Troy DaCosta Harley-Davidson External analysis
Troy DaCosta Harley-Davidson
External analysis: Opportunities and Threats (SWOT)
The opportunities that Harley-Davidson has a chance of touching are that for one the company can start taking an interest of a large market of untapped women and young riders. After that the company could try to expand its markets towards overseas, this shows that there is definitely a market for bikes that people across the globe can show an interest in. Since studies have shown that there is an increased demand of bikes in India. On top of that there has been a greater than before an amount of consumers attracted in racing bikes. Plus with the fact that there has been an increased use of the internet by a young demographic, so it would behoove the company to advertise their products to the adolescent demographic so that one day they become the future customers of the company’s products.
The threats of Harley-Davidson are that the bike can only be ridden only during specific seasons, which can affect the sales of the product depending upon the weather conditions. Also, during this time consumers have less disposable income to purchase a luxury item such as a motorcycle because of the recent recession that had occurred. Plus the population that considered purchasing a Harley is aging and mainly middle-aged men are traditionally who the company markets too. Besides that there have been future regulations on motorcycle market as well which affect the corporation’s source of income.
Natural Physical Environment: Sustainability Issues
As gas prices have been rising over time, this has had an effect on transportation and shipping costs. Which has had a negative impact on the company’s profits. Plus some consumers will not buy another automobile to put high-priced fuel in while other consumers may purchase a motorcycle designed for better gas mileage throughout the pricing increase.
Economic- The confidence in the economy is directly relative to the purchasing of buyer items. But sadly the economic catastrophe will hit this section very much. Due to the currency fluctuation is also a big problem in this business studies have shown that profits from sales outside the spending has increased by 7% from 2006 to 2007.
Technological- When it comes this part as technology evolves, the consumers’ expectations increases as well. Harley-Davidson is considered to be one of the main manufacturer and clients of V-ENGINE configuration. The company has a wide variety of products according to Standard, Performance, Touring and custom.
Political-legal- The people of the United States and the government are deeming Harley-Davidson as an American icon. Even though the federal, state, and local authorities have control requirements relating to air, water, noise, and pollution. On top of that the company has been facing some legal problems in Asian countries, for example in India there is a 60% tariff and various other taxes will cause the price of the bike to double noise pollution. On top of that there have been some emission standards of the bikes to the level of some countries across the globe.
Sociocultural- By tradition the company specifically markets its products to upper middle class males. Also there is an increased demand in women for motorcycles.
During this time the North American market has been steady and the international market was growing. As we all know the numbers that reflected the sales in the foreign markets were 19% in 2005, 20% in 2006, and 27% in 2007 of Harley-Davidsons overall sales. This had shown that the amount of consumer from distant markets had started to take a big interest in products that are being sold from this corporation. But due to that gas prices have risen, since the terrorist attacks in 9/11. This has had an impact upon the cost of production, sales, and the overall profits that the company can produce.
When it comes to the threat of new entrants it is pretty low, and new entrants are businesses entering an industry that typically bring new capacity to an industry, a desire to gain market share, and substantial resources. (Wheelen, T. L., & Hunger, J. D, pg.111). When it comes to bargaining power of buyers, “buyers affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other” (Wheelen, T. L., & Hunger, J. D, pg.112). When it comes to this company it has a high bargaining power of buyers for the reality that it has 30 different models of Harley’s ranging from $6,695-$20,645 while including the 8 models of Buell Bikes that range from $4,695-$11,995. Which gives consumers so many options when it comes to finding a bike that meets their needs while staying in their price range. Now when it comes threat of substitute products or services their force level is at medium.
“A substitute product is a product that appears to be different but can satisfy the same need as another product” (Wheelen, T. L., ; Hunger, J. D, pg.112). Harley-Davidson’s biggest competitor of motorcycles from small and large cruising and touring bikes is Honda. Over the past six years the company has sustained an average of 17.13% in the market share of U.S. Heavyweight Motorcycles. Now when it comes to the when it the organizations bargaining power of suppliers it is high. “Suppliers can affect an industry through their ability to raise prices or reduce the quality of purchased goods and services” (Wheelen, T. L., & Hunger, J. D, pg.113).
This business has about 684 self-sufficiently owned dealerships, 307 of them that are shared H-D and Buell Dealerships. In the year of 2007 the corporation had up to 370 independent H-D Dealerships, while having 32 distributors in Europe. 323 of these were combined between Harley and Buell dealers. On top of that a new dealership was expected to come to South Africa in 2008. This displays how much of a control Harley-Davidson has over the entire market of the motorcycle industry.
Then there is the component of rivalry among competing firms, which is high also, “In most industries, corporations are mutually dependent” (Wheelen, T. L., & Hunger, J. D, pg.111). As we all have seen over the years that competition in the motorcycle industry has continued upon improved designs and has provided a reasonable market for Harley-Davidson to compete for new customers.
Summary of External Factors
External Factors Weight Rating Weighted Score Comments
Opportunities increased by two in international market 0.1 4 0.4 Growth increase twofold in international dealer network for 2007
New dealership in South Africa 0.1 3 0.3 New dealership being built in South Africa in 2008
Addition of Buell motorcycle line 0.2 5 1 Soaring Profits from adding the Buell line to H-D dealers
E-commerce, online catalog 0.03 1 0.03 www.harley-davidson.com developed in 2001
Threats Rising Fuel Prices 0.3 1 0.03 Steady sharp rise in fuel prices since 9/11
Pending recession 0.2 2 0.4 Consumers may keep aging motorcycles or wait to purchase
U.S. and Foreign environment control (EPA) 0.03 2 0.06 Stricter Government environmental controls to add to cost of production
National Traffic and Motor Vehicle Safety Admin 0.03 2 0.06 Stricter Government environmental controls to add to cost of production
Total Scores 1 2.28 Internal analysis: Strengths and Weaknesses (SWOT)
A corporate structure is considered to be “the overall makeup of all of a company’s different departments and areas. Each department typically has their own individual responsibilities, yet all work together in striving to achieve the common goal of the company as a whole” (What is corporate structure?). While a business segment can be seen as “a subsection of a company’s overall operations that is more commonly seen within larger, diversified companies” (What is business segment?). When it comes to this corporation its business segments motorcycles, the products that are related to them and the financial services that come with it as well. Now when it comes to making decision, the procedure that the company uses is decentralized, so that each department can make the most appropriate decision when trouble arises. Which I believe is the best way to go about things because when a small issue happens in one area the whole company does have to worry about fixing that problem but instead that area can take the initiative to tackle the problem with their own resources.
According to the text on page 149, corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another. (Wheelen, T. L., ; Hunger, J. D). For Harley-Davidson the company values run deep through an emotional connection that is established with their customers by the way of their products, services and familiarities with the things that the company provides. Also the company tries to promote strong bonds between the top management and the non-management workers by employing the FISH philosophy throughout the whole organization. In addition to that H-D encourages accountability to all our shareholders, fairness and financial transparency. These are great qualities that a company can have because it willing to do right by its employees, customers and shareholders as well.
In terms of marketing for the company, this was divided into numerous different areas that was common for most all businesses. When it comes to the marketing mix, which is promotion, product, price and place (4p’s), Harley-Davidson over the years has always found a way to stay relevant in the motorcycle industry. When it comes to promotion this company has been able to execute multiple schemes to promote its motorcycle brand. They are able to sell their products through dealer promotions and customer events to retail consumers. These zones consist of TV commercials, cooperative programs with Harley/Buell, public relations, direct mail advertising, magazines, customer events, and dealer promotions.
In addition to that you can also find Harley advertisements on multiple sporting events such as UFC fights and racing events. When it comes to products Harley-Davidson Sportster comes in 7 different models. These models are 1200 Custom, 1200 Low, 1200 Nightster, 1200 Roadster, 883 Custom, 883 Low, and 883 Sportster. In terms of price, the cost range of these models goes from $6,000-$10,000. This is an important tactic of the Harley strategy, since the company has been unable to produce enough bikes to satisfy demand.
Luckily the company hasn’t increased it prices, and since the H-D is willing to keep their prices at reasonable rate for their customers. So that consumers are more willing to come back and show brand loyalty to Harley-Davidson. For the fourth p that is being discussed place, this corporation has been able to encourage close relationships with dealers, while providing a full line of products, which include clothing as well, so that they can increase the profitability of the brand. The company has been using dealerships as a gathering place for faithful Harley supporters, such as swap meets, cookouts, jam sessions and extra events that are considered very popular.
The in finance department of the business, history has shown that in 1985 the company was about 4 hours away from closing their doors. This was all about to happen because Citicorp, which was Harley’s main moneylender, had refused to give the business any money in 1985. So the company was forced to face with a tough decision of either remain standing for only 4 hours or to find another lender to keep the business standing. Luckily they were able to a deal with Heller Financial and managed to save the company. During this moment of time the company is funded by HDFS (Harley-Davidson Financial Services). This is a loaning company for Harley-Davidson motorcycles including multiple other assisting aspects. In other words, Harley-Davidson essentially now finances themselves.
Research and development also known, as R&D is a “systematic activity combining both basic and applied research, and aimed at discovering solutions to problems or creating new goods and knowledge. R&D may result in ownership of intellectual property such as patents.”(What is research and development (R&D)?) This corporation believes that when it comes to the R&D of their custom and touring bikes is the largest part of how they contend against their opponents. Studies have shown that the company had spent $178.5 million in 2005, $177.7 million in 2006, and $185.5 million in 2007 for specific zones such as manufacturing, purchasing, and style as well. This shows that Harley-Davidson is willing to spend whatever amount of money it needs to spend, when it comes to competing with the other brands in the motorcycle industry.
Operations are considered to be jobs or tasks that involve one or more elements or subtasks, performed naturally in one location. (What are operations?) In this area Harley-Davidson has up to 684 dealerships in the United State, while 307 of them are Buell dealerships as well. In addition to that the company has 104 SRL’s, which are Secondary Retail Locations, 68 ARO’s, which stands for Alternative Retail Outlets, and 12 SRO’s, which are the corporations Seasonal Retail Outlets. All of this helps Harley-Davidson to be the largest supplier of sales in the U.S. for the motorcycle industry. Another interesting fact that I was able to come across was that 22% of the companies vending’s had came from their overseas operations in areas such as the Africa, the Middle East, and Europe. These specific locations have up to 370 dealers with 323 shared with Buell as well. Likewise to this information is that the company also has dealers in Asia, Latin America, and Canada. In a sense you can say that Harley-Davidson has been able to monopolize the entire industry of motorbikes.
The following segment after Operations is Human resource management, which is “the process of hiring and developing employees so that they become more valuable to the organization.”(What is human resource management?) In this section the company was able to figure out where to place its employees and how to give them an incentive, for instance it’s said that roughly about 50% of the employees that work in manufacturing own a Harley bike themselves and because of this they are able have a firsthand understanding of what the employees are a part of in terms of the labor force.
In the text it says that, “the primary task of the manager of information systems/technology is to design and manage the flow of information in an organization in ways that improve productivity and decision making.”(Wheelen, T. L., ; Hunger, J. D pg.162) At H-D they do things a lot different compared to their competitors, instead of having one person that only focuses on information systems they have three directors for that program. The company has been able to apply this structure called “Accentual Human Capital Development Framework” which allows Human Resource to explain their problems with upper management in a in a form communication that both groups van understand. By this happening the human resource area and information systems area are both enhanced and this benefits the company since more employees will be engaged in their job and flexible when trouble arises.
Summary of Internal Factors
Internal Factors Weight Rating Weighted Score Comments
Strengths Self-Dependable, Money-wise 0.15 5 0.75 Might have ended in earlier stages but new investors had step in
Excellent Marketing abilities 0.1 4 0.4 Knows how to advertise its products very well
Financial Friendly 0.5 3 .15 Conserves gas and room
Acquiring Buell 0.2 5 1 increases sales while providing more alternatives
Weaknesses The end of the Baby Boomers era 0.15 2 0.3 This era helped the company to reach its financial heights
Competing with Japanese companies 0.15 2 0.3 The bikes were considered a luxury item since it cost more to own one and to keep up the maintenance of it
Lack of suppliers in distant operations 0.1 2 0.2 Minimal sales overseas
Times of the year 0.1 4 0.4 Generates sales spikes and drops
Total Scores 1 3.5 Strategic issues:
The company Harley Davidson is a very well-known luxury company that has magnificently been able to retain its control over the motorcycle industry for multiple decades. Even though the business was able to survive during the recession 2007, the company is struggling with several strategic issues, these problems are their policies, what their value is, brand loyalty, and their focus on the customer. H-D decreased the old-fashioned method in management and fostering the “Open Door” policy so that they could increase the amount of employee involvement around the company. Therefore, the employees can participate in the corporations vital business decisions. In terms of the second issue the companies value “Tell the truth. Be fair, keep your promises. Respect the individual. Encourage intellectual curiosity.” (Olivares, S). After that is brand loyalty, if the company agrees to giving consumers the ability to individualize and modify their bikes, this could affect the company in a very positive way. The last one is the focus on the customer, this company offers an extensive variety of products and service. These include tricycles for children, apparel accessories, and motorcycles that are in the categories of affordable bikes to luxury models that fit all targeting age groups.
Strategic alternatives and Recommendations:
After going through all the options I had came to the understanding of three different alternatives that could benefit the Harley Davidson. The first one is that could be administered is that the company should strengthen its planned agreement with Asian supply channels. Since the lack of marketing familiarity leads to few chances. The pros of doing this that for one sales are increased and that company can expand its global presence by making the business more visible to foreign markets. The cons of taking part in this alternative are that the long reimbursement might affect the company fiscal position. Also it would take an enormous effort and capital spending for this to actually happen. The second Alternative would be that Harley should try to become more attractive so that it take advantage of low interest rates, since there has relatively been a weak performance in the United States. The positives of doing this is that the company will be able to target a lower income market, they will be able to sustain a progressive currency flow, and the company will be able to increase its sales. But the negatives of all this are the cost for the marketing and media for all of this and to being able find a short/mid-term agreement with economic organizations. The final alternative that could be applied to the business is that they could instruct the R;D to enhance the oil consumption energies, by doing this it would create a high rise of oil and eco-friendly agreement. The positives of doing this alternative for the company are that it lowers ecological radiations, and it allows the company to say that there are environmentally friendly. The downside of doing this are that R;D would need a lot of resources to make all of this possible and that it would higher the expenses of developing the tool. Out of the three strategies that are offered I would probably choose the second one because the first one might be too difficult to adhere, since it asks for a lot of money. The third one is challenging as well since it requires a lot of resources and it is expensive.
The plan that should be implemented is the second strategy that was discussed because it requires the company to become attractive so that it can exploit the chances of low interest rates. The kind of program be instituted is TQM which is Total Quality Management. This is an operational philosophy that is committed to customer satisfaction and continuous improvement. (Wheelen, T. L., ; Hunger, J. D, pg.318-319). TQM would be beneficial since it would allow the company to establish frame agreements with economic establishments for funding and supporting H-D media. Also this type of plan would work well with this strategy because it will help extend their promotional campaign through all types of media like social media and faithfulness plans. I believe that the department that handles the marketing and distribution be in charge of this program for strategy number two because it consists with what they do in terms of marketing the company’s products and services. This program is feasible because its aim is “to reduce costs and improve quality, it can be used as a program to implement an overall low-cost or s differentiation business strategy.” (Wheelen, T. L., & Hunger, J. D, pg.318) In my eyes the only thing that would needed to be developed would be to “giving people more control over their work” (Wheelen, T. L., & Hunger, J. D, pg.319) by doing this employees are more motivated and empowered to do more the benefit of the company. Also for the fact that this allows the higher up to focus on keeping the shareholders happy and it shows that the company is willing to display employee involvement.
Wheelen, T. L., & Hunger, J. D. (2012). Strategic management and business policy: Toward global sustainability. Upper Saddle River, NJ: Pearson Prentice Hall.
What is corporate structure? definition and meaning. (n.d.). Retrieved from http://www.businessdictionary.com/definition/corporate-structure.htmlWhat is business segment? definition and meaning. (n.d.). Retrieved from http://www.businessdictionary.com/definition/business-segment.htmlWhat is research and development (R&D)? definition and meaning. (n.d.). Retrieved from
http://www.businessdictionary.com/definition/research-and-development-R-D.html What are operations? definition and meaning. (n.d.). Retrieved from http://www.businessdictionary.com/definition/operations.htmlWhat is human resource management? (n.d.). Retrieved from http://www.businessdictionary.com/definition/human-resource-management-HRM.htmlOlivares, S. (1970, January 01). Harley-Davidson. Retrieved from http://harleydavidsonus.blogspot.com/2012/09/chapter-3-ethics-and-social.html