Harley Davidson HBR Case analysis- Preparing for the next century
Global Brand Strategy Class-2 Made by: Jibin C Joseph PGDM 11-13 IFIM B School, Bangalore
CASE STUDYHARLEY DAVIDSON: PREPARING FOR THE NEXT CENTURY
There are very few products that are so excitingthat people will tattoo your logo on their body- Richard Teerlink-retd. CEO HD
112 year old cult brandAmerica’s top growth stocks since its 1989 IPOAverage age of Harley riders- 35 to 47
Arthur & Walter Davidson and William Harley founded HDin 1903Company filed incorporation in 1907HD became world’s largest motorcycle company in 1918Focused on R & D and came out with V twin design, 4cylinder engine etcPost world war II , its sales declined
The Raw power V-TWIN ENGINEIntroduced in 1909It gave an aggressive appearanceUnique thump sound
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
Image at late 1950sLeather clad rugged & tough riders
Entry of Japanese bikes in USHONDA discovered a segment who didn’t like the ‘tough’ Harley bikesIntroduced 50cc bikes- 1959Communal sweet and family orientedAfter the success more powerful bikes introduced- 250cc
Others followed tooSmaller, quieter & fuel efficientLow maintenance & easy to rideAttracted young riders, women & those who cant afford Harley
Tough competitionDemand of motorcycles increased in 1960-197085% sales went to Japanese from total USmotorcycle salesHighly skilled manpower- mass productionAd spend were many multiples than HDTechnically soundHD’s market share declined
Imitating Japanese didn’t workAMF acquired HD and pumped capital to expand productionLess skilled workers addedQuality issues overlookedReliability & quality reputation dropped.Produced low priced bikes but dealers couldn’t sell it becauseof low margin
The Japanese target HD Year 1975HONDA Goldwing 1000cc Kawasaki H2R 800cc HD share declined by 80% by 1970-80
Year 1980Harley’s profitability down, started looking out for buyerGoal was simple
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
The New approach The Productivity Triad Employee Statisticalinvolvement JIT/MAN operator control
ResultInventory turn increased from 2 to 17 a yearProductivity went up by 50%Work in progress inventory reduced by 75%International revenues went up by 1.7 timesOperating profits increased by $59 millionMarket share increased by 97%HD listed on NYSE
The Transformation of HD Informal formal Leadership institute programEliminated positions of senior VP in marketing & operation.Create demand team & product support teamSaved lot of time!
HD for workersSubstantial changes in JD, responsibilities & productionprocessIncreased job enrichment & worker empowermentNew rewards & incentive systemPay for performance
Harley Davidson ownership groupFormed in 1983 to encourage active involvement.By 2004 900000 members whereas HONDA’s Gold wing riders group had75000 members only
HOG ActivitiesOrganize ridesTraining coursesSocial eventsCharity fund raiser Special HOG group for women‘’The Ladies of Harley’’As per Exhibit 3 10% of customers were female at 2004
Change in leadershipTeerlink retired at 1997Jeffrey Bleustien retired in 2005James L Ziemer retired in 2009Keith Wandell is the current CEO
Preparing for the next centuryRobust growth from 1996-2000But declined from 2002 to 2004Average growth rate is 7% to 9% per yearSlowing trend shows that the HD products are maturingBaby boomers were aging (Born between 1946-64)Loosing its focus on youth
Youth’s inclination to Japanese bikesYounger, sleek, high reviving sports bikes.Median age was 33 where as for HD 47HD was priced higher and was beyond the reach of youth
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
Buell AcquisitionTo get into sports model bikes HD acquired Buell in 1998Lower priced with high powerExcept Japan & Australia sales were going good till 2004
HD For youth V ROD 1000ccCombine fuel injectionOverhead camsLiquid cooling600 poundDesigned to appeal hip Americans
Introduction of liquid cooled engineTeamed up with Porsche to build.Allows boosting acceleration.Big departure from HD’s traditional air cooled engine
Other offering Sportster in 2004 Street Rod in 2005Entry level bikes for young riders & women ridersLow priced
Rental programRental program launched in 1999Offered by 250 dealer in 52 countriesA good percentage of people who rent HD turn up to buy it.Helped sales of accessories too.
Rider’s edge programProgram launched in 2000It offered riding lessons for 4 days at $35070% participants purchased a motorcycle in 18months.Not all dealers could execute it due to its highercost
HD revises its sales estimatesAt 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%
Fan MachineHarley-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
HD MUSEUMThe Harley-Davidson Museum is a North Americanmuseum near downtown, Milwaukee, WisconsinContains more than 450 Harley-Davidson motorcycles The museum attracts an estimated 300,000 visitorsannually
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.
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.
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.
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.
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.
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
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.
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).
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.
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?