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Competitive Analysis
Harley's main competitors, Yamaha, Honda, Suzuki, BMW, and Ducati, all must compete with Harley's exceptional brand recognition. Focusing on this brand recognition places Harley and competitor, Ducati, in the first strategic group: Experience focused. While Harley has up-to-date technology, their main strategic advantage is the experience of driving a Harley - that loud, rumbling noise and showing off the wings on the brand while riding that classic heavyweight cruiser. One issue that presents itself to Harley and this group is the difficulty of extending to overseas countries. One reason that this group struggles in foreign countries like China is that most people in China use bikes to commute to work and loud, heavyweight bikes are not ideal for daily commutes (Miller, 2012).
Companies like Yamaha and Honda have always been on the forefront of technological innovation. Honda was the first company to release the four-cylinder CB750. They represent the second strategic group: Performance Focused. These companies can perform better in countries like China and Japan due to that demographics' demand for high performance sport bikes that are easy and effective for daily commutes. Companies like Harley in 2010 have begun to produce "small, easily affordable bikes - such as mopeds - used for basic transportation" (Miller, 2012).
Porter's Five Forces of Competitiveness
Bargaining Power of Buyers:
The power of buyers in the heavyweight motorcycle industry is relatively high considering that companies in this market are heavily dependent on certain demographics. Baby-boomers, who have been the main target demographic for the industry, are getting to the age of retirement and losing the physical ability to handle heavyweight motorcycles. Companies must now market and adapt to the Millennials, who typically are more in favor of sport and performance bikes instead of heavyweight cruisers (Grant, 2013).
Bargaining Power of Suppliers:
Companies using the preferred suppliers' method creates more power for the supplier as contracts allow for long-term agreements that increase quality of the suppliers. Long-term contracts create trust between supplier and the companies.
Threat of New Entrants:
Due to a high capital investment and a mature industry, the threat of new entrants in the heavyweight motorcycle industry is low. Brand name, such as Harley-Davidson, adds to the emotion and effect of riding heavyweight motorcycles. Harley has become a part of American society so new entrants must compete against high quality and high brand recognition (Grant, 2013).
Threat from Substitutes:
The main substitutes for heavyweight motorcycles include cars, scooter bikes, and sport bikes. Millennials, who are becoming a greater portion of the overall buyer's market as Baby-boomers begin to reach ages where riding and buying bikes, tend to prefer sport bikes to the traditional heavyweight cruisers (Grant, 2013).
Rivalry from Existing Players:
There are four major players in the heavyweight motorcycle market: Harley-Davidson, Yamaha, Suzuki, and Honda. BMW, Kawasaki, and Ducati also have high brand recognition. No brand controls more than 35% of the market. Therefore, when considering the technological capabilities and quality of the products that are similar, the rivalry from existing players is moderately high (Grant, 2013).
Other Factors: Financial Analaysis
Harley-Davidson's financials are a key component on internally analyzing Harley-Davidson and how well they are performing by comparing them against major rivals. On page 536 of case 7 in Appendix 2: Comparative Financial Data for Honda, Yamaha, and Harley-Davidson, we could compare and analyze their performances. Ending 2011, Harley-Davidson had the highest gross margin percentage at 42%, 7% higher than Yamaha and 14% higher than Honda Motor. However, its net margin ending 2011 was $-1,040,000, which was well below Yamaha and Honda Motors. Its operating income/assets percentage was highest of the three. Its inventory turnover also exceeded both Honda and Yamaha Motors. It had a remarkable return on equity in 2011 with 25% compared to Honda's 13% and Yamaha's 2%. By May 2012, the first-quarter financial results showed a year-on-year revenue growth of 16.7% and a net income growth of 44.3%, and Wendell anticipated that it would generate cost savings of around $310 million over the year because of Harley's restructuring program (Grant, 2013). So, Harley-Davidson looks to be on track after witnessing its first net in 2009; however, its estimated total sales in 2012 would be roughly 100,000 bikes short from what was shipped in 2006.
References
Grant, R. M. (2013). Case 7: Harley-Davidson, Inc, May 2012. In Contemporary Strategy Analysis Text and Cases (8th ed., pp. 520-537). Hoboken, NJ: Wiley.
Miller, P. M. (2012). Harley-Davidson in China. Retrieved from China Business Review: https://www.chinabusinessreview.com/harley-davidson-in-china/