1.0.

CASE SUMMARY

Harley Davidson is an American based company headquartered in Milwaukee, Wisconsin by established by William Harley and Arthur R. Davidson. They started building motorcycles in 1903 and in 1907, the company was incorporated. The company was then acquired by AMF Inc in 1969. AMF favoured short term profits instead of investing in research and development. The Japanese competitors on the other hand were continuously improving their products and finally managed to capture some of Harley Davidsons market share. Eventually, a leveraged buyout was conducted by Vaughn Beals who is the head of the company together with 13 other managers. The new management implemented a new system which helped to reduce inventories and increase product quality. After going through financial difficulties in the 1980s, the company became a privately held firm where the management invested more towards research and development that allowed changes to be made in the entire product line whilst maintaining its traditional styling. The result was the break off point dropped significantly from 53,000 in 1982 to 35,000 in 1986.

In 1997, Gerry Berryman who was an intense procurement expert implemented a major revamp of the supply chain. At the same time, there was also a need for Harley to diversify its customer base by appealing towards the younger people, women and the international market. Hence, the V Rod was introduced in 2001 which was faster than the traditional bulky Harley bikes. Other new products introduced by Harley were the Lightning XBS9, FLHRSI Road King as well as an improvement towards the Sportsers. Harley and Buell also had their own group of bikers called the Harley Owners Group (HOG) and the Buell Riders Adventure Group

(BRAG) which brought together motorcycle enthusiasts and share their on road experiences. In 2000, a Rider training and safety program was initialized to address the cases of road fatalities amongst bike riders. This program helped to bring in more new customers. The Harley-Davidson museum was opened in 2008 as a remembrance of a collection of Harley-Davidson motorcycles and historical mementos from the companys 104-year history.

2.0. 2.1.

SWOT ANALYSIS Strength Recognized brand name Adheres to environmental regulations Rider training and safety program Manufacturing process design Biggest market share far ahead of rivals Patent ownership Collaborative relationship with suppliers High Research and Development investment in producing new models/designs Harley Owners Group

2.2.

Weakness Limited product offering Motorcycles are not appealing to young people Seasonal fluctuation in the financial services segment

2.3.

Internal Strategic Factor Analysis Summary (IFAS)

Weight (Ranges from 0.0 to 1.0) 0.0 1.0 Not important Very important Rating 1 2 3 4

Major weakness Internal Strategic Factors

Minor weakness Weight 1 2 0.1 0.05 0.1

Minor strength Rating 3 4 2 3 Weighted Score 4 0.4 0.1 0.3

Major strength Comments 5 Easily identified customers Helps bring customers in by new

STRENGTHS S1 Recognized brand name S2 Rider training and safety program S3 Manufacturing process design

Produces high quality motorcycles with less costs Important to ensure brand originality

S4 Patent ownership S5 High Research and Development investment S6 Harley Owners Group WEAKNESS W1 Limited product offering (only sold motorcycles) W2 Concentrated market segment W3 Slow to trends/needs respond to market

0.2 0.1 0.1

3 4 2

0.6 0.4 Able to produce new designs and models 0.2 Exclusive club which is a premium for the brand

0.05 0.1 0.2

2 3 3

0.1 Exposed to risks if sales falls 0.3 Most customers baby boomers 0.6 Customers require more such as safety aspects for baby boomers, designs that appeal to women and young people are

TOTAL

1.0

3.0

The total of 3.0 shows that the strengths and weaknesses of Yamaha are only at minor strength which is quite significant for Harley-Davidson to improve their strengths and overcome their weaknesses from time to time as to strengthen the companys profile and to widen market shares internationally. 2.4. Opportunity Aging baby boomer population Can increase shares in segments where market shares are low e.g. standard Diversify product offering

 Potential for women and young market segments Buell market segment still low and complements Harley Davidsons (median income and women) Increase number of dealerships in under represented regions e.g. Latin America

2.5.

Threat Slowing economy hence lower demand for its products International competitors sales are bigger and diversified (e.g. from Japanese companies) Baby boomers are aging

2.6.

External Strategic Factor Analysis Summary (EFAS)

Weight (Ranges from 0.0 to 1.0) 0.0 1.0 Not important Very important Rating 1 2 3 4 Major weakness Minor weakness Minor strength Major strength External Strategic Factors 1 Opportunities O1 Can increase shares in segments where market shares are low e.g. standard O2 Diversify product offering 0.2 O3 Potential for women and young market segments 0.1 O4 Buell market segment still low and complements Harley Davidsons (median income and women) Able to secure most important customer segment 3 0.3 3 0.6 Grow a segment customers new of 0.1 0.05 3 2 0.3 0.1 Venture into other business other than motorcycles Can diversify from the premium market Weight 2 Rating 3 Weighted Score 4 Comments 5

0.1 O5 Redesign and reengineers products to cater for aging baby boomers 0.05 O6 Increase number of dealerships in

0.3

0.1

under represented regions e.g Latin America 0.2 Threats T1 Slowing world economy 0.1 T2 International competitors sales are bigger and diversified (e.g. from Japanese companies) T3 Baby boomers are aging 0.1 2 4 0.2 4 0.8

Increase presence in a developing countries Lower demand for its products

0.4 Hard for Davidson compete Harley to

Key market segment is diminishing TOTAL 1.0 3.1

The total of 3.1 shows that the opportunities and threats of Yamaha are only at minor strength which is quite significant for Harley-Davidson to use their abundance of opportunities in order to overcome threats which are coming to take control over their market shares either in US or foreign country. Portal Five Forces Internal Rivalry: Three other competitors that dominant in the motorcycle segments are all Japanese companies such as Honda, Suzuki and Yamaha making their move to gain some market share. Some of the major competitors of Harley-Davidson have larger financial and marketing resources and are more diversified (Example: Yamaha, half of its revenue is only from motorcycles). Strategic alliance between Suzuki and Kawazaki strengthened both companies global motorcycle businesses. Honda competitively gains some market share of Harley-Davidson in the United States. Potential entrants:

Entry barrier is very high in the motorcycle segment. Heavy-duty motorcycle such as Harley-Davidson requires a lot of capital investment. The economies of scale are low. Train and installing machinery for this type of heavy-duty segment would require huge capital.

Substitute products: There are not many substitutes available due to the luxury type of vehicle which could affect the market. The main substitutes would be sports bikes and scooter bikes which are likely the substitutes of Harley-Davidson. Bargaining Power of suppliers: Harley-Davidson has a wide span of suppliers. Alternate suppliers would be able to supplies without jeopardize the daily production of HarleyDavidson. The number of suppliers is also high in the market which resulted to low bargaining power. Bargaining Power of Customers: Consumers of Harley-Davidson motorcycles are amongst individual customers which cant affect the financial position of Harley-Davidson. The numbers of dealers around the globe are also less and they are also dependent to the individual customers, that cant affect Harley-Davidsons financial position. 3.0. PROBLEM STATEMENT

Harley-Davidson Inc. is going through a recession in the year 2008 and did not make Fortunes listm in 2008. James Ziemer indicated that the major problem for Harley-Davidson in the motorcycle industry is whether or not that HarleyDavidson can sustain its growth in the global motorcycle market share.

4.0. 4.1.

ALTERNATIVE STRATEGIES Product Development Strategy

Due to the economic recession faced during the 2008 U.S financial crisis, HarleyDavidson is best to take a timeout in making drastic incremental improvements or inventory introduction. This will help them to sustain in the motorcycle market share without having to gamble on further loss. Harley-Davidson can proceed in focusing the reengineering of product quality and design. Addressing more towards issues such as the environmental concern, safety issues, and appealing design that suite accordingly to the target customer segments (e.g.: Late baby boomers in their 40s; and female customer). By implementing this strategy, Harley can invest more on product development while continuing existing business. 4.2. Sales Initiative Strategy

Due to economic recession in facing the U.S financial crisis, purchasing power among consumers relatively low which cause a shift in buyers from U.S motorcycle products to Japanese motor products. The comparison between prices seemed to be more and more significant in facing the recession phase. Therefore, implementing this strategy will suggest Harley-Davidson to opt a price cut of product or any inhouse promotion for customer. This will help Harley-Davidson to attract more customers to purchase their products rather than shifting to Japanese branded motorcycles. 4.3. Brand Synergy Strategy

This strategy suggest Harley-Davidson to take chances in their acquisition of Buell products where Harley-Davidson can continue introduce its heavyweight products as premium whereas, Buell product (i.e. Buell Blast) which was introduced in 2000 which featured a high speed and performance indicating towards sports of motorcycling as a sub-brand. This strategy will allow a joint in both heavyweight tourings existing customer and Buell Blasts sport performance motor customer to be aware of Harley-Davidsons product offering and will consequently give rise in tendency to purchase product from among Harley-Davidsons product range. This will allow more options for U.S consumer to purchase wide product choice selection

in Harleys corporation especially on Touring and Performance segment that was reported to be increasing from 2005 to 2006. 5.0. 5.1. EVALUATIONS OF ALTERNATIVE STRATEIES Product Development Strategy

5.1.1.Positive Outcome Given that Harley-Davidson is to implement the Product Development strategy, the first positive outcome would be on the avoidance of capital loss for the company. Looking at the uncertainty of economic recession, especially towards the raw material commodity markets, as how it would affect the production of HarleyDavidson, the company could save itself from incurring further lost due to declining income. Secondly, while cutting off drastic production and marketing, HarleyDavidson could take this as an opportunity to revise their strategy in marketing and distribution, production and management, as the current market environment requires them to alter focus on women and young riders. 5.1.2. Negative Outcome Nevertheless, one of the negative outcomes to implement this strategy is the risk of losing market share to competitors; either in the U.S. market or international market. Another possible negative outcome is that being on the safe side to avoid Harley-Davidson from experiencing further loss; the company may actually lost track in catering better for the market trend. 5.2. Sales Initiative Strategy

5.2.1. Positive Outcome Through Promotion strategy, not only Harley-Davidson could enhance its brand awareness level, but also conveying message to the new or non-rider segment with the aim it could trigger their desire for motorbike experience. This strategy would be beneficial with the aim to increase sales and market share, thus helping in terms of company profitability and avoid on excess inventory or production.

5.2.2. Negative Outcome The major negative outcome for Harley-Davidson to proceed with this strategy is the increase in cost for the company, in addition to the current sponsorship that the company already have. Another possible negative outcome is that as the company spends more money on doing promotion, which has little effect for product quality or improvement. 5.3. Brand Synergy Strategy

5.3.1. Positive Outcome In the implementation of Brand Synergy strategy, Harley-Davidson would make use of the Buell Motorcycle Company to focus on women and young riders demand. In this case, Harley-Davidson would be able to modify or introduce a product line that is based on the needs for their new target segment, women and young riders. At the same time, it allows the Harley-Davidson brand to continue their specialization in catering for the traditional motor riders of the older age. 5.3.2. Negative Outcome Even though Harley-Davidson could penetrate the market of women and young riders through Buell, but theres somehow a risk of cannibalization among the two companies. Another possible negative outcome is that the long term growth of Harley Davidson would have remained stagnant as they are targeting at the riders of older generation.

6.0.

BEST STRATEGY AND JUSTIFICATION

Among all the three alternative strategies, we have concluded that Brand Synergy strategy as the most appropriate strategy in handling with Harley-Davidsons current situation, based on the following justification: 6.1. Time Factor

Among the three alternative strategies, Brand Synergy strategy is being rated the highest for time factor. Using Buell Motorcycle Company as a channel to focus and penetrate new market segment; women and young riders, Harley-Davidson does

not require much delay to execute the plan as the company has already owned most of stock in Buell since 1998. On the other hand, Product Development and Sales Initiative strategies are being rated moderately. Product Development strategy requires Harley-Davidson to take longer time in monitoring the market and companys growth; meanwhile, even though Sales Initiative strategy does have certain effect on boosting up their sales volume, it will incur longer time in planning stage. 6.2. Cost Factor

In concern with cost factor, Product Development and Sales Initiative strategies are being weighted lower as compared to Brand Synergy strategy. Implementing Promotion strategy would definitely incur higher cost for the company as it will reduce their profit margin. Even though for Harley-Davidson, Product Development strategy would not incur much direct cost into their operation, but if they lose market share to the competitors, it will diminish the companys income. Brand Synergy strategy on the other hand, is given the highest rating due to no rapid cost to be incurred as production of Buells is an on-going process. 6.3. Complexity Factor

In concern with complexity factor, Sales Initiative strategy is being rated for the least complication. Implementation of this strategy may have required higher cost, but execution wise would be least complicated as compared to Product Development and Brand Synergy strategies. Product Development strategy would need the management team of Harley-Davidson to do close monitoring on market flow, and any miscalculation or analyze would bring upon devastating result to the company. Meanwhile, Brand Synergy strategy is given only moderate rating as it involves proper arrangement of two companies, in which otherwise would end up cannibalizing each other. 6.4. Feasibility Factor

Both Sales Initiative and Brand Synergy strategies are being rated fairly high in terms of feasibility factor. In the case of Harley-Davidson, the company does actually have the sufficient financial resources for further execution, and with their production capacity, it is feasible to be implemented. As Harley-Davidson has

already owned most stock of Buell Motorcycle Company, they would only need to modify the product line to fit in better for the women and young riders, in order for Brand Synergy strategy to work out well. On the other hand, Pa Product Development strategy is being rated the lowest for feasibility factor. Despite the declining income since 2005 till 2007, Harley-Davidsons market share in the international market is progressing well; slowing down their steps forward would have pushed them out of the market.

6.5.

Evaluation of Alternative Strategies Based on Criteria Identified Total Cost (x3) Time (x4) Weighted Score

Criteria Strategy Product Development Strategy 3 3

Feasibility (x1)

Complexit y (x2)

3 3 4 2 4 33 4 3 -

8 3 8 3 6 4 4 3

12

30

1. Sales Initiative Strategy 4 Strategy 4 3 Scale: 5 4

12

30

2. Brand Synergy

12

16

38

(The best) worst)

(The

7.0. 7.1.

IMPLEMENTATION Short-Term Plans

7.1.1. Targeted image positioning marketing Targeted image positioning marketing is an extreme strategy of promoting and advertising the brand name and product of HarleyDavidson to the women and young generations. The reason for the extreme advertising is to revive the image of HarleyDavidson and sending out a revolutionary wave to the women and youngsters towards HarleyDavidson brand and products. The advertisement and commercial will be aiming toward the women and younger generations to be as attractive and effective, as to how Harley-Davidson was once promoted to the baby boomers during their young age. The power of the mass media as a tool to influence and attract women/youngsters can be applied as it has became part of their live and they grew with it. The influences from the technology and culture with the mix of music, movie and famous artist would trigger a new trend to the women and younger generation to follow and engage in to the Harley-Davidson and by eliminating the perceptions stereotype of HarleyDavidson as a product for the aged consumer and professionals that fancy leather clothing, grew beard, beer drinking individual obsessed with violence and a proud displayer of body tattoo. On the other hand, the new message and trends also helps in eliminating the product stereotyping of HarleyDavidson motorcycles as a heavy, loud and hard to handle machine. 7.1.2.Concentration on new market segment Harley-Davidson needs to focus on penetrating women and young riders without challenging the original brand image. In doing so, the acquisition of Buell should be make good use in the new market expansion plan. As women and young riders can be considered as the middle market niche, it is suggested that Buell should be used as to cater the needs for these two groups and Harley-Davidson maintains its

position as the premium brand for the high-end customers plus those would like to feel the real American riders. Harley-Davidson needs to revise its price range for Buell brands so that it can make good for women and youngsters needs. While maintaining the price of Harley-Davidson brand, it has to see whether the price is in parallel with the needs of the high-end customers and at the same time improve its after sale service and its efficiency. It is believed that this market segment always have high competition based on efficiency of after sales service from other brands. 7.1.3.New market expansion in Europe and Asia The presence of Harley-Davidson in these to markets is less compared to its competitors as we can see from the table laid out, it can be said less than 10% and 25% for both market segment. Hence, these two markets could be the new market expansion especially when the emerging of the new developed countries such as Eastern Europe and Eastern Asia. These parts of the world are becoming important in the world market as they turn into industrialised countries and producing the middle and high class society. This class has exquisite taste towards livelihood and at the same time seeks pleasure which is at par with their level of income. Since Harley-Davidson and Buell products have been categorised as high-end and medium brands, both middle and high class society would be the new market target. At the same time, enhancing the products to suit their needs and improving after sales service would be a good investment for Harley-Davison. Hence, beside adding more dealership and branches into these two markets, it is suggested that marketing joint venture with Europe and Asia so as to make analysis on customers needs and satisfaction. It is believed that both markets do not have the same perception towards Harley-Davidson and Buell products. At the same time, it is suggested that Harley-Davidson should not build factory in these two markets so as to maintain its exclusiveness as the products of US and the real feeling of American brand. The customers would really appreciate the brands and at the same time, taste the real American riders by using products made in America itself. 7.1.4. Cause marketing

To further sustain the image and awareness of the people towards Harley-Davidson, it is important for the company to engage in cause marketing such as knowledge, corporate consciousness and ethics will be perceived as valuable resource in a

company. Getting involved in corporate social responsibility campaign can further strengthen the corporate image of Harley - Davidson and at the same to contribute to society. The cause marketing campaign through involvement in corporate social responsibility can improve market shares, motivate sales forces and improve weak public image. Therefore, HarleyDavidson can start by promoting road safety and engage in pollutions control issues. Besides giving rider training and safety campaign Harley-Davidson can also expand their promotion on road safety through drive safe advertisement through bill boards on roadsides, or through Television, or internet advertisement. 7.2. 7.2.1. Long-Term Plans Reorganizing the company management functions

Reorganizing can be established through introducing new beliefs, expectations and values to the current employees. As the basic management function possesses by any organization consists of the finance, human resource, marketing and operation, Harley-Davidson should know the ability of the management functions as the Harley-Davidson management were transcend across in various places. Not forget that Harley-Davidson has their main aim to increase reliability and quality on their product. However, things do not work in that way if they are targeting the new generations customer base as the new generations customer base are different in preferences compared to the baby boomers that they used to serve. The young generations are eager of new development in product, their thinking change even quicker than the weather. A new function embedded with new beliefs, expectations and values into the company current management functions to specifically collects and understand the need of the new younger generation customers base will be the first step to be taken before HarleyDavidson can continue another journey and further enhance their corporate culture. Reorganizing would need a major dismantle on the company existing management structure before a new function could be installed to be in accordance with the new company strategy of trying to capture the younger generation customer base. Among the action that should be taken is hiring new R&D team to support current department on installing new ideas and observing the latest trends in the market. The reason for the new support team is to increase organizational ability to catch up with new product innovations and

maximizing the power of market information. Branding is also important to ensure sustainable competitive ability of HarleyDavidson not only for the ages but all for the new generations. 7.2.2.New product innovation to appeal to the new generation

preferences. To be a great company, Harley-Davidson must have the ability to innovate continually to have a constant flow of new ideas. In that case, to assess to the appeal of the product concept, they should concentrate on the product innovations for the new group of customer to establish the wave and trends to the young generations. Harley-Davidson R&D team will have to concentrate more on thorough study and understanding of the needs and wants of the younger generation. However, Harley-Davidson must be able to produce new product in a faster pace compared to their previous productions that consume longer time frame. Because young generation customers are assimilated with the fast trends of fast and on time service and being patient is a value that tend to run thin in their behaviour and they dont like to wait. Thus the reorganizing the management functions of R&D department and manufacturing department explained earlier would be able to supports the productions of product appealing to the younger generations.

7.3.

Implications of the Strategy on Other Issues

Once the short term and the long term plan succeeded in its implementations, several problems such as first, limited products offerings can be solved where Harley-Davidson managed to diversify its products into Harleys brand as premium brand and Buells brand for middle class or women or young riders. HarleyDavidsons new market expansion and new market segment plans once took place and moved from its usual concentrated market segment. The arising of new competitors especially from Japan at the same time can be overcome by improving on after sales service and creating new product innovation which is suitable for women and youngsters. Hence, the aging baby boomers owners can be comprehended by these two market segments i.e. women and youngsters plus new market expansion towards

Eastern Europe such as Yugoslavia, Russia, Republic Czech and Eastern Asia such as China, Korea, Indonesia, Vietnam where the emerging of the new middle income society at large. 8.0. CONCLUSION

As conclusion, Harley-Davidsons future will be profoundly excellent if Brand Synergy Strategy to be implemented. All short term and long term planning listed out here should be followed in order for the Harley-Davidson to survive in the stiff market and widen market share plus increasing its market segment to women and young people. At the same time, Harley-Davidson will ensure the improvements and new innovations of its products to appeal to new generations. In doing this, certain issues regarding limited products offerings, concentrated market segment, the arising of new competitors especially from Japan and the aging baby boomers owners will be overcoming gradually.