Case Brief/Harley Davidson

Case Brief/Harley Davidson
Case1-Harly Davidson
1. General Environment
• Economic segment (inflation rate): negative effect Rising fuel costs and the monetary log jam are the purposes behind the lower interest for the recreation things such as motorcycles.
• Demographic segment (age/income distribution): negative effect. Customers think of purchasing a motorcycle as a luxury not necessity. Younger people becoming more interested in motorcycles cannot afford highly priced products.
2. Industry Environment
• Threat of substitute products: moderate effect. Competitors offer lower cost products.
• Intensity of rivalry among competitors: high effect. High competition as well established brands in industry offer newer designs and lower prices.
• Bargaining power of buyers: high effect. Customers have a broad range of motorcycles to choose from, staying within their price range at the same time.
• Threat of new entrants has a very low effect. Entry barriers and switching costs are high thus industry is not very attractive for new entrants.
• There is a high level of attractiveness for existing rivals as they can compete on the basis of improved design and lower price.
3. Major Competitors
• Honda: currently holds large American market share; in future may focus on even more innovative and cost efficient products to attract customers.
• Polaris: known for high quality all-terrain vehicles; future alliances may increase the knowledge of industry and thus further fulfill the needs of different types of customers.
4. Value Chain Analysis
Supply chain management and marketing are the most important. Since the company is popular for the quality of a product, all activities related to the conversion of the raw materials into final products are of high importance when it comes to providing value for a customer. The key elements of process are the melding of JIT supply chain with team production management and part interchangeability. Company is also successful in segmenting the target customers based on their needs through the focused differentiation strategy. I think that company is neutral in these two areas as compared to Honda that bases its operations on lower price while offering motorcycle models comparable to those offered by Harley and proved successful in targeting different market segments. Polaris is neutral as well in those two areas as the company’s focus on providing different products to different customers, targets the same market segment as Harley does.
5. Financial/ Non-Financial Factors
• Observing and comparing firm’s debt-to-equity ratio is of high importance when it comes to the financial performance of company. With the ratio being 1.6 a company is highly leveraged which is common in capital intensive industries but company should monitor the ratio to keep it under control. Observing the profit margin of the company through the years would be important as well to compare the profits and thus growth (increase from $146,545 in 2010 to $599,114 in 2011) and also control the costs to get back to 25% operating margins which currently is 16%.
• With its focused differentiation strategy as well as the emphasis on the strong brand identity and organizational culture Harley-Davidson is able to maintain competitive advantage. Focus on maintaining firm’s resources and capabilities and ability to effectively manage its brand name, manufacturing simplicity and dedicated product following are the key sources of this organization’s competitive advantage.
6. SWOT
Strong brand loyalty and the market following are the main strengths and they help the company to pursue new market segments as well as offset the threat of high costs of international importing. Major weakness is the high price of Harley-Davidson products. This limits the opportunity to market the motorcycles to younger riders who become more interested in bikes but cannot afford it as well as increases the threat of cost efficient competitors and high oil prices.
7. Core Competencies
The company’s major core competencies are the reputational resources (brand name) and technological resources (unique production process that allows efficiency). I would say that company has a sustainable competitive advantage. Harley-Davidson knows how to exploit opportunities and offset threats and possess rare capabilities to differentiate. Their motorcycles are valuable due to the culture of the company that cannot be duplicated. Although the motorcycles itself are not rare their brand name and reputation is. These capabilities are also hard to imitate due to the cultural values of organization and finding substitute for them is challenging.
8. Strategies
• Business level: focused strategy
• Corporate level: low level of diversification (88% of revenues comes from single business area: Motorcycle and Related Products)
• International level: multidomestic strategy (each region is managed from regional headquarters)
• Cooperative level: no alliances
o Strategies fit with the analysis above as the company’s technological resources and the focus on providing unique products to the brand followers allows the company to remain competitive and to pursue new markets
9. Problems/ Solutions
• The main problems company faces are firm’s products being considered leisure items and changing demand for motorcycles. To overcome the problem company should create more attractive offering with lower interest rates and direct its effort to product development process and look for increased demand in the international market.
• The most important of 7S implementation factors would be system. Changing some elements of the system can contribute to more effective operations of company. If the procedures that company implements in the area of product development are changed company may come up with a product that will meet needs of international markets.
10. Questions
• What are strategic uncertainties that may keep company from using its full potential?
• Are there any other core competencies that company can utilize to create competitive advantage?