Competition is a force in the general environment, and it is likely the force that is going to impact companies within this industry the most, as it continues to change and grow in the next few years. “The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products, and the jockeying among current contestants” (Ireland et al., 2006). In this industry, even though barrier costs are high, substitute products are a real threat. “If a supplier can either increase the price of its product or reduce the quality while selling it at the same price, the effect on established firms profitability is negative. A supplier that can do one of these things is said to be a powerful supplier” (Ireland et al, 2006). This rule holds true for the motorcycle manufacturing industry as well. There is also a particularly strong domestic market in the US with strong and sustained growth.
In terms of competencies and resources, possessing the first mover advantage in relation to its core competency allows a business like Harley-Davidson in the case to set the paradigm for future operations in the new market and also capitalize on all of the intrinsic benefits of this market in a way that will set a standard and leave a lasting impression. This is why many companies are willing to take the risk that being the first mover entails. There are also drawbacks to this situation: this hearkens back to Porter’s force of substitute products, which are increasingly available in an increasingly globalized international marketplace.
From a perspective of strategic fit, Harley-Davidson is not in a bad position at the end of the case; it still has a centralized command structure, however. This is a common