Case Harley Davidson

KOLEHIYO NG LUNGSOD NG LIPAMarawoy-Dagatan, Lipa City, Batangas 4217

Kolehiyo ng Lungsod ng Lipa

Marawoy-Dagatan Lipa City

Bachelor of Science in Business Administration

Marketing Management

In Partial Fulfilment

of the

Requirements

in Strategic Marketing Management

Strategies in Action

Harley Davidson, Inc.

Submitted by:

FUNDAMIERA, JANINE ELIZABETH S.

LANDICHO, RONEL JOHN O.

NAYANGA, KARLA ANN G.

Submitted to:

Miss Marie Joahnna Aranda

August 8, 2014

BUSINESS ADMINISTRATION DepartmentOperationsMarketing Financial


Harley-Davidson is the largest manufacturer of heavyweight motorcycles in the world by market share, capturing half the U.S. market and a third of the global market. As a luxury good, Harley competes primarily on design and quality, rather than price, which keeps margins high for the past several years.

Studying the case of Harley Davidson Inc for year 2009, it shows that competition have significantly affected the company’s sales performance. Major competitors such as Honda, Suzuki, Yamaha, and BMW have wider territories in terms of production and market share. However, sticking with the “bad boy image” and American dream and spirit connotation, Harley Davidson is still on its journey on bringing luxury motorcycles to male adults.

Given the marketing, sales, and distribution performance of Harley Davidson, one can easily figure out why the company is still glorified as the number one American motorcycle compared to its competitors in the United States.

The hundred –year old company utilizes different strategy to survive competition and imitation such as:

1. INTEGRATION STRATEGIES

a. Forward integration involves gaining ownership or increased control over distributors or retailers. Increasing numbers of manufacturers (suppliers) today are pursuing a forward integration strategy by establishing Web sites to directly sell products to consumers.

Harley-Davidson has approximately 686 independently owned full-service dealerships in the United States.

In terms of non-U.S. distribution, Harley-Davidson has 71 full service dealerships in Canada, 383 in Europe, 201 in Asia Pacific, and 32 in Latin America. The MV brand, to independent dealers primarily through subsidiaries located in Germany, Switzerland, and the United States. In Italy and France, MV distributes its products to independent dealers directly. MV’s network of approximately 500 independent dealers is primarily located in Europe with approximately 40 independent dealers in the United States.



The company Web site, www.harley-davidson.com, is also used to market its products and services. The Web site features an online catalog that allows retail customers to create and share product wish lists, use a dealer locator, and place catalog orders.

b. Horizontal integration refers to a strategy of seeking ownership of or increased control over a firm’s competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers among competitors allow for increased economies of scale and enhanced transfer of resources and competencies.

Taking place in 2008 was Harley-Davidson’s acquisition of MV Agusta.

In February 2009, billionaire Warren Buffet’s Berkshire Hathaway invested $300 million in Harley-Davidson. Harley says Berkshire and Harley’s biggest shareholder, Davis Selected Advisers, L.P., are each committed to buying $300 million in senior unsecured notes, due in 2014. The money will be used to support Harley’s finance company and its ongoing motorcycle lending activities.

2. INTENSIVE STRATEGIES

a. A market penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts. This strategy is widely used alone and in combination with other strategies. Market penetration includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts.

Nostalgia is also badge of Harley’s success. Its unique “potato potato- potato” sound created by its famous V-twin engine is still heard in the rumblings of its motorcycles on the road today, and its legendary styling, overseen by “Willie G” Davidson, himself an icon, has created continuity over the decades



Harley’s Web site announces to online visitors that this is “Where Dreams Come True” and beckons readers to “Join the Family You’ve Always Wanted.” The mystique of Harley begins with two families, the Harleys and the Davidsons, who had big dreams back at the turn of the twentieth century in Milwaukee, Wisconsin.

The marketing efforts are divided between dealer promotions, customer events, and advertising through national television, print, radio and direct mailings, as well as electronic advertising. Harley-Davidson also sponsors racing activities and special promotional events, and it participates in all major motorcycle consumer shows and rallies.

Harley actively promotes the motorcycling lifestyle in the form of events, rides, rallies, and Harley Owners Group (HOG). Harley considers the availability of financing through HDFS as a competitive advantage.

On an ongoing basis, Harley-Davidson promotes its products and lifestyle through The Harley Owners Group (HOG), which was founded in 1983 and currently has approximately1.1 million members worldwide. HOG is the industry’s largest company-sponsored motorcycle enthusiast organization (www.hog.com). The Buell Riders’ Adventure Group (BRAG) formed in recent years has grown to approximately 10,000 members. Both HOG and BRAG sponsor events, including national rallies and rides, across the United States and around the world for motorcycle enthusiasts.

To reach out to current non riders as well as expert riders, Harley-Davidson created its Academy of Motorcycling in 2000. The Academy’s Rider’s Edge program offers a series of rider education experiences that provide both new and experienced riders with deeper engagement in the sport of motorcycling by teaching basic and advanced motorcycling skills and knowledge in a way that is fun and engaging. The courses are conducted by a network of select Harley-Davidson dealerships nationwide enabling students to experience the Harley-Davidson lifestyle, environment, people, and products as they learn. The company Web site, www.harley-davidson.com, is also used to market its products and services. The Web site features an online catalog that allows retail customers to create and share product wish lists, use a dealer locator, and place catalog orders.

The average U.S. retail purchaser of a new Harley-Davidson motorcycle is a married man in his mid to late forties (nearly two thirds of U.S. retail purchasers on new Harley- Davidson motorcycles are between the ages



of 35 and 54) with a median household income of approximately $87,000. Nearly three quarters of the U.S. retail sales of new Harley-Davidson motorcycles are to buyers with at least one year of education beyond high school, and 32 percent of the buyers have college/graduate degrees. Approximately 12 percent of U.S. retail motorcycle sales of new Harley-Davidson motorcycles are to female buyers.

b. Market development involves introducing present products or services into new geographic areas.

The European heavyweight motorcycle market is roughly 80 percent of the size of the U.S. market. Traditional U.S.-style touring motorcycles represent less than 5 percent of the European heavyweight motorcycle market. Harley-Davidson continues to expand its product offerings to compete in the standard and performance segments with motorcycles such as Harley-Davidson’s XR1200 and Nightster, the Buell 1125R, and MV models. Harley-Davidson’s traditional Harley-Davidson products compete primarily in the custom and touring segments.

In addition to Europe and the United States, Harley-Davidson also competes in Canada, Japan, and Australia. In Canada, the company’s market share based on registrations was 41.9 percent, 39.0 percent, and 38.2 percent during 2008, 2007, and 2006, respectively.

In terms of non-U.S. distribution, Harley-Davidson has 71 full service dealerships in Canada, 383 in Europe, 201 in Asia Pacific, and 32 in Latin America. The MV brand, to independent dealers primarily through subsidiaries located in Germany, Switzerland, and the United States. In Italy and France, MV distributes its products to independent dealers directly. MV’s network of approximately 500 independent dealers is primarily located in Europe with approximately 40 independent dealers in the United States.

c. Product development is a strategy that seeks increased sales by improving or modifying present products or services. Product development usually entails large research and development expenditures.



Motorcycles sold through the CVO program are available in limited quantities and offer unique features, paint schemes, and accessories.

Buell motorcycle products emphasize innovative design, responsive handling, and overall performance. Buell manufactures four families of motorcycles: (1) Sportbike, (2) Street, (3) Adventure, and (4) Blast. The Blast features a smaller 492cc single-cylinder engine, ideal for many new riders. MV motorcycle products emphasize exquisite design and high performance.

3. DIVERSIFICATION STRATEGY

a. Businesses are said to be related when their value chains posses competitively valuable cross-business strategic fits

The motorcycle and related products segment of Harley-Davidson includes (1) Parts & Accessories (P&A); (2) General Merchandise; (3) Licensing; and (4) Motorcycles. The major P&A products are replacement parts and mechanical and cosmetic accessories. Worldwide P&A net revenue comprised 15.4 percent, 15.2 percent, and 14.9 percent of net revenue in the Motorcycles segment in 2008, 2007, and 2006, respectively. Worldwide General Merchandise net revenue, which includes apparel and collectibles, comprised 5.6 percent, 5.3 percent, and 4.8 percent of net revenue in the Motorcycles segment in 2008, 2007, and 2006, respectively.

With regarding to licensing, the company creates an awareness of its most significant brand, Harley-Davidson, among its customers and the nonriding public through a wide range of products by licensing the name “Harley-Davidson” and other trademarks owned by the company.

Licensed products include T-shirts, jewelry, small leather goods, and toys. Although the majority of licensing activity occurs in the United States, Harley continues to expand these activities in international markets, such as into India in 2010. Royalty revenues from licensing, included in Motorcycles segment net revenue, were $45.4 million, $46.0 million, and $45.5 million in 2008, 2007, and 2006, respectively.



Through the utilization and improvement of the company’s website, Harley Davidson was able to reach customers around the globe and maintain customer relationship. With its strategy in distribution, consumers can easily find a dealer whether from U.S. or from different locations. Since Harley Davidson brand is claimed as a luxurious motorcycle, constant effort of the company for financing, insurance, and product development have been widely implemented to retain and gain market share. The availability of related product lines such as apparels through licensing has also proactively increased the company’s revenue for the past few years.

Harley Davidson is also on its endeavour of reaching different market segments aside from male adults. Females and young adults are now part of their priority to increase brand identity while keeping its feet on its bad boy image. This is done through modification and diversification of motorcycles produced.

Integration, intensive, and diversification strategies are adapted by the Harley in order to continuously satisfy their stakeholders. Integration strategy was employed to have a control over its distributors and dealers which are important channels of distribution. Through increasing the company-owned dealers in the United States and increasing global dealers, Harley made it possible that their brand will be available at any continent. Intensive strategy was utilized not to hard sell the product but to increase consumer awareness about the brand which was achieve through exerting efforts for advertising and financing. Diversification strategy was also applied which is beneficial for the company’s product development progress.

Just how a strategic plan is important to a business, it will not be complete without a concrete strategy which will guide the overall framework of the plan. Harley Davidson, though experienced a slight downfall in year 2009 because of intense competition, still they were able to sustain their weakness and formulate a strategy to lead in the competition for luxury motorcycles.



STRATEGIC FINANCIAL

MCDONALD’SPlace more emphasis on delivering an exceptional customer experience

Reduce general and administrative spending as a percent of total revenues

Add approximately 350 net new McDonald’s restaurants

Achieve a system-wide sales and revenue growth of 3% to 5%. Annual operating income growth 6% to 7%, and annual returns on incremental invested capital in the high teens

H.J. HEINZ COMPANYIncrease the focus on the company’s 14 power brands and give top resource priority to those brands with number one and two market positions

Achieve 4-6 % sales growth, 7-10 % growth in operating income, EPS in the range of $ 2.35 to $ 2.45, and operating free cash flow of $900 million to $1 billion in fiscal 2006

Continue to introduce new and improved food products

Pay dividends equal to 45-5- % of earnings

Add to the Heinz portfolio of brands by acquiring companies with brands that complement by acquiring companies with brands that complement

SEAGATE TECHNOLOGYSolidify the company’s No. 1 position in the overall market for hard-disk drives

Maintain gross margins of 24-26 %

Get more Seagate drives into popular consumer electronics products

Hold internal operating expenses to 13-13.5 % of revenue

Take share away from Western Digital in providing disk drives for Microsoft’s XboxMaintain leadership in core markets and achieve leadership in emerging markets

3M CORPORATIONDouble the number of qualified new 3M product ideas and triple the value of products that win in the marketplace

To achieve long term sales growth of 5-8% organic plus 2-4 % acquisitions

Build the best sales and marketing organization in the world

Annual growth in earnings per share of 10% or better, on averageA return on stockholders’ equity of 20% - 25%A return on capital employed of 27% or better


Documents

Case Harley Davidson