Analysis of Situation
As a company, Harley-Davidson is one of the most recognizable motorcycle brands in the United States today. The motorcycles produced by the company are the primary things that the company is known for, but it also produces transportation vehicles—including recreational and commercial vehicles, and participates in some defense contracting. The case study discusses the state of Harley-Davidson in the 1990s, when the company was experiencing serious financial trouble as a result of the environment, industry, organization, and marketing strategy of the organization as a whole. Understanding each of these facets is important to understanding an analysis of the problems and successes of the organization.
Environment
In the 1970s, the market for motorcycles changed drastically in the United States. During this time, the world was experiencing globalization in the automotive industry; there were more companies than ever from Japan entering the marketplace, and the motorcycles produced by these companies were cheaper and more reliable than the Harley-Davidson motorcycles were (Peter, n.d.). Globalization changed many industries during this time; Japanese manufacturers were able to produce different products than American manufacturers, and these new products were often heavy competition for American companies. Prior to the 1970s, the Japanese bikes did not compete directly with Harley-Davidson; however, after 1970, economic demand for automobiles of all types changed drastically, leading to a completely new economic environment in which Harley-Davidson needed to survive. Globalization often leads to heavier competition in the marketplace, and the motorcycle marketplace was no exception: globalization led to differentiation and an influx of new products to the consumer, many of which competed directly with Harley-Davidson (Peter, n.d.; Rifkin, 1997).
Industry
Organization
After the failures and struggles of the 1970s, management at Harley-Davidson implemented a system known as the MAN system, which is a “just in time” manufacturing system (Peter, n.d.). This system allowed the company to purchase parts and keep inventory as needed, rather than maintaining massive backlogs of inventory; according to Peter (n.d.), the changes implemented saved the company nearly $22 million after implementation.
Had the organization failed to recognize the need for industrial change, it likely would have fallen onto even harder times. The company also made some human resource changes during this time period, focusing heavily on employee involvement and engagement with the product (Peter, n.d.). This new involvement allowed employees to feel more at home contributing their ideas to the processes at work, and took input from the employees very seriously; all of this investment led to a serious decrease in warranty costs and an increase in employee productivity (Peter, n.d.).
Marketing Strategy
The company also instituted a clear marketing strategy, which involved bringing the company itself closer to the customer: this is still a strategy in use today by the Harley-Davidson company (Baskin, 2013; Montini, 2014). The company invested a lot of time, effort, and capital in trying to change the image of the Harley-Davidson bikes; much of this time and energy was spent interacting with the consumer and demonstrating the new quality levels that the Harleys were capable of achieving. There were a number of specific programs implemented, but the specifics are less important than the overall goal: to build a family following of Harley enthusiasts, and to demonstrate that the motorcycles built by the Harley-Davidson company in the years after the 1970s did not experience the same problems or struggles so often associated with Harleys during the 1970s (Peter, n.d.). The community built around the Harley-Davidson brand persists to this day: there are still many people who remain married to the brand image of the Harley, and the following that the company has achieved is about much more than quality or structure of the motorcycle (McCarthy, 2013; Baskin, 2013). The marketing strategy for the company was to move beyond a brand name and become a social movement or a social group, of sorts (Baskin, 2013; Peter, n.d.; Montini, 2014).
Analysis of Problems
The problems for the Harley-Davidson company were many in the 1970s, but one of the leading problems for the company was the problem of quality (Peter, n.d.). The company began to have a bad reputation as a result of poor quality bikes; many of the bikes that were sold were unsuitable for people without extensive experience fixing bikes, so many of the people who purchased during this time were people who were loyal to the brand for some other reason, or people who were motorcycle enthusiasts (Peter, n.d.). The problem of quality was probably partially the result of increased competition in the market: the company had to be able to produce enough product to meet demand, and the Japanese manufacturers were flooding the market with cheaper, more reliable alternatives to the bigger Harley-Davidson motorcycles (Peter, n.d.).
During this time, the company also found itself in direct competition with the Japanese companies for the very first time. The Japanese companies had traditionally built very fast, performance-based vehicles, but they began to encroach into the heavier road bike industry in the 1970s (Peter, n.d.). For the first time, the Japanese bikes became direct competition for the Harley-Davidson corporation, and coupled with the falling quality of the Harley bikes, the Japanese companies like Honda and Kawasaki began to take over large parts of the market (Peter, n.d). Finally, Harley-Davidson—partially due to its poor manufacturing structure—was unable to complete the R&D needed to truly produce innovative, quality motorcycles during this time. The company had to make significant changes to be able to compete insofar as quality and quantity were concerned and the changes that were made had to be structural changes to the organization as a whole (Peter, n.d.).
Evaluation of Alternative Courses of Action for the Organization
The Harley-Davidson company currently has a few alternatives for the future, and the decisions made in regards to the direction of the company may well decide success or failure. First, the company can continue on its current path: the success of the 1990s has been massive, and the company has managed to build a following of Harley enthusiasts who use Harley bikes exclusively. In addition, the company has managed to wrestle majority control of the American market away from Honda, which is no mean feat—especially considering the relative size of the two organizations (Peter, n.d.). Staying the course is one option for the company, and it is something that may be very tempting for the future.
However, the company faces competitors that are much more well-funded, with many more resources available to them. That is why differentiation is another strategy that can and should be considered; Harley-Davidson has interacted well with customers since the late 1970s, and the company could continue to differentiate itself from competitors by selling customers a lifestyle rather than a motorbike. This option emphasizes a continued focus on both internal and external product integrity, as well as a focus on the appearance and lifestyle associated with owning a Harley-Davidson (Baskin, 2013). This has been one of the most successful strategies that the company has implemented in the past, as it allows customers to feel as though they have become part of a privileged family when they are engaged in the Harley-Davidson lifestyle (Baskin, 2013; Rifkin, 1997; Montini, 2014).
Evaluation of Chosen Alternative and Implementation Details
Differentiation is certainly the best method for the Harley-Davidson company moving forward. This process will create customer value and a family-like following for the company, allowing it to compete with companies that have more funding and more financial support for research and development. Customer value can be created through test-ride facilities and clubs, owner’s club activities and membership, as well as through sponsored events for individuals who ride Harleys. Essentially, the company can customize the customer experience, providing a strong incentive for brand loyalty through image creation and engagement. The current manufacturing process—the MAN process—actually fits nicely into the philosophy of differentiation for customer value; the customized manufacturing process streamlines the process, allowing for greater customization by the customer, and directly influences brand and customer loyalty. Choosing to emphasize this aspect of the company’s strengths also allows the company to sidestep the problem of the high budget for research and development that many of the other companies in the market have (Peter, n.d.). Harley-Davidson has already begun to implement strategies that allow for differentiation, which makes the process of differentiation much easier for the company as a whole. Engaging owners in activities that expand the meaning of the brand into a lifestyle can also help the company engage new followers who might be attracted to the lifestyle associated with the brand. This strategy has been successful for the company in the past, and the social movement that has been linked to the brand since the 1970s has become incredibly powerful; it is a powerful motivator for individuals to remain Harley customers for life.
Conclusions
Harley-Davidson has been one of the most successful companies in the motorcycle industry when it comes to developing and maintaining a lifestyle image. Developing and maintaining this image is fundamentally important to the overall, long-term success of the organization; moving forward, the company should continue to place significant emphasis on the development of niche support and lifestyle appeal. Luckily, the company has largely been able to shed the poor image of the 1970s; this image can only be improved moving forward.
References
Baskin, J. S. (2013). Harley Davidson Will Be A Case History in Social Branding. Retrieved 17 January 2016, from http://www.forbes.com/sites/jonathansalembaskin/2013/07/12/harley-davidson-will-be-a-case-history-in-social-branding/#2715e4857a0b7a64162c5b85
McCarthy, M. (2013). Harley-Davidson CMO: We Aren't an Auto Brand. Retrieved 17 January 2016, from http://adage.com/article/cmo-strategy/cmo-harley-davidson-lifestyle-transportation/242952/
Montini, L. (2014). How Harley-Davidson Mastered Product Positioning. Retrieved 17 January 2016, from http://www.inc.com/laura-montini/a-lesson-from-harley-davidson-on-perfecting-product-positioning.html
Peter, J.P. (n.d.). Harley-Davidson, Inc.—Motorcycle Division.
Rifkin, G. (1997). How Harley Davidson Revs Its Brand. strategy+business. Retrieved 17 January 2016, from http://www.strategy-business.com/article/12878?gko=ffaa3
