IULIIA ZHUPIKOVA – 21701649

NATALIA AMARO CHANG KOVALEFF – 21703435

POOJA SHAH – 21704171
SWETA BORKAR - 21703701

ASSESSMENT 3
REPORT – Harley Davidson's Strategy

JILL GRIGGS
BUS 8503
COMMUNICATION FOR LEADERS AND MANAGERS

New Zealand – Wellington – Dixon Street Campus

Word Count: XXX

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Introduction & Background-Shweta,

Introduction -

Harley Davidson was established in Milwaukee in 1903 and was amongst the two
main American motorbike manufactures, the other one is Indian. Harley-Davidson
Inc. also commonly known as H-D otherwise Harley is beyond doubt an
American motorbike manufacturer. The company endured Great Depression and
also outlived the phase of the mediocre quality management and competition by the
Japanese makers. Starting from 1977 until 2014 Harley Davidson only sold
motorbikes to the communities which were mainly heavyweight, intended for
highway cruising and having an engine which was better than other 700 cc engines.
Harley Davidson connects individuals strongly, passionately and authentically around
the globe. Harley is believed to be an iconic brand which is gratifying and also ignites
the enthusiasm among people on the innumerable highways in the world which
describes who they truly are. Post World War II, Harley was the top motorbike
manufacturer in the United States and maintained its number one position as there
was no other competition for them.

(https://www.forbes.com/sites/greatspeculations/2014/12/19/harley-davidsons-
success-story-in-the-u-s/#39d45b8e4ec1)

Background -

The foremost Harley-Davidson motorbike was built in Milwaukee, Wisconsin in the

early 1900s which is even now the place of the company's head office. The three
Davidson brothers along with William Harley invented and built the bike with the
three horsepower engine in their personal backyard. The company has built an
inspiration in many generations of motorcyclists with its limitless dependability and
trustworthiness. Since 1903 the company has undergone immense changes in their
engine functionality and kept up their brand name. The first three motorbikes were
sold after doing little research in 1903 but eventually, the demand for their bikes
started increasing and they were manufacturing bikes at a very high pace. In 1907
they decided to promote their bikes to increase the awareness among the population
and two years later they effectively introduced the V-twin engine characterized by the
accelerating power of 60 miles per hour and deep and low sound which was

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amazing for that era. (https://www.harley-davidson.com/us/en/museum/explore/hd-
timeline.html)

Harley Davidson was the leading company in 1920 to invent the Teardrop fuel tank
and front brake. The winner of the first racing contest in the United States in 1921
was a rider who was riding a Harley Davidson motorbike and reached a speed of
100 miles an hour speed. During that time H-D was going through a recession but it
overcame the rough time due to their string dealer associations, who were constantly
supplying bikes to the police and military in the United States and also exporting the
bikes to other nations. During this time Henry Ford launched his new car by the
name of Model T which was reasonably priced mode of transport for the common
man and this negatively influenced Harley Davidson. More and more people started
buying cars due to its affordability. (http://hdhistory.com/the-birth-of-harley-davidson/)

During World War I, business for Harley Davidson increased dramatically as the
military purchased the motorbikes from them. H-D put in all their effort in
manufacturing bikes for the armed forces of the United States. They also got an
award from the army for offering top class services during wartime which was the
Army-Navy “E” award as their effort to manufacture 90,000 motorbikes. In 1947 post
the World War people investing their time and money on leisure activities and thus
the need for bikes increased. To meet the increasing demand H-D purchased extra
space in 1947. The company benefited from the monopoly they had in America in
1953 and began work on manufacturing most modern and innovative bikes. It
revealed a sports bike with a robust engine and sporty noise. A totally new tradition
started developing after the launch of the sports bike and riders started dressing up
with leather jackets and riding boots while flaunting their bikes. Soon after their sales
started declining by 1960 but they managed to maintain their sales after their merger
with the American Machine and Foundry Company (AMF). AMF assisted H-D in
trying to win over the Japanese motorbike manufacturer who initiated selling their
bikes overseas which turned out to be a big risk to Harley Davidson.
(http://files.shareholder.com/downloads/HDI/0x0x329002/fe33c217-5914-4dc1-ae6d-
44374a5806c9/bckgrdr.pdf)

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Harley Davidson underwent many good and bad times in their past and always found
a path to come out of the crisis. It recently launched its newest bike Fat Boy with a
750cc engine. (https://www.carfax.eu/article/harley-davidson-history.html)

Current market –

The current state of affairs of Harley Davidson does not look very appealing. The
figures show that the sales have reduced in the US by 12 percent in the first quarter
and 7.2 percent across the world. In Europe, sales were up by 6.8 percent and 7
percent in Latin America. It is a huge matter in the United States as it corresponds to
60 percent of the entire sales. The executive team is constantly outlining various
approaches to resolve the issues of dropping sales and to give good returns to their
investors. The team also confessed that they have given their best but nothing
seems to work. The problems faced by Harley Davidson are long-standing and they
were not doing much to improvise on them. H-D illustrated that the motorbike
business for bikes 601 cubic centimeters and bigger had dropped more than 11% in
the first quarter, as a result, Harley's operation was barely minimally poor than the
marketplace standard. This would harm the earnings as well as the unit numbers of
H-D. Now a day’s people choose to buy low-cost Indian bikes and that is the reason
why Harley’s sales are reducing drastically. Even though Harley has almost 50
percent of market share in the United States nevertheless Indian motorbikes are
creating their entry to the US market at a rapid pace.
(https://www.fool.com/investing/2018/05/03/harley-davidson-sales-go-from-bad-to-
worse.aspx)

The current strategy of Harley Davidson mentions that the company will build 2
million new riders in the US, grow the global dealing to 50 percent of the total
volume, and launch 100 latest high influence bikes. They also mentioned that they
will deliver better financial profits to their shareholders and pay attention to the
impact on the environment. They have recently been ineffective in manufacturing
bikes which are consumer friendly even after identifying the fact that customers are
not much keen on expensive and bigger bikes now. They have tried to make bikes
with smaller engines but the sales have still not increased. (https://investor.harley-
davidson.com/our-company/our-strategy)

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CURRENT BUSINESS STRATEGY - Natalia

Harley Davidson began to shift the company’s mindset in 2017 from “we build
motorcycles” to “we build riders”. H-D decided to focus the business beyond the goal
of building unmatched motorcycles and accessories, but building riders. The efforts
to achieve this goal involved improving the already existing Riding Academy, a
course designed to get riders to develop skills needed to ride motorcycles with
confidence. The course is available at dealerships all over the United States, where
anyone interested can learn how to ride a Harley Davidson motorcycle, getting
directions from skilled instructors. Moreover, in most US states, students are cleared
for the driving license after the course is complete. By inviting riders of all ages who
are new to motorcycling to learn at the Riding Academy, a significant bond is created
between them and the H-D brand, which could influence positively the new
generation predisposition to buy an H-D motorcycle afterward. While for H-D the
design of new products has certainly always been paramount, the new business
mindset offers opportunities to inspire and build the succeeding riders’ generation.
This “customer first” perspective also involves the strengthening and expansion of
their dealer's network as well as creating high-engagement customer experiences
across all retail channels, including H-D’s global digital capabilities.

This business mindset shift carried a new brand promise: “All for Freedom. Freedom
for All”. This strategy led the company with over 32,000 more Harley-Davidson riders
in the United States of America compared to 2016. The company reached US$5.65B
in revenue and US$521.8M net income. The corporation efforts on resource
allocation and cost structure lead to over US$40 million reductions in expenses in
2017. The effort of reducing the company’s costs continued this year, with the
decision of closing the Kansas City plant, while opening an assembly plant in
Thailand. Part of H-D’s long-term strategy is to grow their international business to
50 percent of the annual volume by 2027. Harley Davidson identifies a prosperous
opportunity in developed and emerging markets, where the strength of the H-D
brand seems to be as strong as the local market. The decision to open the plant in
Thailand will allow the company better competitiveness in the international market.

Despite the efforts to reduce cost, Harley Davidson decided to invest in new
technologies to inspire ridership among new audiences. H-D recently became a

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shareholder from the electric vehicle technology-leader Alta Motors. Alta Motors
designs and manufactures the most advanced electric motorcycles in the world, and
started their business operation last than a decade ago. The collaboration among
Harley Davidson and Alta Motors will enable the introduction of H-D’s first electric
motorcycle estimated to be available in the market by 2019. Electric motorcycles
have no gears to change and require little maintenance. Selling electric motorcycles
might be a prosperous path for HD to compete in a new market niche. The global
electric motorcycles market was valued at US$ 15,000 million last year and will
reach US$ 20,800 million by the end of 2025. China alone is expected to buy nearly
35 million electric motorcycles in the next 5 years. The decision to sell electric
motorcycles is aligned with the corporation’s strategy to grow the international
business to 50 percent of annual volume by 2027.

The Harley Davidson’s current strategy lays on building riders, expanding the
international market and increasing the product portfolio, offering electric
motorcycles. Regardless of the company’s great efforts to shift the business mindset
to foresee better business outcomes, H-D’s second-quarter results show little
progress. The international retail motorcycle sales were up 0.7 percent and U.S.
retail sales were down 6.4 percent compared to last year. Worldwide retail sales
decreased 3.6 percent, in which shipments were down with approximately 9,000
motorcycles yr./yr. Operating margin as a percent of revenue decreased in the
quarter compared to 2017 mainly due to lower shipments, costs related to the
manufacturing optimization initiative and higher operating expenses. In other words,
the current strategy doesn’t seem to demonstrate potential outcomes to enable
Harley Davidson to achieve their long-term strategy (2027 objectives).

The electric motorcycle project started recently, in which investments were made but
the outcomes still cannot be measured. Only when the product is available in the
market H-D’s will be able to evaluate how successful the decision of this portfolio
increase was. If the sales volume expected for this new product are not satisfactory,
H-D might jeopardize even more the current disappointing business results.
Moreover, the U.S. retail sales were down 6.4 percent compared to last year in this
year’s second quarter, which means that the strategy of building riders with the
Riding Academy is not impacting positively the sales results with the agility the

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business requires. And even though the international retail motorcycle sales were up
this second quarter, it did not even reach 1 percent.

The risks involved in keeping the current strategy are considerable. None of the
actions taken by now revamped the business results significantly and this year’s
second quarter figures are far from building an optimistic business curve towards the
Harley Davidson’s long-term goals.

Therefore, two new business strategies were designed to offer the Harley Davidson
board fresh options on how to change the current business scenario and shed some
light on possible new short and long-term approaches to reach more successful
results.

PRODUCT DEVELOPMENT STRATEGY

This strategy is focused on expanding Harley Davidson's operations and requires to

extend the current product portfolio. The strategy includes the internal development
of a new product, such as Street 200 cc. The purpose of the strategy to is to allow
Harley Davidson to add a new segment to the existed motorcycle market to achieve
growth. Furthermore, it will give the company an opportunity to attract young
generation 16+ not only in international markets but within the main in the US. The
slogan of the new strategy is: "Starting your dream with Harley Davidson".

PROCESS

Conduction of marketing research including analysis of the current situation of

Harley-Davidson and risk analysis of existing strategy has given a basis for building
a new product development strategy. This strategy will stress on manufacturing new
motorcycle model by focusing only on the young generation.

NEW PRODUCT

The company plans to launch more accessible and small-displacement motorcycle

Street 200 cc. This model has a range of advantages which will attract the young
generation. First of all, increases traffic will make this motorcycle more desirable and
more approachable to put around town or to university or work. At the same time,
this model is very convenient for the open road. Even newcomers will be able to go

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traveling. Fuel economy as compared to traditional heavyweight motorcycles
available. More and more young riders are eager to buy the first motorcycle which is
light, comfortable and fits their budget. New product Street 200 cc is intended to
become first available and reliable motorcycle and to create an atmosphere of
comfort and inspiration for every new rider 16+.

SWOT ANALYSIS

SWOT analysis will give an opportunity to understand internal and external strategic
factors of Harley Davidson and support strategy for launching a new product.

Strength (Internal Strategic Factors). The most significant Harley Davidson

strengths are primarily related to:

1. Harley Davidson's brand as is one of the most trusted names

2. Strong distribution and service channel in 100 countries

3. A strong base of loyal customers and strong references

4. Years of experience in motorcycle launch

The company's strengths support business stability in spite of aggressive direct and
potential competitors.

Weaknesses (Internal Strategic Factors)The most significant weaknesses of the

company:

1. Narrow product portfolio which consists of touring and cruisers motorcycles.

2. Highly competitive market

3. Price on current products

4. Most of the sales are generated in the US

5. All distribution channels with a focus on heavyweight models.

This element of the SWOT analysis has shown that the company should overcome
weaknesses in expansion and growth in the new market segment.

Opportunities for Harley-Davidson (External Strategic Factors) Harley-Davidson’s

most significant opportunities are as follows:

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1. To expand market share and become a leader in lighter motorcycle market by the
launch of Street 200 cc

2. To create among potential customers commitment to brand by offering Street 200.

3. To increase in purchasing power of youth and young professional

This element of the analysis has shown that launching a new model of motorcycle
would give significant opportunities to a growth business.

Threats (External Strategic Factors)

1. The launch of Street 200 could tamper Harley-Davidson image if the motorcycle
would not meet consumer expectation

2. Expectations from sales may not be met

3. Harley Davidson brand is a known powerful sound and engine. However, Street
200 will have a small engine and another sound that may impact on demand.

4. Strong and aggressive competitors in a segment of lighter motorcycles may

impact the company’s performance

5. Imitation.

6. Interest in a new product can take time before customers will consider this
motorcycle.

7. New retail channels with a focus on a smaller motorcycle.

8. Significant costs

9. Quality of new suppliers

significant numbers of the factors from this element have pointed the company
should create a contingency plan to address the potential threats while launching a
new product.

FINDINGS

Producing new model Street 200, Harley Davidson expects to add value to the
company and strengthen existing business. The company believes that investment in
Street 200 will cover operating and capital costs and generate profit. However, the

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new strategy will require substantial investment and Harley Davidson has to fund it
via reallocation of investment or reducing operating costs. Moreover, launching a
new motorcycle will require whether expanding capabilities or finding new suppliers
to produce the lighter engine. The company believes that the new product
development strategy may reinforce its goals to drive revenue growth.

FACTORS:

Harley Davidson's ability for implementation the strategy of launching new product
depends upon a range of factors: Stability of existing business and sales that may
impact on investment in new product; Realization expectations regarding market
demand for lighter motorcycles; Manufacturing product on a timely basis that allow
Harley Davidson to generate the required level of sales and provide the desired
returns on investment; Successful implementation of changes regarding to
distribution methods.; Successful management of changes of market conditions;
Capacity to compete against not only existing but new competitors; Redirecting
capital without negatively affecting existing business; Effective decreasing operating
and capital costs to offset costs of the launching new motorcycle; Comprehensive
promotion of a new product, covering all channels.

RISKS:

The company realizes that implement the strategy related to certain risks that may
arise through launching a new product. For instance, manufacturing and operations,
which may require extra costs. As the company has already made the huge
investment, this risk will be not acceptable. Also, can be a risk of failure in
development and enhancement distribution channels and supply chain. However, the
company understands that the main risk of launching new model Street 200 cc may
be linked to an adverse impact on strong image Harley Davidson which is about
luxury lifestyle. Due to this fact, before the implementation of the strategy, the
company should weigh the consequences of launching a new product. The company
should understand the scale of the negative impact on existing customer
relationships. The company also realizes that it may decrease the level of existing
customers, sales, and profit. Therefore, the company should carefully reevaluate
requirements of new product to reduce the effect on existing customers.

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Strategy 2 & Recommendation Pooja

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