Strategic management concepts and organizational problem analysis

¶ … Generation Alternatives 1-2 pages Important Section Recommendation 1-2 paragraphs This a Grad level strategic management class.

Harley-Davidson: Preparing for the Next Century

Harley-Davidson is not only a motorcycle manufacturer, but an emblem of the American society. Today nevertheless, the company faces the specific problem of an icon -- that of no longer being up-to-date, trendy and desired by the customers.

Harley-Davidson continues to generate strong financial results, but fact is that the incidence of sales has decreased. It would as such appear that the company is in need of a new strategic approach to help it reshape and reposition itself within the industry in a means which generates customer demand.

At a deeper level, the problem is manifested by the fact that the Harley-Davidson sales are based on history, tradition and sentimentalism. And the sales are attached to the target market of the manufacturer, which has nevertheless aged from 35 to 47. These consumers are as such unable to generate sustainable sales and revenues. The younger consumers, while appreciative of the Harley-Davidson brand, seem to prefer lighter versions, such as those manufactured by Honda, Yamaha, Suzuki or Kawasaki.

2. Problem analysis

As it has been mentioned in the previous section, the underlying problem at Harley-Davidson is that it cannot generate sustainable sales and revenues as its primary target base is aging. The motorcycle manufacturer would traditionally target consumers in the 25 -- 34 age group, but, as statistics have shown, the average age of the modern day Harley-Davidson consumer is of 47. At this age, people make purchases more from a sentimental value, rather than extensive, full capacity use of the motorcycle.

Harley-Davidson has for decades focused on strengthening its brand and making its mark on the American history and society. And it has attained this objective, but it has neglected a fact of life -- the aging of its consumer base. The Harley-Davidson bikes are filled with tradition and strongly placed in the American conscience, but they are not popular and trendy for the young consumers. They consume more and they are larger, heavier and as such more difficult to operate and upkeep by the buyers.

In such a context, the younger consumers turned to other bike makers, which were better able to serve the emergent needs of the modern day society. Gradually, Harley-Davidson lost its supremacy within the younger consumer segment to makers such as Yamaha, Suzuki, Honda or Kawasaki. As a parallel, this situation is not uncommon, a similar risk having been materialized in the case of Ford and General Motors, who did not adapt their offers to the new needs of the American consumers, and as such lost supremacy to Toyota.

In the case of Harley-Davidson, the problem was propagated by the increasing popularity of the Japanese bike makers in the United States. These new players targeted a new market formed from older males and younger females, who could not afford or could not operate the heavy Harleys.

"They [Honda, Suzuki, Kawasaki and Yamaha] marketed smaller, quieter, and more fuel-efficient motorcycles that required little or no maintenance and were easier to handle compared to Harley bikes (Harley motorcycles weighed between 450 and 800 pounds). These characteristics attracted younger riders, women, and older riders; riders who could not afford the more expensive Harley motorcycles; bikers who did not want to tinker with the motorcycles; and those who could not muscle them around steep curves" (Noland and Kotha, 2007).

3. Root causes of problem

The main problem faced by Harley-Davidson refers to a steep decrease in their sales volumes, and adjacently, sales revenues. The root causes of the situation can be pin pointed to the following:

The failure of Harley-Davidson to recognize the changing needs of the customer base

The emphasis of Harley-Davidson on tradition and historic resonance in the detriment of niche segments and specific needs

The threat from the external environment linked to the increasing popularity and presence of Japanese makers in the United States

The operational inefficiencies at Harley-Davidson, especially as opposed to the operational processes at Honda. "The [Honda] assembly line was neat and uncluttered -- unlike our operation, where the line was always littered with parts and material. There was minimum paperwork and things flowed very smoothly."8

In the Honda plant, inventory was controlled through a just-in-time (JIT) system that used no computers or automation. Moreover, motorcycles were built to order rather than for inventory" (Noland and Kotha, 2007).

4. Generation of alternatives

Within the presented context, a question is being raised regarding the future of Harley-Davidson. In the generation and selection of the most adequate course of action, it is first essential for the firm to identify its objectives. If it would, for instance, be focused on preserving its heritage, it would strive to implement a market penetration strategy or a market development strategy, through which it would sell the same products. If, on the other hand, it would hope to innovate and re-launch itself within the market, it would consider either of product development or diversification (Tutor2U).

4.1. Market penetration

The market penetration alternative sees that Harley-Davidson would focus on selling the existent bikes within the existent consumer markets. This strategy would specifically imply more aggressive marketing through which more members of the selected target base are convinced to purchase the products. In essence, Harley-Davidson would hope to achieve the following:

Consolidate or even increase the market share of the current products

Ensure dominance within the United States market

Enhance competitive strength by reducing the competitive position of the Japanese makers.

Despite the advantages of such an approach, fact remains that the existent customer base of the company is irreversibly aging, and focusing on them exclusively would be inefficient from a business standpoint.

4.2. Market development

Within the market development alternative, Harley-Davidson would focus on promoting its existent products onto new markets. Specifically, it would emphasize on selling the bikes to younger consumers. Such a strategy would however be ineffective as the consumers outside the Harley-Davidson target market are interested in lighter, cheaper and more easily to operate and maintain bikes. In such a context then, this alternative is not feasible as it would only deepen the already existent problems at Harley-Davidson.

4.3. Product development

This third alternative is characterized by the fact that Harley-Davidson would be selling newly created products onto the same markets. Specifically, it would create more accessible versions of the bikes and retail them to the current customers.

"The oldest of the estimated 80 million Baby Boomers are now entering their late 50s while the youngest Boomers are just entering the earlier part of their 40s. As a generation, Boomers are more affluent and active than any American generation preceding them. . . .We believe that as Boomers age, they are likely to continue riding (indeed, as they retire they may very well ride more)" (Noland and Kotha, 2007).