Abstract
Harley-Davidson Motorcycle Company is one of the largest motorcycle manufacturer and trader in the world. It operates under Harley-Davidson Inc. The parent company also has financial services for its dealers and resellers.
The research explores how Harley-Davidson can use the process of reengineering to implement changes for productivity and profitability. The main idea is to improve performance and influence future changes so that Harley Davidson can adapt to their internal and external environments.
History of Harley-Davidson motorcycle
In 1903, William Harley, Arthur Davidson, and Walter William founded the company in Milwaukee, USA. They officially registered the company and sold their first motorcycles. Harley-Davidson supplied the US military and police with their motorbikes. The company was among other companies that survived the Great Depression. However, the recession affected its operation.
The company increased sales of motorcycles during the World War II to the military. In 1969, the American Machine and Foundry (AMF) took over the company. However, sales declined in the 1970s, and AMF opted to sell the company. The decline in sales occurred due to poor quality of motorcycles. On the other hand, Japanese made superior quality motorcycles for the US market.
Some members of Harley-Davidson bought the company in 1981. During this period, sales of motorcycles declined. The company retrenched more than 1,800 and reduced production in order to reduce costs. Consequently, President Reagan intervened and increased tariffs on imported motorcycles from Japan.
The CEO, Richard Teerlink introduced a restructuring plan in 1985, which he observed from the Japanese system. The plan was to change production techniques, marketing strategies, and improve the quality of motorcycles. This marked the turning point at Harley-Davidson. The company gained confidence in its heavyweight motorcycles in 1987. Thus, the restructuring plan had worked as planned.
Today, Harley-Davidson is the most successful manufacturer of heavyweight motorcycles in the US. The company charges premium prices for its products because of its strong brand name. It controls more than 50 percent of the US domestic market. In addition, the company has continued to invest in research and development (R&D) in order to improve its products. Harley-Davidson has more than 30 models of motorcycles.
The number on the Fortune 500 list
The Fortune 500 ranked Harley-Davidson in position 458 in the year 2012. The company maintained its previous position.
Financial information
During the fiscal year of 2011, Harley-Davidson made significant growth in revenues and profits. It had $5,311.71 million, which represented a growth of 9.3 percent as compared to the same period the previous fiscal year. The company recorded an operating profit of $829.97 million. This represented 74.59 percent in growth as compared to the fiscal year of 2010. Harley-Davidson had a net profit of $599.11 million, which represented an increment of 308.83 percent compared to the year 2010.
Changes for Implementation and their importance
Harley-Davidson started restructuring program in 1980s. New challenges have emerged for the company under different economic conditions. Such challenges present business risks to Harley-Davidson, customers, dealers, and potential investors. It is necessary to implement changes because failure to make changes shall affect long-term business strategies of Harley-Davidson. This means that the company cannot provide any assurance that it will continue to generate revenues and drive growths as expected. Therefore, continuous improvement is necessary for long-term profitability and productivity. Currently, Harley-Davidson has embarked on four pillars of the business strategy, which are “growth, leadership development, continuous improvement, and sustainability” (Harley-Davidson, Inc., 2012).
First, the company must change its manufacturing strategy with aims of reducing costs and improving efficiency of the final motorcycles. Without a proper change initiative, the company may not be able to conduct its manufacturing strategy successfully. Harley-Davidson manufacturing strategy aims at continuous improvement of its products. The process happens with reduction in costs and increased flexibility in order to avoid effects of continuous changes in different markets.
Harley-Davidson strives to achieve flexible manufacturing system, labor terms, supply chains. The company believes that such changes are necessary so that it can meet customers’ needs in a cost efficient way. Harley-Davidson can only implement manufacturing initiatives if management, production workers, and supply chain play their roles. Therefore, failure to implement changes in manufacturing processes could have adverse effects on profitability of the company and its ability to provide quality products to customers at the right time.
Second, the company must also initiate changes to its marketing strategy. Harley-Davidson has noted that its continued efforts to attract multi-generational and multi-cultural buyers from various parts of the world may not be successful in the future. The company has relied on promoting motorcycle experiences across its markets. However, Harley-Davidson must strengthen its multi-generational and multi-cultural strategy across different generations, women, and young adults. For instance, the company must appeal to baby boomers who may not prefer heavyweight motorcycles. Such changes should not affect the brand image.
Third, the company has relied on domestic markets for most of its revenues. However, such dependence on the US markets may expose Harley-Davidson to effects of a possible recession in the US. Focusing on the international market has been a long-term strategy of Harley-Davison. Therefore, the company must strengthen its international sales. At the same, it must be aware of challenges in the international markets. Such risks include “political and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade barriers” (Harley-Davidson, Inc., 2012).
Fourth, the company experiences new challenges from used motorcycles. Many retailers have reported a drop in demands for new motorcycles as prices for used motorcycles decline. This implies that Harley-Davidson production for new motorcycles may be under threat from used motorcycles. At the same time, used motorcycles also affect prices of new motorcycles. Therefore, the company must balance its production volumes in order to respond to both demand and price challenges. The company has also noted that competitors supply motorcycles in large volumes at reduced prices. Therefore, changes are necessary for making Harley-Davidson competitive in the industry.
Fifth, Harley-Davidson must also offer heavyweight models with improved fuel efficiency. Harley-Davidson is the world leader in heavyweight motorcycles. It has invested in R&D in order to develop new models. The company must also focus on fuel efficiency strategy so that it can attract many users. Therefore, Harley-Davidson should change its product mix and provide energy-efficient heavyweight motorcycles.
Reengineering in Managing changes
Harley-Davidson can adopt reengineering process in managing changes for productivity and profitability. Reengineering is the fundamental “rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed” (Grover, 1998). Change management must take place end to end.
The company shall adopt the following steps of managing changes under reengineering process:
Harley-Davidson will realize that the process of reengineering is technical and not simple to implement when managing changes. The process is demanding, and it needs optimum care during its implementation. Some of the issues that the company must address include the following:
First, the company must achieve critical mass it needs for effective change implementation. This shall ensure that the company has commitments of the team for effective implementation process. It is also necessary for avoiding failure and instilling desired behaviors among employees. The company must also let employees understand why they should be the agent of change in the company (Cummings and Worley, 2008). This creates a committed team for change.
Second, the company must remain open to new ideas and learning. Reengineering presents the company with unknown future. Harley may engage in cutting jobs and costs. At the same time, it must ensure that employees continue to work in the same manner, similar roles, and same mindsets. In many cases, management wants to avoid implementation of changes. However, this approach cannot work for Harley-Davidson because it faces a dynamic market and changes in technology. Therefore, any attempt to avoid risk can only lead to serious challenges in the future in a changing environment (Grover, 1998).
Harley-Davidson must learn new ways of motorcycle production and sales. The company cannot stick to its current knowledge and expect a different result. Therefore, employees must learn in the process of implementing change initiatives. A common problem in reengineering is that once an organization has implemented changes, unknown problems emerge. Such problems emerge amidst the need to deliver results and stick to schedule. Therefore, it is necessary for employees to express their ideas about change processes and difficulties they face.
Third, reengineering process deviates from hierarchical tendencies of many organizations. The organization must eliminate status quo, and any political tendencies that may hamper changes. Management should not insist on hierarchy during change implementation. The process of reengineering affects power relationships in an organization. Therefore, the process of implementing change may upset managers who rely on their authority for management.
Many organizations fail to implement effective change processes because of the controlling tendencies of top management teams. Therefore, reengineering must reinforce positive behaviors that encourage change in Harley-Davidson.
Fourth, change implementation must overcome resistance from other people. Many people have tendencies of resisting change. The company must acknowledge that change is hard to embrace and achieve. Harley-Davison must not implement changes fast and easily because it may ignore employees’ dimensions. Change requires employees to change their mindsets, organizational culture, practices, and participate in new roles.
Critical success factors
In order for change initiatives to deliver positive results, Harley-Davidson must observe critical success factors. The company must engage “top leadership in implementing change activities” (Carr and Hard, 1995). Leaders must be deeply engaged in all processes of change implementation. In some cases, managers will also change their behaviors and leadership styles in order to enable changes to take place.
Change process in Harley-Davidson involves working with managers, employees, suppliers, retailers, and customers. The company must engage these stakeholders in all processes. Stakeholders have roles of reviewing the plan, giving feedback, and developing commitment to the process. As a result, the company can understand “stakeholders’ perspectives, produce a general view, create a working relationship, and encourage participation and commitment” (Hammer and Stanton, 1995). The process also provides opportunities for identification of problems.
Harley-Davidson must create the capacity to sustain new changes. The reengineering process must control drifting tendencies into old habits. The company must control cost, production efficiency, sales activities, and bureaucratic procedures.
Conclusion
Harley-Davidson faces some serious risks in the dynamic and competitive environment of motorcycle business. The company must adopt reengineering strategies in order to remain competitive, increase production, sales, and revenues. However, the company must acknowledge that many people will resist changes, including top executives. Therefore, the process of reengineering must address possible challenges during implementation of change initiatives.
The company may need services of experienced change agents to facilitate reengineering process. However, such agents do not eliminate inherent risks in implementing changes. Effective implementation of change shall ensure that Harley-Davidson increases production, marketing, revenues, and profitability.
References
Carr, D., and Hard, K. (1995). Managing the Change Process: A Field Book for Change Agents, Team Leaders, and Reengineering Managers. New York: McGraw-Hill.
Cummings, T., and Worley, C. (2008). Organization Development and Change (9th ed.). Mason, OH: South-Western College.
Grover, V. (1998). Business Process Change: Reengineering Concepts, Methods and Technologies. Hershey, USA: Idea Group Publishing.
Hammer, M., and Stanton, S. (1995). Reengineering Revolution. New York: HarperCollins Publishers.
Harley-Davidson, Inc. (2012). Harley-Davidson, Inc.10-K: Annual report (Filed Period 12/31/2011). New York: Thomson Reuters.