Harley-Davidson: SWOT analysis

The business is a leading automotive company that produces heavyweight motorcycles, motorcycle parts, accessories, apparel and general merchandise. The company provides financial services like wholesale and retail financing and insurance programs at the same time. The company was started by William Harley and Arthur Davidson in 1903 (Nimwegen & Kleiner, 2000; Bronson & Beaver, 2004) and the Harley-Davidson (H-D) trademark has been used for more than 100 years now. The company’s operation mainly include the US and Europe and currently employs 9,700 people.

The company’s headquarter is in Milwaukee, Wisconsin, USA. As of December 2006, the company’s recorded revenues amounted to $6,185. 6 million, which is an increase of 9% over 2005. Its operating profit was $1,602. 5 million during fiscal year 2006 with a net profit of $1,043. 2 million in fiscal year 2006. The company’s leading market share in the US, gives the company a competitive advantage over the others. On the other hand, the strong competition within the industry could adversely affect the company’s business and its results of operations.

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Demographics

Demographics are important when it comes to understanding where the industry is likely to be headed. The motorcycles industry is composed of all classes of on- and off-road motorcycles including scooters and mopeds. In the case of H-D, the demographic profile of its consumers is varied with no particular social class. In general, this also goes with the whole global motorcycle industry. On the other hand, the average H-D motorcycle consumer is usually a married male, with a household income of $78300, and 46 years old (Bronson & Beaver, 2004).

As mentioned by Bronson and Beaver, H-D products are typically used for recreation with 31% of customers having college degrees. Female customers make up only 9% but 90% of its customers has the intention of becoming repeat customers. In the global context, the motorcycle industry has higher male customers than female, but unlike H-D, most customers use the product as transportation especially in the Asian countries. There is also no particular age range and educational background since these are quite varied in the global context.

Market Demand, Growth, Size and Weak Market Rivals

According to one motorcycle industry report in Pakistan (Policy Analysis, 2006), the production of global motorcycle increased from 30 million units (2004) to 40 million units the following year. This only shows that the demand for motorcycle is growing. The market growth remained relatively steady throughout the 2001-2005 periods. The biggest producer is China with 17 million units, next is India with 7. 7 million units. The market growth is attributed to the rapid expansion of the Asia-Pacific market, although excellent rates of growth were also experienced in the US.

On the other hand, Europe has suffered with negative rates of growth. It is also mentioned in the same report that Honda, Suzuki, and Kawasaki (all Japanese brands) dominate the global market. In fact, its world market share is 50% due to its strong presence in the low cost countries. Although H-D had regained its leadership role in the heavy and super heavyweight classes, Japanese and even European manufacturers such as BMW and Ducati are quite active in the growing and highly profitable market. In relation to market size, 41.3% of the global value is occupied by Asia-Pacific. US is 28. 9%, Europe is 26%, and the rest of the world is 3. 8%. Other regions of the world, notably Australia/New Zealand, the Middle East, and Africa contributed relatively little in terms of sales and production to the overall motorcycle market.

Emerging Technologies and Competition

The new available materials and other technologies in the global environment are potentials for better large motorbikes at the same or lower cost and are improving all aspects of the motorcycles.

Engineering a demonstrably safer motorcycle could also widen the potential customer base, thus increasing sales. Motorcycles that are environment-friendly is becoming very popular since people are now becoming more environment-conscious. With the advent of hybrid cars, the motorcycle industry is also considering hydrogen-powered two-wheeler, which is emissions-neutral that could reduce harmful chemical and particulate matter emissions. Honda, Yamaha, Kawasaki, Suzuki, and BMW are major competitors of H-D and all these are based outside the US (Bronson & Beaver, 2004).

Most competitors are diversified as compared to H-D and prices of competitors’ products are more affordable.

New Market, Customers, Suppliers and Economy

Although H-D had established strong positions in the motorcycle market, other Asian companies are also able to penetrate and dominate the market. The strong growth in Asia is the primary reason why there is a new market for the motorcycle industry. Low-end models shifted closer to new markets in Asia such as Taiwan, Thailand, and Vietnam.

Developing economies in Southeast Asia and South America had created a need for easily assembled, inexpensive transportation even as the maturing economies in North America, Western Europe, and Japan had increased demand for high-end recreational models. Customers are becoming decreasingly loyal in the global environment due to the numerous choices available. However, the female participation in the workforce and the subsequent rise in disposable income have had a positive effect on the motorcycle market.

The suppliers of manufactured products are increasingly global rather than local, thus manufacturers could now source supplies from low cost manufacturing companies to cut cost. A global economic slowdown is expected for the following years. The US and Eurozone are not excluded in the said slowdown. Higher long-term interest rates and a slowdown in global housing markets are suggesting that consumers and businesses will become more reluctant to spend and invest. A weak economic outlook for the US and Eurozone would greatly affect H-D since these are the two key markets for the company.

H-D could experience low revenues if the slowdown in both US and Eurozone continues.

Government and Regulations

Not following regulatory compliance would give a negative effect on the industry. Certifications from the US Environmental Protection Agency (EPA) and the State of California Air Resources Board (CARB) are needed before products are released in the market. In addition, the European Union, Japan and certain emerging markets are also considering making motorcycle emissions and noise standards more stringent, increasing the pressure on the industry. Also read Ducati vs Harley Davidson case study

References

Bronson, J. W. , & Beaver, G. (2004 June/July). Strategic change in the face of success? Harley-Davidson, Inc. Strategic Change, 13 (4), 205-217.

Government of Pakistan and the United States Agency for International Development (USAID). (2006 December 1).

Policy Analysis on the Competitive Advantage of the Motorcycle Industry in Pakistan; Problems and Prospects. Pakistan: Competitiveness Support Fund Printing Office. Nimwegen, J. V. , & Kleiner, B. H. (2000).

Harley-Davidson Motor Company. Management Research News, 23 (7/8), 121-127.

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