· Business model: Economic logic. How does the company make money?
· Value Propositions: What’s in it for the customer? Why do customers purchase the product/service? Why do they purchase from the company being analyzed versus competitor firms?
· Strategy: On what basis does the company compete, vis-a-vis their competitors? What is unique about the firm, compared to their competitors? (Include all strategies in this section, not just distinctive competencies.)
· Major Issues: List 1-3 (in priority order) major issues, questions, or dilemmas.
Case Report: “Harley-Davidson: Preparing for the next
Century”
Business
Model
Harley-Davidson designs, develops, manufactures and sells heavyweight
motorcycles to the public, with engine displacements greater than 700 cc,
designed for cruising on highways. The parent company of Harley-Davidson
supports more than 1,500 worldwide networks of dealerships individually owned
and has operationally structured its business that transformed Harley-Davidson
into one of the largest producer of motorcycles. The company has moved into a
wide range of accessories and motorcycle parts within the last half decade.
What is much remarkable about Harley-Davidson is their ability to continuously
and consistently be the market share leader in heavy motorcycles. Harley-Davidson
is an example of a company that creates loyalty through interactions with its
customers.
Value
Proposition
In terms of value proposition, Harley Davidson did several things over
the years in order to add value to their customers. In the early years, Harley utilized
innovation to attract customers with the invention and improvement of the
V-Twin engine and the use of an electronic starter. These items spanned sales 2 to 1 over the
only competitor at the time, Indian. In
those days, Harley focused on being the leader in heavy motorcycles and even
with pressure from Europe; Harley remained dominant in market share. The image and lifestyle which came with the
Harley starting in the 1930’s was that of the US military, rebel bikers, or police officers to give the
value of raw power and toughness along with the symbol of patriotism backing it
up which added to Harley’s popularity.
The 60’s and 70’s were a bad time for Harley which will be discussed in
the major issues section. During the
early 1980’s Harley focused on improving quality issues which were contributing
to the loss of sales and by benchmarking Honda using the productivity triad;
this improved quality basically restored the customers’ value knowing that they
have a quality product versus the poor quality bikes produced during the
1970’s. During the 80’s and 90’s Harley
expanded its scope by offering support to enthusiasts and socialist groups who
are loyal customers making the brand reinforcing and adding value to existing
customers. The rental program was also a
success attracting future customers along with the offering of the motorcycle
riding class which adds value to new riders teaching them proper safety. Also the offering of a smaller cheaper
sportster model adds value to women riders and younger riders with smaller
budgets.
Strategy
Harley Davidson strategy is based on high value to customers and throughout
its history established an image of “raw power” which became its major selling
point. With the addition of new features, Harley adopted the “image and
lifestyle” approach. It’s reputation and strong market position was based on
reliability and quality of its motorcycles.
While facing the Japanese competition, Harley-Davidson management team formulated
and implemented the following strategies to maintain high production with high
quality:
-
Operations: Just in Time (JIT) for optimized inventory practices,
employee involvement and statistical operator control;
-
Research and Development: New R&D expenditures, product design, new
developed product line and customer loyalty approach;
-
The scope of the firm: Harley acquired the Buell Motorcycle Company to target
the younger generation and the ‘performance’ market. The company also considered
selling parts and accessories;
-
Leadership Institute: Learning at all levels of the organization;
-
Employee involvement: This strategy focused on delegating more
responsibilities to employees with an aim of increasing loyalty, productivity
as well as foster ownership;
-
Pay System: New rewards and incentive systems introduced to pay
performance;
Harley
also differentiated itself by offering support to various enthusiast and social
groups, for example the HOG and ‘The Ladies of Harley’.
Major
Issues
Over the years, Harley Davidson
faced many obstacles and at times made poor decisions which chanced the
company’s survival. The biggest issue
faced over the years took place during the 1960’s and 1970’s when Harley faced stiff competition by Honda and other
Japanese firms which appealed to an entirely different audience; gentle versus
tough. The other bikes were smaller,
easier to handle, more reliable and cheaper than the Harley. With demand being high, Harley (taken over by
AMF) decided to go with mass production hiring less skilled workers in addition
to paying less attention to quality issues.
This led to an all-time low in quality for Harley Davidson which was so
bad that Harley dealers had to put cardboard underneath brand new Harley’s in
order to sop up the leaking oil. The
poor quality led to poor market share and decreased profits for Harley during
that time period. The launching of the
V-Rod and Street Rod models was also a small dilemma for Harley Davidson due to
the liquid cooled system. For many
years, all Harley engines were air cooled and Fortune magazine titled the
change unwelcomed and implied that this is one of more unwelcomed changes to
come. The original intent of the new
models was to compete in the sports bike market but with such higher prices
than most competitors, competition was difficult. Harley Davidson also faced a small dilemma
with their 2005 sales projections. In
April of 2005, sales had declined and Harley revised the unit projections in
addition to the downed rise in earnings initially projected.
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