Motorcycle Market Motorcycle Industry Environmental Analysis

One of the primary determinants of success or failure in most industries is the level of competition and response to that competition by individual firms. In many industries this is entirely straightforward, as competition is direct in terms of product offering and pricing scale: McDonald's and Burger King are clearly in direct competition with each other, for example. Things are not quite so clear-cut in the motorcycle industry, as the product lines of many of the key players in this industry differ dramatically and cannot all be said to be in direct competition with each other, the competitive forces and macroenvironmental influences that exist in the industry can affect different companies in very different ways.

Numerous Competitors: In some regards, the motorcycle industry is very well populated and well balanced, and there is not a clear industry leader. While Harley Davidson has the largest market share at 28%, Honda's 25% share is quite close. Yamaha, Suzuki, and Kawasaki all have greater than a ten percent share (17%, 13%, and 11%, respectively), and there are several smaller companies that specialize primarily in higher-end motorcycles. Factoring in the diversity of Honda's other industries of operations -- as well as Yamaha's and Suzuki's -- makes it clear that in terms of clout and purchasing power Harley Davidson doesn't stand a chance. This differentiation as well as the strong market shares of the top five competitors undercut Harley Davidson's seemingly-obvious position as the market leader, increasing competition.

Industry Growth: Motorcycle sales in the United States have been steadily dropping over the past several years, while sales of scooters and other similar products have been increasing. This has...

Essentially, companies that are not poised either to effectively diversify into other product areas or stake a very strong and immediate claim on a solid market share of pure motorcycles is liable to succumb to the forces of competition. Attempting direct competition in motorcycle sales would lead to losses for all companies, though companies that are better diversified would be better able to withstand such competition and engage in ongoing aggressive tactics as a means of securing future profitability and security through increased market share. Overall, competition is increasing.
Differentiation: Much of market share and sales is built on branding, which is essentially a form of differentiation; this high level of perceived differentiation in the motorcycle industry decreases competition. Though at one level motorcycles are a near commodity, serving as transportation vehicles that can be easily interchanged insofar as this utilitarian purpose goes, many if not most motorcycle owners derive a great deal of personal pleasure and intrinsic utility from their motorcycles. These individuals buy specific motorcycles made by specific companies for very specific reasons; a Harley Davidson enthusiast would never consider his or her bike interchangeable with a Suzuki, and vice versa. As these individuals constitute a large part of the market, differentiation is very important.

High Fixed Costs: Especially as factories become more and more high tech, the fixed costs that are a part of the motorcycle manufacturing…