Harley Davidson



Harley Davidson

Harley Davidson, the famous manufacturer of heavyweight motorcycles, has dominated the U.S. market by successfully targeting and selling its customers not only a motorcycle but the lifestyle that accompanies it. However, due to its overemphasis of the American heavyweight segment, the retirement of its core demographic, lack of research and development, and the economic strain on its financial services, the American icon must remodel its business strategy to achieve profitability and sustainability (Harley Davidson, 2012)

The motorcycle industry is segmented into different markets dependent upon the cubic centimetres (cc) of the engine. Harley Davidson is a key contender in the heavyweight (over 650cc) and super-heavyweight (over 850cc) markets, with its main competition coming from Yamaha, Honda, Kawasaki and BMW. Competition is fierce amongst the different producers as the industry is plagued with consumer brand loyalty. In fact, the switching costs of the buyers are not so much the cost of the motorcycles, but the prestige and style each bike brings. Harley Davidson's success thrives on the loyalty of its customers. It has successfully marketed the experience, freedom and lifestyle that riding a Harley brings and for this reason it accounts for more than 50% of the U.S. heavyweight market. (McBee, 2011)

Harley Davidson has also diversified into the sale of motorcycle parts, accessories, general merchandise, and financial services through its Harley dealership network to reduce the risk associated with a single industry. These competencies have allowed Harley Davidson to garner stronger financial performance with respect to its competitors (Exhibit C). High gross profit margins and net margins have allowed the company to compete effectively against its competitors and compensate for their lack of size. Their return on equity has been well above the industry averages and demonstrates that they are able to garner superior returns for their shareholders compared to their competitors. (Harley Davidson, 2012)

One of Harley Davidson's biggest liabilities comes from its inability to successfully penetrate the International markets, with the exception of Japan. Harley Davidson has been unsuccessful in pushing an American culture onto people who do not relate or desire the same lifestyle that is offered in the American market. Also, Harley Davidson has not been able to build that deep customer relationship that exists in the U.S. because the company simply has not taken the time to get to know the International consumer as it did with the baby-boomers. Hugo Wilson of Britain's Bike magazine said it best when he said, “the guy who's into Harleys here is also the guy who owns cowboy boots.” Harley Davidson needs to realize that the majority of International consumers do not wear cowboy boots.

Harley Davidson also lacks the diversity in its product line that appeals to the International consumer. It has made efforts by acquiring Buell, MV Agusta and Cagiva brands in providing the sporty performance in the European markets, but it has not made any efforts for the demand for smaller transportation vehicles in fast growing markets such as India and ...