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Team 7
Gabriella Kawilarang, MinJae Park, Kripa Shroff, Leanne Tremblay
Background
• Founded in Milwaukee
in 1901
• NYSE: HOG
• Manufacturer of high
end motorcycles
• Vision: “Fulfilling
dreams of personal
freedom” Source: Harley Davidson Twitter
Mission
• Create superior value for shareholders
• 52 week range from $49.15 to $74.13
• Four pillars: Continuous improvement,
leadership development, sustainability, and
growth
Source: Yahoo Finance
Business Segments
• Motorcycles and
Related Products: 89%
of Total Revenue
• Financial Services:
11% of Total Revenue
Source: ThompsonOne
Industry
• Leading in the motorcycle, bike and parts
manufacturing industry
Direct Motorcycle Competitors
2013 Revenue from US Market (Millions)
• Harley: USD 4,189
• BMW: USD 2,092
• Honda: USD 1,099
• Yamaha: USD 491
• Polaris: USD 220
Major Target Market
Caucasian
Male
35+
Source: Harley Davidson Twitter
International Markets
• 2013: 29% of
revenues from
International Sales
• Europe: 13%
• “Others”: 4%
• Canada and Japan:
4%
• Australia: 3%Source: ThompsonOne
How to Win in this Industry
• Create the RIGHT EXPERIENCE
• Older Caucasian Males
– Membership in an exclusive club
– Feeling roaring engine
– High Quality Bike
– Exclusive Look
– Psychologically benefiting from
premium brand status
Create the …
right experience for the target market
Financial Structure
Revenue Growth Rate is Declining
Source: Bloomberg
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(Projected)
Revenue 5320.5 5673.8 6185.6 6143 5955.4 4781.9 4859.3 5311.7 5580.5 5899.9 6054.7
Cogs 3232.3 3441.7 3742 3816.8 3784 3184.6 3114.8 3352.8 3440.6 3621.4 3748.2
OperatingIncome 1361.5 2232.1 1597.2 1425.6 1071.6 448.8 724.1 898 1028.7 1151.6 1211.2
NetIncome 889.8 959.6 1043.2 933.8 654.7 -55.1 146.5 599.1 623.9 734 775.8
Revg 8.50% 6.64% 9.02% -0.69% -3.05% -19.70% 1.62% 9.31% 5.06% 5.72% 2.62%
Cogg 5.28% 6.48% 8.73% 2.00% -0.86% -15.84% -2.19% 7.64% 2.62% 5.25% 3.50%
OIg 18.46% 63.94% -28.44% -10.74% -24.83% -58.12% 61.34% 24.02% 14.55% 11.95% 5.18%
NIg 16.94% 7.84% 8.71% -10.49% -29.89% -108.42% -365.88% 308.94% 4.14% 17.65% 5.69%
cog/rev 60.75% 60.66% 60.50% 62.13% 63.54% 66.60% 64.10% 63.12% 61.65% 61.38% 61.91%
ni/rev 16.72% 16.91% 16.86% 15.20% 10.99% -1.15% 3.01% 11.28% 11.18% 12.44% 12.81%
OI/rev 25.59% 39.34% 25.82% 23.21% 17.99% 9.39% 14.90% 16.91% 18.43% 19.52% 20.00%
Possible Explanations
• Strong competition from BMW
• Harley’s focus on psychological
experience
• BMW’s focus on products with
cutting edge design
• Sleeker & smaller
• Faster in acceleration
• Competitor’s marketing budgets
are larger
• Harley spends only 15% of its
revenue on marketing expenses
Source: BMW Motorcycle Website
Core Complication
Shrinking target market:
AGING BABY BOOMERS GENERATION
Complications of Aging Baby Boomers
• Baby Boomer Generation is much larger in
comparison to subsequent generations
• No obvious replacement segment
Population
Size
• 60+
• Impede them from riding and buying bikes
Health
Issues
• Brand image: “Freedom and
Independence”
• Less attractive
Change of
Perception
Expanding Customer Base
Younger
Generations
Women
International
Markets
Failed Attempts
Younger Generations
Failed Attempts to Target
Younger Generations
• Harley STOPPED
reporting the average
age of their riders
• The average age of a
Harley rider rose from
43.4 years old in 1999 to
49.5 years old in 2014.
Source: Harley-Davidson Website
Qualitative Quantitative
Dark Custom Lineup
• Customizable Small Bikes
• Example: Iron 883
– Small & Customizable
– $8000 - 50% Cheaper than
traditional bikes
– Attracted young riders and was
the best selling model
Source: Google search of Iron 883
• Weak Value Proposition
– Lost to BMW Sport Bikes due to
performance
• Weak Execution
– Advertisement features an older,
Caucasian men
Marketing Strategy
• Music Festivals
– Musicians Lynyrd Skynyrd &
Dropkick Murphys
• Social Media
– Facebook: 6.1 Million Likes
– Twitter: 203K Followers
– Instagram: 170K Followers
• Older Management Staff
Source: Google search of Harley 110th Anniversary Party
Failed Attempts
Female Market
Harley’s Female Market Growth
• Decade long
strategy
• 10% of sales mix
• 62.8% market
share in 2013
• 13.1% (2.62%/yr)
market share
growth
• 8.2% (1.64%/yr)
market share
acquired
• 5% (1%/yr)
market growth
833 Low Bike
Slimmer - Smaller Handle Bars - Lighter Weight
Poor Brand Perception
YIKES…
Reality of Customer Acquisition
Most women
who own a
Harley have a
significant
other who also
owns a Harley…
Female Market Growth
According to the Motorcycle Industry Council, from 2009-
2012…
Female
motorcycle
OPERATORS
grew about
30%
(10%/yr)
Female
motorcycle
OWNERS
grew 20%
(6.6%/yr)
OPERATORS THAT ARE NOT OWNERS ACCOUNT
FOR 3.4% POTENTIAL GROWTH!
Create the Right Experience
Luxury
Accessories
for Men
Luxury
Accessories
for Woman
TRANSLATED
Woman, biologically and culturally, do
not desire the same psychological
benefits from luxury goods as men.
The Right Experience By Gender
“Dreams of Personal Freedom”
Strong
Macho
Independent
Sexy
Confident
Empowered
Failed Attempts
International Market
Potential Growth in Emerging Markets
• 60% of world
population is in the
emerging markets
• Booming economy
• Growing number of
HNIs (High Net
Worth Individuals)
Source: marketsmedia
Difficulties in International Market
• is complex and costly in China
Conflicting Market Demand
• 27M motorcycles
• 99% are small bikes
(*Small bikes: Engines below
600cc (Harley: 800-1600cc)) Source: motor-bikes.com
Regulations
• Vehicle Registration
• Out of 1.74M applicants, only 240,000 accepted
• Now decreasing the number to 150,000
• Compulsory Scrap Policy
• All bikes must be scrapped after 11 years
• Driving Restriction
• Motorcycles restricted on freeways and downtown core
• complex and costly in China
Difficulties in China
Difficulties in India
• Small Market Share
• In India, Harley’s market share is 0.08%
• Large Import Tariffs
• The country is imposing large import tariffs
that nearly double the original price
• complex and costly in China
Core Question
How can Harley Davidson improve their customer base
expansion strategies in order to ensure sustainable revenue
growth?
Solution
Younger Generations
Possible Solutions
• Steady as She Goes
• Expand their “Used
Bike Market”
• Enter the Dirt Bike ATV
market
• Partner with General
Motors
Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-
boomer-demographics/
Our Optimal Solution
• Manufacture and
Introduce customizable,
affordable and superior
performance bikes.
• Sponsor music bands and
festivals that younger
generations listen to. For
example: One Republic
• Sponsor movies instead
of fighting championships
• Transform website to
better incorporate social
media
Source: Google search of music festival
Implementation
Costs: Increase spending on R&D & Minimal increase in marketing
budget
2016
Motorcycle Usage Growth Rate 3.16%
Number of Motorcycle users in 2009 (Million) 10.4
No of Motorcycle users (Million) 12.53
Generation X and Y users to Baby Boomers (2:1) 0.33
Generation XY users (Million) 4
New Motorcycle Purchase Rate 46%
New Motorcycle Purchases (Million) 2
Harley Davidson Market Share Growth Rate 3%
% of Population purchasing Futuristic Sports Bikes 30%
Harley Davidson capturing competitors market 2%
Harley Davidson Market Share 58%
Total number of people buying Harley (Million) 1.12
Lower price of Harley 8,000$
Revenues (Millions) 8,939$
Solution
Female Market
Possible Solutions for Women
Macho
Independent
Sexy
Empowered
• Steady as She Goes
• License the Harley Davidson Brand
• Sell a Line of Woman Bikes under a Different Brand Name
• Bring the Leather Jacket Back
• Celebrity Endorsements for the Bike
• Partnership with Fashion Retailers
• Update Advertising Strategy
• Equalize Gender Bias in Human Capital
Optimal Solutions
Macho
Independent
Sexy
Empowered
• Partnership with Fashion Retailers
• Update Advertising Strategy
• Equalize Gender Bias in Human Capital
Partnership with MK
Macho
Independent Empowered
• Incorporate their leather and
metallic goods in the Harley
Davidson bikes and
accessories
• Complimentary business
relationship
• Leverage loyal customers
• “Luxury accessory” brand
association
• Valued MK customers receive
“Free Riding Lesson” pass
Update Advertising Strategy
Macho
Independent
Sexy
Empowered
A New American
Legend Is Born…
Video that
depicts a woman
riding her Harley
through the
“glass ceiling”
with the catch
phrase “It’s time
to ride.”
Equalize Gender Bias in Human Capital
Macho
Independent
Sexy
Empowered
Recruit women
who will be able
to connect with
their target
market
Implementation
We believe the
successful creation
of “the right
experience” for
women riders’
“dreams of
personal freedom”
will increase their
market share and
revenues
Forecasted Market Share
62.80%
67.8400%
72.8800%
77.9200%
37.20%
32.20%
27.12%
22.08%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
2013 2014 2015 2016
Female Motorcycle Market
Harley Others
Forecasted Sales Revenue
$418,900,000
$440,012,560
$462,189,193
$485,483,528
$380,000,000
$400,000,000
$420,000,000
$440,000,000
$460,000,000
$480,000,000
$500,000,000
2013 2014 2015 2016
HD Female Motorcycle Revenue
Solution
International Market
Possible Solutions
• Steady as She Goes
• Pull Out- Harley could stop
focusing on International Markets
and should start focusing on the
domestic market.
• License- Harley Davidson’s brand to
be used by experts in these
markets.
• Expand the Product Line of
Associated Goods- Expand the
product line for leather jackets,
boots, and other associated riding
goods.
Optimal Solution
• International division/second headquarter
• Harley Davidson should start to centralize the
operations in international markets and focus on
issues that are region specific.
• Partnerships with local players
• Will not only give Harley a better chance to
increase their market share, but also help them
to better understand the market.
• Expand the sales of used-bikes –
• Will attract more customers as people in the
International market are more price-sensitive.
Source: entrepreneur.com
Implementation
Estimated Implementation Results
• Small bikes
• 29M bikes * $500 = $13.8B
• 5% market share = $690M
• Used bikes
• 37.27M *.54 *2000 = $40B
• 5% market share = $2B
54% of people who get motorcycles get used bikes
Competitors
China
• Baotian
• Lifan
• Qingqi
• Zongshen
• Znen
India
• Hero
• Moto Corp
• Bajaj Auto
• TVS Motor
• Triumph
Cumulative Results
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2013 2014 2015 2016
Total Revenue Forecast
Younger Female International Traditional
Thank You
We will be taking questions at this time
Possible Solutions
• Steady as She Goes
– Target population
would not reach its
age until 2035
– Revenues will not
increase in the near
future
Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-
boomer-demographics/
Possible Solutions
• Expand their “Used Bike
Market”
– Buy Back Used Harley’s,
service them and sell them
– Accompanied Service
Packages
– Lower Margins in Service Packages
and Used Bikes
Source:
https://answers.yahoo.com/question/index?qid=20120517141007AAorbzJ
-Yahoo Comment
Possible Solutions
Source: Google search of dirt bike ATV wall paper
• Enter the Dirt Bike ATV
market
– Similar image
– Attracts younger
generation
– A new source of revenue
– Attract more customers to
the store-cross sell
– Fiscal 2013 Cash on Hand:
378 days
– Already Saturated Market
– Loss of focus from their
current product
Possible Solutions
Source: General Motors Partner
• Partner with General
Motors
– Attract more customers to
the store-cross sell
– American multinational
cooperation
– Same brand image of
“freedom”
– Harley senior employees are
ex-GM employees
– Loss of individual brand
image
– Possible Conflicts in
workspace

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Strategic Analysis of Harley Davidson

  • 1. Team 7 Gabriella Kawilarang, MinJae Park, Kripa Shroff, Leanne Tremblay
  • 2. Background • Founded in Milwaukee in 1901 • NYSE: HOG • Manufacturer of high end motorcycles • Vision: “Fulfilling dreams of personal freedom” Source: Harley Davidson Twitter
  • 3. Mission • Create superior value for shareholders • 52 week range from $49.15 to $74.13 • Four pillars: Continuous improvement, leadership development, sustainability, and growth Source: Yahoo Finance
  • 4. Business Segments • Motorcycles and Related Products: 89% of Total Revenue • Financial Services: 11% of Total Revenue Source: ThompsonOne
  • 5. Industry • Leading in the motorcycle, bike and parts manufacturing industry
  • 6. Direct Motorcycle Competitors 2013 Revenue from US Market (Millions) • Harley: USD 4,189 • BMW: USD 2,092 • Honda: USD 1,099 • Yamaha: USD 491 • Polaris: USD 220
  • 8. International Markets • 2013: 29% of revenues from International Sales • Europe: 13% • “Others”: 4% • Canada and Japan: 4% • Australia: 3%Source: ThompsonOne
  • 9. How to Win in this Industry • Create the RIGHT EXPERIENCE • Older Caucasian Males – Membership in an exclusive club – Feeling roaring engine – High Quality Bike – Exclusive Look – Psychologically benefiting from premium brand status Create the … right experience for the target market
  • 10. Financial Structure Revenue Growth Rate is Declining Source: Bloomberg 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(Projected) Revenue 5320.5 5673.8 6185.6 6143 5955.4 4781.9 4859.3 5311.7 5580.5 5899.9 6054.7 Cogs 3232.3 3441.7 3742 3816.8 3784 3184.6 3114.8 3352.8 3440.6 3621.4 3748.2 OperatingIncome 1361.5 2232.1 1597.2 1425.6 1071.6 448.8 724.1 898 1028.7 1151.6 1211.2 NetIncome 889.8 959.6 1043.2 933.8 654.7 -55.1 146.5 599.1 623.9 734 775.8 Revg 8.50% 6.64% 9.02% -0.69% -3.05% -19.70% 1.62% 9.31% 5.06% 5.72% 2.62% Cogg 5.28% 6.48% 8.73% 2.00% -0.86% -15.84% -2.19% 7.64% 2.62% 5.25% 3.50% OIg 18.46% 63.94% -28.44% -10.74% -24.83% -58.12% 61.34% 24.02% 14.55% 11.95% 5.18% NIg 16.94% 7.84% 8.71% -10.49% -29.89% -108.42% -365.88% 308.94% 4.14% 17.65% 5.69% cog/rev 60.75% 60.66% 60.50% 62.13% 63.54% 66.60% 64.10% 63.12% 61.65% 61.38% 61.91% ni/rev 16.72% 16.91% 16.86% 15.20% 10.99% -1.15% 3.01% 11.28% 11.18% 12.44% 12.81% OI/rev 25.59% 39.34% 25.82% 23.21% 17.99% 9.39% 14.90% 16.91% 18.43% 19.52% 20.00%
  • 11. Possible Explanations • Strong competition from BMW • Harley’s focus on psychological experience • BMW’s focus on products with cutting edge design • Sleeker & smaller • Faster in acceleration • Competitor’s marketing budgets are larger • Harley spends only 15% of its revenue on marketing expenses Source: BMW Motorcycle Website
  • 12. Core Complication Shrinking target market: AGING BABY BOOMERS GENERATION
  • 13. Complications of Aging Baby Boomers • Baby Boomer Generation is much larger in comparison to subsequent generations • No obvious replacement segment Population Size • 60+ • Impede them from riding and buying bikes Health Issues • Brand image: “Freedom and Independence” • Less attractive Change of Perception
  • 16. Failed Attempts to Target Younger Generations • Harley STOPPED reporting the average age of their riders • The average age of a Harley rider rose from 43.4 years old in 1999 to 49.5 years old in 2014. Source: Harley-Davidson Website Qualitative Quantitative
  • 17. Dark Custom Lineup • Customizable Small Bikes • Example: Iron 883 – Small & Customizable – $8000 - 50% Cheaper than traditional bikes – Attracted young riders and was the best selling model Source: Google search of Iron 883 • Weak Value Proposition – Lost to BMW Sport Bikes due to performance • Weak Execution – Advertisement features an older, Caucasian men
  • 18. Marketing Strategy • Music Festivals – Musicians Lynyrd Skynyrd & Dropkick Murphys • Social Media – Facebook: 6.1 Million Likes – Twitter: 203K Followers – Instagram: 170K Followers • Older Management Staff Source: Google search of Harley 110th Anniversary Party
  • 20. Harley’s Female Market Growth • Decade long strategy • 10% of sales mix • 62.8% market share in 2013 • 13.1% (2.62%/yr) market share growth • 8.2% (1.64%/yr) market share acquired • 5% (1%/yr) market growth
  • 21. 833 Low Bike Slimmer - Smaller Handle Bars - Lighter Weight
  • 23. Reality of Customer Acquisition Most women who own a Harley have a significant other who also owns a Harley…
  • 24. Female Market Growth According to the Motorcycle Industry Council, from 2009- 2012… Female motorcycle OPERATORS grew about 30% (10%/yr) Female motorcycle OWNERS grew 20% (6.6%/yr) OPERATORS THAT ARE NOT OWNERS ACCOUNT FOR 3.4% POTENTIAL GROWTH!
  • 25. Create the Right Experience Luxury Accessories for Men Luxury Accessories for Woman TRANSLATED Woman, biologically and culturally, do not desire the same psychological benefits from luxury goods as men.
  • 26. The Right Experience By Gender “Dreams of Personal Freedom” Strong Macho Independent Sexy Confident Empowered
  • 28. Potential Growth in Emerging Markets • 60% of world population is in the emerging markets • Booming economy • Growing number of HNIs (High Net Worth Individuals) Source: marketsmedia
  • 29. Difficulties in International Market • is complex and costly in China Conflicting Market Demand • 27M motorcycles • 99% are small bikes (*Small bikes: Engines below 600cc (Harley: 800-1600cc)) Source: motor-bikes.com
  • 30. Regulations • Vehicle Registration • Out of 1.74M applicants, only 240,000 accepted • Now decreasing the number to 150,000 • Compulsory Scrap Policy • All bikes must be scrapped after 11 years • Driving Restriction • Motorcycles restricted on freeways and downtown core • complex and costly in China Difficulties in China
  • 31. Difficulties in India • Small Market Share • In India, Harley’s market share is 0.08% • Large Import Tariffs • The country is imposing large import tariffs that nearly double the original price • complex and costly in China
  • 32. Core Question How can Harley Davidson improve their customer base expansion strategies in order to ensure sustainable revenue growth?
  • 34. Possible Solutions • Steady as She Goes • Expand their “Used Bike Market” • Enter the Dirt Bike ATV market • Partner with General Motors Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby- boomer-demographics/
  • 35. Our Optimal Solution • Manufacture and Introduce customizable, affordable and superior performance bikes. • Sponsor music bands and festivals that younger generations listen to. For example: One Republic • Sponsor movies instead of fighting championships • Transform website to better incorporate social media Source: Google search of music festival
  • 36. Implementation Costs: Increase spending on R&D & Minimal increase in marketing budget 2016 Motorcycle Usage Growth Rate 3.16% Number of Motorcycle users in 2009 (Million) 10.4 No of Motorcycle users (Million) 12.53 Generation X and Y users to Baby Boomers (2:1) 0.33 Generation XY users (Million) 4 New Motorcycle Purchase Rate 46% New Motorcycle Purchases (Million) 2 Harley Davidson Market Share Growth Rate 3% % of Population purchasing Futuristic Sports Bikes 30% Harley Davidson capturing competitors market 2% Harley Davidson Market Share 58% Total number of people buying Harley (Million) 1.12 Lower price of Harley 8,000$ Revenues (Millions) 8,939$
  • 38. Possible Solutions for Women Macho Independent Sexy Empowered • Steady as She Goes • License the Harley Davidson Brand • Sell a Line of Woman Bikes under a Different Brand Name • Bring the Leather Jacket Back • Celebrity Endorsements for the Bike • Partnership with Fashion Retailers • Update Advertising Strategy • Equalize Gender Bias in Human Capital
  • 39. Optimal Solutions Macho Independent Sexy Empowered • Partnership with Fashion Retailers • Update Advertising Strategy • Equalize Gender Bias in Human Capital
  • 40. Partnership with MK Macho Independent Empowered • Incorporate their leather and metallic goods in the Harley Davidson bikes and accessories • Complimentary business relationship • Leverage loyal customers • “Luxury accessory” brand association • Valued MK customers receive “Free Riding Lesson” pass
  • 41. Update Advertising Strategy Macho Independent Sexy Empowered A New American Legend Is Born… Video that depicts a woman riding her Harley through the “glass ceiling” with the catch phrase “It’s time to ride.”
  • 42. Equalize Gender Bias in Human Capital Macho Independent Sexy Empowered Recruit women who will be able to connect with their target market
  • 43. Implementation We believe the successful creation of “the right experience” for women riders’ “dreams of personal freedom” will increase their market share and revenues
  • 47. Possible Solutions • Steady as She Goes • Pull Out- Harley could stop focusing on International Markets and should start focusing on the domestic market. • License- Harley Davidson’s brand to be used by experts in these markets. • Expand the Product Line of Associated Goods- Expand the product line for leather jackets, boots, and other associated riding goods.
  • 48. Optimal Solution • International division/second headquarter • Harley Davidson should start to centralize the operations in international markets and focus on issues that are region specific. • Partnerships with local players • Will not only give Harley a better chance to increase their market share, but also help them to better understand the market. • Expand the sales of used-bikes – • Will attract more customers as people in the International market are more price-sensitive. Source: entrepreneur.com
  • 49. Implementation Estimated Implementation Results • Small bikes • 29M bikes * $500 = $13.8B • 5% market share = $690M • Used bikes • 37.27M *.54 *2000 = $40B • 5% market share = $2B 54% of people who get motorcycles get used bikes
  • 50. Competitors China • Baotian • Lifan • Qingqi • Zongshen • Znen India • Hero • Moto Corp • Bajaj Auto • TVS Motor • Triumph
  • 51. Cumulative Results 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 2013 2014 2015 2016 Total Revenue Forecast Younger Female International Traditional
  • 52. Thank You We will be taking questions at this time
  • 53. Possible Solutions • Steady as She Goes – Target population would not reach its age until 2035 – Revenues will not increase in the near future Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby- boomer-demographics/
  • 54. Possible Solutions • Expand their “Used Bike Market” – Buy Back Used Harley’s, service them and sell them – Accompanied Service Packages – Lower Margins in Service Packages and Used Bikes Source: https://answers.yahoo.com/question/index?qid=20120517141007AAorbzJ -Yahoo Comment
  • 55. Possible Solutions Source: Google search of dirt bike ATV wall paper • Enter the Dirt Bike ATV market – Similar image – Attracts younger generation – A new source of revenue – Attract more customers to the store-cross sell – Fiscal 2013 Cash on Hand: 378 days – Already Saturated Market – Loss of focus from their current product
  • 56. Possible Solutions Source: General Motors Partner • Partner with General Motors – Attract more customers to the store-cross sell – American multinational cooperation – Same brand image of “freedom” – Harley senior employees are ex-GM employees – Loss of individual brand image – Possible Conflicts in workspace

Editor's Notes

  1. Harley Davidson, Inc. (NYSE: HOG) is a manufacturer of high end motorcycles. The company has been committed to “fulfilling dreams of personal freedom” since it was founded in Milwaukee, 1901 by William S. Harley. It is still headquartered in Milwaukee.
  2. The company’s mission is to create superior value for their stakeholders. Their stock price is doing relatively well, with a 52 week range from $49.15 to $74.13 (Yahoo Finance). The company has USD 15.09 billion market capitalization as of June 2014 (Yahoo Finance). They achieve this mission by consistently focusing on their four pillars: continuous improvement, leadership development, sustainability, and growth.
  3. The company operates in two business segments: Motorcycles and Related Products and Financial Services. Motorcycles and related products operations account for 89% of total revenue while Harley Davidson Financial Services account for 11% (Exhibit 3) as of 2013.
  4. Harley Davidson is leading in the motorcycle, bike and parts manufacturing industry, with 49.7% market share in the US (Exhibit 1).
  5. Last year, Harley Davidson earned USD 4,189 million in revenue in the US alone. You can compare their performance to their competitors in the US market. Their competitors include Yamaha, Polaris, BMW and Honda which all earned significantly lower revenues than Harley.
  6. Harley’s current target market is Caucasian males over the age of 35+. Moreover, its customer base is primarily 45-60 year old Caucasian males.
  7. Harley Davidson opened dealerships in strategic international markets as well. As of 2013, 29% of its revenues were obtained from international sales. Of those sales, 13% came from Europe, Canada, 4% from Canada and Japan as well as “others” which mainly consists of sales from China and India, and then from Australia at 3%.
  8. The way Harley Davidson has “won” as a luxury brand in this industry is by effectively creating the right experience. They have historically created the right experience for older Caucasian men -having membership in an exclusive club, feeling the roaring engine of freedom, riding a high quality bike with an exclusive look, and psychologically benefiting from the premium brand status. Therefore, what it takes to win in this industry is to create the right experience for the target market.
  9. Even though, Harley Davidson has been “winning”, their revenue growth rate has been declining. In fact, the projected revenue growth for 2014 is 2.62%, which is significantly lower compared to the previous years.   
  10. Harley Davidson only spends 15% of its revenue on marketing expenses and thus may have a lower effective reach than Honda and BMW (Yahoo News).  
  11.   Even if Harley Davidson focuses on the above possible explanation, their revenue growth is not going to be significantly affected because of a bigger trend; the aging baby boomers generation.
  12. The relative amount of potential customers in that age range is shrinking because the aging baby boomer generation is much larger than the subsequent generations. Additionally, consumers past the age of 60 are more likely to experience health issues that impede them from riding and buying the bikes. Moreover, the brand image that Harley Davidson promotes of “freedom and independence” becomes less attractive past this age. Due to this diminishing customer base, they are experiencing slower revenue growth.
  13. Due to the large size of the Aging Baby Boomers generation, Harley Davidson cannot solely focus on their next target market to be Generation X if they want revenue growth levels to return to its previous levels. Harley Davidson now targets the younger generations, including Generation Y as well as X, and has branched out to women and international markets. Nevertheless, they have executed less effective strategies in appealing to their new target markets.
  14. With this increased affordability and customization, Harley intended to gain significant sales volumes by attracting the Gen Xs and Ys who “want to be different and part of a crowd as well”. These bikes did attract many young riders and resulted in being the best-selling model. However, it did not result in significant gains in sales volumes for Harley. One of the possible reasons is Harley’s value proposition. Harley has a strong brand reputation as a “free-spirited [and] rebellious” motorcycle that is contrary to what younger generations want in their bikes. Younger generations want performance and Harley lacks in this aspect, “BMWs [are] faster, handle-better, and [are] safer than Harleys - by a wide margin” (Taylor) This relatively weak performance compared to BMW may have resulted in Harley losing its potential young clients to sport bikes. Another possible reason is their weak execution. Although Harley tapped really well into customization, they fell short in their execution.  The man (not woman) featured in the advertising for this customization is always an older, Caucasian male. Consumers want to see people who like and sound like them; and Harley did not deviate from starring their diminishing customer in their ads.
  15. Another possible reason for their limited success with the youth is Harley’s marketing strategy. Although Harley sponsors music festivals, the festivals and genres that they support are popular with the older generations. Musicians Lynyrd Skynyrd and the Dropkick Murphys were two of the bands featured in the 110th Anniversary party. These musicians are popular with baby boomers and generation X and not with generation Y. Also, in terms of social media marketing, Harley has been successful in gaining followers and likes with 6.1 million likes on Facebook, 203K followers on twitter and 170K followers on Instagram (Official Facebook, Twitter and Instagram Pages). However, Harley has not been able to integrate all these social media sites. Although Harley’s website does allow users to share the website on social media, it does not have links to their official social media pages and does not allow users to share their customized bike images with their peers.  Also, Harley has not capitalized on the ability to engage with consumers where they could gain feedback and suggestions on how to better appeal to the younger generations active on social media.
  16. In 2010, the Chinese purchased about 27 million motorcycles. Among those units, about 99 percent were small, affordable bikes, such as mopeds, that were used for basic transportation. These bikes feature engines in size below 600 cc, which is a range that is below Harley’s product line; 800cc to 1600cc In Beijing, about 240,000 new vehicles are registered monthly. In November 2013, there were 1.74 million applicants who wanted their vehicles registered. The city is expecting to reduce the number to 150,000 each month China has a compulsory scrap policy, in which all bikes must be scrapped after 11 years
  17. Like in the Chinese market, heavyweight motorcycles are not the most popular choice in India, which is apparent in Harley’s 0.08% market share the country is imposing large import tariffs that nearly double the original price
  18. Due to the large size of the Aging Baby Boomers generation, Harley Davidson cannot solely focus on their next target market to be Generation X if they want revenue growth levels to return to its previous levels. Harley Davidson now targets the younger generations, including Generation Y as well as X, and has branched out to women and international markets. Nevertheless, they have executed less effective strategies in appealing to their new target markets.
  19. Steady as She Goes - Harley could continue to sell to their current market – American men between the ages of 40-49 years. However, with this strategy, Harley Davidson would not be able to increase their revenue growth rate because the “number of American men aged 40-49 is set to decline through the early 2020s and won’t reach its old 2010 peak until 2035” (Sizemore). Therefore, if Harley continued to target its current market, Harley would not be able to increase its revenues in the near future. Thus, it may not be a wise decision to remain quiet and not expand their target market.  
  20. One of our recommendations for Harley to better target the younger generation is that Harley could invest in manufacturing and introduce affordable bikes that have superior performance along with the ability to customize. Through this introduction, Harley would be able to focus on what the younger generations really care about rather than what they believe the younger generations care about. An introduction of such a bike would attract many young adults and thus would increase the sales volume and revenues. To implement this solution, Harley must increase their research and development budget. Since Harley Davidson as of Fiscal year 2013 has USD 1166 million in cash, equivalent to 378 days cash on hand, Harley could be able to afford the solution.    Another suggestion is that Harley should switch to sponsoring music bands and genres that the younger generations listen to. Through this change, Harley could be able to gain more awareness as a brand for the youth and thus attract many young customers. In addition, Harley should invest in sponsoring movies rather than fighting championships. Through the movies, young adults would begin associating themselves with the bikes and Harley could transform into a fashion statement for the youth. Lastly, Harley should transform their website to better incorporate social media and allow users to share their preferences on social media. These changes would result in Harley being a status symbol and a fashion accessory for the youth, resulting in higher sales volumes and revenues. To implement these solutions, Harley may not have increased costs because Harley would need to just reallocate their current budget.
  21. To implement this solution, Harley must increase their research and development budget. Since Harley Davidson as of Fiscal year 2013 has USD 1166 million in cash, equivalent to 378 days cash on hand, Harley could be able to afford the solution. To implement these solutions, Harley may not have increased costs because Harley would need to just reallocate their current budget. For Monday, your assignment is to estimate the size of the new market segments that you want Harley to enter. 2 million consumers   What market share do you anticipate they would have? 58% What competitors do they need to beat in these segments?  BMW How big will Harley be if your strategies are successful? 8.9 billion in revenures As per the motorcycle industry council
  22. BOTH BRANDS CURRENTLY IN NEED OF A BRAND IMAGE ENHANCEMENT Convert operoraters to owners
  23.   Steady as She Goes- Harley Davidson does not fully understand the different markets and must make adjustments for sustainable growth and success.   Pull Out- Harley could stop focusing on International Markets and should start focusing on the domestic market. This is not an optimal solution as international markets comprise 60% of the world’s population. Furthermore, with international markets forming 30% of its revenues, it is important for Harley to continue selling internationally. Also, with the problem of the aging baby boomer generation, Harley needs to expand their customer base. License- Harley Davidson’s brand to be used by experts in these markets. This is not an optimal solution as there will be quality concerns and possible brand dilution.   Expand the Product Line of Associated Goods- Expand the product line for leather jackets, boots, and other associated riding goods. This is not an optimal solution as these products have low margins and are outsourced.
  24. International division/second headquarter -Harley Davidson should start to centralize the operations in international markets and focus on issues that are region specific. Partnerships with local players - will not only give Harley a better chance to increase their market share, but also help them to better understand the market. Expand the sales of used-bikes – will attract more customers as people in the International market are more price-sensitive.
  25. Enter the Dirt Bike ATV Market- Most of the bike companies, for example BMW, Honda etc., tend to have a diversified product range whereas Harley Davidson only deals with bikes. Harley could thus enter the dirt bike ATV market. This product has a similar image of “badass” that is associated with Harley Davidson and this product tends to attract the younger generation too. Through entering this market, Harley could generate another source of revenue. Also, Harley would be able to further attract customers to the store and then be able to cross sell their bikes to dirt bike ATV customers. Currently, potential Harley buyers, or potential bike buyers only visit Harley Davidson stores. Through the expansion of the product category, Harley would have more visitors to the store and thus could cross sell their bikes to the dirt bike ATV customers. To further bolster this solution is the fact that Harley does have the cash to enter into this market. Harley Davidson as of Fiscal year 2013 USD 1166 million in cash. This cash is equivalent to 378 days cash on hand. However, the dirt bike market has many market players and is already saturated, thus resulting in not a significant source of revenue for Harley. Also, diversifying may result in Harley losing focus from their current product which may further affect revenues negatively.  
  26. Partner with General Motors- Harley Davidson lacks the advantage of diversification and distribution that other bike companies such as Honda and BMW have. Strict motorcycle purchasers usually visit Harley Davidson and thus, Harley has a limited number of visitors. On the other hand, potential vehicle purchasers visit companies such as BMW and Honda and thus, these companies are able to show their bikes to a larger number of customers and are also able to cross-sell bikes to these customers.  Thus, for Harley to gain this advantage of diversification and distribution, Harley could partner with a car company. A company that would be a great choice to partner with is General Motors because General Motors is an American multinational corporation and does share the same brand image of freedom. In addition, most of Harley’s senior employees have previously worked in General Motors. This might ease the collaboration because the Harley Davison senior employees may be familiar with the working style of General Motors. However, since the senior employees of Harley Davidson are ex-GM employees, there might be increased conflicts in the workspace. Also, through this partnership, Harley may lose its individual brand image.