Harley Davidson - Study of Strategies Followed and Customers Earned

Question : Analyse the various customer segments for Harley Davidson: - 1. A comment on what you perceive their Value Proposition is for each segment 2. A comment on the buying behaviour for each segment 3. Recommendations for how to market and appeal to one of the segments identified in previous sections incorporating a pricing strategy, promotion strategy and a distribution strategy. Answer : Introduction Harley-Davidson Inc, also popularly known asH-DorHarley, is a very famous American Heavy Motorcycle manufacturer. The company was formed inMilwaukee, Wisconsinin early years of the first decade of the 20th century, it was among the big two motorcycle companies to survive the Great Depression faced by all the industries after World War 2, just because of its export links with the police and military (Indian was the second company to survive the Great Depression).The company also faced a period where they were having poor quality control and were under heavy competition from the Japanese Motorcycles. In 1901, a 20 year-old boyWilliam S. Harleystarted designing up his plans for a small engine with an overalldisplacementof 7.07 cubic inches (116cc) and four-inch (102mm)flywheels.The engine was to be used in a regular pedal-bicycle frame. For the next two years, Harley and his childhood friendArthur Davidsonworked day and night on theirmotor-bicyclein amachine shop on the North side of the Milwaukee, at one of their friends home, Henry Melk. The bike finally came out in 1903 with the final and a crucial help from Arthur's brother, Walter Davidson. The company came to existence in 1903 by William Harley, Walter and Arthur Davidson, and their first three motorcycles were manufactured in a shed in Milwaukee. Company launched its trademark bike in 1909; it was a 2 cylinder, v-twin engine, and was the fastest motorcycle of that time, with a maximum speed of 60 mph. Company got an instant popularity because of the power they introduced in their motorcycles, and because they introduced an altogether new class of motorcycles, but faced very stiff competitions in the later years. World War I was the period when there was a high demand for motorcycles manufactured in America overseas grew tremendously. Due to this, Harley Davidson became a leader in this segment in the 1920's with its innovative technologies like the introduction of the front brake and "teardrop" gas tanks. The company built its mystic presence in the period exceeding World War I, but faced a marked decline in the Great Depression after the World War II, but managed to survive due to the export links in the police and in the military. Harley Davidson became an icon company during the period of World War I and prospered in the period of World War II due to heavy export orders to the military. More than 90,000 units were manufactured for the military in this period which increased their production record to remarkable levels and earned them the coveted Army-Navy "E" award for excellence in war time production. When the war came to an end, the company switched over to recreational motorcycles than military motorcycles. Harley introduced many new modules; the K-model (1952), Sportster ("Superbike", 1957), and Duo-Glide (1958) motorcycles. By the mid-20th century Harley-Davidson became the last surviving major motorcycle manufacturer in the US. In 1969 American Machine and Foundry took over Harley-Davidson and put the company on sale in the late 1970's because of a gross reduction in sales. This was due to poor level of quality control in the Harley bikes as compared to Japanese counterpart. In 1981, 13 members of the original Harley-Davidson management team bought the company back from AMF in a leveraged buy-out, but faced an overall drop in the demand for motorcycles dramatically and the shares of the company in this market also continued to drop. In a step to help the declining the United States motorcycle industry in 1983, President Ronald Reagan incurred huge amount of taxes on large Japanese motorcycles from 4.4% to 49.4% but this was a temporary increase and was only effective for five years then there would be a regular decline annually. Management Strategy Harley was the biggest and the most popular American Motorcycle manufacturer during the period of the World War I and II, because of the high demand in overseas for the American built bikes and also because of the companys export and sales relationship with the military. But this position of the company in the market was not for very long, and it faces a marked decline in 1970s after the company was taken over by AMF and then was sold back to the previous management in a leveraged buyout. The new owners of the company soon realized that in order to gain the previous prestige, they have to look in deeply for what actually went wrong which caused the problem, in the process they formed an internal committee to investigate the causes for the decline faced and came up with the following key points responsible for the poor performance of Harley in the past few years: Managements focus was mainly on short term goals. Management was not giving the credit or recognizing the hard work of its employees. Belief in short fixes for complex problems. Market fluctuations were not predictable because of the high break even points set by the company. Company was unaware and not bothered about foreign competitors because of it cant happen here syndrome. Like any other process in life and market, recognizing the problem is only half the battle won, the key to success was to ensure the effective and fast solution to the problems recognized. The first goal to achieve for the management was to attain a strong relationship with the employees, as a strong relationship with employees will help in the companys advancement towards success with a firm base. The following conversation between a machinist and the Vice President of the power train plant at Harley is a good example of this to understand; "You are new here, aren't you?" asked the machinist. "Let me buy you a cup of coffee!" this one gesture was enough for the new VP to understand the importance of strong relationships in the company. Harleys new management soon realized that in order to become a strong organization and to regain their original position they need to be in an always improving themselves situation. This was only possible with the help of the companys strong relationships with its employees. The strong relation will help the company to stand firm in the market even at the time of crisis. Everyone in the company must understand the importance of inter-personal communication between all levels and with proper gestures. But in order to bring the lower level employees up to the same level they need to understand the companys policy in detail to be confident on what they are working for. Marketing Strategy American customer base was undergoing a change in desires, now the market was more customer specific that product specific. Due to this reason, company switched from fixed product line to customizable product line, based on the survey conducted across the nation between prospective customers. The real power of the Harley Davidson motorcycle is the image associated with it, the image of class, strength, freedom, adventure. The bike truly depicts the pioneering and adventurous spirit of an American. The Harleys symbol comprises of the flag and the eagle, depicting the amount of freedom enjoyed by a Harley rider on his bike. It is very difficult to describe an average Harley buyer, as they range from a Blue Collared worker to someone very affluent, who just wants to fulfil their dream and fantasies on their own Harley. The company advertised the spirit of freedom and the fantasies associated in comparison to the competitors advertisement of technology. When a customer buys a Harley motorcycle, he gets a free one year membership to the Harleys Owner Group (HOG), which is the biggest bikers enthusiast group in the world. It conducts various activities across the country and worldwide for bringing the Harley owners together. This group makes the company connect directly to the customers and understand their experiences with their Harley. This is very necessary as the customers are the base of any company. Company also tries to promote itself from the various HOG activities conducted, where bikers from round the world meet and share their own experiences with each other. Harley-Davidson has a huge and strong dealer network. Around 1,065 dealers worldwide sell the Harleys products. The company owns 54 percent of the market share in the USA, 16 percent in Japan, 10 percent in Europe, and 38 percent in Australia. The company can increase its share in the foreign countries but is bound by the agreement with the US customers not to sell more than 30% of the bikes to other countries if the domestic demand is not met with. Harley has developed a very effective marketing strategy, but it is the responsibility of manufacturing to produce high quality and reliable motorcycles. Manufacturing Strategy Harley's imbibed the continuous flow process and proved wrong the most prevalent notion that "continuous improvement in quality and productivity was an attractive concept but likely to be uneconomical". Switching from a batch process to a continuous flow process is not an easy task to accomplish. However, Just-in-time inventory, Employee Involvement, and Statistical Operator control could be combined to make it possible as in the case of Harley. Harley-Davidson's new approach proved itself of worth when the productivity levels rose to record levels. Good relationships, continuous improvement, employee and management involvement, team building are the concepts adopted by Harleys management and other techniques and built a solid base between the management and the employees, and made it possible for Harley-Davidson to improve its management processes. Demographics Through the various strategies and investment made by Harley-Davidson, it has been building its appeal and prestige across generations, cultures and borders. Internationally, 118 new dealer points have been added since 2009 and in 2013, 35.9% of motorcycles were shipped to international markets. In America, Harley-Davidson is having a more diverse customer pool, even more grown than its traditional customer base. In 2013, U.S. retail sales of new Harley-Davidson motorcycles to our "outreach" customers -- young adults 18-34, women, African-Americans and Hispanics grew overall at more than twice the rate of sales to "core" customers -- Caucasian men, ages 35-plus. For the sixth straight year in 2013, we were the number-one seller of new on-road motorcycles (all cc's) to each of these segments. Harley Davidson has built its image in all the segments of the American public, and one of the main reason of success is the companys focus on various customer segments. The company has divided the public in some broad segments, and focus its product line keeping them in mind and priority. The main segments divided are: Young Adults Women Afro-Americans Hispanics Men 35+ Young Adults Company is building its image very swiftly in the young adults segment, as they are the young blood, want to enjoy their freedom and go on adventurous. They want to win the world by themselves, exactly what is portrayed by the company through its motor cycles. The spirit of freedom and adventure is truly met in this segment. These customers always want something new, for them uniqueness is the key, and he company understand this very well, and is always ready to cater all the needs of their customer. Whether it is about custom built engine or totally new model for someone, or exclusive merchandise for the bike, company is ready to cater all the demands of this sections. Women In the last few years company has witnessed a marked increase in the women segment. Women are now buying these heavy and power packed bikes more to show their inner strength and also to reveal their tough and adventurous nature. They want to show the world that they are not lacking behind to men in any way. Company understands this and build modified bikes to serve the purpose. Women are also the customers of the premium segment of 601cc+ Afro Americans They have always remained an integral part of the American community; they have brought a mix of life in the nation and brought the cool dude attitude, so the company also brought them with some classic aviator bikes to match their style. Most of the customers of this segment are of the age 35+ Men 35+ The main customer base of the company is of the age 35+, people who are mature enough and grown-ups have attained some position in life and now want something to live their dreams and fulfil their fantasies. These bikes provide them with this only, they have got the power and the freedom to be adventurous whenever needed. Financial services Eagelmark Financial Services is a majority-owned subsidiary, providing private label financial services programs, including Harley-Davidson Credit, which is the largest division of Eagelmark. It provides wholesale financing and also the insurance programs, including the bikes floor-planning, parts and accessories trade acceptance. It also deals in commercial insurance and providing brokerage to Harley-Davidson's US dealer network. It also provides an added attraction i.e. the Private Harley Card, an exclusive credit card to be used in Harley-Davidson dealerships. In addition, Harley-Davidson brings out offers for its domestic dealers very often, like once in a quarter discounts or even 120 day delay in the billing terms are given especially through Eagelmark so as to carry enough parts as well as accessories inventories, also to counteract the seasonality of the parts and accessories business. Conclusion Recommendations Harley Davidson, the biggest and the most popular American motorcycle brand, founded in 1903 has come so far, facing all kind of odds and challenges, just because of the continuous efforts put in by the company to withstand the strong forces that were trying to uproot them from the market. Harley never compromised from its quality and that is the result of its continuous growth. With a strong and efficient network of export and sales in military, the company also survived the great depression exceeding World War II. Harley beats his Japanese competition from its solid quality. Harley as a brand signifies the true spirit of the American culture, the emblem of the company consists of the flag and the eagle, showing the level of freedom and independence enjoyed by the American nationals, and the same freedom will be experienced by the Harleys owners. It is a machine which lets a person fulfil all his dream and desires. It brings out the true adventurous nature of its rider. The company focuses on the quality rather than on the price, and that is the fact it is in popular demand even after a high price tag. The owner of a Harley can be anyone, if he has that spirit in him. Most of the owners are from affluent families or famous personalities, giving the brand a royal ambience. Harleys owners are made to feel that they are the part of this big family by regular activities conducted by the company. Harley has specifically focussed on all the prospective segments of the public, and has designed their motor cycles keeping them in mind to increase their sales, and this strategy worked really very well. Harley today has a presence in many of the countries which are the fastest growing markets, and can increase their sales in overseas but bounded by the contract to US public for not selling more than 30% of the total production to non-domestic public, showing a gratitude to those who have kept them alive and have stood with them in all thick and thin. Customers of the company are very loyal, because they love their Harley, it is a part of their life, they dont consider it to be a machine, and it just becomes an integral part of their life, like an organ of their body without which they cant live truly. References Schouten, John W., Mc Alexander James H. (1993). Market Impact of a Consumption Subculture: The Harley-Davidson Mystique. European Advances in Consumer Research, Association for Consumer Research. Vol-1. pp. - 389-393. Dads Vintage Ads. 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Eberle, Flickinger, Hutchinson, McCaslin, Sutton and Ziemer (incorporated herein by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183)) Form of Severance Benefits Agreement (6 March, 2006). Between the Registrant and Mr. Bergmann. incorporated herein by reference to Registrants Quarterly Report on Form 10-Q. File No. 1- 9183. Form of Supplemental Executive Retirement Plan Agreement (31 March 1996). Between the Registrant and each of Messrs. McCaslin and Zieme. Incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q. File No. 1-9183. Harley-Davidson Pension Benefit Restoration Plan (31 March 31, 1996). Incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q File No. 1-9183. Harley-Davidson (1998). Non-Exempt Employee Stock Option Plan Registrants Registration Statement. On Form S-8. File No. 333-75347. York Hourly-Paid Employees Stock Option Plan. (2001). incorporated herein by reference to the Registrants Annual Report on Form 10-K. File No. 1-9183. Director Compensation Policy effective (29 April, 2006). Incorporated herein by reference to the Registrants Current Report on Form 8-K filed. File No. 1-9183. Deferred Compensation Plan for Nonemployee Directors initially effective (May 3, 2003). Incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q. File No. 1-9183. Harley-Davidson (2004). Incentive Stock Plan as amended through. incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q. File No. 1-9183. Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson (1995). Stock Option Plan and the Harley-Davidson (2004). Incentive Stock Plan incorporated herein by reference to the Registrants Annual Report on Form 10-K. File No. 1-9183. Harley-Davidson. 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Incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q. File No. 1-9183. Form of Severance Benefits Agreement (2007). Incorporated herein by reference to the Registrants Quarterly Report on Form 10-Q. File No. 1-9183.