harley davidson

Harley - Davidson: Preparing For Next Century

Group 4Gaurav Anand – 15PGP148Saurabh Kumar – 15PGP046Naveen Kumar - 15PGP019Emani Kamalaja – 15PGP077Rucha Mirashi – 15PGP103Saad khan – 15PGP131

Historically, how did Harley Davidson manage to dominate the US market? How did it do so? What were the sources of its competitive advantage? During 70's what change took place internally and externally?

• Deep rooted to American Culture.• Frequent Innovation and Experimentation uplifted the market.

• 1910’s - Stiff competition from Ford Motors, leveraging on production concept due to newly invented assembly line manufacturing thus creating a market disruption. H-D had long term contract with US Army, State Police and US Post Service thus ensured a constant revenue.

• 1920,s - Constant innovation in the form of Front Wheel Brake, Duel Headlight which changed its image as a rugged motorcycle.

• 1930’s – Introduced V Engine (added convenience for self repair as mechanics where in scarce), Eagle Logo which were deep rooted to culture of the country.

• Used movie actors like Marlon Brando to build a establish an image of “raw power”. Advertisements depicted leather clad riders, military dispatch riders and police officers.

• Source of CA:• Unparalleled cultural similarities (1920’s ) rugged design, strong unique engine sound. Increased mechanization

earned this time period the title of the "Machine Age.” The censuses of the era revealed that more Americans than ever were beginning to move from the countryside to the cities, where women took low-paying jobs as retail clerks.

• Long term contract with government bodies to ensure sales.

External Changes:• 1970’s : Japanese motorcycle manufacturer commercialized there technology of JIT and Lean manufacturing, through

experimentation and unique value proposition in the US Market.• Honda created disruption by tapping the unexploited segment of price sensitive buyers specially women buyers. • Empowered line workers with decision making power.• Unique Value of Honda:

• Low maintenance cost.• Easy to handle.• Mass production (availability)• Constant redesign• Strategic pricing to increase market penetration. Honda was trying to build a market for its bigger bikes through

increased brand awareness.

Internal Changes:• Acquisition by AMF Group, and started focusing on mass production on cost of quality.• Unique self developed Craft Method of manufacturing was not researched upon and incorporated in mass production.• Engineering drawings were not standardized, thus components had more than required tolerances in design thus

leading to leakage of oil.• Management concentrated on adding new features rather improving quality.• The above moves alienated the loyal customers.

RESOURCES HARLEY-DAVIDSON HONDA

Tangible Finances Limited Possesses financial strength to bare heavier investments.

Plant and equipment Few plants Modern plants with equipment.

Location Only present in US. Invests in plants throughout the world, mostly low cost markets.

Intangible Technology Much behind Honda Advanced technology

Reputation Strong reputation and brand name. Reputation due to car manufacturing. Affordable bikes.

Relationships Single-minded focus to its brand equity.

Know how Committed specialized labor but much less know-how than Honda (Lack of resources)Less empowered line worker when it comes to quality.

Highly trained work force. Invests more in HR.Highly empowered workforce. Used tools like Andon System which empowers like worker to ensure quality.

CAPABILITIES HARLEY-DAVIDSON HONDA

Product development and design Weak Honda focuses on product innovation and design. Fights every threat with new products.

Engineering Weak | Design drawings lack tolerance analysis thus resulting in leakage.

Core technical strength. Production and design drawings the thoroughly researched upon.

Operations Continuous improvements Invests in plants throughout the world, mostly low cost markets.

R&D In comparison to Honda, Harley is very weak with regards to R&D.

Strong R&D. Innovative and fast-cycle new product development.

Marketing Excellent brand management and reputation.

Responds to market trends and demand.

What are Harley Davidson's current sources of competitive advantage? Can they be sustained in the light of the latest competition?

Current Sources of CA:• H-D thoroughly studied Honda and decided that it cannot compete with Honda on technology front.• The strongest CA is brand name.• H-D is not targeting short term profitability rather investing heavily on long term profitability by spending in branding.• Harley Owners Group, HOG, is formed which conduct many events worldwide sponsored by the company and its

dealers, it helps to establish a unique image, add value to the brand and attract more customers. • Moving to more labor centric production system giving decision making power to line workers.• Material-as-need (MAN) program was launched to increase inventory turnover ration thus reducing additional cost in

carrying and maintaining of inventory (Similar to JIT).• Quality related training to employs so that they will be able to sort out production problem by themselves.

Valuable? Rare? Costly to imitate?

Exploited by organizations?

Competitive implications

No No No No Disadvantage

Yes No No No Parity

Yes Yes No No Temporary Advantage

Yes Yes Yes Yes Sustained advantage

The Question of Value: "Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?"The Question of Rarity: "Is control of the resource/capability in the hands of a relative few?"The Question of Imitability: "Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"The Question of Organization: "Is the firm organized, ready, and able to exploit the resource/capability?" "Is the firm organized to capture value?

Why Temporary Advantage can not be sustained?•Brand is losing perceived customer value•Faces threat of losing exclusivity•Not costly to imitate•V-Rod is not very successful (experimenting to find new value proposition)

Can it be sustained: As per the VRIO framework

What are the challenges facing or entering into the 21st century? What is the evolution of current strategy?

Challenges:• Baby Boomer, which formed a majority of H-D customer base is aging.• Growth of touring and cursing motorcycle has been slow.• Median age of customer, which was 37 years in 1987 is 47 years now.• Customer readily accepting new lifestyle i.e. a lighter, more fashionable, sporty and smooth motorbike.• Cultural clash while expanding internationally (Eg. Chinese consider motorcycle as a means of transport and not as a

way of life or hobby).• People around the world specially middle east has negative opinion about US and tend to avoid bikes so deeply rooted

to US culture.• Due to competition H-D is not able to get economy of scale thus production and transportation cost is very high.• Tariffs and regulations in some countries like India further increases there price.

Evolution of current strategy?• Launched V-Rod having liquid coolant rather than traditional air cooled engines.• Redesigned Sportster models targeting lower price market. Specially younger and women riders market.• Marketing through events and media.• Targeting niche market like bike launch for women journalist.• Initiated Rental Program and Rider’s Edge program.

What specific recommendations can you give in short term and long term basis?

Long Term:• Market penetration into the Indian and Chinese market (the largest motorcycle markets worldwide). In India, there is

huge brand excitement and the Indian customer base is growing. (In 2011 H-D has already entered India)• Market development in new geographies, try to attract customers with age bracket 35 to 40.• Concentric Diversification : Launch new recreational models by clubbing in various value prepositions all together

(Experimenting depending on geography to find out hidden potential market).

Short Term:• Horizontal Diversification : Launching new products which differ marginally, this will utilize the same capacity thus

bringing down the cost. Though the core design of the product will almost be same, price can be varied depending on minute changes in color and design. Thus capturing hidden market.

Thank You