External threats to Harley Davidson in the global motorcycle market

¶ … 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).

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.

The case shows that HD tried to leverage the expertise of Lehman when the former was in threat of recessionary market in the U.S. It presented an opportunity for HD; however the intention of HD was only to exploit the small and less influential size of Lehman as an exclusive supplier. It was a bigger opportunity for Lehman than was it for HD as the former would have been the sole supplier for HD for Tri Glides. However, a strategic mistake that Lehman Trikes did was that the company compromised their long-term strategic positioning against the short-term gains of being exclusive supplier to HD. In this strategic alliance of HD and Lehman Trikes, HD always dominated the partnership and this proved to a disadvantage of Lehman Trikes. The loss of business from HD that was faced by Lehman proved out to be bigger than the gain that Lehman Trikes made when entering into an alliance with HD. This is shown as HD announced restructuring of the same manufacturing facility that was responsible for to produce Tri Glides in York, PA (Looney, 2011).