Harley-Davidson Global Expansion Strategy and Leadership

Global Economy and Factors Affecting Harley-Davidson

Motivations for expansion are primarily business and economics related. Expansion will open new markets for Harley-Davidson (HD). Considering that HD is already an established global brand, entering new markets through 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 in its market. Companies look to HD as an element of leadership for the future in an industry that is often subjected to negative lobbying from environmental organizations, among others. The motivation for expansion is therefore also to consolidate this leadership status and ensure that the HD brand is promoted worldwide as one grounded in values and firm beliefs.

As with any expansion process, this one is also likely to carry risks. The first to be considered are operational risks. These 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; and (3) hiring new employees, which can be particularly difficult in foreign markets or in a new industry where new skills are required.

Financial risks are also significant and can include accounting challenges. When expanding to a foreign market, for example, the challenge will likely be to repatriate as much profit as possible while minimizing taxation. Financial risks will also include risks related to accessing capital markets. With HD located solely in the United States, tapping local capital will likely rely on previously established methods, including obtaining bank loans. In foreign markets, this can often be more complicated, in part because of a lack of knowledge of local market characteristics.

One should not ignore geopolitical risks, particularly in the current challenging international environment. Some markets that may seem safe at present could become, overnight, a problem from a geopolitical perspective due to increased political volatility. This volatility could bring additional costs to a company like HD that has just begun the expansion process.

Competitive Advantages and Market Entry Strategy

HD's competitive advantage in global markets remains its strong brand, as well as its leadership-based model. In terms of brand, HD remains a well-recognized name throughout the world. Furthermore, it is a brand that is easily and immediately associated with the motorcycle industry. This brand advantage will likely facilitate the expansion process through 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 employees to perform creatively and innovatively within a coordinated environment — one where the creative freedom of employees is guided only 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 depend on the type of market the company is entering. For an established market, such as Japan, joint ventures or acquisitions are the preferred entry form, while for emerging markets an approach that lowers risk — such as opening a representative office or working with local agents — should be preferred.

In the case of HD, the key would be to leverage the company's brand value. This will likely mean adopting an entry strategy based on franchising and/or licensing. This approach transfers some of the risk to local franchisors while benefiting from a lower degree of exposure in a foreign market.

At the same time, the current business environment also favors an internet-based approach. In the case of HD, the company's high-value primary products — motorcycles — will not be the subject of online commerce. However, associated merchandise such as jackets, clothing, and fashion accessories can be sold through a company website.

Primarily, however, the online environment could be used successfully for marketing and advertising. Through various social media platforms, HD can better interact with potential clients as well as dedicated HD fans. It is not necessary for a fan to become an immediate customer, but it is important to develop an online community of individuals who are passionate about motorcycles and about HD in particular.

Corporate Leadership and Organizational Culture

The key element for HD's organizational culture — and for the role it plans to assume in the industry — is leadership. However, before discussing the organizational culture structured around leadership, one must briefly analyze a dichotomy that exists between what the company stands for and the concept of leadership itself.

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 carries an underlying meaning of revolt against authority, something that HD motorcycles have long represented. Revolt against authority is difficult to reconcile with the idea of leadership, because leadership also means adhering to a commonly established set of norms and values.

The key correlating concept in this case is empowerment. HD implemented a program called "Optimizing Talent: A Culture of Empowerment." Through this program, the company was able to transform from a traditional hierarchical structure to an open model — one in which individual employees are empowered to make decisions within a framework supported by HD's business processes and values.

This is how the dichotomy is resolved. On one hand, traditional HD freedom is respected, because employees are strongly encouraged to take risks and feel free, albeit within a structured and regulated environment. The authority dimension has also been addressed: the organizational structure was flattened rather than maintaining a hierarchical, top-down management model. The entire organizational culture encourages openness and transparency, including through annual evaluations in which managers from all functional areas interact to compile an individual's assessment.

In this context of empowerment, it is important to quote Rich Teerlink, former CEO of HD, and Lee Ozley, who wrote a full article for 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. The natural rebelliousness of HD employees is channeled toward creativity and innovation in a productive way. Employees, having accepted and embraced HD's values not only at work but also in their everyday lives, are willing to use their creativity to move the company forward in alignment with its objectives and values.

Another important aspect Teerlink highlights is that management was willing to change the organizational structure to match this new perception of leadership and empowerment. The previous hierarchical model could not work with an empowerment-based approach, since it encouraged strict delineations of responsibility and authority. As a consequence, HD introduced a work-circle organization system focused on teamwork — but without fixed teams, as former CEO Teerlink described it.

The idea was to group HD employees around the main work processes at Harley rather than around a rigid hierarchical structure or static teams. Three main work processes were identified: create demand, produce product, and provide support. From a more conventional perspective, these processes are analogous 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 gave the company significant flexibility and a dynamic structure capable of responding optimally to market challenges.

There are two more aspects worth discussing in relation to HD's organizational culture and corporate leadership: HD functioned as both an ethical and a learning organization. As an ethical organization, some of the company's core values are clearly expressed. These include being fair, respecting the individual, and encouraging intellectual curiosity. As previously discussed, these values are closely linked with the organizational culture and the notion of empowerment.