HD Executive Summary the Forbidden

HD Executive Summary

The forbidden image of the motorcycle rider in the Forbidden City

Harley Davidson Executive Summary: Entry into the Chinese Market

Organizational Purpose

Beginning as a representative of the renegade motorcycle counterculture, Harley Davidson is now beloved international brand name representing rebellion and freedom. It seeks to bring this ethos to China. "For years, iconic motorcycle maker Harley-Davidson Inc. has pushed hard to find ways to sell its motorcycles in China," and the company has an opportunity to open its first retail outlet in China since World War II (Nakashima, 2006, p.1) Liu Xintong, secretary-general of China Motorcycle Industry Association applauds the prospect, saying: "Motorcycle riding fans are still eager to get top machines like Harley-Davidsons" (Nakashima, 2006, p.2).

Organizational goals

Harley Davidson wishes to make its presence in China as ubiquitous in densely populated cities as in rural areas, and take advantage of the fact that there are now fewer trade barriers preventing mass entry into the market than before. It wishes to create a motorcycle culture within China. The size of the population, and the fact that many Chinese people are accustomed to riding bikes would make Harley Davidson's product seem ideal for the average Chinese consumer. Harley Davidson represents Americana. The newly affluent sectors of the China market are open to the company's motto of "Live Large" like an American (Nakashima, 2006, p.2; Harley Davidson USA, Official Website 2007).

Performance measures

China's middle class is expanding, although the company may take time to show a profit, as "the company will have to sell its products, which can exceed $20,000 retail, in a country where most Chinese make around $1,000 a year," thus although the potential is "enormous" to develop a leisure-oriented market of motorcycle riders, the financial risk is also great (Nakashima, 2006, p.2).

Consumer behavior

Motorcycle use at present, is currently limited by national laws. 170 Chinese cities limit or ban motorcycle use or ownership, allegedly because of air and noise pollution, traffic concerns, and safety concerns. This means that although Harley Davidson is allowed to sell its motorcycles in China, the majority of Chinese citizens cannot use the vehicles in the streets. The spokeswoman for the Shanghai Public Security Policy Consultation Office said: "We are not encouraging motorcycle use" (Nakashima, 2006, p.1).

Global markets

After China joined the World Trade Organization in 2001, import restrictions, quotas, and tariffs dropped substantially against foreign motorcycle manufacturers, but municipal traffic ordinances have remained (Nakashima, 2006, p.1). These prohibitions function as "de facto trade barriers" (Schmid 2004).

Risk and return analysis

The size of the population and the interest in Americana means China offers a relatively untapped market. Because the relaxation of market barriers to entry into the Chinese market have only recently come down, the potential for return for a first-mover like Harley Davidson is enormous, particularly as it already has strong brand name recognition. Yet there is also great risk if local governments continue to place restrictions on motorcycle use and construction, such as engine size (Nakashima, 2006, p.1).

Furthermore, "a population with a restricted but expanding disposable income will be a challenge" ("Harley-Davidson roars into China" BBC News, 2006). The Chinese business culture remains "fast-changing, enigmatic and anything but transparent, China is a nation where local corruption and shifting rules abound" (Schmid 2004). At present unlicensed, unauthorized Harley Davidson dealers are now operating in China, catering to local enthusiasts, but if the company does not act now it could lose the brand integrity and recognition it has worked so long to build around the world, as these dealers capitalize upon the name without giving money to Harley Davidson, and sell an inferior product, diluting the Harley brand name's reputation for quality as well as speed (Schmid 2004).