In 1903 Milwaukee Wisconsin, three young men, William Harley together with Arthur and Walter Davidson built their first motorcycle. Today, the business has thrived into the ever popular and successful Harley-Davidson Incorporated, which heads a group of conglomerates transacting as Harley-Davidson Motor Company, Buell Motorcycle Company, MV Agusta and Harley-Davidson Financial Services (HDFS) producing American sport performance motorcycles. Notably, the Harley-Davidson organisation is known as the largest American manufacturer of heavyweight custom, touring and cruiser motorcycles.

During the 1960’s, Japanese manufacturer of Honda invaded the American motorcycle market resulting in an 80% decline in sales at Harley-Davidson. Consequently, in 1965 the company went public and by 1969 it was acquired by AMF Incorporated. These new owners hired lower skilled workers and were able to increase production from 15,475 motorcycles in 1969, to 70,000 in 1973. However, their focus was on quantity rather than quality, and so, the organization did not realise profits. In fact, the quality of the motorcycles became so poor that dealers had to place cardboard under the showroom bikes to absorb leaking oil. Conflict eventually erupted between AMF and the Harley-Davidson management and an impromptu decision was made to sell.

The turnaround began in 1980 when a 13-member team of the former senior Harley-Davidson executives, headed by Vaughn Beals and the grandson of Arthur Davidson, reacquired the organisation with the aid of a consortium of banks led by Citibank. The members pooled $1 million in equity and borrowed the other $80 million.

Now in this era, Harley-Davidson has risen again with its mission statement, “We fulfill dreams through the experience of motorcycling by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments”. Its motto says, “Customer Satisfaction” where its employees are the driving force behind the organisation’s commitment to exploit advanced technology to manufacture the most sophisticated motorcycles to dominate the global market.

DEVELOPMENT

One of the first steps which this new team initiated was to design its business around customer loyalty through a process called “Super-engagement”. This involved the managers getting first-hand information and direct feedback for improvements by riding with customers on a regular basis. The executives also made a bold decision to visit a nearby Honda plant and eventually implemented their new programme – The Productivity Triad. The Just-In-Time (JIT) inventory coupled with greater employee involvement enabled Harley-Davidson to experience lower costs, which meant that they only needed to sell 35,000 motorcycles in order to break even.

Implementation of this programme also realised rapid success – productivity went up over 50%, work-in-progress inventory went down to 75% and a measure of quality improvement was down by 68%. International profits increased 1.7 times and operating profits increased by $58 million. Additionally, market share increased to 97%.

Consequently, Harley-Davidson’s CEO sought tariff protection from the U.S. Administration. They requested and were granted a 5-year self-liquidating tariff. Import tariffs were raised from 4% to 40% on Japanese motorcycles. With this “breathing space”, Harley-Davidson now focused their core values to producing quality products rather than quantity, which led to their ultimate success.

The Harley-Davidson’s transformation and sustained success that we observe today is directly linked to this extensive Business Process – involvement, empowerment and alignment. Harley-Davidson developed a unique hierarchical structure, the “circle organization” consisting of three overlapping elements involving creating demand, producing products and providing support. The organisational structure was consequently flattened and there was focus on cross-functional teams and the Just-In-Time (JIT) inventory. These core factors tremendously contributed to the fact that Harley-Davidson motorcycles are recognised as an “American icon” which customers have accepted as their lifestyle today.

According to Interbrand, statistics show “the value of the Harley-Davidson brand fell by 43% to $4.34 billion in 2009. The fall in value is believed to be connected to the 66% drop in the company profits in two quarters of the previous year.  On April 29, 2010, Harley-Davidson stated that they must cut $54 million in manufacturing costs from its production facilities in Wisconsin, and that they would explore alternate U.S. sites to accomplish this. The announcement came in the wake of a massive company-wide restructuring, which began in early 2009 and involved the closing of two factories, one distribution center, and the planned elimination of nearly 25% of its total workforce (around 3,500 employees). The company announced on September 14, 2010 that it would remain in Wisconsin”.

HARLEY-DAVIDSON’S STRATEGIES

In 1983, Harley-Davidson launched “SuperRide” – a marketing campaign which authorised over 600 dealerships inviting people to test-drive “Harleys”. Over 40,000 would-be customers accepted the invitation, and henceforth many customers were not just purchasing a motorcycle from Harley-Davidson but instead, were buying “the Harley Experience”.

Another major strategic move which Harley-Davidson shrewdly implemented was their unique marketing and branding campaigns. Statistics show approximately 75% of the customers made repeat purchases. Notably, Harley-Davidson recognised that they needed to devise a way to appeal to the extraordinary loyalty of customers. They needed to go a bit further than merely offering them the product. Consequently, the Harley Owners’ Group (HOG’S) was formed which was one of the most innovative strategies used that have helped to create the experience of their product. In 1987, Harley Owners’ Group claimed a 73,000 membership.

Harley-Davidson offers many choices to its huge customer base. They offer free 1-year membership to local riding groups, motorcycle publications, private receptions at motorcycle events, insurance, emergency roadside service, rental arrangements on vacation, and a host of other member benefits. They use this opportunity to brand their experience, not just their product and this has allowed for expansion on how it captures value. Harley-Davidson also offers a line of clothing, a parts and accessories business and their own Visa Card.

According to Ezine Articles, “Harley-Davidson went from supplying motorcycles to antisocial raiders to selling a lifestyle to the aging bad boy wannabes caught in their midlife crises. Traditionally, Harley-Davidson bike owners came from the working and middle classes, but as quality and prices of the bad-boy-bikes rose, and with energetic marketing, the company soon attracted a different class of buyers-currently one third of Harley buyers are professionals or managers, and 60% are college graduates. Women also account for a significant portion of the new riders, and there are women-only riders clubs spreading all over the globe”.

Additionally, Harley-Davidson has executed a 3-part strategy which includes measures to deal with the decrease in customer demand due to the impact of the global economic downturn and recession. This strategy has been implemented with the intent of strengthening their operations and financial results. Jim Ziemer, top executive of Harley-Davidson articulates, “Our strategy is focused on three critical areas: to invest in the Harley-Davidson brand, get our cost-structure right, and obtain funding for HDFS to help our dealers sell motorcycles and our retail customers to buy them”.

MAJOR COMPETITORS

During the early years, Harley-Davidson had a stronghold on the market share with its only competitor being the Indian Motorcycle company, until its closure in 1953. However in 1960 Honda, the first of the many Japanese competitors entered the U.S. market. By this time, the Japanese products were gaining more popularity and “the all American Harley” was in trouble. The major drawback with Harley-Davidson was that it suffered quality issues resulting in low customer satisfaction and also the instability of its workforce.

Harley-Davidson competes primarily on design and quality rather than price with its distinctive characteristics, such as its roaring exhaust note. In comparison to its major competitors, it continues to dominate the United States heavyweight motorcycle market. While the Harley Owners’ Group (HOG) most important market is the United States, it also sells motorcycles globally to Europe and Canada. Worldwide in 2005, Harley-Davidson dominated a 33% market share in this growing industry.

Today, statistics show that Harley-Davidson’s main competitors are:

Honda Motor Company (HMC) who is the world’s 5th largest automobile manufacturer and largest motorcycle producer by FY2009 sales. Its headquarters is based in Japan.

Suzuki Motor (SZKMF) operates in four business segments and has 141 subsidiaries and 37 associated companies. The 2-wheel vehicle segment manufactures 2-wheel vehicles as well as parts for these 2-wheelers. Its sales are both in domestic and overseas markets. Suzuki is Japanese based.

Yamaha Motor (YAMHF) is known as the world’s s 2nd largest producer of motorcycles (after Honda). It also manufactures other motorised vehicles which include all-terrain vehicles, boats, snowmobiles, outboard motors, and personal watercraft.

Kawasaki Heavy Industries (KWHIY) is a global manufacturer of transportation equipment and industrial goods. It manufactures ships, rolling stock, aircraft and jet engines, gas turbine power generators, environmental and industrial plants, and a range of manufacturing equipment and systems. It also produces consumer products which include Kawasaki-brand motorcycles and personal watercraft.

Despite competition, Harley-Davidson has not been driven away. Instead they have taken time to implement effective strategies to recapture its market share. They have done this by exploiting their older designs and customisation of their product. The Harley-Davidson fanatics believe that the main disadvantage of Japanese motorcycles is that they are not as easily customisable as a “Harley” is.

In a published article entitled “The Competition between Japanese Manufacturers and the Harley-Davidson Motorcycle”, the author says “regardless of whether or not one believes the reputation of Harley biker gangs enjoy being able to customise their personal motorcycle, these machines are here to stay. Production of both Japanese and American bikes has not slowed down and there are, statistically, more bike owners than automobile owners. This statistic holds especially true outside the U.S., where a bike is a more common means of private transportation for the average citizen than a car is. This embracing of the motorcycle is happening despite the higher accident rate for bikes than any other private land vehicle out there. It doesn’t seem to matter what country one goes to; the youth of every culture seems to view these two-wheeled machines as symbols of teenage euphoria and thus, the adrenaline rush associated with a bike ride is, as they say, like nothing in this world”.

CHALLENGES & ISSUES

A major challenge faced by Harley-Davidson is meeting its demand for their products. The combination of the strength of their powerful brand image, retaining good customer relationships, strong financial position and superiority of technology and design have still not eradicated their problem of fulfilling their market demand.

Another issue is the impact on earnings due to the fluctuating strength of the U.S. dollar. Harley-Davidson is highly dependent on sales in the international market, particularly in Europe. In 2009, the organisation’s sales revenue from the international market increased to 32% from a low 18% in 2004. Because Harley-Davidson acquires its production costs in the U.S., it benefits when the U.S. dollar weakens against the Euro and the Yen.

Harley-Davidson also faces legal issues in the Asian countries. For example, in India statistics show a 60% tariff and a rise in other taxes. Consequently these increases will undoubtedly cause the price of motorcycles to double.

Another challenge is that of noise pollution and emission standards. Globally, in countries where environmental policies and standards are law, the Harley-Davidson motorcycle will “fail” because it is not up to level of some countries.

Presently, with the global economic downturn, Harley-Davidson is faced with customers buying less, because they too are greatly affected by the recession.

LOOKING AHEAD TO THE NEAR FUTURE

Harley-Davidson is looking at a bright future for its motorcycle organisation. Statistics recorded by The Economist show that overall U.S. sales increased over 20% in 2000 and over 650,000 new motorcycles were sold in the U.S. market in that year. Harley-Davidson is proud to reveal that its loyal customers spent approximately $5.45 billion on new motorcycles in 2000.

Harley-Davidson has plans to build an assembly plant in India. Notably, this plant would be the second assembly plant ever built outside the United States. It is intended to be a “complete knock down” (CKD) plant and is expected to be in operation in mid 2011. Anoop Prakash, managing director for Harley-Davidson India told CNN, “What we are doing is made in USA, assembled in India, which will have a positive job effect back home which is why we are driving this investment as quickly as we are. We see a distinctive credible growth story here, growth opportunity,” he said. Globally, India is known to be the second fastest emerging 2-wheeler behind China.

http://articles.cnn.com/images/pixel.gif Additionally, Harley-Davidson has announced that beginning in 2010; they have begun focusing on engaging their entire workforce around the major role they play in sustainability of the environment. Employees will be encouraged to make a difference both at work and at home.