Harley-Davidson Societal Marketing Analysis

Part 1 Questions

Question 2 ORIGINAL (changes have been highlighted in red):

Discuss the societal marketing issues related to the business of Harley-Davidson, using concepts from Block 4, Reading 36 and information presented in the case study. In this process you should also reflect upon the strategic choices of Harley-Davidson that it has considered for responding to the societal challenges. (20 marks)

Question 2 AMENDED (changes have been highlighted in red):

Discuss the societal marketing issues related to Harley-Davidson, using concepts from Block 4, Reading 36 and information presented in the case study. Analyse the strategic choices considered by Harley-Davidson for responding to the societal challenges. (20 marks)

Question 3

Question 3 ORIGINAL (changes have been highlighted in red):

Explain the concept of demand curve and the determinants/general factors that can influence the demand of a product/service, using concepts from Block 5, Reading 40. Informed by these concepts, and the information from the case study, discuss the determinants/factors that have the potential to affect the demand for Harley-Davidson bikes. (30 marks)

Question 3 AMENDED (changes have been highlighted in red):

Explain the concept of demand curve and the general factors that can influence the demand for any product/service, using concepts from Block 5, Reading 40. Discuss the specific factors that could affect the demand for Harley-Davidson bikes using concepts from Block 5, Reading 40 and information from the case. (30 marks)

Question 4

Question 4 ORIGINAL (changes have been highlighted in red):

Explain the concept of market structure and the different types of market structures using information presented in Block 5, Reading 42. Drawing on these concepts and the information reported in the case study describe the market structure which best represent the market in which Harley-Davidson is operating. (20 marks)

Question 4 AMENDED (changes have been highlighted in red):

Explain the concept of market structure and the different types of market structures using information presented in Block 5, Reading 42. Using these concepts and the information from the case study, analyse which of the market structures best represent the market in which Harley-Davidson is operating. (20 marks)

Case study AMENDED

Anything changed has been highlighted in red

Harley-Davidson Inc is [hoping] electric motorcycles to attract the next generation of younger and more environmentally conscious riders to reverse declining U.S. sales. But as Harley ships its first Live-Wire bikes - priced at US$29,799 - to dealers, there is little evidence the 116-year-old brand is catching on with new young customers. The problem lies mostly with this "super-premium" product's price. The bike costs nearly as much as a Tesla Model 3 [electric car] and aims for a market that does not really exist: young, "green" and affluent first-time motorcyclists. The sleek sport bike has been available for pre-order in the United States since January. However, the bulk of the orders are coming in from existing and old riders, according to interviews with 40 of the 150 dealerships nationwide that are [stocking] the bike this year. The dealers Reuters spoke with [represent around a quarter] of LiveWire dealerships and are spread across Wisconsin, Illinois, Indiana, Ohio, Michigan, California, Nevada, New Jersey and New York.

[For many years], Harley has failed to increase sales in the United States [which is] its top market accounting for more than half of its motorcycles sold. As its tattooed, baby-boomer [customer] base ages, the Milwaukee-based company is finding it challenging to 'woo' new customers. In 2018, Harley posted the steepest sales decline in four years in the United States. U.S. sales are [expected] to fall again this year. The heavyweight motorcycle maker's stock price has declined by 42 per cent in the past five years. By comparison, the S&P 500 Index has gained 47 per cent.

When chief executive Matt Levatich announced LiveWire's launch last year, his hope was [that] the ease of riding motorcycles with no gears or clutch would help attract young and environmentally conscious urban riders. In an interview in February 2018, Levatich said the bike would help address Harley's demographic problem. "It is more about the next century than the last century," he said at the time. The pre-orders, thus far, have [failed to meet those expectations], according to the dealers. "It is appealing to a demographic that is already riding," said Gennaro Sepe, a sales manager at a Harley dealership in Chicago. His store has received four pre-orders for the bike. All of them are from existing riders. Harley declined to comment on LiveWire pre-orders.

The motorcycle maker is not the only company investing in battery-powered transportation. Tougher emissions rules in Europe, China and the United States are forcing [car] companies to switch to electrified models. A survey of U.S. millennial motorcyclists, published in  February by the Motorcycle Industry Council, found 69 percent of the riders are interested in electric motorcycles.

Harley's dealers said they are getting [enquiries] from young customers but are struggling to [turn] them into sales. [A key reason for the lack of sales is LiveWire’s high retail price]. "Interest is very high," said a sales manager at a New Jersey-based dealership, who declined to be named because he was not authorized to speak to the media [...] Over half of young college graduates in America, whom Harley is [hoping to turn into customers have high student loans] that entail average repayments of US$200 to US$300 per month. Harley is not offering any discount or incentives to push the sales, either, the dealers said.

In an interview with CNBC television in May, Levatich called LiveWire "one of the best engineered products on the market" and said it was worth its price. Gary Jon Prough, general sales manager at a dealership in Countryside, [Illinois], said the vast majority of millennials cannot afford the bike as LiveWire is targeted at young and affluent customers with incomes above US$100,000 a year. To drive up sales, Prough and other dealers expect Harley to go Tesla Inc's way: launch more affordable battery-powered vehicles after creating a buzz with the premium model. Tesla's first electric car costs over US$100,000, but prices came down with subsequent models.

Its Model 3 [electric car] now comes with a base price of US$35,000 and was instrumental in [increasing] its vehicle deliveries to a record level in the latest quarter.

Traditional Harley Davidson entry-level bikes cost about US$6,900. The motorcycle maker has plans to bring out four more electrified models in the mid-power, low-power, e-bicycles and kids' two-wheeler segments by 2022. But unlike Tesla, Harley does not enjoy the true first mover’s advantage. California-based Zero Motorcycles is already selling electric bikes in the United States with retail prices ranging from US$8,500 to US$21,000. Its top-end bike - SR/F - is similar to LiveWire, but costs nearly US$9,000 less.

Still, Bob Clark, a dealer for Zero's bikes in Chicago, says he has not yet sold one SR/F to riders under the age of 35. All three electric bikes he sold to young riders this year were in the US$10,000 price range. "Young riders are environmentally conscious, but are also very price-sensitive," Clark said.

It is not just pricing. LiveWire's limited range is also hampering its sales. The bike can travel 235 kilometres in the city or 153 kilometres in combined city and highway riding per charge. An ordinary household [electric bike charging unit] can provide an overnight charge, while Level 3 direct current fast chargers stationed at Harley dealers will fully charge the bike in 60 minutes. This [means] LiveWire [is] less effective for longer-distance rides, limiting its appeal among rural riders who prefer touring bikes.

According to Porter, barriers to entry (which reduce the threat of new entrants) can include:

. Government policy or legal requirements restricting access. For example, in virtually all countries you need to have passed several stringent examinations before being able to set yourself up as a lawyer or a doctor.

. High capital requirements. It is obviously financially easier to set up a market stall than to build a new steel works.

. Economies of scale. If you need a certain size of business in order to be profitable, then it is more difficult for a small firm to enter the market.

. Expected retaliation from existing competitors in the industry.

. Access to distribution. If you are to build a new food brand you will need to negotiate access to the main food retailers in order to sell it (at least if you are aiming for large quantities).

Seven Harley dealerships told Reuters they have not even bothered ordering the bike, which would require investing in a Level 3 charging station and training staff. An Ohio-based dealer, who had initially signed up for LiveWire, said he pulled out at the last minute as he was not sure of the bike's demand in his area.

A delay in LiveWire's arrival in stores has left the dealers in the Midwest and the East Coast with hardly a month to aggressively push the bike before the snow season sets in. Winter generally means a [decline in] motorcycle sales.

When dealers began taking pre-orders, the delivery was expected in August but was later shifted to September. On 30th September, the dealers Reuters spoke with were still waiting for the first bike. In a Twitter post on 2nd October, Harley said the bikes were starting to  arrive at authorized dealers. The tweet also carried a picture of the first LiveWire that was "rolled off the line" at its York, Pennsylvania, facility in late September.

With the demand rather limited, the dealers said Harley has decided to keep the supplies [low] in order to protect the bike's brand value and prevent any price discounting pressure. The dealers said they are all expecting to receive less than 10 LiveWires this year. James Hardiman, an analyst at Wedbush Securities, reckons Harley would sell between 400 and 1,600 LiveWires in the first year. That is not even one per cent of the 228,051 bikes it sold worldwide last year.  (Singh, 2019)