CASE STUDY 1:

HARLEY DAVIDSON

“We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments”, Harley-Davidson Inc. mission states. Harley-Davidson Inc. is a company that has survived through the years having to face different problems such as internationalization, foreign competence and financial problems. But during the 90's Harley-Davidson Inc. has been able to use its outstanding products and strong brand name to rebuild itself as a flexible and modern company able to compete against bigger makers and succeed. Harley-Davidson Inc. proudly produces high quality, unique style heavyweight motorbikes and is the reference point in its segment. Harley-Davidson Inc. also commercializes parts, accessories and financial services to complement its main production line: Motorcycles.

STRATEGIC DIRECTION

Harley-Davidson Inc. designs, manufactures and markets heavyweight motorcycles (engine displacement of 851 c.c. and above), parts, accessories, collectibles and riding apparel. Harley-Davidson Inc. also provides through Harley-Davidson Financial Services, named Eaglemark Financial Services, financing services programs to dealers and retail customers. Harley-Davidson Inc. mission statement says, “We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments”. The objectives are; keeping and increasing demand with a goal of over 200,000 motorbikes per year by 2003, continuing the level of high quality products Harley-Davidson Inc. makes, improve the information system network, be a high performance company financially and establishing Harley-Davidson Inc. as a pioneer in co-determination practices.

Harley-Davidson Inc. will try to achieve this goals by paying “ vigorous attention to the fundamentals: product development, innovative marketing, and state-of-the-art manufacturing strategies” (Jeffrey L. Bleustein, Harley-Davidson Inc. CEO)

INDUSTRY ENVIROMENT

Harley-Davidson Inc. enjoys a current market share of 48.3% of the super heavyweight motorcycle segment in the U.S. in 1997. In 1999 Harley-Davidson Inc. grew a 14.3 % against a 13.8% of the worldwide growth in heavyweight registrations.

The existing competitors are the powerful Japanese makers Honda, Yamaha, Kawasaki and Suzuki. Germany's BMW also competes in this segment. In the last years another American company entered the market; Polaris, the snow bikes maker, has recently entered the market. While the Japanese makers cover all the motorbikes segments, BMW, Polaris and Harley-Davidson Inc. among with some other minor European makers such as Italy's Ducati and Guzzi and Britain's Norton compete exclusively in the heavyweight segment.

Barriers to entry the motorbikes market are characterized by the high technology, mass production and low prices in the lightweight segment. That is an atomized market where the Japanese makers own the biggest market share against other strong European competitors, especially Italians, such as Aprilia, Piaggio. Other competitors are the Chezk's Husqvarna and the Spanish Derby. The heavyweight and super-heavyweight segments are characterized by state of the art manufacturing and customized bikes, where brand loyalty and strong image is a barrier for other makers than the classic Harley-Davidson Inc. and BMW, just as for the super car segment Ferrari and Porsche are the reference in the market. On the other hand the high price/ high margin of this segment makes it likely to the powerful Japanese brands.

Natural substitutes of heavy and super heavyweight motorbikes are medium and lightweight motorcycles, mopeds scooters and as a meaning of transportation cars, trucks, SUV's, public transportation and bikes. Both suppliers and distributors have low impact in this market because of the atomized of the number of suppliers and the brand loyalty of distributors/dealers.

MACROECONOMIC ENVIROMENT

Harley-Davidson Inc. is currently licensing its name worldwide as a mean of advertise and to create a sense of strong brand name even in markets where it has no presence getting and income from about $ 27 million in 1997 to $ 114 million in 1999 on licensed merchandise. This show the effort Harley-Davidson Inc. is making in finding new incomes and new promoting ways of creating a strong brand name, worldwide recognize.

There are some advantages motorbikes have over cars that have to be considering as a macroeconomic advantage. Motorbikes are cheaper to buy and maintain, consume less gas and are highly miserable on heavy traffic. On the other hand riders can only carry one passenger, less luggage and are very weather sensitive. That is why motorbikes tends to be a recreational vehicle and that is why it is subjected to decreasing demand during recession periods. We have to add government regulations (such as the mandatory use of helmets) that are subject to reduce the demand of motorbikes.

INTERNAL ENVIROMENT

Harley-Davidson Inc. financial strengths are various. First of all shareholders equity, which has grow from $ 662,720 in 1996 to $ 1,029,911 in 1998. The earning per common share have been growing since 1995: .74 in 1995, 1.09 in 96, 1.13 in 97 and 1.38 in 98. That shows that Harley-Davidson Inc. is an attractive company to invest in. Operating margin has grown from 15.1% of revenue in '97 to 15.7 % in '98. Net sales are growing from $1,350,466 in 1995 to 2,063,956 in 1998, with an increase in every year. Finance debt has remained constant in '97 and '98 with $280,00.

Marketing objectives are continuing offering diverse services, giving Harley-Davidson Inc. a unique style, trying to attract the new generations. Its main strategy is to show to potential customers that Harley-Davidson Inc. image is no longer associated to “hell's Angels” but to liberal workers as lawyers and doctors. The strong brand loyalty and the HOG's, Harley Owners Groups make Harley-Davidson Inc. a company that try to keep their current customers by showing them how enjoyable owing a Harley is and providing all kind of services to the to keep them within the Harley Family.

The “Outlaw” image of the Harley-Davidson still exists and there are people who are reluctant to acquire a Harley-Davidson because of that. The limited niche in which Harley-Davidson Inc. competes is also a problem. Women and people who looks for smaller bikes are not part of Harley-Davidson Inc. customers.

CONCLUSSION

Harley-Davidson Inc. is currently increasing production, lowering costs, keeping employees involved in the company and stating a sense of pride in the company. Harley-Davidson Inc. manufactures heavy and super heavyweight motorcycles. Competence is fierce because of the high margins of this segment. Harley-Davidson is successfully competing among biggest companies thanks to their strong brand image, the unique Harley-Davidson style, its outstanding quality and a competent management. Harley-Davidson Inc. keeps growing and evolving. Foreign markets are a good opportunity for Harley-Davidson in the future. Harley-Davidson Inc. is working. And it is growing and evolving not only to stay in the market but also to be a winner.