Harley Davidson Harley – Davidson Inc. Motorcycle Industry INTRODUCTION The purpose of this report is to develop a strategic corporate objective for HarleyDavidson Inc., a publicly traded, employee owned manufacturer of heavyweight motorcycles, recreational and commercial vehicles, military defense items, and small engines, distributing its products to domestic and international markets targeting all men and women of all ages. INDUSTRY AND COMPETITIVE MARKET The industry under study is the motorcycle industry consisting of five major manufacturers: one American (Harley Davidson), and four Japanese (Honda, Yamaha, Kawasaki, Suzuki) and some European companies (mainly BMW of Germany and some other Italian companies). Most companies market their motorcycles and accessories on a worldwide basis, handling international trade through foreign distributors and domestic sales through franchised outlets. Industry sales of motorcycles were shrinking in the early l990s because of the recession and the competition from computers and electronic products decreasing consumers’ discretionary income.
Sales of accessories and parts make up 36% of total retail sales and is a viable area for producers to explore because people want something to differentiate their bikes. Previously, motorcycles were viewed as a cheap means of transportation. By 1992, they came to be viewed as a recreational, or a luxury item. This new perception of motorcycles led to the introduction of more expensive models with higher prices. This led to the introduction of consumer financing, one of the fastest growing service areas in the motorcycle industry.
MISSION Harley’s strategic objective is to continue to provide safe, high technology heavyweight bikes and keep customer satisfaction at high levels. This quality vision more than doubled Harley’s market share and increased its brand loyalty. EXTERNAL PLANNING PREMISES CUSTOMERS They can be divided into 2 categories men and women. Men. A. Men under 30. This group accounts for 44% of all sales. Therefore, a great opportunity exists here because of the group’s size.
This group’s members buy motorcycles for their transportation and recreation needs. Men in this group buy more of mopeds, scooters and entry level lightweight road bikes. B. Men between 30 and 50. This age group makes up 45k of buyers another large area providing opportunities for firms.
The motorcycles most frequently purchased are the heavyweight tourers and cruisers. Many buyers are married couples looking for an alternative to taking the car out for weekend drives to the country. C. Men over 50. This group accounts for about 11% of motorcycle sales.
The heavyweight touring class and the middleweight road bike categories account for most of the sales here. Women. This group is a segment that is growing at a fast rate, thereby representing an opportunity area. Firms to be successful here are to provide smaller, easier to handle, comfortable, and good quality bikes to build up brand loyalty. PRODUCTS Three types of products/services are being offered motorcycles, accessories, and financing services, all related to the sale of the main product motorcycles. Motorcycles: It includes mopeds or scooters (with engines under 125cc which are used as an alternative to walking), accounting for about 17% of total motorcycle sales; lightweight motorcycles road bikes, dirt bikes, dual purpose bikes (with engines ranging from 125cc to 499cc), accounting for 51% of sales; sport motorcycles street bikes, and superbikes (with engines ranging from 450 to 749cc) accounting for 13% of sales; heavyweight motorcycles cruisers, tourers (ranging from 750cc to 1500cc) accounting for 19% of sales. Accessories: Aftermarket accessories, such as saddle bags, higher windshields, customized seats, and clothing items are produced or contracted to be produced by all leading manufacturers.
Since these items realize high profits and strengthen customer relations and customer loyalty, this area is providing an opportunity for companies. To succeed here, firms provide a wide product line, of stylish items, and aggressively advertise/market them. Financing Services: As prices of motorcycles increased well above the reach of many motorcycle enthusiasts, manufacturers begun to set up consumer credit arrangements falling into 3 categories consumer, dealer, and corporate financing. Financing services are vital for success in the industry and firms unable to provide them will lose market share. To succeed here, firms are to provide a wide variety of flexible (in terms of maturity and payment arrangements) plans.
MARKETS Although motorcycles are sold internationally, 3 main geographic markets comprise the bulk of motorcycle sales North America, Asia, and Europe. The largest is the North American Market (USA and Canada account for about 60% of this market) accounting for 60% of worldwide motorcycle sales. With the baby generation aging, opportunities exist for the penetration of new markets. The Japanese market accounting for a great chunk of the Asian Market is an untapped one for foreign manufacturers. Government regulations and trade policies make it difficult for foreign manufacturers to enter though. Most Asians consider motorcycles as a basic means of transportation.
Major target areas include China, Korea, Taiwan and Vietnam. The European Market is another market with great potentials since Europeans have a higher disposable income and enjoy a higher standard of living. Eastern Europe is not offering a good deal mainly because of its unstable political and economic environment. To succeed in these markets, firms are to modify products to meet local needs, provide after sales service, expand distribution networks, create strong customer COMPETITION Competition in the motorcycle industry consists of only a handful of producers worldwide. The Japanese producers Honda, Yamaha, Kawasaki, and Suzuki are producing a full line of motorcycles ranging from scooters to heavyweights, and together control the largest share of the market. Their wide product line though has also created some customer complaints to them (especially true for Honda and Kawasaki) for low quality service. This significantly decreased their market shares. Japanese companies’ success began with copying other products, but evolved to depend on innovative designs and technology.
Harley Davidson is producing heavyweight motorcycles emphasizing good quality product and after sales service, thereby building up brand loyalty. Honda is the largest company in terms of size, financial backing, and reputation. It is offering the widest selection of styles, classes and sizes within the heavyweight category. This wide product line hurts Honda since salespeople have limited knowledge of each product. Kawasaki’s products include a full line of motorcycles, all terrain vehicles, jet skis and other.
It is the leader in superbikes manufacturing but US legislation is limiting the number of sports bikes to be imported because of safety reasons. Yamaha produces Harley clones but lacks Harley’s image. Being a market follower, Yamaha is to face many problems. BMW is famous of producing quality products but its high prices hold it from expanding sales. INTERNAL PLANNING PREMISES CUSTOMERS l.
Men. Under 30: This segment is growing since men in this category look for a cheaper alternative means of transportation and for recreational purposes. Harley is to produce high quality, safe bikes, with radical styles and provide them at reasonable prices to build up brand loyalty. 30 50: Recent demographic profiles show that the median age of buyers of Harley products is 35 and their customers’ median household income is about $45,000. These customers account for a great market chunk and, therefore, provide an opportunity for Harley, which is to provide them with safe, high performance, good quality bikes to increase brand loyalty and succeed in this segment.
Over 50: Motorcycle lovers still want to ride Harleys when they are above 50 years of age but they now look for more comfortable, easy to use bikes. Harley is to provide them with both of them in order to penetrate this market. PRODUCTS Motorcycles. Harley Davidson produces only heavyweight motorcycles (with enginedisplacements of 750cc or greater) that are categorized into touring and cruiser motorcycles. Touring motorcycles are designed for long distance riding and feature many car like features (i.e., trunks), and provide Harley with the greatest profit margin. Cruisers are styled after early motorcycles and are the kind most often associated with Harley.
They provide a very low profit margin because of their low prices used as a means to attract young customers. Harley is to increase its R to improve product designs, quality, and safety. It is also to offer a guaranteed resale value (that most Japanese firms are lacking), offer a high quality after sales service and, ther …