Harley Davidson Strategic Analysis - Essay Example

?Topic: HARLEY DAVIDSON STRATEGIC ANALYSIS 14th December Question 2 Political factors Harley Davidson Motorcycles Company is a US based firm that deals with production and sales of motorcycles in addition to dealing with financial services. One of the major political aspects that affected the operations of the company in 2002 was the steel tariffs that were implemented during President Bush reign. As a result of the legislations that were protested by EU, the cost of production for the company increased thus reducing the gross profit. To comply with the US company law, Harley Davidson has adopted various trademarks and logo such as H-D, Harley, the motorClothes, V-Rod and Harley Owners Group among others. Economic factors Despite the recent economic downturn that affected local and international companies, Harley registered remarkable sales and growth of its stock prices an aspect that created a strong trust from the shareholders. According to Harley Ziemer, the company has put in place effective monetary strategies thus making it to be recession-resistant and not recession proof. Social factors One of the notable social factors that Harley Davidson has adopted is the safety of its brands. To curb the high number of accidents that caused high rate of deaths in 2000, the company initiated Rider’s Edge, an instruction program that was spearheaded by the dealers. In this way, riders were trained on how to use the company motorcycles to reduce the number of accidents on the highways. Technological factors To meet the high demand of its products, Harley Davidson emulates innovation through intensive research and development. For example, the establishment of 43,000 square feet Buell research and development facility has made the company to increase its production significantly. In the same way, the company has continued to allocate significant funds to cater for research. For instance, in 2001 the company spent $80.7 million towards research while in 2000 and 1999 it spent $75.8 million and $70.3 million respectively (Wheelen et al, 2002). Environment factors Based on the environment control requirements by the federal local and state authorities, Harley-Davidson has registered with US Environmental protection Agency (EPA). In this way, the company has adopted the rules that are put in place by the State of California Air Resources board to deal with the issues of noise and harmful emission. Legal factors Despite the various legal suits that has faced the company such as the 2001 class action in Milwaukee County, the company has initiated strong legal department to deal with issues that may jeopardize its operations. For example, after the purchase of the Pennsylvania production facility, the company in collaboration with Pennsylvania Department of Environment Protection has initiated investigation and feasibility studies to analyze the impact on the facility on the lives of the neighbors and customers. Porter 5 forces Despite of its extensive marketing strategies, Harley Davidson is likely to face stiff competition in the market. Some of the major competitors are Honda, Suzuki, BMW, Kawasaki and Yamaha. The company low and competitive prices have been not only influenced by the market forces but also by the bargaining power from the customers. Being one of the Porters 5 forces, bargaining power of the suppliers has an impact on the Harley Davidson sales. This is based on the fact that the company has created a strong link with its suppliers in order to reduce the costs of raw materials. To deal with the competition in the motor cycle industry, Harley Davidson has adopted various advertising avenues including magazines, television, direct-mail advertising, cooperative programs as well as public relations. According to Joanne, the company marketing vice-president, Harley Davidson has strong marketing strategies that will drive the company towards achieving its goals in the next 100 years. One of the major opportunities for the company is the elimination of import taxes on motor cycles and their spare parts by developing countries. In this way, the demand for the motorcycles has significantly increased leading to high sales. On the other hand, the company is threatened by stiff competition and reduced consumers purchasing power. This is based on the fact that majority of consumers are still recovering for the effects of recent recession. Households are diverting their incomes towards purchasing basic commodities including food and education. Question 3 To meet the high demand of its products, Harley Davidson has expanded its market to cover the regions such as Asia Pacific, Latin America and Canada. With more than 15 country market in Latin America, the company has a capability of effectively facing off its competitors in the region. Additionally, product diversification in one of the key capabilities that has benefited the shareholders in terms on increased dividends. This has resulted to the improvement of the shareholders value and trust leading. To be distinctive in the market, Harley Davidson is focused at selling and manufacturing of premium motorcycles that target heavy weight markets (Wheelen et al, 2002). In the same way, the company embarks on design simplicity, durability and traditional styling to make its products unique. In this way, its customers are satisfied resulting to increased sales and dividends. To deal with future challenges, Harley Davidson takes into consideration the evolutionary changes that have implication on its sales. This is evident by the extensive research and development capabilities that the company has initiated. Based on the extensive marketing strategies that the company has initiated, it is clear that Harley Davidson will achieve its markets objectives. Additionally, adequate legal and environment strategies suggest that the top management team led by Jeffrey Bleustein, the company CEO is focused at making the company to comply with all regulations thus benefiting from the government support. One of the major capabilities that have positively impacted on the Harley Davidson sales is the strong link with its customers. With a brand portfolio of more than 20 products, customers can get their favorite brand that has all the features that they need. In addition, Harley Davidson has marketing strategies based on the VRIN framework. For example, the company prices are competitive in nature while its brands are valuable thus adding value to the customers. To put at bay its competitors, the company has the capability of emulating strong network and effective distribution chain that is inimitable. This suggests that the company is focused at creating strong team work as a way of retaining its employees, customers and achieving the corporate goals. Question 4 Strengths Strong management team Product diversification Use of modern technology Extensive marketing strategies Skilled employees Direct contact with customers and dealers Weaknesses Lack of facilities in developing countries Inadequate measures to face competitors Opportunities Emerging markets Reduced taxes High demand for motorcycles in third word countries Threats Stiff competition Customer resist to buy foreign products Lack of adequate financial resources From the above matrix, it is clear that Harley Davidson performance is positive. Based on the large number of strengths, the company has the capability of acquiring a strategic position that will generate high revenue and customer trust. According to the matrix, Harley Davidson has more opportunities that will make it address the threats that it is exposed to. Based on the company culture to form joint ventures with other financial institutions, Harley Davidson will strengthen it capital base an aspect that will led to increment of shareholders returns and expansion into developing countries. Question 5 Strategic position refers to the position at which a company is located based on the changing environment. Being influenced by capabilities, purpose and culture, companies emulate various strategies to deal with the financial, marketing and other challenges. On the other hand, strategic purpose is the driving that assists a company to attain innovation that is imperative to achieve the strategic position. One of the major factors that have made the company to attain a competitive edge in the market is product diversification brought about by extensive innovation. To deal with the challenges of financial resources. Harley has highly invested in brand designing thus increasing its sales especially among the executives. Question 7 One of the major causes of increased expenses for Harley is the large number of facilities that it has established. Apart from its corporate head office located in Milwaukee, the company has various facilities that have occupied large areas thus increasing the rent payments. Some of the major classes of costs that the company has adopted include selling costs, engineering expenses and administration costs. As a result of the expansion of the company operations in US and foreign countries, the costs of administration has continued to raise significantly although the net sales have increased leading to high profits. To cater for the increased expenditure in its facilities, the company has diversified its sources of incomes. The financial position of the company has also been attained through an initial public offer. As a result of the company product diversification, the costs of production has been effectively been distributed among large number of units thus making the company to have a competitive advantage. Despite the high costs of advertising and promotion of the company motor cycles via the internet, the company has benefited from strong consumers awareness that has resulted to increased and repeated purchases. In the same way, the company increased costs are due to the high salaries paid to the executives as well as the engineers. This has not only led to the motivation of the employees but also the turnover rate has been minimized. It is vital to note that the company also provides intangible benefits such as security in the work places and insurance thus further raising the costs. As a result of the wide range of benefits and high salaries, Harley Davidson operations remain uninterrupted thus ensuring its brands are available in the market. Question 8 One of the major corporate choices that have benefited Harley Company is the adoption of Material as Needed system. This strategy was undertaken to reduce the costs of maintaining the inventories as well as stabilizing the production schedule. Despite its performance in the market and strong management team, Citicorp Company, the key lender of the Harley withdrew its financial support in 1985. This forced Harley management team to seek for substitute assistance form Heller Financial. Another notable choice that the company took in 1985 was going public. In this way, Harley was in a position to meet the high costs of operation that were caused by the expansion of its services in the international market. Despite being a private company during its incorporation stage, Harley-Davidson invested in technology. For example, the purchase of Computer-Aided Design (CAD) system ensured the improvement of the production line thus raising the company profits. In 1996, the company discontinued its operations in the transportation vehicles segment. This strategy was undertaken by the company in order to concentrate with motor cycle business a profitable initiative that benefited the company significantly. This was followed by the sale of the transportation vehicles segment for approximately $105 million. One of the aspects that makes Harley a successful corporate is the ability to hire experienced employees from other companies. For example, the hiring of Garry Berryman who was working for Honda significantly enhanced Harley procurement process. Additionally, Garry streamlined the designing and planning process through the use of modern technology similar to the one adopted by Honda. Question 9 To meet the demand for motorcycles in the international market, Harley-Davidson has established operations in Middle East, Africa and Europe regions. For example, through the 381 dealerships in the European region, the company has effectively distributed its products. In the same way, Harley has established a strong network with its dealers located in various countries. In this way, customers can easily access the company brands that are sold by various outlets. To create a positive image on the eyes of the public, Harley participate in various international social forums. For example, through the Harley Owners Group, the company participates in rallies and events that bring together major sellers and customers of motorcycles. To ensure supplies of modern motorcycles, the company has established two major production facilities in Pennsylvania and Wisconsin. As a result, the company production increased to 258,000 units in 2002. One of the major factors that make Harley-Davidson to be a successful international organization is the use of e-commerce. In this way the company has maintained strong linkage with its customers regardless of their location. Similarly, provision of wide range of products tat meet the needs of various consumers has led to the support of the company from its clients thus increasing the overall sales. Question 10 The strategic choices made by the Harley-Davidson have enhanced the performance of the company in the local and international markets. Based on the stiff competition instigated by close and well established competitors such as Honda and BMW, the pricing and products strategies adopted by Harley-Davidson are suitable. In addition, the internalization of its operations by first meeting local demands and then opening production facilities in various regions has made the company sales and profits to increase. To ensure close contacts with its customers and to provide opportunities through which employees can provide feedback, the company has established a website. Based on its policies to comply with the requirement of international organizations that deal with the environment safety, the strategic choices are acceptable. As the world is facing climate changes brought about by global warming, companies that are focused at meeting their objectives have taken initiatives to ensure safety of their products. One of the essential processes that have been adopted by Harley-Davidson is conducting a feasibility study. This way, the company has provided quality brands as required by its customers. Through the Harley-Davidson Financial Services (HDFS) the company has provided support to its retail and wholesale outlets located in Canada and domestic markets. Similarly, through the formation of joint ventures with Transamerica Distribution Finance Corporation, Harley Company provides financial assistance to wholesale outlets located in Europe. Such finance support has greatly assisted the company in its marketing and distribution of its brands. In the Asia-Pacific market, the company has established more than 240 outlets. In this way, consumers located in Japan and Australia can easily access the brands and services offered by the company. One of the Question 1 Before hiring Garry Berryman in 1995, Harley-Davidson procurement process was not adequate. Even though the company had nine purchasing departments and 4,000 suppliers, the company engineers who were responsible for procurement raw material were not experienced. This led to the adoption of effective chain of distribution and well managed procurement process. Through dealers located in various countries, Harley-Davidson has created a strong link with its customers. One of the major advantages of the value chain adopted by Harley-Davidson is that it reduces the time taken by the customers to receive their orders. In the same way, the simple value chain is a good avenue of reducing the costs of operations. In the Canada market, Harley-Davidson has established 26 Buell dealerships. This is due to high demand of its products in the rural areas as well by the urban based consumers. Based on the extensive market in Latin America, Harley-Davidson has established 28 dealerships that services Mexico and Brazil, two of the major company markets. The use of dealership in the distribution of the Harley-Davidson company is an indication that the company is focused at controlling a large market segment as compared to its competitors. This is based on the fact that customers can easily purchase the company brands from outlets that are located in major cities. Similarly, the use of large number of dealership suggests that the company is not only aimed at motivating its chain members but also creating a strong team work. In this way, the company has effectively met the stiff competition in the motorcycles industry. Question 2 PESTLE Analysis Political Steel tariffs that were implemented by President Bush had an impact on the company costs of production. For instance, as a result of the legislations the cost of production for the company increased. Another political factor was the compliance with the US company law. This is evident by the company adoption of various trademarks and logo such as H-D, Harley, the MotorClothes, V-Rod and Harley Owners Group among others. Economic According to Harley Ziemer, the company has put in place effective monetary strategies that made the company to effectively face off the challenges brought about by recent economic recession. Social factors To curb the high number of accidents that caused high rate of deaths in 2000, Harley Davidson established Rider’s Edge. This is a program that was focused at training motorcycle users on how to drive company motorcycles in highways. Technological factors The establishment of 43,000 square feet Buell research and development among other facilities has made the company to increase its production significantly. To cater for research and development, Harley Davidson allocates significant funds to its research department. For example, in 2000 and 1999 it spent $75.8 million and $70.3 million respectively. Environment factors Harley-Davidson has registered with US Environmental protection Agency (EPA) among other environment regulators. In this way, the company has adopted the rules that are put in place by the US government to protect environment. Legal factors Notwithstanding the various legal suits that have faced the Harley-Davidson company since 2001, the company has initiated strong legal department to deal with issues that may jeopardize its operations. Question 3 Harley Davidson Business-Level Strategy has enhanced the performance of the company in the local and international markets. For example, the internalization of its operations by first meeting local demands in its country of origin, and then opening production facilities in foreign countries has made the company sales and profits to increase. To ensure that its customers and employees give personal views and feedback, the company has established a website. In the same way, Harley Davidson has adopted policies to comply with the requirement of international organizations that deal with the environment safety. In this way, its strategies are suitable since they cater for the health of all stakeholders regardless of whether they are its customers or not. One of the essential processes that have been adopted by Harley-Davidson before launching new brands in the market is the feasibility study. In this way, the company is fully armed to deal with challenges that exist in the market. Through the formation of joint ventures with Transamerica Distribution Finance Corporation, Harley Company has expanded its capital base. In this way, it has put in place adequate marketing strategies that are essential in penetrating new markets. The use of flexible management policies including the 3 years rotation system for the board of directors is a good strategy that is focused at securing the shareholders interest. Question 4 In order to ensure that its operations are well guided, Harley was initially managed by nine members who made up the board of directors. The number of the members was however changed to eight. With three-year stagger system, the company gives each new board member clear responsibilities. This is followed by competitive salaries and benefits that highly motivate the board members. Based on the flexibility of the Harley Davidson management system, it is clear that the company is able to change through its organizational structure without jeopardizing its activities. One of the major aspects that make Harley Davidson management team to achieve its goals is the extensive skills possessed by the leaders. For example, Jeffrey Bleustein has worked in various positions in the company prior to becoming the CEO. These positions include director as well as executive vice president. This is an indication that the company does not limit its top managers from taking senior position a situation that ensures managers become experienced to deal with company issues. Being a global company that is faced with stiff competition from its rivals, Harley Davidson has the culture of providing wide range of quality brands. To effectively meet the needs of its clients, there is need to improve its organizational culture through establishment of more production facilities in the developing economies. In this way, it will capture larger market segment before its competitors take over the new markets. References Wheelen, T., Wheelen, W., Wheelen, II and Wheelen, D. 2002. Haley-Davidson:The 95th Anniversary. Strategic Management and Business Policy. Upper Saddle River: Prentice Hall. Read More