External Analysis Frameworks - Case Study Example

? International Business: Harley Davidson External Analysis Frameworks (Political, Cultural, and etc) External Analysis Frameworks involves the scanning and analysis of the organization’s macro-environmental factors which influence the business of a firm and can impact on it either positively or negatively. It involves the following: a) PEST analysis; which considers Political, Economic, Social and Technological factors in scanning components of management strategies. This analysis information can be used to guide the organization indecision making. In the case of Harley, changes were predicted in the demographic trends where older people and women could also become interested in bikes like the young men traditionally targeted using this technique. b) SWOT Analysis; is another framework that can be used in external analysis and it looks at the strengths, weaknesses, opportunities and threats in the market. These factors are used for determining the growth or decline of the market, position of the business, direction and potential for operations. The strength of Harley Company included customer loyalty and good reputation that they enjoyed in the local market, dominance of super heavyweight motorcycle segment, state of art technological equipments for production, excellent work force due to good treatment of employees and good strategies and organizational leadership. The major weakness for Harley was lack of expansion into the global market and lack of innovation or limited innovation. On the other hand the opportunities that Harley had good reputation, possibility of expanding into the global market and the Harley Owners Group (HOG) through which they could link with consumers and improve sales. And the main threat was competition which was very stiff in the motor cycle market as well as entrant of cheap products into the market. This analysis shows that Harley was at a greater position of making use of its opportunities and strengths to create strategies that would help it improve sales and gain competitive advantage over its competitors. The creation of Harley Owners Group further saw an improved and close relationship between the company and the consumers because they were involved in social and charity events in the community. This delivered an atmosphere and the kind of emotions where the consumers felt an experience like they had never felt before linking with the Harley-Davidson Company. This help the company improved its sales and gain customer loyalty as well as competitive advantage in the market. Traditionally majority of Harley consumers were blue collar men aged 20s and 30s but the demographic profile shifted and in 2002 the age group rose up from 30s to 40s. The company also recorded a 9% increase in female consumers down from 2 percent in 1987. The introduction of baby boomers into the market also improved their sales and as the prices rose up, the middle-aged professionals became the demographic targets and as they were the most attractive for the company. The super heavyweight bike technology was Harley’s main source of strength and competitive advantage and thus they maintained the classic styling over the years even with the introduction of new and small substitutes into the market. The introduction of Twin Cam 88 was an improvement from the traditional V-twin which was now air cooled and had push rods. However this innovation did not create an impact as compared to the Japanese liquid-cooled and BMW’s fuel injected versions which were already in the market. They therefore focused on improving their bike technology through increase of refinements into the engine, gearboxes and frames which were for improving delivery of power, reducing vibration, increasing the breaking power and for reliability. Economies of scale caused by price differentiation was a big challenge to Harley and thus they offered a wide range of models as well as a lot of options like three engine types so as to promote as much sales as possible. They also standardized their components in terms of economies in engineering, purchasing and manufacturing. They also had a wide price range from $ 20.405 Ultra Classic Electra Glide to a $ 6.495 Sportster model to target various groups depending on their incomes. Political analysis reveals a positive impact on Harley performance for example the government imposed 49% import tariffs on Japanese heavyweights to discourage importation and allow Harley to sell and dominate the local market with their products which contributed to their growth and stability in the market. Strategic positioning Micro Analysis Frame (Porter) Strategic positioning micro analysis of a company involves the analysis of micro-environmental factors of the organization which include customers, channels, public, competitors and suppliers. Porter developed five forces analysis for industry analysis and strategic positioning of a company for purposes of its development. These forces are the ones which are use to determine the intensity of competitive advantage and the attractiveness of the market which can lead to organization’s profitability. These factors are referred to micro-environment because they are close to the organization and thus affect its ability to make profits through serving customers. Porter’s five forces of strategic analysis Threat of new competition; is where a new company selling the same products invaded the market causing reduction in sales and profitability. This competition can be overturned by utilizing the advantage of customer loyalty. Threat of substitute products; is where the customers switch to alternative products maybe due to high costs of the products that they are currently using. The bargaining power of customers; is the case where customers apply pressure on the company causing them to change their prices. Here differential advantage is applied which help the company gain competitive advantage because of their unique products. Bargaining power of supplier; may result in suppliers refusing to work with the company due to presence of substitutes which affects strength of distribution channel and degree of differentiation. And lastly intensity of competitive rivalry is the measure of competitiveness of the industry which is overcome by powerful strategies and competitive advantage achieved through innovation. Since micro-environmental factors involve customers, channels, public, competitors and suppliers the micro-analysis frame shows that Harley has employed several strategies to improve sales. The company has a large customer base at home that is North America and thus enjoys good reputation and customer loyalty all over the country and in some parts of Europe as well. The company targets consumers from as young as 20s to the middle aged that is 40s and thus they have a wide customer base leading to improved sales. The distributers are the means through which the company connects with the consumers thus the company took an initiative to upgrade the distribution channels that had been neglected and poorly maintained. This involved training of the distributors on customer service qualities as well as training on skills that could enable them offer technical services to the consumers. They also opened a school, Harley-Davidson University which improved competency among the dealers and enhance customer satisfaction. As a result by the year 2003 there was great increase in sales and the motor cycles were actually sold while still at the production line. Porter’s forces of strategic analysis show that there was steep competition in the market of motor cycles. Among Harleys competitors were BMW from Europe, Honda, Suzuki, and Yamaha. In addition to this Harley only had the advantage of the American market which was also infested by the European and the Japanese brands and this caused lower production rate for Harley. Harley’s was acquiring Buell which enabled it to compete directly with these companies furthermore heavyweight motor product provided a differential advantage and together with customer loyalty helped the company in dealing with the intense competition. Apart from motor cycles Harley was also involved in the line of other accessories such as clothing apparels for men, women and children. They also established a credit and insurance channels for customers and suppliers which earned profits between 2002 and 2003 of the total operating income. Porter’s strategic analysis also showed the threat of new entrants into the market such as the specialists who were producing retro-styled cruiser bikes hence giving Harley competition for their own products. Polaris, Bog Dog and Excelsior also entered Harley market during the 1990s but because they had limited access, they did not cause serious effects to Harley Company. Other forces of analysis experienced by Harley are the bargaining power of supplies where they faced loosing suppliers to their competitors. Harley also faced threat of substitute products because there products even though of high quality were very expensive and so during hard economic times consumers opted for alternative products at cheaper prices thus driving their sales down the hill. Bargaining power of consumers caused them to adjust their prices since the consumers are the priority of the company. Bargaining power of the consumers leads to consumer sensitivity and thus the situation had to be handled strategically. National Culture (Hofstede) and Globalization Culture is a group of people who share a specific and distinctive way of life or values while globalization is the distribution and bringing together of the world aided by the ease in transportation and communication. Globalization affects the national culture position in the organizational environment. Hofstede dimensions of culture reveal the differences and similarities across cultures and hence emphasizes on open-mindedness to help in understanding the differences in the other culture. He developed five dimensions of culture that leaders can use to compare cultures and thus gain an understanding of how to adjust their leadership strategies for productivity of the company. These dimensions are collectivism/individualism, power distance, feminine/masculine, long term/short term orientation and the fifth one is uncertainty avoidance. Culture and Globalization: Harley Different countries possess different features despite globalization and so when Harley wanted to expand its markets into the global market, they first had to understand and acknowledge these differences and then formulate a strategy that can be applied in a particular country. Europe was there first priority in the international expansion strategy and using the Hofstede’s dimensions of culture. This was a big challenge as the Harley product mostly focused on the American culture which was the cowboy identity and this could not appeal to the European consumers. Another challenge was that unlike Americans, Europe based consumers were more style conscious and there preference was mostly into sporty motor cycles and performance bikes while Harley specialized in cruiser bikes. As result Harley modified some of its models to meet the culture and the fit the kinds of roads that were in Europe for example the US Sportster was modified to Custom 53 and the Harley Softball became the Night Train. With the adoption of Hofstede’s dimensions which are collectivism/individualism, power distance, feminine/masculine, long term/short term orientation and uncertainty avoidance, Bluestein developed leadership strategies that helped in expanding into the global market. Harley went into the global market even though they were well aware that it was already dominated by the Japanese brands and the European brands as well. Hence it had to fight market share with the likes of Honda, Yamaha, BMW and Kawasaki who were already established in the market. It acquired several distributor channels in Europe and Asia even building headquarters in England and thus they expanded their dealership network. They expanded their dealership in Africa and Canada as well which resulted in gaining global market share. The management emphasized on value growth and brand strengthening and with excellent management system, the company was headed for global prosperity and continuous improvement in the industry of motor cycles. Harley-Davidson Inc. with excellent management under the leadership of Bluestein was able to rise up pick up the pieces and emerge one of the famous bike producers in the world like it used to be before its decline. The company was able to expand its operations to the global market and thus gain the market share globally previously enjoyed with its competitors such as Honda, Yamaha and BMW. Globalization increased opportunities for Harley-Davidson Company but also competition which made the company go back to the drawing board and come up with strategies that could help stabilize in the global market. International expansion enabled Harley Company to sell its image in the global market and hence to demographic changes, exposure to forces of supply, demand, completion from the international market and political developments. The Harley experience and HOG helped the company to earn good reputation in the international market as the consumers felt close relationship with the company. Globalization and expansion into the European market enable the company expand more into the Asian and African market. Good leadership strategies and dedicated human resource enabled speedy expansion into the international market and consequently gain good reputation and competitive advantage of the market leading to increased sales. Bibliography Grant, M. R. (2004). Harley-Davidson Inc. Read More