Expansion Strategies

Global Economy & Factors Affecting Harley-Davidson (HD) Motivations for expansion are primarily business and economics related. Expansion will open new markets for HD. Considering that HD is already an established global brand, entering new markets and an overall expansion process should benefit from the necessary supporting structure and stature to ensure reduced risks. There are other motivating elements as well. As the analysis shows, HD is a recognized leader on the market.

Companies look to HD as an element of leadership for the future in an industry that is often subjected to negative lobby from environmental organizations, among others. So, the motivation for expansion is also to consolidate this leadership statute and ensure that the HD brand is promoted worldwide as one based on values and firm beliefs. As any expansion process, this one is also likely to have risks. The first to be considered are operational risks.

These operational risks can be associated with expanding the existing operational structure and (1) creating new manufacturing units in foreign countries; (2) expanding into connected industries, with similar risks; (3) having to hire new employees, which can be particularly difficult in foreign markets or in a new industry, when new skills are required. Financial risks are also important and this type of risks can include accounting challenges. When expanding to a foreign market, for example, the challenge will likely be to repatriate as much of the profit with as little taxation as possible.

Financial risks will also include risks related to accessing the capital market. With HD located only the U.S., tapping the local capital will likely resort to previously established methods, including obtaining a bank loan. In foreign markets, this can often be more complicated, including because of a lack of knowledge of local market characteristics. One should not ignore geopolitical risks, particularly in the current challenging international environment.

Some of the markets that may seem safe in the present, because of increased political volatility, could become, overnight, a problem from a geopolitical perspective. This volatility could bring additional costs to a company like HD that has just begun the expansion process. HD's competitive advantage in global markets remains its strong brand, as well as its leadership-based model. In terms of its brand, HD remains a well-recognized brand throughout the world. Furthermore, it is a brand that is easily and immediately associated with the motorcycle industry.

This brand competitive advantage will likely facilitate the expansion process through an easier adoption in foreign markets. The second competitive advantage is HD's leadership and empowerment-based model. As discussed further below, this type of model allows the employs to perform creatively and innovatively in a coordinated environment, an environment where the creative freedom of the employees is only directed by the values of the company, which everyone has embraced and implemented in day-to-day life.

According to Lasserre (1995), the entry strategy for global expansion will demand on the type of market that the company is entering. For an established market, like Japan, joint ventures or acquisitions are the preferred entry form, while for emerging markets, an approach that lowers the risk, such as opening a representative office or working with local agents, should be the preferred choice. In the case of HD, the key would be to benefit from the company's brand value.

This will likely mean adopting an entry strategy based on franchising and/or licensing. This will transfer some of the risks to the local franchisors, while benefiting from a lower degree of exposure on a foreign market. At the same time, the current business environment also favors an Internet approach. In the case of HD, the high-value products that the company sells primarily (motorcycles) will not be the subject of online commerce.

However, the associated merchandise, such as jackets, clothing and fashion accessories, can also be sold through a company website. Primarily, however, the online environment could be successfully used for marketing and advertising. Through various social networking platforms, HD can better interact with its potential clients, but also with the dedicated HD fans. It is not necessary for a fan to become an immediate client, but it is important to develop an online community of individuals who are passionate about motorcycles and about HD in particular.

Part II: Corporate Leadership The key element for HD's organizational culture, but also for the role it plans to assume in the industry, according to the scenario being analyzed, is leadership. However, before discussing the organizational culture structured around the idea of leadership, one needs to briefly analyze a dichotomy that exists between what the company stands for and the idea of leadership. The company has been structured around the idea of complete freedom. Someone riding a Harley Davidson is as free as an individual can be.

However, complete freedom also has an underlying meaning of revolt against authority, something that HD motorcycles also represented. The revolt against authority is more difficult to put together with the idea of leadership, because, after all, leadership also means adhering to a commonly established set of norms and values. The key correlating word in this case is actually empowerment.

HD has implemented a program called "Optimizing Talent: A Culture of Empowerment." Through this program, the company was able to transform the organization from the traditional, hierarchical structure to an open model, a model in which individual employees are empowered to make decisions within a framework that is supported by the HD business processes and values. This is how the dichotomy is solved.

On one hand, the traditional HD freedom is respected, because employees are strongly encouraged to take risks and to feel free, albeit in a structured and regulated environment. The authority part has also been solved, with the structure been flattened instead of a hierarchical, top-down management structure. The entire organizational culture also encourages openness and transparency, including through the annual evaluation, where managers from all functional areas interact to compile an individual's evaluation.

In this context of empowerment, looking at the organizational culture at HD, it is important to quote Rich Teerlink, former CEO at HD, and Lee Ozley as they write a full article for the HBS Press defining the "leadership journey" at HD. For them, the new definition of leadership at HD is "the process of creating and sustaining an environment in which people work together toward the achievement of common goals" (Teerlink, Ozley, 2000). The idea is clear here.

The natural rebellion of HD employees is fostered towards creativity and towards being innovative. It is being channeled in a productive way. The employees, having accepted and embraced the HD values not only at work, but also in their everyday life, are willing to use their creativity in order to move the company forward along the lines set by objectives and values. Another important aspect that Teerlink mentions is that the management was willing to change the organizational structure in order to match this new perception about leadership and empowerment.

The previous hierarchic model could not work with an empowerment-based approach, since the former encouraged strict responsibilities and authorities. As a consequence, HD introduced a work circle organization system that focused on teamwork, but without the teams, as former CEO Teerlink described it. The idea was to group the employees at HD around the main work process at Harley rather than around a rigid hierarchical structure or around teams. Three main work processes were identified at Harley: create demand, produce product and provide support.

From a more mainstream perspective, these processes appear to be similar to marketing and sales, production and manufacturing and support functions, such as accounting or human resources. Employees at HD would come together into ad-hoc teams depending on the work process they were involved in. This obviously gave the company significant flexibility and a dynamic structure that could respond optimally to the challenges on the market.

There are two more aspects to be discussed when referring to HD organizational culture and to corporate leadership: HD was both an ethical and a learning organization. As an ethical organization, some of the values of the companies are clearly expressed. These include being fair, respecting the individual and encouraging intellectual curiosity. As is clear and has been previously discussed, these values are linked with the organizational culture and the notion of empowerment.

Part III: Strategic Plan Summary Harley Davidson appears to benefit from several competitive advantages and strong points, all of which give it a good position for a future expansion on the global market. These strong points include its leadership-based model, which empowers regular employees to become instrumental in the decision making process within the company and to be as creative and innovative as they can.

Another strong point is the company's brand and what it stands for: freedom, challenging authority, but also high quality, with manual manufacturing on most of its products. In terms of recommendations, the company should carefully choose the markets into which it wants to initially expand. Starting out in a market as challenging as the Chinese market, for example, despite its growing purchasing power, will be extremely complicated. The recommendation is that HD expands initially into markets that are closer, in characteristics and consumer preferences, to the American market.

These markets could include the European market, as well as the Australian market. Many of these markets are easier to understand and the cultural differences are not that obvious as with some of the developing markets. Risks range from political and economical risks to financial and operational ones. Many of these can be hedged: financial risks by investing in hedging instrument such as futures, while political risks by simply avoiding those countries that present a high level of such a risk.

The company can also decide on a gradual expansion process that would lower its exposure to potential risks. As previously argued, the best strategy for expanding in the case of HD, given the lower exposure to risk, is a franchise or a licensing process. However, the company will also need to closely monitor the selection of franchisor and the training for them: one of the company's most important assets remains its brand and improper or lesser quality service would damage that brand.

At the same time, the company could consider opening small presentation offices in some of the markets it is aiming for. These presentation offices could also include a small shopping area that could focus on the company's merchandise, while several HD motorcycles could be available for testing. The model would.