The Harley Davidson Inc Marketing Essay

Harley Davidson is one of the largest manufacturers in the United States. It was establish in 1903 from William S. Harley, Arthur Davidson, Walter Davidson and William A. Davidson. It has become a major leader in the industry for creating the heavyweight motorcycle that has been designed for cruising on the highway. In 1907, the company was incorporated.

They started in 1903 with three motorcycles which they sold them immediately. Then in 1904 motorcycles increased to eight. AMF Inc.’s management production increased the production from 15000 in 1969 to 40000 in 1974. In that period of time they had some negative problems such as: oil-leaking, noisy, heavy vibrating, poorly finished and hard to handle machines. Although Japanese competitors continue to improve the quality of their motorcycles.

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In 1981, Vaughn Beals with thirteen (13) other managers bought the company from AMF for $65million because AMF was facing huge problems with their profits, poor quality and Japanese strong competitors. Vaughn Beals with his thirteen (13) managers had a system to reduce inventories and stabilized the production schedule, so the system had been forced the production to work with marketing for more accurate forecasts. They also forced their suppliers to increase their quality in order to reduce customer complaints. The new management invested in research and development, these investments had a quick payoff in that the break-even point went from 53000 motorcycles to 35000 in the years 1982-1986. Harley – Davidson owned most of the stock of Buells’ in 1998.

Year

Sales

Units(thousands)

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1994

6million

576

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1995

14 million

1407

1996

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23 million

2762

1997

40 million

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4415

1998

53.5 million

6334

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1999

63.5 million

7767

2000

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58.1 million

10189

2001

61.9 million

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9925

2002

66.9 million

10900

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2003

76.1 million

10000

2004

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79.0 million

9900

2005

93.1 million

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11200

2006

102.2 million

12460

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2007

100.5 million

11513

In 2000, Harley- Davidson brought up a new model called Soft ail. Then in 2001 a new model came up with the name of V-Rod which was the quickest and fastest production model the company had ever built. V-Rod was updated in 2002 in a new name, VRSCA V-Rod and the horsepower from 110 became 115. In 2003, Harley-Davidson designed a new model – “lighting XBS9”. The next year (2004) they made a new model – FLHRSI Road King, for sports lovers which the tire frame was wider and the engine was refitted with rubber. The sport FLHRSI Road King was upgraded to a new name – “FLSTNI” with the difference that it has a softail deluxe with a new sleek appearance. The company introduced four (4) new bikes in 2008 for baby boomers and for the females.

Mission statement

To fulfill the dreams of the motorcyclists through experiences by an expanding line of motorcycles, branded product and services in selected market segments.

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Vision statement

Harley Davidson is an action – oriented, international company, a leader in its commitment to continuously improve mutually beneficial relationships with stakeholders (customers, suppliers, employees, shareholders etc.). It believes that the key to success is to balance stakeholder’s interests through the empowerment of all employees to focus on value added activities.

Identification of the problem

Harley-Davidson’s is facing two problems:

a) The high average customer age.

b) There’s no inventory which results in delaying the customers orders.

Values

These Harley – Davidson bikes are famous all over the world. They are well known as the status symbol. They are known for their high cost. It is like possessing your own jet. All these high costs factors make these Harley Davidson bikes most sought after items. Many people use these old Harley – Davidson bikes as investment proposition. But it is extremely dangerous to do so. This old Harley – Davidson motorcycles value will depend upon the trend only. Generally it is observed that the trend of the price of these old Harley – Davidson bikes depends upon the profile of the customers.

The customers who have this sort of spending power do buy these old Harley – Davidson bikes more for the emotional value associated with them and not for the practical use of these bikes. The old Harley – Davidson models associated with the child hood experiences of this class determine the trend of old Harley – Davidson motorcycles value.

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Value chain

According to Thomas L. Wheelen & J. David Hunger (2003), ‘Value Chain Analysis’ is a linked set of value-creating activities beginning with basic raw materials coming from suppliers, moving to a series of value-added activities involved in producing and marketing a product or service, and ending with distributors getting the final goods to consumers. In other words, it’s a high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. Companies are using their position in a wider value chain to leverage strength to induce competition elsewhere, thus increasing available profits for themselves.

In business, we’re paid to take raw inputs, and to add value to them by turning them into something of worth to other people (Final product). In most cases, the more value you create, the more people will be prepared to pay a good price for your product or service, and the more they will they keep on buying from you. On a personal level, if you add a lot of value to your team, you will excel in what you do. You should then expect to be rewarded in line with your contribution.

Primary manufacturing

Fabrication

Raw materials

Retailer

Distributors

Product producer

Industry Value Chain Analysis

The industry value chain analysis is composed of all the value-creating activities within the industry, beginning with the first step in the product development process, and ending with the completed delivery of it to the customer.

In the Industrial value chain analysis we have 6 stages:

a) Raw Materials

b) Primary Manufacturing

c) Fabrication

d) Product Producer

e) Distributor

f) Retailer

Explanations

a) Raw Materials

Throughout the years, Harley Davidson has achieved to create very good relationships with its suppliers. That was one of the most important long-term strategies for Harley Davidson because ‘Good relationships make better businesses’. In other words, a commitment to business integrity and tight working relationships with suppliers helped Harley Davidson to achieve supply chain excellence. The specific strategy was resulting in reduced lead times for product development and improved product technical integrity application of new features and innovations. In general, it really helped Harley Davidson not to have delays in the manufacturing process. Having delays in the manufacturing process is a very bad ‘headache’ not only for Harley Davidson but in every manufacturing company.

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b) Primary Manufacturing

Manufacturing strategy can be defined as a set of co-ordinate objectives and action program applied to a firm’s manufacturing function and aimed at securing medium and long- term, sustainable advantage over that firm’s competitors. The manufacturing function requires a strategy to ensure a match, between the company’s markets and the existing and future abilities of the production system. The manufacturing strategy purpose is to improve the product quality, to increase the capacity, to reduce the costs and to increase flexibility. Among Harley Davidson’s loyal customers, the brand may be known for quality, but many loyal clients may not be aware of the innovative manufacturing techniques behind the motorcycles. Harley Davidson techniques include continuous improvement which demands employee involvement in order to achieve the best possible quality, just-in-time inventory techniques & statistical operator control.

Successful implementation of any company program occurs when there is a commitment at all a level of the organization. Top management must not only direct but take direction from the lower level employees. In order to feel comfortable with this, top management must encourage education for employees of company objectives and develop a trust that employees will execute the right decisions. Simultaneously, employees must learn that their job stability is dependent on the overall health of the company. Their dedication must be expressed in learning techniques to continuously improve the quality of Harley’s manufacturing processes.

Harley has set the following nine guidelines to follow for successful employee involvement:

Management, through its words and actions, must demonstrate that continuous improvement of quality and efficiency is a way of life, not just another “program.”

Management must be firmly committed to the people-building philosophy-that is, the belief that employees are thinking, rational human beings and therefore should be encouraged to develop and grow.

All management must be totally committed to the EI program and by demonstrating that commitment foster a mutual trust between employees and management.

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Employees must be thoroughly trained in specific problem-solving and quality-control techniques.

Managers must encourage participation from everyone.

Employees must be given responsibility and authority for production, quality, preventive maintenance, and other aspects of their jobs.

Individual employees must help each other develop and grow.

Employees must attack problems, not each other-that is, there must be no finger-pointing when things go wrong.

Creativity must continuously be encouraged through a free, non-threatening atmosphere.

Just-in-time inventory ‘was the driving force of Harley’s quality-improvement program’. Very simply, as you operate with lower and lower inventories, it becomes essential that your entire inventory is usable. If you’re only going to get a few parts, they all have to be good ones. Suppliers of Harley Davidson had to implement Just-in-time inventory into their production process in order to compliment Harley Davidson’s system.

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In the beginning Harley Davidson believed that their present machinery was unable to produce quality products. But, with the implementation of the Statistical Operator Control (SOC) process they soon realized that it was not their equipment but their methods. SOC involves using simple statistical techniques and control charts to monitor the variation in a work process. Harley Davidson realized that this process would only work if the responsibility of quality was placed upon the persons who had direct contact with the materials (operators). Therefore, Harley decided to hand the SOC approach down to its employees on the floor.

c) Fabrication

Harley Davidson emphasizes on engineering changes, quality improvements and workforce. V-Rod Harley Davidson new model combines the characteristics of a well performance motorcycle with the styling of a custom. Harley’s inventory system reacts quicker to quality improvement.

d) Product Producer

Harley Davidson as a well-known successful company, apart from producing motorcycles also manufacture several accessories like t-shirts, pants, boots, jackets, gloves, alarm clocks, bottle openers and many other things, in order to spread an awareness of goodwill to the overall society in general. It is also a very good advertising method for the company itself because Harley Davidson riders usually like apart from riding their motorcycles also to wear the brand cloths and kind of representing the brand through the society.

e) Distributor

Harley-Davidson motorcycles are sold by 1,070 dealers worldwide. The company owns 54% of the market share in the USA, 16% in Japan, 10% in Europe, and 38% in Australia. The foreign markets could be larger, but the company has an agreement with American dealers not to sell more than 30% of the bikes overseas, if the domestic demand is not met. The company implemented in 1983 a program to concentrate on helping its dealers to develop the up-to-date business skills in order to sell motorcycles more effectively. The dealers are considered to be business partners and the headquarters plays an active role in developing programs, financing improvements, implementing support and management consultants. The dealers also invest their own money into these programs which allows them to feel like a part of the company. Harley-Davidson treats the dealers not only as partners, but also as customers. Harley has developed a very effective marketing strategy, but it is the responsibility of manufacturing to produce high quality and reliable motorcycles.

f) Retailer

Harley Davidson has lots of retailers around the globe supporting, promoting and selling their products. Harley Davidson reflects a unique modern society for its riders around the world, so retail shops were created worldwide to meet its customer’s needs.

Competitive advantage:

In a business competitive advantage means that a firm has the ability to distinguish its self from its competitors. The goal of much of business strategy is to achieve a sustainable competitive advantage. The two basic types of competitive advantage:

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a) Cost advantage: Exist when the firm is able to give the same benefits as competitors, but at a lower cost.

b) Differentiation advantage: Exists when the firm is able to deliver benefits those are in excess of competing products. Harley-Davidson uses more the differentiation advantage. William Harley and Arthur R. Davidson they are still leaders in their industry because of their differentiation advantage and the continuous use o their core competencies and capabilities. For over 100 years Harley Davidson is differentiates from their competitor with unique reliability, styling and quality.

At the beginning competitors of Harley-Davidson were local banks and other financial institutions that provide wholesale financing to Harley-Davidson and Buell dealers in their local markets.

Core Competences

According to Thomas L. Wheelen & J. David Hunger (2003), Core competencies are the things that corporations can do very well and also called corporate capabilities. When these capabilities are superior to those of competitors, they called distinctive competencies. It is a key strength of a certain company “A” offer its competitors.

As we know core competence is something that a corporation can be extremely well at and even better than its competitors. The heavyweight motorcycle market is a high competitive market. The majority of competitors are basically outside the United States and they have more financial and marketing resources. Competition in this market is based on a number of factors including: price, quality, reliability, styling, product features, customer preference and warranties. Harley-Davidson emphasizes on quality, reliability and styling on its products and also offer one year warrantee for its bikes.

They also regard its support of the motorcycling lifestyle in the form of events, rides and rally as a competitive advantage.

Besides resale prices for used Harley-Davidson are higher than other competitors. This shows the reliability of the brand since in other words has no second hand value.

Finally another competitive advantage of Harley-Davidson is that they have the highest segment in the market. Some other companies have a production and sale volume that is by far lower than Harley-Davidsons and does not holds a significant market share. For the last 14 years they have led the industry in domestic sales of heavyweight motorcycles, which that says a lot.

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Critical Success Factors

James C. Ziemer who is the CEO of the company said: “I believe there are three constants in our success as a company:

Passion for the business, for riding and for relating to and being one with the customers

Sense of purpose – focus on growing demand by offering great products and unique experiences

Operational excellence – continuous, relentless drive to eliminate waste in all aspects of operations and to run Harley-Davidson better and more efficient.”

Factors

Brand Loyal customers

Buying a lifestyle

Since 1988 – 90% of Harley – Davidson owners tend to purchase

Very well managed team

Manufacturing techniques – employee involvement, 50% of employees have Harley – Davidson

Successful Marketing Development

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Ranked 46th in 2006 by TOP 100 Global Brands

Licensing of its production of goods, national T.V, advertising,

E – Commerce

Build a good trust relationship with the suppliers

Mr. Berryman, had studied Japanese Keiratsu which was a huge vertically integrated & invited Harley – Davidson to do so

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Supports female participation & involvement into marketing

Only manufacturer that safely devoted a division to marketing women

Demographic trend: 2% – 12% female riders

Offers a wider production line of motorcycles

Customized, touring, standards & performance. Thus to attract more customers with various preferences

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Recommendations:

Gain new younger customers as their future customers in replacing the old generation

Harley should contrast new bike like V-Rod more often. V-Rod was the newest bike for over 50 years.

Harley should find ways to cut cost and make prices go down. Harley’s bikes are much more expensive than its competitors and that could be a reason of why young people don’t buy Harleys.

Harley should find a way to create inventory so that there won’t be delay in customer’s orders.

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Conclusion:

Harley Davidson is a healthy company with 20 years growth and market controller in USA industry with more than 48% market share – way too far from its main competitors. Even though, through our research, we found some drawbacks and diminishing growth. This is due to the economic uncertainty and fear of recession witch impacts as the psychology of consumers and drives demand down.

We believe that if they keep up the good work and continue to create new value potentials, they shall find ways to solve their problem and create even more competitive advantages over their competitors.

REMEMBER

It is important for a company to look inside, realize its core value and have the confidence to build on that rather than get carried away by what the competition is doing.