Companies HD Threats for Harley Davidson Opportunities

¶ … Companies HD

Threats for Harley Davidson

Opportunities for HD in global market

HD and Lehman Trikes

Harley Davidson (HD) is heavy motorcycle company that manufactures and markets motorcycles above the capacity of 700 CC of engine capacity. HD is an American company and is a world leader in heavy motorcycle industry. Based in Milwaukee, Wisconsin, the company reported having annual revenue of $5.3 billion in 2011 (Harley Davidson, 2011). Gradually, the number of competitors in the industry has increased with Japanese, European, and Chinese manufacturers gaining foothold in American market. Since the domestic market share is increasingly under threat from international competitors like Suzuki, Honda, and Ducati, the company must assess the external threats to leverage its internal strengths to benefit from the opportunities.

Threats for Harley Davidson

There are several threats in the external environment of HD that may impact the business of the company in medium to long-term. The threats being presented by the external environment can be analyzed through an external analysis tool of Porter's five forces model.

Threat of new entrants: Moderate the threat of new entrants in the heavy motorcycle industry is moderate fro HD as the industry in capital intense and customer loyalty is achieved by investing number of years in the industry. Suzuki, Ducati, and Honda are the companies that directly compete with HD and these companies have been successful in reducing the market share of HD in the U.S. The product of this industry is heavy motorcycles and shall remain growing due to change in trends in the European and Chinese manufacturers of heavy motorcycles.

Threat of substitutes: There is an increased threat of infiltration of substitute products as a replacement of HD motorcycles as high performance machines. There is increased competition from within the industry as more number of non-American manufacturers of heavy motorcycles have captured market share in the American market. Honda and Suzuki are two such brands that have effectively positioned themselves in the North-American market of heavy bikes. Further, high performance technological gadgets such as computing devices, console games are also in the market that provides an indirect threat to the luxury items of HD as people are increasingly interested in purchasing electronic luxury items.

Threat of supplier power: HD also faces moderate level of supplier power as there is more number of buyers for them in the motorcycle industry as compared to before. Thus, HD has to maintain good relations with suppliers. Further, the impact of input costs also influences the end price of the motorcycles, therefore HD has to maintain proactive cost control mechanism with its suppliers and make available replacement of key suppliers to avoid any backlog in manufacturing due to supply shortage of materials.

Buyer power: The power of buyers presents a significant challenge to the company as the buyers have more choices and substitutes available now. There are ore heavy bike manufacturing companies pitching their marketing efforts to the buyers and thus the bargaining power of buyers has increased. Price sensitivity has impacted the industry due to entrance of Chinese manufacturers. HD's market position as compared to the decades of 1980s has got reduced manifold. Threat of rivalry: High: There is considerable rivalry among the industry firms as competition has increased manifold. Now the competitors have increased their quality through effective cost management techniques. Despite support from the politicians from Republicans and Democrats, HD could not maintain its market share in the U.S. due to external market environment (McBee, 2011).

Opportunities for HD in global market

To offset the threats in the external environment in which the company operates, HD will have to focus on sales and marketing opportunities abroad. The American market is already facing recessionary phase of economy and people may not be able to purchase the luxury items. On the other hand, Europe also faces an economic downturn and only countries such as Germany, France, and Belgium are currently showing good consumer confidence.

Asian markets: The potentially lucrative opportunity for HD is to expand its operations in Asian markets. Asia is the only region having most number of emerging economies. The size of economies in South and South East Asia is large enough to benefit the company. India, China, Bangladesh, and Sri Lanka are the economies that have good growth rates. The market of China is particularly large enough to offset the threats present in the North American market. Since number of competitors in the American market will keep increasing due to free-trade, it is imperative for HD to explore new markets.

European market: The countries that are in or close to Europe, such as Germany, France, and Turkey, present handsome opportunities for HD to expand its marketing and sales activities. Since Turkey is one of the most robust economies in the region and that has large number of people in middle and higher middle class, it is anticipated that HD can leverage that unmet demand.

Shift the manufacturing operations abroad: Although, HD is a symbol of 'Made in America' the current environment present significant opportunities to decrease the manufacturing cost of motorcycles by shifting the production to India or China.

HD and Lehman Trikes

In 2008, HD announced entering the three-wheel motorcycle segment and this showed that the downturn in the economy has compelled HD to enter in market segment that were new to the company. However, to leverage the expertise of Lehman Trikes in this segment, HD made a strategic alliance with the former to market the three-wheeler. Lehman Trikes was provided with the exclusive rights of supply of Tri Glide motorcycle. However, it was not later than 2010 that HD announced revoking the agreement with Lehman Trikes.