Lack Of Products Differentiation Or Narrow Product Line Marketing Essay

Lack Of Products Differentiation Or Narrow Product Line commercialiseing EssayThis senior coer report examines the Harley-Davidson (H-D) phenomenon. From near bankruptcy to double-digit growth e very year, H-D has something working for them. That something is called strategical planning and development. With the growing global economy, companies ar looking for ways to better their securities industry sh are. many a(prenominal) excellent firms pay learned how to beat their competitors through then implementation of new management, commercialiseing, and/or manufacturing techniques (Hitt, Ireland Hoskisson). H-D is one of those excellent companies whom have challenged traditional ideas. This report ordain identify those strategies that have worked and brought the federation and its shareholders success individually year.Today, Harley-Davidson Inc., an employer of 8,100 workers, consists of H-D Motor Company ground in Milwaukee and Eaglemark Financial Services Inc. establish in Chicago, Illinois. These are strategic fear units are they are managed separately based on the fundamental differences in their operations, products and services. In addition, there are nearly 1,500 dealerships worldwide. Harleys commitment toward continuous cash advance is exemplified in their financial statements.II. Vision, Mission of Harley DavidsonH-D has realized since the 80s an impressive commercialiseing dodge was giving H-D a daub name that more than recognized than any opposite company. Indeed, the outline was non to focus on reducing the costs, or on the distri preciselyion improvement, but the main chemical element was to establish client value. In new(prenominal) words, H-Ds will was to give more credibility, trust, safety, desires, lumber of product and service, and thus fidelity to its brand. In order to reach that goal, H-D centralized its merchandiseing on these topics, for example creating a Harley Owners Group who rallies more than 900,000 members worldwide (www.harley-davidson.com). The main interest of this group is to ensure members to know each other, and travel a second family who share the same interests, wills, and thoughts. This strategy also ensures H-D to maintain a upstanding relationship with its customers, and thus a strong brand name all over the world. correspond to customers, the owners of H-D say that this brand understands them and their needs, and also that they are always there if a riddle appears. These remarks send away be relate with H-Ds values. According to H-D Our values are the heart of how we run our business. They adopt our actions and serve as the framework for the decisions and contributions our employees make at every Respect the Individual, and Encourage Intellectual Curiosity (www.harleydavidson.com).This strategy can also be linked with the mission statement of H-DWe fulfill dreams through the experience of motorcycling by providing to motorcyclists and to the general public an hit the roofing line of motorcycles and branded products and services in selected market segments (www.harleydavidson.com).In order to be booming, organizations must determine clear financial and strategic objectives. (Hitt, Ireland, Hoskisson) H-D focused on gaining a greater market share, achieving in high spiritser product quality than rivals, maintaining a stronger reputation and a better branding strategy than its competitors, increasing levels of customer satisfaction and finally attaining stronger customer faithfulness.In the 60s and 70s Harleys strategic intent was based on going shoulder-to-shoulder against the predominantly Japanese companies. Harley could not compete on the terms level, and the Japanese products were of superior quality, Harley decided to compete in other areas. Their new strategy was to connect with people on an emotional level. They are not selling a product but a way of life, a way of thinking. Harley changed its strategy from selling products to selli ng community (Mitchell). And the fact that H-D has developed a Brand stretching strategy can also be an element of Harleys success in developing relationships with customers. Indeed, owners can buy other Harleys products than bikes it means that they can be more than a biker, they can join Harleys group get leather accessories or clothes, and even cosmetics.III. Industry/External summaryPorters Five Forces AnalysisThreat of New Entry small-scaleRequiring high capital enthronisation to enter the business be shell of the scale economies in production, research, marketing and service of this industry is high.Brand Identification of Harley Davidson has been strongly established for days. The entrants will face a grownup barrier to overcome customer loyalty of Harley.Harley has developed its limited distribution channels via licensed private dealer and distributor. The new entrant of this industry to the highest degree probably has to create its own distribution channel and make a nother investment which causes a barrier to entry this industry become high.Powerful Buyers LowThe product is targeted to individual buyer rather than large-volume buyer therefore buyers will have that small power to force the price down.The product is tell or targeted for niche market therefore the buyer will not easily find the alternative product.Harley also produces parts and accessories as proprietary components for their bikes which are not produced by other company.There is instead a small number of this industry in the same market.Since the product is differentiated, the customer tends not to price sensitive.Substitute Products HighCustomers taste is shifted into Japanese motorbike.Products with the sophisticated features, high quality and new design have been available in the market to adopt the trend-shifting. new(prenominal) means of transportation which are less season restrictive.Powerful Suppliers LowThe suppliers customer are not fragmented so they have a high barg aining powerSwitching cost of changing suppliers is not too high since it doesnt require to invest heavily to be a supplier. agonistical argument HighLack of products preeminence or narrow product line.Industry growth is s pocket-size, precipitating fights for market share that involve expansion minded members decease barriers are high. Harley has a high loyalty to keep the business survive.The rivals, for example Honda, are diverse in strategies, origins and personalities to compete and continually run head-on into each other.Competitor Analysis/Strategic IssuesThere are four strategic issues that H-D has to face with. The most important is the European market where H-D has to affix its gross sales, then, linked with the start issue, there is a fierce competition with the Japanese firms such(prenominal) as Honda and Yamaha. The other issues are the womens market and the accessories which are in decline.Harley-Davidson is not very noteworthy in Europe where Harleys market shar e of 650 cc plus motorcycle is less than 7% (6.6%), while in North America Harley-Davidson has a bulky market share (46.4%), 21.3% for the Asian market. The main industry competitors are Honda, Suzuki, Yamaha, Kawasaki and BMW. Harley-Davidson is the market leader in the U.S. market with 46.4% market share (Woodyard). Their domestic position is quite secure however the rival companies are all aiming to increase their impact on the North American market.Honda remains the main competitor with a 20.2% market share in North America. Even though they trail behind Harley in the high profit market for heavy bikes, Honda sells more bikes worldwide than H-D. Honda provides a wider selection of products ranging from super sport bikes, cruisers, scooters and motor cross bikes. The popularity of cruiser bikes is increasing and last year the registrations for heavy weight motorcycles rose by 22%, but Harleys share fell from 50.2% in 1997 to 46.4% in 2002 (Woodyard). This means that companies li ke Honda are quite successful in taking customers away from Harley.Rival manufacturing businesss such as Kawasaki or BMW have all made a well(p) attempt to establish them at the heart of Harleys market. The Japanese bikes were often considered to be sissy cycles by Harley lovers (Mitchell). This image is slowly changing and the Japanese companies are toilsome to out Harley the Harley models. Yamaha motor USA is starting to improve its position in its various markets. The U.S. sales have increased for 47% since 1998.Despite these successes, companies have had a tough time in creating an image for themselves particularly in the cruiser markets. Harley continues to dominate the U.S, market and is also the leader in the Asian/Pacific markets with 21.3% market share.So, compared with Honda, its main competitor, H-D is better in North America and in Asia-Pacific, but certainly not in Europe. There is not too much gap between all the competitors, especially between H-D and Honda (21.3% a gainst 19.1%). But, this is totally different in Europe for Harley-Davidson who has only 6.6% of market share this market is the most promising. Thats why Harley-Davidson has to focus especially its marketing in the European market in order to win market shares, and reduce the gap between its competitors. Moreover, Harley cabbage revenue in Europe is the second behind the U.S. So, if Harley succeeds in increasing its market share in Europe, its net revenue could be in high growth.Then, in order to fully understand its market, and in order to compete in a more serious way its competitors, H-D must identify the distinct segments that their competitors focus on and what distinctive product service benefits they offer.Hondas activities are forcing H-D into a niche market. The company is known for its flexibleness and is progressively introducing bigger and better bikes. The Japanese manufacturer is starting to increase its competitive pressure by applying some of the strategies implem ented by Harley. Honda is beginning to improve its relations with its customers and is also trying to build a sense of community among its customers. The Honda Rider Club of America is Hondas attempt to achieve the same sense of be Harley bikers have with their beloved brand (www.honda.com). The club allows customers to gain 24-hour emergency roadside services. The club also organizes a number of events and rallies for the Honda fans. Honda is also trying to create the next generation of loyal Honda bikers. Honda organizes a number of Motor-Cross Camps for young riders. Some of the main activities include riding courses races and riding trips and family activities, the main way to gain the loyalty of young bikers who will hopefully stay loyal to the brand, as they get older. These community-building strategies are proving to be extremely beneficial for the Japanese firm. The Honda new models such as the Shadow 750, the VTX 1300S are Hondas attempts to steal some of Harleys market s hare by recreating the Harley feel. Superior technology is the main strategy to achieve this goal. Yamaha is also trying to outperform Harley and is improving its mass customization skills. The Yamaha website offers a section that allows customers to design their own bike and choose the look and functionality they desire. The interface ensures customers to choose from 75 Yamaha accessory items and makes it behind for the customer to purchase the bike online. The Yamaha V Max model, the Drag Star, and the Road Star models attract customers with their slick design and technological tweaks (www.yamaha.com). The Yamaha sports models are also very successful and the company is still maintaining a strong position in world markets.European rivals are also trying to make an impact on this lucrative market. Italys Moto Guzzi recently introduced the V11 EV custom cruiser. BMW introduced 3 models of its R1200C cruiser and thanks to clever advertising is beginning to improve its position in th e U.S. and Asian markets (www.bmw.com).According to the website, only 10% of the Harleys customers are females. But female bikers are more and more interested by bikes (www.moto-station.com). Yamaha and Kawasaki are trying to take service of this growing interest of female bikers and many of their ads feature women on motorcycles. Harley has already understood this new opportunity.Another key issue for the future is the problem of the accessories. Indeed, those products such as perfumes or cosmetics are decreasing a lot. So, Harley-Davidson should take a decision about this unsuccessful strategy of brand stretching. But, this strategy has a lot of success regards to the leatherwear and fashion area. According to me, Harley-Davidson should continue to improve this brand stretching and not leave the market of cosmetics and perfumes.V. Financial Assessment of Industry Harley Davidson noncurrent Current Financial PerformanceYear 2003$ 4.6 billion total revenue (up 13% from 02)$ 761 m illion net income (up 31% from 02)$650 million unload cash persist (up 59% from 02)Repurchased 2.3 million shares of stockReturn an average equity 20%291,000 H-D units shipped (up 10% from02)36% Gross Profit margin (up from 02)Gross profit margin 37.87% of revenueYear 2004$5.0 billion total revenue (up 8.5% from03)$889 million net income (up 16.9% from 03)Repurchased 10.6 million shares of stockReturn on average equity 25%317,289 motorcycle units shipped (up 9% from 03)EPS 3.0 (20% increase form last year)(Hoovers Online)Trends ForecastsPushed by an increase in female riders, wider age group, and the broadening appeal of motor scooters and other small, less-expensive cardinal-wheelers, motorcycles sales rose 4.7% to top 1 million for the second-consecutive year (Woodyard). However a market slowdown is looming due to the weak dollar, costs of steel and other materials are rising this will cause makers to rises prices or take a hit on profits. Currently all segments in the market are increasing, however scooters and classically styled so-called cruiser bikes are of the most heavily increasing and popular segments (Woodyard).Business Models of Firms in the Motorcycle IndustryFirms in the motorcycle industry operate in two modes of the business model Just-In-Time and Built-To-Order. Companies such as Honda and Harley primary focus are on supplying motorcycles through licensed distributors and dealers. Smaller dealers focus on built-to-order where riders can tailor-make performance and style designed to complement their style, size, and skill level.Profit PoolsHarleys primary sources of profits come from the initial motorcycle sale, finance contracts, licensing agreements, product upgrades, and accessory goods. establish on this information we can conclude that Harley does a good job of extracting the most margins from its customer base.Key Financial Performance Metrics of Major Players * market share figure in 2004 ( %)North America Market share 2004 (%)Harle y Davidson 48.1Honda 18.6Suzuki 10.3Yamaha 9.1Kawasaki 7.1BMW 2.8Other 4.0(WoodYard)Key Valuation Metrics of Major Players *Harley Davidson Financial Performance2004Market Cap 13,638.01Earning Rate 20.3%Growth Rate 5.3%P/E 15.10(Standard Poors NetAdvantage)*SP considers Harley-Davidson to have no competitors hence no competitor metrics are available.VI. Competitive AnalysisStrengthsCustomer Loyalty and FollowingVery High Product DemandProfitable Product Line and Market MixHighest Market Share for Motorcycles over 750cc in the United StatesUnion contract that is beneficial to both the Firm and the EmployeesSignificant opportunities in the growing worldwide motorcycle marketA prove management team thats committed to build a beneficial relationship with all of the stakeholders for the long termIncreased capacity with the construction of new install and distribution centerIncreased Segmentation with the purchase of Buell Motorcycle Co.WeaknessesInefficiency due to Large Production Le velMore Demand than SupplyLower Than pass judgment Sales in Motor ClothesLingering rebel biker imageOpportunitiesElectronic commerce and communicationsOpportunities in the female market nicheThreatsTariffs that cogency exist in other marketsImitation of Harleys products from other competitors.Loss of market share due to low production capacityVII. Market/CustomerHarleys customers are not the metal bikers customers who used to be in the past. Indeed, Harley-Davidson attracts now more profession such as lawyers or doctors about 45 years with a medium income level. H-D has developed a brand stretching strategy can also be an element of Harleys success in developing relationships with customers. Indeed, owners can buy other Harleys products than bikes it means that they can be more than a biker, they can join Harleys group buying leather accessories or clothes, and even cosmetics. young trends learn there is an increase in the market segment to appeal to women. Roughly 10% of riders in the U.S. are women which offer potential for growth.Although motorcycles are interchange internationally, 3 main geographic markets comprise the bulk of motorcycle sales North America, Asia, and Europe. The largest is the North American Market (USA and Canada account for about 60% of this market) accountancy for 60% of worldwide motorcycle sales (Klein). With the baby generation aging, opportunities exist for the penetration of new markets.The Japanese market accounting for a great hoard of the Asian Market is an untapped one for foreign manufacturers. Government regulations and trade policies make it difficult for foreign manufacturers to enter though. Most Asians consider motorcycles as a basic means of transportation. Major target areas include China, Korea, Taiwan and Vietnam.The European Market is another market with great potentials since Europeans have a high spendable income and enjoy a higher standard of living. Eastern Europe is not offering a good deal mainly bec ause of its unstable political and economical environment. To succeed in these markets, firms are to modify products to meet local needs, provide after sales service, expand distribution networks, and create strong customer relationships (Klein).VIII. subjective Capabilities IssuesIssuesExports in Europe are not that easy since the products are going to be acceptable to heavy tariffs, since they come from a country outside the European community. In the future a subsidiary in one of the European community countries would relax the tariffs. Also loss of market share due to low production capacity may also prohibit Harley from gaining potential new customers because of the extended waiting period.Management DepthHarley Davidson has a flexible management that encourages employee thing by having an open door policy to allow employee to communicate and contribute his and her idea to senior management or CEO (Teerlink).Organization IssuesWith over 8000 stipendiary and unionized emplo yees are the key competency to H-D success. Employees are considered as foundation of company success and are the engine to drive company to success, because employee involvement is strong culture in H-D where employees are empowered to take initiative to identify and solve problems. (Teerlink).Value ChainMarketing AdvertisingHarley Owner Group convoys free advertisingPromotions at motorcycles rallies and improve dealer network to broaden appeals to new customersNot much spending on advertisingLicensing brand/logo to more than 100 manufacturers thereby increasing exposure to customerDistributing newsletter and promote ralliesHuman resourcesHarley Davidson mechanics and dealership personnel were trained at Harley Davidson University. They took course in retail management, inventory control, merchandising, customer service, diagnostics, maintenance, engine service technique.Provide in -dealership courses through its web based distance learning programService designate ride in various location through all USDaily rental to decide whether they want to buyProviding training course for inexperienced riders in America, Europe and Asia (25 hour Riders Edge Program) contributed to company increased sales from female buyers (increased from 2% total sales before adapting to 9% in 2003). The company found that woman more likely to purchase after taking training courseFinancial service to make it more affordableoperationsThe companys expansion plan of its York and Pennsylvania plants expects to allow the company to increase production to 400,000 units by 2007.DistributionThrough dealershipsShowrooms offer a large assortment of habilitate items and accessories in addition to new motorcyclesDealers are responsible for operating showrooms, stock parts and accessories.161 dealers in Japan.50 dealers and 3 distributors in Australia and New Zealand.7 dealers in South East Asian and East market.InfrastructurePublic listed companyQuality system schema planning are not clear su bstance Competencies and Competitive AdvantageCustomer loyalty and brand imageValuable? YesRare? YesCostly to imitate? YesNon substitutable? YesA core competence and a sustainable competitive advantageLarge-displacement motorcyclesValuable? YesRare? Yes (for now)Costly to imitate? NoNon substitutable? YesYields only a temporary competitive advantageVIIII. Strategies of Harley DavidsonAs stated earlier, strategic issues that H-D has faced is increased segmentation in the motorcycle industry causing them to shift focuses in their strategy. With the purchase of Buell Motorcycle Co. they have been successfully able to increase their market segmentation by offering high quality bikes at competitive price. This allowed H-D to have to opportunity to move from a differentiation strategy to a cost/differentiation strategy.Harley Davidsons use of the Cost/Differentiation as a Business Level Strategy has proven highly successful since they have been in business. They have always tried to diff erentiate themselves from everyone else in the motorcycle industry, by producing a brand image that many competitors have failed to recreate. Harley Davidson has two different companies built into one. The first of the two companies produces motorcycles at competitive prices against their competitors. Harley Davidson demands high standards of quality and efficiency and demand lower costs, which will add to a higher quality less expensive motorcycle. Harley Davidson has done extensive research to find out information about their average customer. Harley Davidson concluded that the average motorcycle consumer is a married, college educated, 38 year-old male earning $44,250 a year and his average income is increasing. Research also shows that females represent 10% of the new purchasers.The second company that Harley Davidson implemented is the Costume fomite Operations or CVO. This company specializes and customizes the motorcycles to suit the individual owner. Harley Davidson also off ers genuine parts and accessories so Harley owners can customize their own motorcycles. The CVO tries to use the differentiation strategy to beat out its competitors. The customization of a motorcycle can prove to be very expensive and time consuming, but Harley Davidson knows that what good is a bike if you cannot show people who you really are. The customers are willing to wait an average of 1 year after placing their order to receive their customized motorcycle. Every other motorcycle manufacturer is trying to imitate Harley and their products. Harley has the top of the industry manufacturing process with large state of the art factories, and distribution, with many small and personalized, to market dealers, who sell their products.Harley Davidsons Corporate Level Strategy tends to favor the Related Diversification Strategy. Their two primary businesses are related to each other in some manner or another. The two divisions, CVO and the Competitive Price Division, are related by u sing the same suppliers. Although the two divisions serve two totally different responsibilities to the consumers, they are truly related in their strengths to differentiate themselves from all the other competition. Harley Davidson does not do much promotion at the corporate level. Primarily, the local dealers do their promotion.Harley Davidson uses many different types of strategies to help them become on of the most dominant motorcycle producers in the world.X. Assessment AnalysisThe Senior Paper has given an intuitive look into strategies at work and based on the analysis done it is reasonable to assume that H-D will be successful staying competitive. H-D implemented changes in the 90s to prepare for the future challenges and stay ahead of competition. They have targeted towards improving and expanding manufacturing and creating new products and services. Thus far, the strategies have been very successful and have built strong relationships with all their shareholders.H-D has f ound new ways to extract margins from its customer base through finance contracts, licensing agreements, product upgrades, and accessory goods. It has expanded it product line to the small and mid-size range with the purchase of Buell Motorcycle Co. They know who their customers are, and which markets they need to expand on. They also have happy unionized workers who share the same values as the management team. Most importantly through the decades, H-D motorcycles have had the ability to retrovert emotion. This emotion and loyal has never been duplicated by any company to date, and probably never will. If H-D continues to innovate there is not question that they continue to gain market share.