communication with all stakeholders is one of the main contributors to Harley-Davidson’s flourishing. The notion of partnership strengthens the sense of responsibility among the company’s staff. In other words, all collaborators consider themselves in charge of the effectiveness of business processes. This approach saved Harley-Davidson from the crisis in the 1980s. In particular, the employees were encouraged to invest an insignificant amount of money, which turned into a considerable profit for the company over a short period of time. In this way, the company was saved. Therefore, such an innovative engagement of the staff, who became investors, strengthened the spirit of partnership and allowed the same people to belong to two groups of stakeholders simultaneously. Without a doubt, this approach improved the bond between the workforce and the company and assured better productivity.

Cultural Attitudes in the Harley-Davidson Corporation

Nowadays, the sense of partnership is deeply incorporated into the company’s culture. Before identifying the rest of the corporate cultural values, it is necessary to stress their meaning for successful growth and prosperity of Harley-Davidson. Specifically, the development of the value-based culture is an effective approach to obtaining sustainability. Firstly, the company’s set of values unites all stakeholders under the same denominator. Secondly, the business communicates with the community as its key stakeholders with the help of its values. As a result, the firm is able to enhance its client base. Thirdly, communicating values is a way of self-advertising. It is a positioning strategy that helps to strengthen the brand and image of the company. For example, with time, the notion of partnership has transformed into the spirit of a family. Harley-Davidson positions itself as a trustworthy and fair corporation that provides goods and services of an exclusive quality with orienting to care for the needs of all stakeholders as of its own family members. This idea is accentuated by the company’s public claim that “no other motorcycle has the look, the sound and the feel of our two-wheeled pieces of art” (Harley-Davidson Motor Company, 2004). In this way, Harley-Davidson creates and maintains the sense of exclusiveness that resonates with the luxury. Another peculiarity of the Harley-Davidson brand community is the ‘family bond’ that is associated with the history and traditions. In order to deliver this idea to the minds of the current and potential clients, the company keeps the design of its vehicles unchanged. It makes Harley-Davidson motorbikes easily recognizable, which helps to convey the sense of the American cultural values.

Brand Image of Harley-Davidson

In addition, the notion of ‘family bonds’ is closely connected with ‘the lifestyle hook’, which is implemented by Harley-Davidson in the form of a branding strategy. This company’s motorcycle is known as the “America's freewheeling symbol of the road” (Rifkin, 1997). Undoubtedly, this definition assumes relevant lifestyle and related experiences. One of the success factors is a strong connection between the management team of Harley-Davidson and its customers. This particularity favorably distinguishes the company from its competitors. In particular, both buyers and produces share the same lifestyle, own the same vehicles and enjoy the same experiences. Without a doubt, this first-hand promotion is a strong positioning strategy that helps to advance the brand name. Besides, the Harley-Davidson’s approach to listening to the needs of the customers helped to overcome the crisis and increased the company’s financial sustainability. What is more, it helped to choose the right branding tactics. In particular, “the company learned that the bikes filled some kind of emotional need” (Wilhite, 2002). Consequently, the brand image was built on the notions of luxury and uniqueness. Further, in order to protect and cultivate the company’s values, in 1983 Harley-Davidson made a decision to build its own community. Specifically, the owners found “a company-sponsored club for Harley riders” (Rifkin, 1997). Naturally, the creation of such a community is a great strategic decision that keeps all clients focused on the lifestyle promoted by Harley-Davidson. Besides, it helps to increase the customers’ loyalty. The club’s name is the Harley Owners Group. The name itself displays how the Harley-Davidson’s board of directors manages to assemble its clients. As a result, this community assures better communication between the customers and the company, which also allows comprehending the public needs better. Consequently, the corporation can organize its business performance in a way that would meet the customers’ requirements. Moreover, this approach ensures that the members of the Harley Owners Group identify themselves with the Harley-Davidson brand. As a result, the bikers do the job of marketers, which enhances the company’s competitiveness. What is more, one of the core company’s claims is that Harley-Davidson does not sell the products, instead, it sells an experience. This statement is supported by the unique old-fashioned design of the motorcycles that resembles the vehicle of the 40s-50s. Besides, the Harley-Davidson motorcycles can be easily recognized by their unique sound. Nevertheless, the company’s owners comprehend that the value of experience can be significantly enhanced when it is shared. Therefore, the Harley Owners Group arranges numerous rallies and gatherings in order to let the members share common experiences and enhance the value of the product. Furthermore, an important reason for Harley-Davidson’s success is the decision to extend the brand. Specifically, a stereotyped image of the bikers’ gang was replaced by the notion of charity and social amity. In addition, a traditional black biking outfit was dismissed for the favor of linking this brand to the bright and casual clothes (Rifkin, 1997). As a result, the adoption of this safe and friendly image allows Harley-Davidson to implement new ways of its brand leveraging. For instance, the brand label was licensed and sold to the companies that produce clothes and similar items. The Harley-Davidson’s branding techniques, which were discussed above, help the company to differentiate its product and services. As a result, the Harley-Davidson Motor Company enhanced its competitiveness and profitability.

Environmental Sustainability

What is more, the cultural values of the Harley-Davidson are reflected in the company’s environmental sustainability. It is not surprising that as a potential source of nature’s contamination, this business strives to care about the environmental protection. In such a way, it strengthens its reputation as a reliable, trustworthy company that is responsible for its actions and is concerned about the surrounding world. For instance, Harley-Davidson made a public claim that “at Harley-Davidson, we respect our riding family our employees, our communities, our planet and our environment” (Harley-Davidson Motor Company, 2010). This approach is realized through the prevention of pollution and over-consumption of the natural resources. In particular, the company has reduced “GHG emissions by 23,839 metric tons - from 79,536 metric tons in 2004 to 55,697 metric tons in 2009” (Harley-Davidson Motor Company, 2010). Besides, Harley-Davidson initiated environmental programs aimed to protect the nature from pollution. The company’s adherence to environmental sustainability is also a powerful strategy of positioning as a trustworthy, reliable, responsible and eco-friendly corporation that is safe, friendly and beneficial for both humans and nature. For instance, the company’s sustainability report (Harley-Davidson Motor Company, 2004) states that by following environmental sustainability, the company endeavors to align business performance with its shareholders’ views concerning the environmental issues. Moreover, Harley-Davidson strives to preserve and advance its brand, as well as “improve the relevance of the brand to new and different customers” and “support expansion into new markets” (Harley-Davidson Motor Company and Buell Motorcycle Company, n. d.). Summarizing this research, it is appropriate to accentuate that Harley-Davidson is characterized by an ability to adapt and change in accordance with circumstances. Despite all challenges, this company managed to evolve from its Ideation stage, avoid the Valley of Death and reach the phase of the Growth and Expansion. As a result, the corporation remains competitive due to its open-minded and flexible entrepreneurship, which allows to properly choose the needed management style. Besides, the company is prosperous because of its three-circled structure. Moreover, Harley-Davidson supports environmental sustainability and encourages loyalty among all stakeholders. This approach is realized by creating a set of values and maintaining a strictly ethical corporate culture. Considering the above-stated particularities of Harley-Davidson’s business operation, it is not surprising that this company is competitive and flourishing.

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