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Strategic Position

Discuss About The Davidson Motorcycle Artwork Gets Personal?

Harley Davidson was founded in 1903 and continues to be a success story even today. Its emphasis on quality product and image marketing has got the firm where it is today. After gaining control from AMF, management commenced just in time manufacturing which implied receiving and making goods as and when they are needed thereby leading to reduced inventory costs. Many competitors challenged Harley’s leadership position specifically in the motorcycle segment but in vain. By 1993, the firm acquired Buell Motorcycle Company in order to expand its product offerings.

Harley’s attempt at diversifying into recreational industry was reversed. As Harley’s customer base aged, it introduced V-rod which appealed to the youth. After the growth stages of 1990s, Harley’s sales started to decline majorly for two reasons safety and pending recession. How Harley continued to grow is discussed in the questions below.

Different brands aim to position themselves in various different segments, however the most fundamental positioning distinction comes from price (Association for consumer research, 2016). Harley has been unique by not following the low cost strategy like all its competitors hence Harley’s positioning is extremely critical to its success especially given that image marketing is their strongest suits. They aim to fulfill the dreams of personal freedom. Even its vision indicates the company’s focus on overall development of all its stakeholder’s. The vision statement also focusses on international success which makes its expansion plans evident. Harley’s mission is to bring exceptional service to its clients and thereby gaining their continued loyalty. Harley’s customers are fiercely loyal. And this is also one of the most distinguishing features of the brand. It believes it delivering people an experience and not just a motorcycle (Harley Davidson, 2017).

Its strategies also clearly indicate Harley’s intention of selling motorcycles as a lifestyle and not just as a mode of transportation (Advertising Age, 2013). Harley continues to differentiate itself by focusing on the experience and not the intricacies of the bike. Harley’s CMO mentioned that Harley has an engine and wheels and it runs on road, but that is where its similarities with respect to its competitors ends (Forbes, 2013). Harley has focused solely on heavy weight motorcycles and continues to ensure its products are different from competitors (Business Insider, 2016). In the aim to sell an experience, Harley makes sure that it hires employees that customers can relate to. Their sales employees and store workers are bikers and dressed in biker jackets. Their knowledge about various bikes and its technicalities are in accordance with the Harley store atmosphere.

Harley-Davidson's Corporate Governance

Corporate governance is the very essence of business (Forbes, 2015). Harley Davidson takes immense pride in its excellent measures taken to achieve efficient levels of corporate governance. Governance basically implies the art the managing any entity. It envelops leadership roles, management styles, company policies, procedures, organizational structures and employee conduct (Business Line, 2017).

Harley’s company policies are transparent and leave no room for discrepancy. Harley’s board of directors come from a range of industries with decades of experience (Harley Davidson, 2017). Harley even has a corporate governance committee in place that ensures that the company’s policies are in place and implemented continuously. The firm’s mission, vision, values and objectives are crisp and clear and adhered to sincerely.

Cult brand: Harley Davidson has positioned itself in the niche segment of high cc cruiser bikes and transformed itself as a cult brand. This is also because of the sense of ownership and along with that a sense of belongingness to the Harley family that its customers feel. Harley merchandises like jackets, caps, bottles, key chains make sure of bringing a feeling of similarity among its owners.

HOG: Harley owners groups are organized across the world. They meet often, discuss experiences, and travel together. They conduct rallies and other events there by making people feel like a part of a group (Harley Owners’ group, 2017). These passionate owners used these rallies as a killer sales tool (Cult branding, 2011). Harley bikes were made available to people at these rallies so they can get a firsthand experience of riding this beast. Feedbacks were taken from these test riders by Harley employees and changes were accordingly made to bikes.

High customer pull: Harley’s distinguished promotional strategies and branding has helped the brand gain a huge customer base. Harley comes up with various campaigns and these promotional ideas help consumers connect more with the brand by increasing awareness. Its ‘Live your legend’ campaign gained a high TOMA score (Top of the mind awareness) and increased demand by $70 million in 2016 (Advertising age, 2016)

Loyal customer base: Harley’s customers are fiercely loyal owing to its image marketing and targeting a niche segment. Also, Harley is the only brand that provides its consumers with an option to customize their bikes via an online portal. This attracts bike enthusiasts and they remain loyal to the brand as they do not find this facility with any other competitor. As rightly said, such a high level of loyalty is achieved not just by a great service delivery but by willingness to invest in individual customer’s needs (Inc., 2013).

Strengths and Weaknesses

Customization: Harley Davidson gives its customers the luxury of customizing their bikes as per their needs. This can be done on an online tool where people can design their bikes and see it come to life (Harley Davidson, 2017). This gives consumers a sense of individuality and ownership with their bike. The emotional quotient attached with a self-customized bike is high and this helps in gaining customer loyalty.

High cost of exporting: Outside US, Harley Davidson has only one manufacturing unit in India and one assembling plant in Brazil. Recently it announced the plan to make an assembling plant in Thailand as well to cater to Asia Pacific clients. But even then the number of Harley facilities outside of US is very less and this makes the price of exporting to other countries relatively higher. Even though they seek a cut in import duties with various countries, nothing substantial has been accomplished yet (Deccan Chronicle, 2014).

Over dependence on the US market: As mentioned above their lack of manufacturing units in other countries make Harley focus more on the US market. This creates a very high dependency on one particular market as more than 65% of the revenue comes from the United States of America (The Britton, 2017)

Limited suppliers: Harley suppliers go through a strenuous selection process in order to maintain the Harley standard. This is why Harley has very few suppliers especially outside of US and in the long run depending on such few suppliers’ increases dependency and may even lead to delivery delay and customer dissatisfaction.

Asian and European markets: Harley has a very strong hold in the US market but with time it must be noticed that the demand in the developing Asian and European markets is consistently on a rise and there are almost no other players especially in high cc cruiser bikes segment. This makes for a very attractive opportunity for Harley.

Lower CC bikes: Harley Davidson has kept its focus completely on high cc and heavy weight bikes but Harley can immensely increase its customer base by introducing low cc heavy weight bikes as the demand and market for these bikes is much higher. Especially now that Harley is focusing on targeting a younger clientele, this is a definite opportunity to expand base.

Women and young riders: Harley can put advertising to efficient use and encourage women and younger riders into biking. In 2006, women accounted for 12% of total bike sales across the globe. At present, demand for motorcycles among women is at an all –time high (JS Online, 2016). This is a growing number and it marks a golden opportunity to introduce these budding riders into the Harley cult club.

Opportunities and Threats

YouTube partnerships: Recently there is an emerging trend of bikers uploading their travel experience videos on YouTube. So much so that YouTube has become a better travel influencer than Instagram (Business Standard, 2017). These v-loggers have a huge fan base and it helps them earn money as the viewership for their videos is very high. Harley can associate with these bikers and provide them with Harley merchandises. These bikers also organize meet-ups with their fans in the different cities they travel and Harley Davidson can partner by offering their venue. This would also increase the footfall at the store and hence higher sales.

Approach: given the market scenario, consumer needs are consistently changing. This is the time to understand those needs and bring in efforts to fulfil them. Being myopic can significantly hurt Harley sales. Another factor is that at the moment 65% of the revenue comes from US and such a high level of dependency can cause internal distress.

Substitutes: Based out of US Harley must keep in mind that a stronger economy means more competitive threats (Forbes, 2012). There are many emerging players in the market who are offering heavyweight motorcycles at a lesser price like Royal Enfield, KTM, Triumph motorcycles etc.  Harley’s most endangering substitutes are Yamaha VMax, Suzuki Intruder, Ducati Divel, Ducati Multistrada and Suzuki Hayabusa.

Increasing age of customers: As the case elaborates that a lot of Harley sales were conducted in the late 1990s. This means most of them are over 50 years of age, mostly male and mostly white (The guardian, 2016). Rider over the age of 40 account for 40% of the fatalities caused by bike accidents. This becomes a major issue as increasing number of accidents by Harley Davidson bikes is sure to impact its brand image. Also almost all Harley’s competitors are focussing on targeting a younger generation and it is high time Harley begins to capture that market.

Increasing number of substitutes: Harley Davidson is no more a solo player in the heavy weight bike segment. Motorcycle companies like Royal Enfield, Suzuki and Triumph are slowly gaining markets with their ‘heavy weigh bikes at a lower price’ strategy. Harley’s target customers belong to the high income segment but substitutes offering low price goods is sure to eat away from Harley’s market share.

Need more manufacturing units: Lack of manufacturing units in different countries makes the cost of exporting really high and time consuming. Secondly it somewhat reduces the trust in the minds of consumer by increasing service delivery time. Although, opening manufacturing units is a tedious and expensive investment to make, but given Harley’s increasing brand awareness, it is about time to make a rational change in the operational structure of the firm.

Recession: The case that we are referring to, is dated before 2008 and hence the recession is yet pending. This black hole in the American economy is sure to affect Harley Davidson as well by reducing people’s buying power and hence demand for high end motorcycles. Strategies must be carefully built to tackle such macro-economic scenarios as and when they arise.

Core competencies are skills that the organization is best at.  Core competence is the collective learning in the organization, especially the capacity to coordinate diverse production skills and integrate streams of technologies (Harvard Business Review, 1990). These competent abilities may or may not give the firm an advantage over its competitors. Harley Davidson’s core competency lies in its positioning strategies and customer management. Harley positions its bikes in the most differentiating and innovative manner leading to customer loyalty. Harley does not sell motorcycles for transportation but rather as a status symbol. It symbolises leisure, freedom and a strong personality.

Harley owners groups organize various events and rallies where all proud owners of Harley participate. This gives the brand a cult status. Harley celebrates birthdays of all its customers by inviting them to a nearby Harley Davidson outlet and sometimes gifts them merchandise. They make the customer feel like they are a part of the family leading to a passionate customer base and loyalty.

Distinctive competencies of a firm include those abilities that a firm does better and differently from its competitors. Harley’s distinctive competencies lie with its niche targeting and customer relationship management.

Harley targets high income groups of people and sells them heavy weight high CC cruiser. This differentiates Harley from its competitors who do not have a strong hold on this segment of technology and hence consumer base. Being a part of a niche market segment always makes customers feel special.

Harley’s customer loyalty is one of its biggest assets and that is completely owed to image marketing done brilliantly done by the team. Harley markets its motorcycles are a symbol of freedom, independence, strength, ready to take challenges and immense force. Anyone who associates with these qualities immediately gets driven towards Harley. Harley sells a lifestyle, an image and a reputation, not just a bike. And this is what makes it different and even superior to its competing counterparts.

Customization of motorcycles is one of Harley’s most special services. Harley provides its customers with an online portal where they can design their own Harley and see it come to life on delivery. This makes customers associate more with the brand as the emotional quotient associated with a customized bike is very high (USA Today, 2017).

Build manufacturing units: As discussed before, Harley Davidson has just one manufacturing outside US which is in India and one assembling unit in Brazil. This leads to high cost of exports and also impacts delivery. In order to overcome this, Harley recently announced to build an assembling unit in Thailand which will be a knock down facility to serve its Asia pacific customers (Fox Business, 2017). Building more manufacturing units in exporting countries is the next recommended step for Harley Davidson and this is sure bring an increased customer base.

Marketing focused on women and young riders will inspire them to enter the motorcycle segment. This will benefit Harley Davidson sales as no other firm is targeting them at the moment and the share of motorcycles purchased by women is much lesser as compared to their male counterparts. Harley must also target young riders as firstly, brand loyalty will be much higher as Harley will be introducing them to the world of motorcycle. The emotion behind the first bike can surely be banked upon. And secondly, Harley’s customers who bought their bikes in 1990s have reached a risky age and may affect Harley’s brand image if the number of accidents increase.

Academy to teach motorcycling: Harley Davidson’s ‘riding academy’ is its initiative towards teaching biking to youngsters. This has been a major strategic decision that is expected to raise sales. By the end of this year they aim to train 65000 motorcyclists across the country. This will ensure a certain loyalty from this set of prospective clients (JS Online, 2016).

Social Media: According to the global digital snapshot over 40% of the world’s population are active social media users (Web Pro News, 2017). YouTube channel partners are a fad and Harley must take advantage of this and target a large mass of youth. Many bikers have active YouTube pages with high number of followers. Harley Davidson can tie up with them and take advantage of their fan base alongside with promoting their own products.

Focus on international markets: As discusses earlier, 65% of Harley’s revenue comes from its US market. This high level of dependency and lack of diversification in the consumer segment is rather unsafe (Fortune, 2012). Any macro factors affecting the economy of America will directly impact the company’s performance. Harley Davidson must strategies and increase its focus on international soil by building manufacturing units and service stations in other countries. This will lead to efficient service delivery and an increased base of customers.

Bike riders are often associated with strength and a risk taking aptitude. They symbolize rawness, speed and power. They are filled with pride and responsibility. They seem fearless and extremely passionate about travel. They are strong willed and living on the edge and their life is filled with enthusiasm and energy.

The biker image portrayed above is surely a huge help to Harley Davidson’s image as the brand reflects all the same values. The high CC of Harley bikes shows speed, power. The heavy exterior symbolises strength and robustness. The HOG members signify passion and pride. This is exactly what Harley Davidson has banked upon. This image marketing by the brand has led to aggressively loyal customers and a very high emotional quotient attached with the purchase of the bike.

Like every other brand, sales are bound to get impacted with the presence of higher competition. Also despite the presence of other brands offering lower prices for heavy weight high CC bikes, Harley Davidson consciously made the decision of protecting their iconic brand image by not engaging in discounting activities.

However, Harley continues to hold the highest market share in unites states of over 65% which is expected to grow by 2-2.5% annually (Forbes, 2014).  Polaris has been Harley’s biggest competitor with its sales growing 23% year over year which is more than Harley and this is surely a matter of grave concern (Forbes, 2016).

Harley Davidson customers’ loyalty is world renowned and often a reason for envy among other brands. This is predominantly because of three factors which are Harley’s greatest competencies. First being image marketing, second being their customer relationship management and third being their product differentiation.

Image marketing helps its customer associate with a certain image every time they own or ride a Harley Davidson bike. Customer often wish to continue being associated with this image and hence remain loyal to the brand. They like the perception that they leave in people’s minds when they are owning a Harley Davidson bike.

Customer relationship management of Harley is done in the manner that the customer feels like a part of a family. HOG events and rallies are conducted often where all the Harley owners get together. They all have shared passions and personality traits that they relate with and hence they have made a cult and continue to be loyal towards it.

Product differentiation has occurred mainly because of the absence of too many competitors in the niche segment of high cc heavy motorcycles. Styling of the bike, its exteriors, high engine power are factors which are not easily available with other brands. Hence customers are loyal towards Harley Davidson.

Changing demographics are a major opportunity in the form of increasing potential clients for Harley Davidson. Women are increasingly gaining interest in and ability to ride bikes. This is a potential market for Harley bikes as they can invest in marketing strategies to target this segment of the society.

People are now beginning to ride their first bikes at an early age and also people’s inclination towards healthy living has got people above the age of 50 also to ride bikes. In fact old rider clubs are getting formed where senior citizens of the country meet and travel together.

However Harley must continue to cater to its current customer base who are above 50 years of age as Americans over 50 control 77% of the total net worth in the country. And across the country 39% of the motorcycles are owned by people aging between 51 and 69 (JS Online, 2015). 

Harley must invest wisely in the marketing of these segments as they are still niche and any kind of association with bikes at this stage with ensure  a continued relationship.

References:

Advertising age, 2013, ‘Harley Davidson CMO: We aren’t an auto brand’, https://www.adageindia.in/marketing/cmo-strategy/harley-davidson-cmo-we-arent-an-auto-brand/articleshow/45807295.cms, viewed on 16 September, 2017.

Advertising Age, 2016, ‘Live your legend – urges Harley’, https://www.adageindia.in/marketing/cmo-strategy/live-your-legend-urges-harley-davidson-in-new-global-campaign/articleshow/51426587.cms, viewed on 16 September, 2017.

Business Line, 2017, ‘All you wanted to know about corporate governance’, https://www.thehindubusinessline.com/opinion/columns/slate/all-you-wanted-to-know-about-corporate-governance/article9825427.ece, viewed on 15 September, 2017.

Business Standard, 2017, ‘Sorry Instagram, You Tubers are the new travel influencers’, https://www.business-standard.com/article/technology/sorry-instagram-youtubers-are-new-travel-influencers-117071400046_1.html, viewed on 16 September, 2017.

Cult branding, 2011, ‘Official Harley Davidson cult brand profile’, https://cultbranding.com/ceo/harley-davidson-cult-brand/, viewed on 16 September, 2017.

Deccan Chronicle, 2014, ‘Harley Davidson seeks cut in import duty’, https://www.deccanchronicle.com/140930/business-autos/article/harley-davidson-seeks-cut-import-duty, viewed on 16 September, 2017.

Forbes, 2012, ‘A Stronger economy means more competitive threats’, https://www.forbes.com/sites/martinzwilling/2012/04/24/a-stronger-economy-means-more-competitive-threats/#755f1e277df9, viewed on 16 September, 2017.

Forbes, 2013, ‘Harley Davidson will be a case history in social branding’, https://www.forbes.com/sites/jonathansalembaskin/2013/07/12/harley-davidson-will-be-a-case-history-in-social-branding/#11179032155e, viewed on 15 September, 2017.

Forbes, 2014, ‘Harley Davidson’s success story in the US’, https://www.forbes.com/sites/greatspeculations/2014/12/19/harley-davidsons-success-story-in-the-u-s/#62de06464ec1, viewed on 15 September, 2017.

Forbes, 2015, ‘Corporate governance is the very essence of business’, https://www.forbes.com/sites/dinamedland/2015/02/10/corporate-governance-is-the-very-essence-of-a-business-stephen-green/#5c8841671bef, viewed on 16 September, 2017.

Forbes, 2016, ‘Harley Davidson: tough times ahead in the domestic market’, https://www.forbes.com/sites/greatspeculations/2016/09/13/harley-davidson-tough-times-ahead-in-the-domestic-market/#5c17f501fb95, viewed on 15 September, 2017.

Fortune, 2012, ‘The hurdles at Harley Davidson’, https://fortune.com/2012/10/03/the-hurdles-at-harley-davidson/, viewed on 16 September, 2017.

Fox Business, 2017, ‘Harley Davidson building factory in Thailand’, https://www.foxbusiness.com/markets/2017/05/23/harley-davidson-building-factory-in-thailand.html, viewed on 16 September, 2017.

Harley Davidson, 2017, ‘About Harley Davidson’, https://www.harley-davidson.com/content/h-d/en_US/company.html, viewed on 15 September, 2017.

Harley Davidson, 2017, ‘Build your freedom’, https://www.harley-davidson.com/content/h-d/en_US/home/hd1-customization.html, viewed on 16 September, 2017.

Harley Davidson, 2017, ‘Corporate Governance’, https://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=irol-govhighlights, viewed on 15 September, 2017.

Harley owners’ group, 2017, ‘Harley owners’ group’, https://www.harley-davidson.com/content/h-d/en_US/home/owners/hog.html, viewed on 15 September, 2017.

Harvard Business Review, 1990, ‘The core competency of the corporation’, https://hbr.org/1990/05/the-core-competence-of-the-corporation, viewed on 16 September, 2017.

Henkel, A., Boegershausen, J., Aquino, K., & Lemmink, J, 2016, ‘The Undesired Discounting Effect of Budget Brands: How Brand Positioning Affects Perceptions of Customer Service Representatives’ Human Qualities’, ACR North American Advances.

Inc., 2013, ‘How to get fiercely loyal customers’, https://www.inc.com/les-mckeown/how-to-get-loyal-customers.html, viewed on 16 September, Accounting.

JS Online, 2015, ‘Harley Davidson seeks to move throttle to meet changing demographics’, https://archive.jsonline.com/business/harley-davidson-seeks-to-move-throttle-to-meet-changing-demographics-b99464795z1-297125131.html, viewed on 16 September, 2017.

JS online, 2016, ‘Harley Davidson CEO says increased competition is the new normal’, https://archive.jsonline.com/business/harley-davidson-ceo-says-increased-competition-is-the-new-normal-b99716374z1-377692191.html/, viewed on 15 September, 2017.

JS online, 2016, ‘Motorcycle makers’ focus on women pays off’, https://archive.jsonline.com/business/motorcycle-makers-focus-on-women-pays-off-as-female-ownership-doubles-b99642657z1-365050911.html/, viewed on 16 September, 2017.

The Britton, 2017, ‘Harley Davidson and the quest for female customers’, https://www.brittonmdg.com/the-britton-blog/Harley-Davidson-targeting-women-and-young-customers-in-marketing, viewed on 15 September, 2017.

The guardian, 2016, ‘Harley davidson’s reputation as an old white guy maybe on its downfall’, https://www.theguardian.com/business/2015/oct/24/harley-davidson-brand-revenue-loss-easy-rider-image, viewed on 15 September, 2017.

USA Today, 2017, ‘Harley Davidson motorcycle artwork gets personal’, https://www.usatoday.com/story/money/cars/2017/09/06/harley-davidson-motorcycle-artwork-gets-personal/637138001/, viewed on 16 September, 2017.

Web pro news, 2017, ‘Global digital snapshot’, https://www.webpronews.com/can-guess-many-people-around-world-use-social-media-2017-2017-08/, viewed on 16 September, 2017.

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