Harley Davidson Case Study

Introduction
Harley Davidson, world renown for a prestigious and high-quality brand of
motorcycles, has been a global presence worldwide. Harley-Davidson was started in
Milwaukee Wisconsin in 1903 and has grown to become the most recognized
motorcycle company in the United States. Harleys or Hogs have developed a cult
following due to their niche brand and customization options.
Harley-Davidson, Inc., known for its famous bar and shield trademark, is based
out of Milwaukee, Wisconsin. It is currently a public company with over 100 years of
experience producing motorcycles. The company operates internationally in both the
United States and European market and is expanding into the Asian market as well.
However, a few years later the competition was becoming stiffer. During World War I,
the demand for United States motorcycles overseas grew tremendously. As a result,
Harley-Davidson became a leader in innovative engineering in the 1920's. With the
introduction of the front brake and "teardrop" gas tanks, Harley was quickly
developing its mystic appearance. The industry, which was thriving after World War I,
was diminishing quickly as a result of the Great Depression. As one of only two
remaining motorcycle companies, Harley-Davidson survived because of exports and
sales to the police and military.
Representative of the World War I motorcycle market, Harley-Davidson prospered
from military purchasing during World War II. Over 90,000 cycles were built for the
military which elevated their production to record levels and earned them the
coveted Army-Navy "E" award for excellence in war time production. After the war,
Harley went from producing military to recreational bikes. Harley-Davidson was the last
remaining major motorcycle manufacturer in the US.
I. Problem Identification
During the 1990s, Japanese motorcycles, known for their reliability and lower
prices, took over the heavyweight market and left the leaky and temperamental
Harleys in their dust, a relic of biker glory past.
The biggest challenge facing the Harley-Davidson was poor quality. Japanese
competitors were flooding the U.S. market with high-tech bikes and Harley's machines
were suffering quality problems

II. Areas of Consideration

a) Product
Harley-Davidson would describe themselves as full-sized motorcycle
manufacturer, not in the transportation, or even the entertainment industry.
They believed no one bought motorcycles for transportation, but rather
leisure time use. When concerning Harley-Davidson, most motorcycle
owners have purchase their bike as a second vehicle, using them more
during weekends and off-time instead of during the work week. This would
imply that the motorcycle only serve for recreation purpose only.
b) Price
Harley-Davidson quickly learned it could not compete with the foreign
manufacturers on cost. Not only did Honda have a low priced product.
Therefore, Harley developed a strategy of value over price. They made
every part of the motorcycle premium as much as possible. Not able to
worry about the price but the experience of the product was the new game
of the company. The company is looking to differentiate itself from its
competitors by offering motorcycles that have more power, custom
accessories and carry the Harley-Davidson brand name and logo. Although
it has often been suggested to market a lower quality Harley-Davidson
motorcycle to accommodate consumers with less purchasing power and
that are looking for low-cost transportation, such a strategy would
damage the global brand and simultaneously weaken the credibility of the
product.

c) Place
Harley-Davidson motorcycles are sold by dealers worldwide. the
company promotes the Harley lifestyle experience through "designer store"
dealership that have either been completely remodeled or built from
scratch to provide a warm and inviting retail environment. Floor plans and
display counters are laid out to draw customers in and surround them with
motorcycles, and all one needs to ride one. The dealerships are becoming
a one stop shop for bikes, accessories, clothing and financing. Parts, once
stored in the back room, are handsomely displayed in user-friendly
packaging. This company is changing the perception of clients that motor
dealers are dirty and downright ugly.
The company implemented a program to concentrate on helping its
dealers develop the up-to-date business skills they need to sell motorcycles
more effectively. The headquarters sponsored training programs are
dubbed "Harley-Davidson University". The dealers are considered to be
business partners and the headquarters plays an active role in developing
programs, financing improvements, implementing support and
management consultants. The dealers also invest their own money into
these programs which allows them to feel like apart of the company.
Harley-Davidson treats the dealers not only as partners, but also as
customers. Harley has developed a very effective marketing strategy, but it
is the responsibility of manufacturing to produce high quality and reliable
motorcycles. These new dealership were friendly and inviting.
d) Promotion
Harley-Davidson started the innovative Harley Owners Groupsor
HOGs. Each new buyer received a free one-year membership in a local
riding group, a subscription to a bimonthly publication, Hog Tales, and a six-
month subscription to American Iron, a magazine for motorcycle
enthusiasts. Other privileges included admission to open houses and private
receptions at motorcycle events, insurance, emergency roadside service,
rental arrangements on vacation, even support groups for female riders.
The group is the companys way to reach to its faithful client.
The company has introduced many brand extension that help the
client be hooked with the lifestyle of Harley-Davidson. Harley-Davidson's
merchandising line - which ranges from clothing, tattoo patches, coffee
mugs, belt buckles and infant wear to memorabilia - are also intended to
support and amplify the riding experience. Today's Harley customer is as
likely to be a factory worker, engineer, housewife, graphic designer or
salesperson and typically family-oriented.
The company's catalogs, brochures and annual reports complement
this arrangement. A Harley poster is included in every annual report, since
so many owners want to hang them in their garage, and Harley bike
catalogs are designed to be collector's items. Rarely are they thrown away,
instead they're likely to be found on coffee table all over the world.
Interestingly, Harley never shows people on bikes in advertisements. The
Harley-licensed restaurant in Manhattan, modeled after the Hard Rock
Cafe, will soon be joined by another, in Las Vegas. And Harley-Davidson
stores selling clothes and other paraphernalia have become familiar
tenants in malls.

III. Alternative Forces
Harley-Davidson lobbied the International Trade Commission (ITC) for relief from
these allegedly predatory trade practices, mainly the Japanese manufacturer. Harley
wasnt asking for a permanent injunction against foreign competition. The very survival
of the only U.S. motorcycle maker hung in the balance. Politicians representing districts
with Harley-Davidson operations rallied behind the company. The ITC found the
arguments compelling and recommended slapping disciplinary tariffs on Japanese
bikes. The existing 4.4 percent import duty on Japanese was immediately boosted to a
whopping 49.4 percent. But some Japanese manufacturers found a way around the
surcharge by assembling their bikes in American plants instead of shipping them
whole. The implementation of tariff can also be attributed to the political environment
which was ripe with Anti-Japanese sentiments.
a) Production Process
Initially, Harley's manufacturing plants were designed to use a batch
process in the flow of material on its plant floor and the frequency of
products made. With Harley's transition from a privately financed company
into a public company, they were forced to seek an alternative method of
production to achieve quality and productivity.
Throughout the years, the companys factory managers and line
workers had been given responsibility for producing quantity, not for
monitoring quality. As a result, more than half of the bike made off the
assembly line failed inspection and required repairs.
The executives at Harley-Davidson learn it the hard way and have
resulted in mimicking the Japanese in their operations. It was also worth
noting that the Quality Management which was used by the Japanese was
fathered by an American to help Japan after World War II.
The strategy rested on the so-called productivity triad. The triads
three components were Just in Time (JIT) Inventory, Employee Involvement
(El), and Statistical Operator Control (SOC). With JIT Inventory, manufac-
turers keep just as many parts on hand as needed for immediate use
instead of keeping large pools of components and tools lying around the
facility. Under JIT, factories could turn over inventory twenty to thirty times a
year. Before the executives toured a Japanese plant, the company had
started a pilot JIT program based on the Japanese concepts. Almost
immediately Harley-Davidson realized savings on storage and inventory
costs, thus leaving the company with more cash available to meet debt
payments. The reduction of inventory cleared space on the factory floor,
thereby eliminating assembly-line bottlenecks. Under Harley-Davidsons
brand of JIT, which they called Materials as Needed (MAN), defective parts
could be spotted before they were widely used. Since inventory came in
smaller batches, adjustments could be made before the next supply of
components arrived. The adoption of MAN let Harley cut its inventory by 75
percent and allowed its two assembly plants to operate without
stockrooms.
The second major initiative was greater employee involvement.
Harley-Davidson sought to dissolve the distinction between blue-collar and
white-collar workers. Top managers and line workers joined together to
redesign the assembly lines and factory floors.
Workers were also trained in a third technique: Statistical Operator
Control (SOC), which prescribes that assembly-line workers not simply
perform tasks robotically; it recognizes that the companys employees had
the greatest familiarity and intimacy with production. Aside from monitoring
the process, employees were encouraged to discover kinks and problems
in the process, question its efficacy, and propose solutions. Workers began
to use control charts to analyze data and monitor quality.
These new processes laid the ground for future improvement to the
company.

b) Design new model that fit market preference that compete with
Japanese.
Harley-Davidson has many varieties to offer their customers thanks to joint
ventures and buyouts involving companies such as Buell Motorcycle,
which offers performance bikes. The Buell brand varieties have done well
against foreign competitors, such as Honda, Yamaha & Suzuki.
Harley initially tried to compete by manufacturing smaller bikes but had
difficulty making them profitably. The company even purchased an Italian
motorcycle firm, Aermacchi, but many of its dealers were reluctant to sell
the small Aermacchi Harleys.
IV. Recommendation
The companies have flaws that other can take advantage of but they also have
many straight to speak of. One of this is the loyalty of the customer to the brand. Their
clients are repeat purchaser. The Harley-Davidson even has its own culture to speak of.
When you buy the motorcycle you are buying the experience and lifestyle of the
brand. Strong customer relationship keeps the company afloat.
The company is closely associated with leather jacket, tattoo or bearded bikers.
Which is good but it certainly limits the market of the company.

The company can expand to other demographic to gain new follower to the
brand. The companies market is an aging one and is mostly marketed to middle aged
men. The company may to introduce new product line that will continue the legacy of
Harley-Davidson. Say for example, something that is intended for the younger
audience. And of course, motorcycles geared towards woman are a start. Marketing
the motorcycle towards woman can also have a negative impact with its image but
considering that todays generations are more than willing to see a new perspective
to the otherwise manly company. The inclusion of woman does promote equality
which is a plus and generates new image.
The company has the largest market share in United States but is nowhere near
the competitor when we look at the Asian market. The Asian market is a new
opportunity that is not wholly marketed by the company. Asian market is slowly
embracing leisure product.
Harley does believes that the brand name and the ability to customize the
motorcycles allow it to charge a premium to customers Harley could slightly reduce
the premium to accommodate the consumers through the recession or offer special
discounts to loyal customers. This could entice consumers to purchase Harley
motorcycles or merchandise, thus stimulating sales.
In order to be successful in emerging countries, the brand will most likely have to
manufacture a lower quality motorcycle that is very inconsistent with the global
position of being a high-quality motorcycle company. In short, the short-term gains are
not worth the risk of damaging the global image. Joint ventures would be a better for
Harley to introduce itself to a new market this can give the company an advantage
and help them to gain the trust of new customers.
Harley has been known to take up to a year to produce certain models of their
motorcycles and loyal American customers are usually willing to wait; however, since
most foreign customers purchase motorcycles to fulfill the need for convenient, low-
cost transportation, they would likely want their product to be more readily available
although waiting shouldnt be an issue due to consumers long-term orientation.