Harley-Davidson (H-D) is a long-standing motorcycle (MC) manufacturer with a century-old history and experience. The global financial crisis of 2008 led to substantial debt cancellation and a supply surge of second-hand MCs. Thus, a considerable redundancy was an inevitable consequence of a fall in profits and revenues. The following increase in international sales can be explained by a slowdown in the domestic market and production expansion.
Luxury goods (LG) refer to when a rise in income results in a larger percentage increase in demand for these goods and services. The perception of LG varies according to region and country. The US alone stands for a quarter of the world’s LG consumption, while Europe accounts for more than a third of it. Asian countries akin to China, India, and Japan are the fast-growing markets.
At home, H-D is regarded as an icon with high standards in quality and intentional technological lag. China and India pose significant trade barriers, whereas the rest demonstrate a strong demand for the product. Globally, H-D deals with giants of the auto market such as Honda, BMW, and Ducati. The company’s strategy is to maintain supply at a specific level to keep prices high. The main objectives concern investment in the brand, cost reduction, and better financial services.
H-D is proud of its open communication with staff members and wide access to various courses for personal growth. The operations are highly automated and aimed at cost minimization. The distribution is mostly concentrated in the US where MCs are sold in private dealerships. The company operates two major product Research and Development centers. H-D consists of three MC units with the V-Rod model being the most popular. Additionally, the company sells accessories and provides financial services in MC acquisition.
Porter’s Generic Strategies
Porter’s generic strategies include four elements used by companies to achieve a competitive advantage. It can be noted that cost leadership is somewhat pursued by H-D in the sense that it tries to reduce production costs to a minimum so that to “increase” its market share and “performance” (Islami et al., 2020, p. 3). Next, H-D has a definite and explicit differentiation tactic of attracting customers with its unique and outstanding motorcycles. The brand actively employs product development centers, has a presence on television and the Internet, and produces high-grade MCs. The differentiation focus of H-D is on the motorcycle riders who value the legendary MCs. However, the company does not apply the cost focus since the prices are not cost-effective for all targetted customers. Therefore, H-D conducts three of the four strategies to boost its performance.
Years of trading in the US brought the company to its current position, acting as a foundation for the abovementioned tactics. Hence, the strategies will function for this country as they should. A similar conclusion can be drawn from Europe, Australia, and Japan’s cases as countries’ consumers are thirsty for luxury goods and can afford them. However, strict regulations and trade barriers in China and India will prevent the tactics to work properly. Thereupon, the generic methods will perform healthily in most countries.
Porter’s Five Forces Analysis
The five forces analysis is a structure that examines the competition level within a particular industry. The auto market presents significant difficulties concerning high capital costs, consumer loyalty, and economies of scale. H-D does not face a significant threat from new entrants. Its strategies are directed at the provision of distinguished products, developing a strong connection with consumers. The recent decision of plant closures and outsourcing increases the bargaining power of suppliers as more activities are performed by third parties. Thereby, the danger of new businesses entering the market is negligible, while suppliers are given more responsibilities.
Oppositely, the power held by buyers determines their response to price changes and readiness to switch to another producer. Considering that the company manufactures for wealthy clients, customers are not sensitive to price surges and may hesitate to leave the iconic brand. Thereby, H-D’s tactic of limited production and top-quality goods diminishes consumer influence. However, there is a wide range of substitutes accessible in the market. The brand’s tactic of loan and credit offerings can offset alternative products without financial services. Lastly, the existing competitors, such as Honda, Suzuki, and Kawasaki, create a severe rivalry with their cost advantages (Isabelle et al., 2020). The objective of investing in the brand lets H-D compete with them on equal terms. Thus, Porter’s analysis of the next three components reveals that the strategies applied by H-D are effective.
It is undeniable that H-D encounters marked competition in the motorcycle market. The company’s products rely on the nostalgic mood of its customers. In contrast, Ducati and Kawasaki produce MCs with high-performance characteristics with an emphasis on technologies. Moreover, H-D, similar to BMW and Ducati, charges top prices, unlike Honda, which focuses on consumers of all income ranges. The product line is another comparison tool where H-D produces a narrow series of goods, including MCs, accessories, and clothing. On the other hand, Kawasaki and Honda offer automobiles, all-terrain vehicles, and power products. Therefore, H-D’s pricing policies, product priority, and mix are the elements to evaluate collation with other companies.
Isabelle, D., Horak, K., McKinnon, S., & Palumbo, C. (2020). Is Porter’s five forces framework still relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6), 28-41. Web.
Islami X., Mustafa, N., & Latkovikj, M. T. (2020). Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(3), 1-15. Web.