An Analysis on Harley Davidson's International Business Strategy

Harley-Davidson (HD) is a multinational corporation that has been able to successfully market its brand of high-powered, heavy weight motor bikes through transformation management, marketing and manufacturing. Harley –Davidson management created a brand that offers a lifestyle that many the world over sought to attain. Prior to the great transformation, Harley- Davidson, founded in 1903 was one of more than 100 companies producing high-powered, heavy weight motor bikes. HD found a niche in the US Government as their bikes were used by the military during World Wars I & II. By the end of the wars Harley-Davidson became the only standing American Manufacturer of high-powered, heavy weight bikes due to their reliability, popularity and prestige.

As Harley-Davidson’s popularity rose in the 1950s, competition ensued by the British & Japanese within a decade with the production of middle weight motorcycles entering the market. In hopes of expanding its portfolio in order to remain the chosen product, The American Machine and Foundry Co. (AMF) acquired HD but faced difficulties in trying to compete by making smaller bikes to contend with the British and Japanese through increasing production, and as a result the quality was sacrificed which caused sales to plummet. They were not able to fight against the more stable Japanese bikes that essentially took over the market. For the next 20 years, the AMF performed below par, miserably failing to execute the vision, mission and culture that Harley-Davidson was known for. Instead, the AMF created an Organizational cultural lag because they attempted to abandon the successful product of heavy weight bikes by moving to a new innovation much too rapidly without proper balance or practical application. With an increased production of bikes, a diminished workforce and quality jeopardized, chaos ensued and AMF devalued the Harley-Davidson brand. Later in 1981, a group of thirteen managers bought the company back from AMF in a leveraged buy-out. Richard Teelink, chief financial officer described the problem the new management faced: “The problem was us. The problem was the guys in the white shirts and ties.” His solution was for Harley to “get back to the detail” and the key was in knowing the business and the customer. While increasing quality and improving service to customers and dealers, Harley management focused on restructuring its image through its focus on the classic Harley bike styles and the company’s traditional strength- which were heavyweight and super heavy weight bikes.

The Restructuring of Harley Davidson took into consideration the pre-existing corporate culture values and beliefs in rebuilding the Harley brand image which embodies the basic American values of individuality, freedom and adventure. In addition, HD’s Management philosophy and strategy aimed to control innovation, penetrate international markets, adapt to cultural differences while maintaining the brand image. Reacting to its internally oriented management style of focusing on themselves rather than their customers, Harley management began to change the image of Harley-Davidson by offering a lifestyle rather than an “aging” baby boomer image. Utilizing a transformational leadership style stirred followers and employees to look beyond their own interest to the good of others, and in this case its customers; Harley management participated by riding their bikes to work and participating in rallies. Teerlink stated, “our customers want the sense of adventure that they get on our bike…Harley-Davidson doesn’t sell transportation, we sell transformation. We sell excitement, a way of life.” Using charisma, Teerlink provided a vision for Harley management and employees, a sense of mission and pride in the Harley brand and products. Harley management participation in riding their bikes to work demonstrated shared leadership involving peer or lateral influence to meet the objective of leading one another to meeting organizational goals or company achievement. Harley-Davidson realized that individuals needed to have a shared vision of the company values- know the customer, know the business, and pay attention to detail. This form of leadership and management style allowed Harley-Davidson to move from an internally focused or self managed organizational style. The development of methods for improvements and gaining company wide support was key.

HARLEY-DAVIDSON’s REGIONAL EXPANSION AND INTERNATIONAL BUSINESS STRATEGY
Harley Davidson products are currently sold in over 67 countries that include the North American, European, Asian Pacific and Latin American Regions. With innovative marketing strategies through research and development HD has implemented tactics to 1) ensure brand loyalty and 2) increase international development while sustaining authenticity. It is imperative for Harley-Davidson to retain its “Made in America” high-end brand while penetrating international market as that is the core essence of the appeal in foreign markets. However, HD must be critical in valuing multicultural diversity and differences in national cultures. The strategy that has allowed Harley Davidson products to currently be sold in these countries will allow them to expand anywhere in the world. Harley Davidson has branded itself as not just another product but, an experience and lifestyle. By creating the Harley Owners Group (H.O.G) whereby members receive a bi monthly magazine and a list of services including Harley rentals, discounted products, emergency road service and networking with additional Harley owners ensures brand loyalty and customer inclusion. In addition, technology through the movie industry has helped stimulate enthusiasm for the product abroad just as it has within the United States. Potential bikers around the globe can now visualize themselves through the lens of the “bad boy” image depicted in movies.

A large part of the success for Harley Davidson can be attributed to their new marketing and advertising strategy. This strategy emphasized the dynamics of the relationships with consumers. A large percentage of their current market of the customers comes from the professional sector such as the lawyers, doctors and school teachers. Management knew they needed to refocus their efforts on knowing how their customer interacts with dealerships and shops. This relationship is the foundation for loyalty.
In deciding where to expand, Harley Davidson must look at some key factors. First and foremost, they must know the culture of the area targeted for expansion. Secondly, current demographics on age and income should be used as a guide in segmenting the market. Advertisements must be created specifically tailored for the region. Translating English advertisement to the country’s native tongue will only produce mediocre sales.

GENDER 2007 2006 2005 2004 2003
Male 88% 88% 88% 89% 89%
Female 12% 12% 12% 11% 11%

MEDIAN AGE MEDIAN INCOME



Another option for expansion would be densely populated developing countries such as those on the continent of Africa, The Continent of Australia and also the Caribbean Region with its idyllic tropical backdrop and temperature suitable for year round riding. These markets would be looking for alternative means of transportation. The transportation would need to be inexpensive, light weight and use less gas when compared to the standard car. Harley Davidson has a line of bikes to fill each requirement needed for satisfaction.

For Harley Davidson to be successful in continuing its global expansion, they must provide the same amenities currently offered in the United States when applicable. For example, a promotion offering test rides would be the initial contact. Establishing a HOG members club that interacts with other countries would also be very beneficial. In addition, classes on how to ride and care for the bike would be needed. Globally, Harley Davidson must strive to make all their members feels like family as they’ve done in the United States.

Harley-Davidson’s main international business strategy is to bring a piece of the American dream overseas. This is their advantage over other motorcycle companies. In order to take advantage of the global market, they have created different marketing strategies within different cultures to appeal to potential customers. Not only have they developed ads specifically for different markets, they have even gone so far as to customizing their marketing approach to a specific culture. For example, in the Japanese market, Harley “offers shinier and more complete tool kits than those offered in the United States” (pg. W28). Harley has influenced German and Japanese cultures with their products and can definitely be considered a multinational corporation. They not only have major influences in these two countries, but Harley also has a joint venture with Porsche AG of Stuttgart, Germany to further expand their horizons in the industry.

Because Harley-Davidson bikes proved to be as popular abroad as they were in the United States, the company decided to think more seriously about international markets and exporting. Companies and firms like Harley engage in joint ventures, or co-ownership arrangements, in order to establish a direct investment presence in a foreign country that pool resources and share risks and control for business operations. In this joint venture with Porsche, Harley hoped to source and assemble power-train components for use in potential new motorcycle products.
The main reason my Harley has refused to produce overseas is because their main strategy is to promote the American dream overseas, and if these bikes were produced somewhere other than the US, then it wouldn’t fully represent the American dream. It is very important to them to protect the authenticity of each bike with the “Made in the U.S.A” label. This unique character is their advantage overseas, and if they lost this, they wouldn’t survive in the global market. However, producing overseas does have its advantages. Production costs can be lowered because the cost of shipping would not apply and perhaps some raw materials that they need are cheaper overseas than in the US.

Overseas production also means shorter turnover period, because once again, shipping overseas is not needed. Although it would decrease costs and make production more efficient in that country,producing overseas also has its flaws. A major concern would be abiding to the foreign country’s laws. Just because they’ve always done it this one way in the US does not guarantee that they are allowed to proceed to do the same in the foreign country.

Traditionally, the company’s ads had been translated word for word into foreign languages. Nowadays, the ads are developed specifically for different markets and rallies adapted to fit local customs. Harley also began to think more seriously about international markets by setting up a branch of the Harley Owners Group (H.O.G.) in Germany to serve European owners and fans. The H.O.G. gave Harley owners certain benefits such as emergency road service and opportunities to ride with other Harley owners. Furthermore, Harley began to actively recruit and develop dealers in Europe and Japan in order to improve their human relations.
This decision made the company stand out more because it made the company sound more prestige. Instead of being just another company supplying another means of transportation, I think it sent the message across that once a person gets a hold of a Harley bike, it can change the way they look at life. Getting a Harley was meant to bring more excitement into one’s life. This is what made a Harley unique when compared to other motorcycles.

Using an acquired needs theory, Harley-Davidson management exercised the need for achievement motivational theory with the desire to do something better to solve its problems, in particular, willing to change its corporate structure, its brand and marketing to generate and sustain its product offerings. Using motivator factors, Teerlink specifically sought out change job content through advancement and growth by working to eliminate its internally managed structure by focusing on the customer and paying close attention to detail. In learning the importance of relationships, Harley-Davidson management advanced its company practice through its strong relationships with workers which became a major component of the Harley-Davidson corporate culture. Harley-Davidson management knew that in order for the company to survive they needed to become a perpetual learning and improving organization.

Harley-Davidson management later began focusing on international markets to increase its sales and brand management. Marketing promotions were developed specifically for different markets outside the U.S. with its opening of the Frankfurt, Germany European office in 1993. Management also began to actively recruit and develop dealers in Europe and Japan. In addition, the company created a line of Harley Motor Accessories to increase their focus on customer initiatives.
Keeping the traditional Harley-Davidson look, and resisting the pressures and temptation from customers and dealers to expand at a faster pace, Harley-Davidson management continued its focus on the company’s long term strategic objectives: “to be number one in consumer satisfaction in the United States and abroad, to develop the ability to produce and market more than 100,000 units per year by 1996, and support those sales with parts, accessories, and merchandise.” Teerlink explained that, although the company had looked in manufacturing overseas, “our customers are buying a piece of the American dream. Overseas manufacturing just wouldn’t work for them.”
Through its continued improvement and expanding international markets including a joint venture with Porsche AG of Stuttgart, Germany and Japan, Harley-Davidson management, through its words and actions must demonstrate that continuous improvement of quality is a way of life and not just another corporate program to implement change.

HARLEY DAVIDSON PRODUCT TO SERVICES

As better built Japanese motor cycle began to take over the market, Harley’s share of its major US market – Heavy weight motorcycles fell to twenty three percent. Richard Teerlink CEO of Harley since 1987 explained the key was to know the business, to know the customer, and pay attention to details.

The company recognized it should focus on process were it is increasing quality and improving service to customers and dealers. Harley’s quality image was restored, as a result of this change in the philosophy of the company. Harley’s customers were called aging baby boomers, Teerlink didn’t like this description of his customers; his idea was that the customers want the sense of adventure more than simply riding the bikes.

The company built on the enthusiasm of its customers by creating the Harleys owner Group (H.O.G) many riding their bikes to work who also participate in Rallies. HOG members receive a bi-monthly magazine, emergency road service, Harley’s rental program for trips and opportunity to meet and ride with other Harleys owners.

In Japan, these services provided caused Harley riders to increase. The owners ranges from middle ages to younger riders who were intrigued by the mechanics of the American image. The company’s study ways to give Harley rider a smother rides because some overseas customers ride the bike at high speed of one hundred miles per hour. As a result, it emphasizes accessories that will give riders more protection.

The company created a line of Harley’s motorcycle accessories available through dealers or by catalogue, all adored with the Harley Davidson logo. The jacket, caps, T-shirts and other items, became popular with non-bikers as well. The clothing and parts also had a higher profit margins than the motor cycles, it made up to as much as half of the sales at some dealers. With all these, Harley gained popularity as the only bike you can develop a relationship with. The services render really made Harley Davidson a company selling excitement as a way of life the hallmark of the company.

In providing all these services there has been a lot of product differentiation. Harley’s products have been differentiated from all other products in the market by proving these services. The products and the organization are uniquely peculiar to their services, the organization behavior and culture which are different from that of their competitors.

A powerful analysis of successful companies in both the U.S.A. and Japan resulted in Theory Z:
How American Companies Can Meet the Japanese Competition, by William Ouchi. This
"Theory Z" is so named to designate a third model, different from both the old, rigid theory X
and the modern, flexible, theory Y contrasted by McGregor (Weisbord, 1987). Theory Z
anticipates much of the work that adopted the banner of "the learning organization." "Z
organizations . . . are intimate associations of people engaged in economic activity but tied
together by a variety of bonds;" he sees them as more like clans than bureaucracies (Ouchi, 1981,
p. 70). An essential factor is trust; another is recognition of the subtlety of human relationships.
When these factors are cultivated over the long-term, within a well-integrated organizational
culture, employees do not have their performance frequently appraised against measured criteria,
but accountability is maintained within a deeper and more subtle shared understanding of the
fundamental goals of the enterprise, shared by workers and managers.
This system includes the following principles of best management/leadership practice:
• Seek to establish a long-term employment culture within the organization.
• Use collective decision making as much as possible.
• Increase and reinforce the importance of individual responsibility.
• Establish a slow and long-term process for evaluation and promotion.
• Employ implicit, informal control that utilizes explicit, formal measures/tools of performance.
• Institute and use moderately specialized job descriptions and career paths.
• Develop policies and practices that support a holistic concern for and support of the individual both at work and at home (as regards family issues).
Theory Z has had a marked impact on the manner in which companies are led today. Theory Z
strategies have been instrumental in building stronger working relationships between
subordinates and their leaders because of the increased level of worker participation in decision
making as well as leaders' higher level of concern for their subordinates. Theory Z is a management framework that emphasizes long-term employment and teamwork. By moving overseas, a positive effect on Theory Z can be obtained because their expansion will open up new jobs, opportunities and also increase production. This will consequently increase sales and
thus stabilizing existing jobs. Furthermore, opening up more dealerships overseas will allow them to advertise their products and attract more customers. This would eventually lead to a stronger multi-lingual system in the company. The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s independent dealers to sell its motorcycles and related products and services to
retail customers. The Company depends on the capability and financial capacity of its independent dealers and distributors to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company’s independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

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