Hog There Are Many Opportunities for Harley

HOG

There are many opportunities for Harley Davidson moving forward in the motorcycle industry. Historically, Harley Davidson has sold most of its bikes in the United States and has enjoyed success almost exclusively in the heavyweight and superheavyweight categories. This leaves a lot of opportunity for Harley Davidson to capture other markets, if it can find the right branding and niches. There are also internal opportunities to lower costs and improve quality, both of which could increase profits at the company at least in the short run.

Lehman Trikes represents one of the opportunities that Harley Davidson faces (Looney & Ryerson, 2011). The trike industry is a niche part of the motorcycle industry, wherein Lehman offers parts and kits for converting existing motorcycles into three-wheeled motorcycles. This industry is likely to remain niche, despite some promising growth from motorcycle enthusiasts. From Harley's perspective, the deal represents a couple of opportunities. The first is that it gives them another outlet for parts sales, where Lehman would simply be a retailer of sorts as people seek to convert Harley bikes into three-wheelers using Lehman kits. Having Harley on board helps lend legitimacy to the kits, and working with Lehman provides Harley with an opportunity to capture revenues from the conversion of its bikes into three-wheelers (Huze, 2010).

For Harley the second opportunity that relates to the Lehman deal is the potential of the trike industry niche for development by Harley Davidson. Once Harley develops the parts and technology for trikes in-house, it will have the ability to sell kits on its own, or even to develop its own line of trikes. It stands to gain from Lehman, therefore, the technological capabilities to compete in this industry for itself, something that occurs a few years after the initial deal (Huze, 2010).

In general, this is the approach that Harley needs to take to develop their business further. Overall, Harley's business has been dependent on older people -- baby boomers -- purchasing bikes. As these baby boomers enter their 60s, they might be challenged to ride Harleys, which are heavy and relatively difficult to control. There are also balance issues as older people have lower equilibrium than younger people. Harley's ability to respond to the aging of its core market, followed by a smaller Gen X demographic, represents a challenge going forward in the long run. Trikes are a niche market, but any market that is growing is a good one. Further, trikes help solve the balance problem if not the control problem, and may be a way for Harley to stretch its appeal to its core market for an extra decade.

There are also opportunities overseas. Part of the problem for Harley is that its products have not traditionally appealed to the overseas consumer, where motorcycles are often viewed more as a specific transportation solution rather than a luxury item. This leads consumers to cheaper bikes. Harley has to consider that it needs to find ways to appeal to foreign buyers more in order to become less dependent on specific segments of the American market.

2. There are significant threats that Harley faces. One such threat is in the economy. The recent performance of Harley Davidson is such that its revenues today are still below the peak in 2008, the result of the economic downturn that reduced demand for luxury items, and that is usually what a Harley bike is for most consumers (MSN Moneycentral, 2013). This reduced demand is therefore an ongoing threat, and if there was any further economic downturn the company would be challenged to recover. It is now back to profitability after some cost cuts, but must consider that its business remains highly dependent on a health economy, and there is no guarantee that the economy will continue to recover.

Another significant threat for Harley Davidson is that the company is faced with an aging of its core customer, and that puts the bikes out of reach for many. The nature of the Harley bike is that its appeal wanes considerably once the consumer enters his sixties (and it is almost always "his"). The baby boomers are now at that age, something that threatens the long-run revenues of Harley Davidson. To counter this, the company needs to find ways to maintain its appeal to this market, and it needs to find ways to appeal to younger consumers, since there is a large cohort of millennials to whom Harleys could potentially be sold.

3. The alliance between Lehman and Harley Davidson represented an opportunity for Harley Davidson, yes. Lehman had a product that was selling and its business was growing. The result is that Harley saw an opportunity to develop exactly the type of niche that it needed. The company knew that trikes were also a way to extend its appeal to baby boomers, who only gave up their Harleys when they became physically difficult to ride. Thus, the trike was an opportunity to extend appeal and to capture a growing segment of the market.

The deal was a classic case of technology transfer. With the deal, Harley would gain the opportunity to produce parts for conversion kits, thereby giving it the opportunity to learn about building trikes. This expertise could then be used to help Harley capture a major part of the trike market, something that it knew would be pursuing over the coming years. The deal worked well for Harley as it was able to gain this new expertise and eventually it ended the deal with Lehman.

For Lehman, the deal was good because it gave the company an opportunity to gain significant sales from Harley. The company knew at the time of the deal that it was taking a significant risk in transferring the trike conversion technology knowledge to Harley, because Harley is a much larger competitor. However, Lehman also knew that if the kits were made with certified official Harley parts, that those kits would be more marketable.

Indeed, what happened was that Lehman experienced a significant bump in sales from the Harley deal. Harley conversions were already big business for Lehman and they became bigger business with the deal, so much that Lehman enjoyed two big years at a time when the industry overall was slumping, owing to the deal. Lehman had to know from the outset that this deal was going to be short-term in nature, and that in the long-run the deal with Harley was an existential threat of Lehman, should Harley put together its own kits or even a line of trikes.