25th March 2014

Devendra Bhandari
Saliha Sahin
David Huckschlag
Amani Alkaddah
 Outline
1. HarleyDavidson at a Glance

2. HarleyDavidsons Strategy

3. Comparison of Harley-Davidsons and Hondas Resources and

Capabilities

4. Establishing Competitive Advantage

5. Harley-Davidsons Threats

6. Sustain & Enhance Competitive Advantage

7. Conclusion

8. References

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Harley-Davidson at a Glance
Founded in 1903: William Harley & Davidson brothers

Represents a tradition of US engineering and manufacturing

Focus in Heavyweight motorcycle market

Harley-Davidson is a lifestyle people choose

We fulfill dreams inspired by the many roads

of the world by providing extraordinary
OUR motorcycles and customer experiences. We fuel
VISION
the passion for freedom in our customers to
express their own individuality.

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 Harley Davidsons Strategy
According to Porters Generic Strategies:

Harley Davidsons has a Focus - Differentiation Strategy:

differentiate within just one or a small number of target
segments

Focus

Differentiation
Cost
Advantage

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 Focus Strategy
Basically, we do not believe in the lightweight market. We believe
that motorcycles are sports vehicles, not transportation vehicles. Even
if a man says he bought a motorcycle for transportation, its generally
for leisure time use. The lightweight motorcycle is only supplemental.

- William Davidson, President of Harley-Davidson

Focus Focus on Heavyweight market with

customers who consider their
Differentiation motorcycle a luxury product
Cost
Advantage

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 Differentiation Strategy
Differentiation based on customers social and psychologial
needs
Harley-Davidson is in the business of selling lifestyle,
not transportation

Internal and external product integrity critical factor in

such differentiation:
Ability of employees and customers to identify with one
another
E.g management wearing biking leathers

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 Cont.
Differentiation advantage by careful examination of
activities customers undertake:

Dealer Network
price, fuel price)
gathering (e.g.
Information

Customization

Maintaining
Purchasing
Selecting
visit

Customer Value Chain

Creating customer value by providing:

Test ride facilities
Owners club activities
Various sponsored events for Harley riders
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Resources and Capabilities
HARLEY-DAVIDSONS RESOURCES AND CAPABILITIES
SUPERFLUOUS STRENGTH KEY STRENGTHS

Brand & Customer Loyalty

Distribution
Public Relationship
MAN (Material As Needed)
Customized Design
Relative Strength

ZONE OF IRRELEVANCE KEY WEAKNESSES

Manufacturing
R&D

Product Development
International Exposure

Strategic Importance
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 BRAND & CUSTOMER
LOYALTY
greatest asset

Harley Davidson had long

recognized that it was not
selling motorcycles
it was selling the Harley
Experience.

Brand of one of the worlds oldest motorcycle companies

Appeal of the Harley Brand - associated with an entire lifestyle

- Riders emotional attachement to the brand

1983 Harley Owners Group (HOG)

To increase involvement of customers riding experience
Played a critical role in building brand image and customer loyalty 9
 DISTRIBUTION

Harley believed that the

quality and effectiveness of its
dealer network was a key
determinant of the strong
demand for its products.

Dealership Network: 85% of Harley dealerships in the U.S.

Far more than any other motorcycle manufacturer

High standard of pre- and after- sales service

New services to customers:

Test ride facilities, rider instruction classes, motorcycle rental

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 MAN
(MATERIAL AS NEEDED)

Productivity gain from

reorganizing around team-
based production and
commitment to continuous
improvement

MAN (Materials as Needed):

Just-in-time (JIT) system and production scheduling program

Reduce inventories & costs

Cost Advantage
Improve quality control

However, difficulties to satisfy the surging demand for its products 11

CUSTOMIZED DESIGN

Every Harley rider would

own a unique, personalized
motorcycle

Wide range of customization opportunities

Mutliple options for:

Seats bars
Pegs Competitive Product Strategy
Controls
Paint jobs
Range of 7000 accessoires

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 HONDAS RESOURCES AND CAPABILITIES
SUPERFLUOUS STRENGTH KEY STRENGTHS

Product Diversification (R&D)

International Exposure
Manufacturing
Product Development
Public Relationship
Relative Strength

ZONE OF IRRELEVANCE KEY WEAKNESSES

Strategic Importance

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 PRODUCT
DIVERSIFICATION

- automobiles,
motorcycles, power
equipment, robots,
aircrafts etc.

Ability to share R&D across cars and bikes

Benefit from sharing technology, engineering capabilities, marketing

and distribution know-how across different vehicle devisions

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 PRODUCT
DEVELOPMENT
Harleys smaller corporate
size and inability to share
R&D across cars and bikes
(unlike Honda) limited its
ability to invest in technology
and new products.

Honda offering V-twin cruisers styles closely along the lines

of classic Harleys

At a lower price
With more advanced technologies
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 MANUFACTURING

HARLEY-DAVIDSON
Low production volume relative to HONDA
Significant scale & cost disadvantage

Key cost disadvantage: purchasing components

HARLEY lacked the buying power of HONDA 16
 INTERNATIONAL
EXPOSURE
Harley needed to fight to take
market share from the
established leaders in the
heavy bike segment in Europe
(like Honda)

Honda attracting younger customers

International Market Share

European motorcycle market differed significantly from the

American market differences in style preferences 17
 Establishing Competitive
Advantage
Harley-Davidson lacks in their resources and capabilities to
have cost advantage over Honda low economies of scale
and learning curve due to low production

Differentiation advantage is obtained through brand

recognition and the Harley experience providing the
customers a unique motorcycle

However, Harleys international exposure as a key

weakness demonstrates the inefficient sales in order to
sustain their other resources such as R&D and product
diversification

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 Harley-Davidsons Threats
Threats faced by Harley-Davidson creating a barrier to
sustain competitive advantage:

1. Brand Recognition

2. Customers

3. International Exposure

4. Intellectual Property

5. Lack of Diversification

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 1. Brand Recognition
Everyone lost interest in the brand as HOG didnt feel like an
exclusive club for loyal customers anymore.

Anthony Gikas, senior research analyst at Piper Jaffray

Increase in demand and sales led to loss of exclusivity

Losing appeal loss of their strongest asset

Risk of changing consumer preferences (increasing interest

in sport models)

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 2. Customers
Harley-Davidson highly focused on American traditional style for
higher-class customers

In 1987, 50% of buyers are under 35 and now less than 15%

Generation threat Current customers are ageing

More focus on younger middle-class customers

To grow and thrive, they must create a deep emotional connection with
younger consumers.

Gregory Carpenter, a marketing professor at the Kellogg School of Management

at Northwestern

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 3. International Exposure
EU and Asia prefer lightweight, high technology, sportive
and low-priced motorcycles

Falling back on innovation and technology

High cost due to low production high prices for above

average profit

Acquired Buell in order to gain market share outside

America tried offering same experience as Harley-
Davidson Unsuccessful

Low market-share in Europe and Asia

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 4. Intellectual Property
Company # Patents Level of Secured Innovation
Harley-Davidson 90 Very Low
Honda 3971 Very High
Yamaha 2057 High
Kawasaki 502 Medium
Suzuki 247 Low
Company Average Retail Price ($)
Harley-Davidson 14.549
Honda 10.565
Suzuki 10.765
Kawasaki 9.299
Yamaha 9.340

Offering average or similar product price will play the final role 23
 5. Lack of Diversification
Portfolio consisted mainly Cruiser Motorcycles
However, competitors imitated Harley-Davidson loss of
competitive advantage
Touring Motorcycles not up to customers requirements
low on technology
No market of Performance Motorcycles most demanded by
consumers
Harley-Davidson maintains on a vision of traditional
heavyweight motorcycles lowers the potential of
diversification

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 Sustain & Enhance
Competitive Advantage
Grant (2010) identified that superior Economic and Financial
performance is viewed as evidence of competitive
advantage:

In 2008 Harley-Davidson Honda

Income after tax $655 million $5,135 million
Operating Cash Flow -$685 million $11,382 million
R&D Expenditure $164 million $5,703 million
Return On Equity 19.50% 11.19%

As identified, Harley-Davidson falls behind its competitors and

therefore needs to sustain and enhance its competitive position

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 Measuring sustainability:
VRIO Framework
Valuable? Rare? Costly to Exploited by Competitive
imitate? organizations? implications
No No No No Disadvantage
Yes No No No Parity
Yes Yes No No Temporary Advantage
Yes Yes Yes Yes Sustained advantage

Harley Davidson Temporary Advantage

However:
Brand is losing perceived customer value
Faces threat of losing exclusivity
Not costly to imitate
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 Cont.
According to Grant (2010), sustainability can be achieved
through price-based strategies, differentiation, and lock in.

1. Price-based strategy 2. Differentiation 3. Lock-in

Accept reduced margin Create difficulties for Achieve size/market
imitation dominance
Win a price war Achieve imperfect First-mover
mobility of advantage
resources/competencies
Reduce costs Reduce margin Reinforcement
Focus on specific Rigorous enforcement
segments

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 1. Price-based strategies
Harley-Davidson?

Potential cost reduction throughout value chain

Improvement in price transparency

Increase of sales in European and Asian market leading

to economies of scale

Increase production volume to lower cost per unit

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 2. Differentiation Strategy
Harley-Davidson?

Roberts (1999): Sustainable advantage comes from

innovation, pure and simple.

Separate department for R&D in order to realize and

obtain consumer preferences

Sustain intellectual property make imitation difficult

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 3. Lock-in
Harley-Davidson?

Sustain dominance in American market

Aim to achieve higher market share in Europe and Asia

through lightweight motorcycles

Economies of scale through price-based strategy

Reinforce intellectual property rights such as more patents

difficult to imitate

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 Conclusion
Harley-Davidson remains to be among the market leaders in
America

Many threats regarding losing competitive advantage

Trends of heavyweight is going down

Temporary advantage needs to be retained with proactive

strategies

International exposure is essential as it will open many new

sources of cash flow for the company

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 References
Barney, J. (1991). Firm resources and sustained competitive
advantage. Journal of management, 17(1), 99-120.

Grant, R., 2010. Contemporary Strategy Analysis: Text and Case.

7th Edition, Sussex: John Wiley & Sons Ltd.

Porter, M. E. (2008). Competitive advantage: Creating and

sustaining superior performance. Simon and Schuster.

Pugliese, M. J., & Cagan, J. (2002). Capturing a rebel:

modeling the Harley-Davidson brand through a motorcycle
shape grammar. Research in Engineering Design, 13(3), 139-
156.

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