What Is Harley Davidson Generic Competitive Strategy - Coursework Example

? s on case study: Harley Davidson What is H-D generic competitive strategy? Cost leadership, differentiation, cost focus or differentiation focus? Harley Davidson as a company started out in the year 1903 when four young and experienced men in the field of internal combustion started out a motorcycle company that went on to serve their customers for over several hundred thousand miles. As a company, Harley Davidson has a very high and excess demand for their motorcycles all over the world. Motorcycles are not their only products as they also produce accessories to these motorcycles and also apparels to ride them with. They also have a very interactive website that provides their niche of customers (who are mostly those above the average income earners) with important visual information about their products (Harley Davidson, n.d., 1). Over the years HD Motorcycle Company had to adopt many strategies in terms of marketing so that they could cope with stiff competition posed by the likes of Honda and Suzuki. According to a famous book written by Michael porter on the different competitive strategies adopted by companies and nations, we see that they may take the form of 3 basic strategies; the overall cost leadership strategy, differentiation strategy or the strategy that focuses on just a particular niche of the market. These strategies are normally used to create a platform that can be used to outperform various competitors. Harley Davidson generally uses the ‘differentiation’ strategy widely as their generic competitive strategy. The differentiation strategy is where a company chooses to counter competition by attempting to offer something unique in the existing market in terms of products or services. The HD motorcycle company offers its heavyweight brand of motorcycles through various designs which are distinctive in terms of design. The company in itself has over 100 years of existence in the motorcycle industry, more than any other motorcycle company in the world. It was because of this that the Harley Davidson brand has become an American iconic brand and nostalgia therefore it was no longer a just a motorcycle brand but also a traditional brand that has been carried on through generations. The motorcycle brand in itself consists of an American flag that represents the nice feeling of freedom to the Americans, the type of freedom only compared to that of riding. This attachment to the consumers is what has given Harley Davidson the competitive edge over other motorcycle companies. Therefore the customers owning the American made versions always perceive the Harley Davidson bikes as the only high quality products and are always demanding for the additional exclusive value that can be added without even considering the increase in price. Also still on the differentiation strategy, the HD motorcycle company produces over 30 different models of motorcycles. This diversity has increased their reach into the 4 different units of the target market which are; Touring market, Custom market, Performance market and lastly the Standard market. Harley Davidson Company allows buyers of their bikes to customize them through the use of chromes and other custom parts that are provided by Harley Davidson dealers all over America. This has made sure that they establish an unrivaled motorcycle empire in the American market only and not the other market areas like in Europe. This was because the company’s history and reputation affected only as far as American states alone. Further differentiation of their motorcycles and accessories then proved to be a good generic competitive strategy again. This was through the development of new motorcycle design that was called the ‘V Rod’ which is a Porsche designed engine heavy motorcycle. The V Rod or the VRSC model did not just impact positively (in terms of sales volume) for Harley Davidson Company in Europe alone, it also sold very well in Japan although this strategy was not that effective as the sales declined later on. Parental styles of corporate choices. Are they portfolio manage, synergy manager or parental developer? There was the need for Harley Davidson to expand their operations and this brought about many partnerships and dealerships across the world. This in turn made it a parent corporate to many subsidiary sellers and companies, and as a result it had to be one of the following types of managers; Portfolio manager, Synergy manager or a Parent developer. Portfolio managers are just corporate parents who effectively act as agents for financial markets and enhance individual business more than the financial markets ever could. Their work is mainly to look for businesses that are undervalued and improve on them. This kind of corporate parenting can manage a large number of many unrelated businesses. The synergy manager type of corporate parenting on the other hand is the kind where the value of resources is enhanced through sharing e.g. through distribution systems offices or in some cases brand names. This type of parenting is expensive as bringing any form of synergy to different systems is difficult since there is that lack of compatibility. Lastly the parent developer kind of corporate parenting is where the business uses its own competences in value addition. The parent has the value adding capabilities that are needed by the other business units. In the Harley Davidson case study, the company mainly uses the portfolio manager kind of corporate parenting in many of its mergers and dealerships. It established a long-term mutually beneficial relationship with all its suppliers and through these relationships the Company was able to gain access to all the technical and commercial resources that were applied directly to product design, development, and manufacturing initiatives. This important strategy resulted in the immediate improvement of product technical integrity, the application of new features and innovations, a significantly reduced lead-time for product development and last but not least faster new motorcycle introductions into the market. Excellent relationships with suppliers then enabled them to ask for cost reduction and instant quality improvement. For instance when exploring the United Kingdom markets, the Harley Davidson Company chose to open it through a network of independent dealers who are served by eight independent distributors and five wholly owned sales and marketing subsidiaries across the UK, France, Germany, Netherlands and Italy. They provided special training programs, ongoing product development and retail financing initiatives. These led to a continued focus on the expansion of the dealerships and distributors. HD acted as a parent corporate for many dealers and distributors such that they increased their operating efficiency by developing of information systems that linked the subsidiaries in Europe with the major independent distributors. This direct link was also a connection to other dealers who were located in the subsidiary markets. In the Asia Pacific markets there were a total of 240 Harley Davidson outlets of which 82 were Harley Davidson/Buell dealerships and 27 service only outlets. These dealerships were sub divisions of the Harley Davidson that went a long way to stabilize that market for several years. Describe H-D corporate choices using Ansoff BCG or parenting style method of strategic analysis. Looking at the tool called the ANSOFF’S BCG analysis mechanism developed by Igor Ansoff, there are many chances for a business to grow if it uses one of the four strategies which are; making use of the existing markets and already existing products, the introduction of new products into the existing market or looking for new marketing avenues for the existing products. Harley Davidson used almost all the four strategies in marketing of their heavy motorcycles. In terms of market penetration, HD realized that their market base was mainly in America and that competitors were benefiting more in the other markets. In order to avoid being phased out from the international scene, they decided to venture further into the Europe and Asia Pacific markets. This enabled them penetrate the markets further. On the second strategy of Product Development, Harley Davidson decided to create a new range of motor cycles known as the V Rod which were liquid cooled and inspired by the Harley Davidson drag racing heritage. These bikes were specifically made for the European markets because they combined the characteristics of a performance motorcycle that had a Porsche engine. This was a phenomenon that also opened the markets to a new customer base witnessed during the launch of the bikes as over 4,000 enthusiasts applauded this launch. This was an example of something that really needed to be added to the already existing product (that was meant for America only) in order to meet the needs of other markets. As a matter of fact the bikes were two; there was the Buell model bike in addition to the V Rod. The third strategy of market development was also employed by Harley Davidson when they needed to sell the existing models of motorcycles to the new markets. This is evident by the many dealerships and subsidiary firms across the world that sells motorcycles and accessories for Harley Davidson. The firm has also developed over 33 models of motorcycles that are all suitable for the four market categories; Standard motorcycles which consisted of those that emphasized simplicity and cost, Custom made motorcycles which emphasized that the individual could style it whichever way they felt like according to individual customization, Performance bikes which had the best handling and acceleration and lastly the Touring class motorcycles which emphasized comfort and other amenities for a typical long distance travel (these models had fairings, wind shields, saddlebags and Tour Pak carriers). These different models really increased the market reach of Harley Davidson’s motorcycles and accessories through out all the available markets and also new markets. The last strategy which is diversification involves the selling of new products to new markets which is specifically what Harley Davidson did when venturing into the European market. The need for diversification was brought about by the feeling by the other part of the market, particularly the Europe market that the HD motorcycles were only meant for the American markets since the bikes were branded with the American flag and style. This required the company to diversify their bikes so that they could fit into some other people’s lifestyle and taste. Basically the Ansoff BCG choices model helped HD Motorcycle Company decide their growth strategies based on the existing and available markets and products and the kind of market these products are meant to target. These strategies have been so helpful more so when the HD Motorcycle Company is expanding to the international markets. There was a great need for them as we saw earlier for them to explore the market fully by diversifying their products and expanding into the unexplored markets. This was necessary so as to avoid becoming relevant only in America and irrelevant the rest of the world. This diversification was in terms of dividing their operations into two different business segments; the Motor Cycles and related segments and the financial services segment. This increased their market reach in more ways than one. This enabled the different segments to dedicate full time research into their individual betterment and which proved so efficient. This is the time Harley Davidson motor cycles registered a huge number of customers owning their own HD bikes and also a significant number coming off competitive motorcycles from other companies. This diversification also led to significant innovation of the existing designs as the specialization led to improved handling and overall performance. International choices The application of these strategies by Harley Davidson Company could also be observed during their various entry and operation plans in the various new markets. In Europe they ventured into the market further by creating a huge network of independent distributors and dealers in France, Italy, Germany, and Netherlands and in the United Kingdom. This same strategy was used in determining the strategic choices when venturing into the Asia Pacific market. There were even more outlets serving eight country markets; a total of 240 Harley Davidson outlets of which there were 82 combined Harley Davidson / Buell dealerships. These trends were synchronous to the Latin America and Canada markets too. Although to some extent these strategies were efficient, figures still showed that Harley Davidson did not capture that much in terms of market share in the Europe market as they did in the USA market. This comes as HD motorcycles remained the most admired of all motorcycles. This made it necessary for Harley Davidson to adopt Ansoff BCG choice of product development as they endeavored to create awareness of the brand among the non riding public too. This they did by providing a wide range of products for the enthusiasts by first of all registering the name ‘Harley Davidson’. There were other numerous trademarks registered too. This meant that HD had licensed products and a cafe in Las Vegas a trend that continued through to the international markets. This provided a good platform and avenue for advertisement and goodwill. This ensured that the royalty revenues collected translated into high profitability of the business (www.harley-davidson.com). Also for them to ensure efficiency and increase the profit margins, Harley Davidson had to make some international changes as well, changes that were introduced at different levels of the business’ operations. For instance the introduction of means to ensure that there is significant reduction of lead time for product development. This leads to faster and smoother manufacture of new introductions. This was followed by Harley Davidson purchasing all its raw materials like carburetors, batteries, aluminum cast, steel, forgings, tires and seats among other components. This led to the moving of the assembly of its Dyna Glide family to the Kansas City facility. This was done to narrow the gap between supply and demand. Also as an international choice, Harley Davidson Company developed a supplier web portal that was launched in July 2000. This was simply an accounts-payable network through which suppliers could log onto and review all their accounts and at the same time do their reconciliation and to view their shipping specifications and product testing forms. This greatly freed up Harley’s payables department with a 90% drop in the number of supplier calls from users. This led to a 12month worth of forecasted volumes and schedules for all suppliers in 2002. Generally as a company Harley Davidson has developed in terms of sales and registration of new motorcycles during the period between 1992 and 2001. In North America the sales and registration of the 651+CC motorcycles raised from 58 thousand units out of a total of 112,000 motorcycle units sold in 1992 to 185,800 units out of a total of 422,600 units sold in the year 2001. Although their market share decreased from 50% in the year 1992 to just about 43.9% in the year 2001, they still remained the company that sold the highest number of units in America. It was a different case when it came to the European market though. Between 1992 and 2002, the number of Harley Davidson units registered was not as high as in America. They had a total of 12,100 units sold in 1992 and about 19,600 units in 2002. This was just about 6.7% of the total market share. Here the leading seller was Suzuki at 17% followed closely by Yamaha at 16%. This means that the strategic choices made by Harley Davidson did not have that much impact in the other markets other than their home markets. To what extent were H-Ds strategic choices suitable? acceptable? and feasible? Although we must give credit to the fact that the sales of the 651+CC Harley Davidson motorcycles in Europe increased during the period between 1992 and2002 and so did their market share which is not an easy thing given they had to change some of their production ways completely so as to fit into the market. These small sales volumes did not affect Harley’s profit margins that much given that they were still strong in terms of the stock market. There was a time when the other automakers had their profit margins significantly whacked down, but not Harley Davidson. They on the other hand, continued selling every bike that they made even as the dealers sold these bikes $2,000 to $4,000 above the sticker price. This was fueled by the strategic choices Harley Davidson made in order to make sure that they stick close to their customers, a feat that in turn translated to their bikes having a continued strong demand. Their sportster bikes (which were entry level bikes), the Custom bikes (which basically carried the highest in profit margins), the touring (which had the highest selling prices although also the costliest to manufacture) and the Buell line of motorcycles increased Harley Davidson’s profit margins significantly. HarH The management then changed their focus to trimming costs which raised the sales of parts and other motorcycle accessories from the Harley Davidson line, which in turn resulted in an improved operating margin for a full year. All these choices then went a long way to improving the company’s outlook in terms of their operating income, assets, the balance sheet, income statements and also in terms of statement of cash flows (www.harley-davidson.com). Therefore looking at the rise in the sales volume from 1994 to 2001, we can say that the strategic choices of Harley Davidson have been feasible so far. The partnership with Buell led to the increase in sales from only $6 million in 1994 to $61.9 million in 2001. Also the company’s strategy of acquiring all the common stock and common stock equivalent of Eaglemark Financial Services Inc. in 1993 made it possible for leisure product manufacturers, their dealers and customers in the USA and Canada to acquire credit. This was a move that was suitable given that the bikes produced were expensive hence increased the buying power of many enthusiasts since they could pay for the whole amount later. In 1996, the company also chose to discontinue the operations of the transportation vehicles segment which consisted of Recreation vehicles division (Holiday Rambler trailers basically), the commercial vehicles division (which comprised of small delivery trucks) and the B & B molders (a manufacturer of custom standard tooling and injection molded plastic pieces). This was a strategic decision that enabled Harley Davidson to concentrate all the financial and human resources on its core motorcycle business. This was a feasible move that enabled efficient use of labor and approximately $105 million got from the sale of the Transport Vehicles Segment (it was about $100 million in cash and $5 million in notes and preferred stock). All these strategic decisions are in the long run acceptable too since the company has continued making profits from the sale of their units. Reference Harley Davidson (n.d.). From 1903 until Now; http://www.harley-davidson.com/history Read More