Identify Harley Davidsons Strategy Essay

Harley is a globally recognised brand firmly associated with large motorbikes with a historic emphasis on style, individuality and freedom rather than on technology, speed or sports. From a segmentation view they belong in the heavyweight motorcycle market and are particularly strong within a sub-segment of super heavyweight. Their bikes are strongest in the Cruiser motorcycle segment, feature in the Touring bikes segment (focus on their style and image) and through acquisition of Buell, now have a presence in the Performance models segment. The Harley-Davidson image and the customer loyalty earned and sustained by the unique ? Harley Experience’ are its greatest assets. The appeal of the Harley brand was central to the corporate strategy. The focus of the strategy was to reinforce and extend the relationship between the company and its consumers. The Harley Owners Group was established to be a vehicle to unite management, employees and customers in a special community and to foster relationships and shared experiences towards a bonding with the brand and the company. The loyalty of Harley owners is evident in their repeat purchase behaviour ? over 50% of sales between ’99 and ’05 were to previous owners, while brand attraction helped account for a 20% share from first time buyers. The brand was also successful in effecting a demographic and socioeconomic shift away from young workers to middle-aged, higher income owners. Harley lagged behind its competitors in terms of technological innovation and rapid progress but insisted on playing the game on their home strengths of distinctive features and traditional designs. They lacked the economies of scale of their competitors who could spread the costs of research and development across higher unit volumes of products and multiple product lines. Instead they concentrated on incremental improvements to their engines, frames and gearboxes to increase reliability and power and reduce vibration. In 2006 they had 36 models available with lots of customisation options so that each purchaser could virtually have a personalised motorcycle. This captures their reconciliation between differentiation and economies of scale ? a wide range of customisable options while standardising on key components. Sales of parts, accessories and merchandise had grown to a 20% share in 2000. Harley established a dealer development program to improve its distribution and position it in support of the brands requirement for a sustained ? Harley Experience’. The program increased support for dealers while imposing higher standards of pre- and after-sales service and better dealer facilities. Training programs, test ride facilities, rider instruction classes were all initiatives designed to differentiate the Harley products from their competitors and success is evident with sustained demand. Not all initiatives were so successful, the intent of the Buell acquisition was to broaden the customer base by merging the comfort and style of a Harley cruiser with the performance attributes of a sports bike. While by no means a failure the Buell strategy has performed steadily but has not attracted the same demand from the market and annual shipments now approach just 12 to 13 thousand. Compare Harley’s resources and capabilities to those of Honda. What does your analysis imply for Harley’s potential to establish cost and differentiation advantage over Honda? Harley has continuously upgraded its manufacturing operations and invested in plant and machinery both to introduce advanced process technologies and to expand capacity. Despite constant development and investment, Harley’s low production volumes relative to Honda and the other Japanese manufacturers imposed severe cost disadvantages. They simply could not attain economies of scale to match their large competitors. A related area was their weakness in buying power ? While not having the volumes with which to bargain quantity discounts Harley emphasised the internal roles of Purchasing Managers to foster close relationships with suppliers. Honda, in particular, are renowned for their engine technology and they can sustain continued engine innovation as they have a very large product range to which engines are central and over which the costs can be amortised more easily. Harley turned to their own strengths and organisational capabilities to achieve cost efficiencies and product / brand differentiation. By utilising ? Strategic Innovation’ they chose to establish competitive advantage through creating value for customers from novel experiences, product delivery, customisation options and customer care. As a smaller organisation and one which adopted a non-hierarchical, team based structure, Harley successfully engineered a transformation in employee commitment and job satisfaction which also helped the company sustain this competitive advantage once it had been achieved. By ensuring that the ?Harley Experience’ was kept to a very high level it proved impossible for imitators or competitors to tap into the brand attractiveness. The sustainability of Harleys differentiation is less vulnerable to being overturned by changes in the external environment and is more difficult to replicate. Harley differentiate on more than one plane ? their products certainly, but also their design, marketing and customer interactions ? have you ever seen a group of Honda owners get together BECAUSE they are Honda owners ? Way to go Harley. How can Harley D. sustain and enhance it’s competitive position? The essence of differentiation advantage is to increase the perceived value of the offering to the customer either more effectively or at lower cost to competitors. This requires that Harley continue to match the requirements and preferences of customers with its own capacity for creating uniqueness. Successful differentiation requires a combination of astute analysis and creative imagination. The Value Chain provides a useful framework for analysing differentiation advantage. By regularly analysing how value is created for customers and by systematically appraising the scope of each of the firms activities for achieving differentiation, the value-chain permits matching demand-side and supply-side sources of differentiation.