Harley Davidson HBR Case analysis- Preparing for the next century

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  • 1. Global Brand Strategy Class-2 Made by: Jibin C Joseph PGDM 11-13 IFIM B School, Bangalore
  • 2. CASE STUDYHARLEY DAVIDSON: PREPARING FOR THE NEXT CENTURY
  • 3. There are very few products that are so excitingthat people will tattoo your logo on their body- Richard Teerlink-retd. CEO HD
  • 4. 112 year old cult brandAmerica’s top growth stocks since its 1989 IPOAverage age of Harley riders- 35 to 47
  • 5. Arthur & Walter Davidson and William Harley founded HDin 1903Company filed incorporation in 1907HD became world’s largest motorcycle company in 1918Focused on R & D and came out with V twin design, 4cylinder engine etcPost world war II , its sales declined
  • 6. The Raw power V-TWIN ENGINEIntroduced in 1909It gave an aggressive appearanceUnique thump sound
  • 7. Image & lifestyle approach New colors, decals, & stylized designs in late 1930s Promoted through biker magazine & word of mouth Used byUS Military Highway patrol Hell’s angels Hollywood rebels
  • 8. Image at late 1950sLeather clad rugged & tough riders
  • 9. Entry of Japanese bikes in USHONDA discovered a segment who didn’t like the ‘tough’ Harley bikesIntroduced 50cc bikes- 1959Communal sweet and family orientedAfter the success more powerful bikes introduced- 250cc
  • 10. Others followed tooSmaller, quieter & fuel efficientLow maintenance & easy to rideAttracted young riders, women & those who cant afford Harley
  • 11. Tough competitionDemand of motorcycles increased in 1960-197085% sales went to Japanese from total USmotorcycle salesHighly skilled manpower- mass productionAd spend were many multiples than HDTechnically soundHD’s market share declined
  • 12. Imitating Japanese didn’t workAMF acquired HD and pumped capital to expand productionLess skilled workers addedQuality issues overlookedReliability & quality reputation dropped.Produced low priced bikes but dealers couldn’t sell it becauseof low margin
  • 13. The Japanese target HD Year 1975HONDA Goldwing 1000cc Kawasaki H2R 800cc HD share declined by 80% by 1970-80
  • 14. Year 1980Harley’s profitability down, started looking out for buyerGoal was simple
  • 15. Benchmarking HONDAHD senior managers visited Honda’s Ohio plantThey found following there: Neat assembly line Minimum paperwork Just in time system Bikes built to order Workers responsible for quality
  • 16. The New approach The Productivity Triad Employee Statisticalinvolvement JIT/MAN operator control
  • 17. ResultInventory turn increased from 2 to 17 a yearProductivity went up by 50%Work in progress inventory reduced by 75%International revenues went up by 1.7 timesOperating profits increased by $59 millionMarket share increased by 97%HD listed on NYSE
  • 18. The Transformation of HD Informal formal Leadership institute programEliminated positions of senior VP in marketing & operation.Create demand team & product support teamSaved lot of time!
  • 19. HD for workersSubstantial changes in JD, responsibilities & productionprocessIncreased job enrichment & worker empowermentNew rewards & incentive systemPay for performance
  • 20. Harley Davidson ownership groupFormed in 1983 to encourage active involvement.By 2004 900000 members whereas HONDA’s Gold wing riders group had75000 members only
  • 21. Exhibit 1
  • 22. HOG ActivitiesOrganize ridesTraining coursesSocial eventsCharity fund raiser Special HOG group for women‘’The Ladies of Harley’’As per Exhibit 3 10% of customers were female at 2004
  • 23. Change in leadershipTeerlink retired at 1997Jeffrey Bleustien retired in 2005James L Ziemer retired in 2009Keith Wandell is the current CEO
  • 24. Preparing for the next centuryRobust growth from 1996-2000But declined from 2002 to 2004Average growth rate is 7% to 9% per yearSlowing trend shows that the HD products are maturingBaby boomers were aging (Born between 1946-64)Loosing its focus on youth
  • 25. Youth’s inclination to Japanese bikesYounger, sleek, high reviving sports bikes.Median age was 33 where as for HD 47HD was priced higher and was beyond the reach of youth
  • 26. HD’s Strategy The stronger the brand is with older generation, the weaker it is with younger generation. Eg: LevisAl Ries Population segment will remain constant till 2020. Boomers live more adventurous life. Youngest baby boomer are just entering 40s. HD is addressing shifting demographics to attract more younger generations HD
  • 27. Buell AcquisitionTo get into sports model bikes HD acquired Buell in 1998Lower priced with high powerExcept Japan & Australia sales were going good till 2004
  • 28. HD For youth V ROD 1000ccCombine fuel injectionOverhead camsLiquid cooling600 poundDesigned to appeal hip Americans
  • 29. Introduction of liquid cooled engineTeamed up with Porsche to build.Allows boosting acceleration.Big departure from HD’s traditional air cooled engine
  • 30. Other offering Sportster in 2004 Street Rod in 2005Entry level bikes for young riders & women ridersLow priced
  • 31. Rental programRental program launched in 1999Offered by 250 dealer in 52 countriesA good percentage of people who rent HD turn up to buy it.Helped sales of accessories too.
  • 32. Rider’s edge programProgram launched in 2000It offered riding lessons for 4 days at $35070% participants purchased a motorcycle in 18months.Not all dealers could execute it due to its highercost
  • 33. HD revises its sales estimatesAt the end of 2005 company stock pricedeclined by 17%Lowered its sales estimates by 10,000 units.Financial forecast is predicted to rise till 5% to8%
  • 34. Fan MachineHarley-Davidson launched a new Facebook app,called “Fan Machine,” That allows fans to submit advertising ideas directlyto the company via Facebook. The goal is to provide an outlet for the brand’s“passionate” fans, and also to connect with youngeraudiences
  • 35. HD MUSEUMThe Harley-Davidson Museum is a North Americanmuseum near downtown, Milwaukee, WisconsinContains more than 450 Harley-Davidson motorcycles The museum attracts an estimated 300,000 visitorsannually
  • 36. Brand Report Card
  • 37. The brand excels at delivering the benefits customer truly desire 8 Introduced V-Rod in combination with fuel injection, overhead cams & liquid cooling. Harley-Davidson focused on:-  New product development  Upgraded manufacturing technology.  Capacity and processes.  Modernized and strengthened dealer network.
  • 38. The brands stays relevant 9 Despite sagging economy Harley-Davidson invested in R & D and came out with:-  V-twin design.  Four-cylinder engine.  Improving reliability of machines. Harley came up with a first ever new motorcycle dedicated solely to female motor- journalists. Continuous support for various bike rallies focused on minorities.
  • 39. The pricing strategy is based on consumers’ perception of value Harley-Davidson stands for independence, freedom, individuality, 9 expressing one’s self, adventure on the open road, and experiencing life to its fullest.
  • 40. The brand is properly positioned 8 American by birth. Rebel by choice. Harley-Davidson focuses on riders between the age of 35 to 64. Majority of the youth generation is more or less aging to 30 years. Younger generation favors sleek and high revving sports bikes. Harley-Davidson have to address the shifting demographics.
  • 41. The brand is consistent 10 In 1908 Harley came up with V-twin engine, clutch, internal expanding rear brakes & three-speed transmission. Acquisition of Buell in the year 1998. In 1999 Harley launched rental program. In 2000 Harley initiated Rider’s Edge program. In 2001 Harley introduced V-Rod, first motorcycle to combine with fuel injection, overhead cams and liquid cooling.
  • 42. 9The brand portfolio and hierarchy make sense
  • 43. The brand makes use of and co-ordinates a full repertoire of marketing activities to build equity 9 Brand name designed:- Name originated from the name of Arthur and Walter Davidson and William Harley. Slogan:- American by birth. Rebel by choice. Brand awareness:-  Harley organized two events for leading national women’s media.  Harley hosted its first ever new motorcycle dedicated solely to females.  HOG meets
  • 44. Continued… Logo:-
  • 45. The brand’s managers understand what the brand means to consumer 10 Harley-Davidson formed a group called Harley-Davidson Owners Group (HOG). Close to customer marketing. Harley launched rental program. Harley initiated Rider’s Edge Program.
  • 46. The brand is given proper support, and that support is sustained over the long run 10 Harley nearly went to bankruptcy but came back strongly. When Harley was loosing its market share they benchmarked Honda. Acquisition of Buell. Harley came up with “Productive Triad”:-  Employee involvement.  Use of JIT Inventory practices.  Statistical operator control (SOC).
  • 47. The company monitors sources of brand equity 10 Harley’s logo tattooed on bodies. Hosting number of events around the United States. Merchandise is another huge source of brand equity for Harley. People who do not own Harleys often wear clothes featuring the logo. HOG was launched and online communities were watched for insights.
  • 48. QUESTIONSB1/B2Q1. Why do you think some people will tattoo the Harley Davidson logo on theirbody? Explain?Q2. Is Harley Davidson taking us to next century or going back to the old?Comment?C1/C2Q3. What Should Harley Davidson do to enhance connect with the Youthglobally, in the near future?Q4.Do you think Enfield Bullet is the ‘Indian Harley’? Explain your point of view?D1/D2Q5. What strategies is Harley Davidson adopting to build a brand community? Doyou think this will help attract new customers?Q6. Has Harley Davidson been able to convert its cult brand equity into strongfinancial performance & growth? Explain your view?