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9-1
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
I. CASE ABSTRACT
At Harley Davidson, customers not only purchased a motorcycle, they bought
the “rebel” lifestyle Harley signified. This rebel image took a long time to
develop and constituted a major competitive advantage for Harley. Nothing
promised the same excitement as being on the open road on a Harley, its
Company Background
In 1903 William S. Harley and Arthur Davidson produced the first Harley
Davidson motorcycle in a 15’ x 10’ wooden shed with the words ‘Harley-
Davidson Motor Company’ etched into the door. The warehouse was located in
Milwaukee, Wisconsin, the company’s headquarters to this day. They were soon
joined by Arthur’s brother Walter, and by 1910, the company had begun to
establish itself, using its current “bar and shield” logo for the first time,
which it trademarked with the US Patent Office in 1911. In 1981, Harley
Decision Date: 2014 FY Sales: $4.2 billion
FY Net Income: $568 million
II. CASE SUBJECTS AND ISSUES
Aging Baby Boomers First Mover Advantage
Strategy Formulation Competitive Advantage
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
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III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
IV. CASE OBJECTIVES
1. To discuss Harley’s increasing foreign competition.
2. To discuss Harley’s business level strategy.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor-led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
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1. How will Harley Davidson appeal to younger buyers?
2. Can Harley maintain its American Icon status?
VII. CASE AUTHOR’S TEACHING NOTE—Not Available
VIII. STUDENT STRATEGIC AUDIT
I.CURRENT SITUATION
A. CURRENT PERFORMANCE
History:
• Founded in Milwaukee, Wisconsin in 1903 by William S. Harley and Arthur
Davidson.
Economic Performance:
• Listed on NYSE as “HOG” revenues rose dramatically in the late 1990s.
• After a stellar last five years, the stock is down 10 percent this
year. As we were preparing this document, the company issued a recall
for 126,000 motorcycles over a problem with the clutch that could cause
crashes. The stock price on October, 4, 2013 was $65.30, a year later
it was $59.37.
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
Rankings and Accolades:
• One of top 100 brands in the world. Recently ranked #96 in the World,
ahead of brands such as Mastercard.1
B. STRATEGIC POSTURE
Mission:
• Design, manufacture, and sell premium motorcycles for the heavyweight
market.
The mission statement has been appropriate for the years, but we believe it
should be adjusted if H-D wants to remain relevant in the stock market. As we
Objectives:
• Provide a quality and reliable product.
• Allow for highly customized and stylish products.
Overall, these objectives support the current mission.
Strategies:
• Traditionally, H-D targeted a narrowly defined market of middle-aged
males with disposable income (2012 65 percent of sales were to white
males over thirty-five), but we believe the new strategy needs to
target younger buyers and female buyers with appealing products.
1 Interbrand, Best Global Brands 2013, page 6.
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
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Policies:
Strong culture of Ethics based on five principles:
• Diversity and inclusion.
• Safety in the work environment (especially in foreign markets).
All of these policies meet the standard for corporate behavior and support
the clean, hardworking, American image that the company portrays.
International Operations:
H-D is approaching new markets in a different way than its home US market. It
is manufacturing new lightweight street bikes to meet the demands of foreign
markets, especially India and China. In an effort to keep prices competitive,
H-D also assembles the bikes locally to avoid tariff fees and to reduce
II. CORPORATE GOVERNANCE
A. BOARD OF DIRECTORS
• See Appendix A.
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
• Several members have experience in multinational corporations and
other manufacturing firms (Boeing, Cummins).
• Also several members have experience with strong brands and brand
development (e.g., Levi’s, Kering ect.).
Good mix of short and long tenured members ranging from start dates in 1991
to 2012
The H-D Stock Ownership Guidelines state that all directors must hold 5,000
shares of common stock and that members of the Senior Leadership Group must
B. TOP MANAGEMENT
• CEO—Keith E. Wandell
• CEO since 2009 and first “outsider” to be named CEO, since 1981.
Eight Member Senior Management Team:
• Somewhat diverse team
• Appears as if the strategic direction is set from this top level.
No information provided on how the executives interact with lower
levels of management.
III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)
A. SOCIETAL ENVIRONMENT
Economy:
• Rising gas prices, increased demand for eco-friendly, and fuel-
efficient transportation may drive more consumers to efficient
(smaller) motorcycles. (O)
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
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Technology:
• Tech advances allow H-D to produce a plethora of innovations, like
built in GPS, Cameras, and Airbag Systems. (O)
Political—Legal:
• Highly regulated industry. (T)
• Increasing EPA regulations. (T)
Sociocultural:
• Aging target market segment—baby boomers becoming concerned for their
safety. (T)
International Societal Environment:
For the most part, these issues are generally the same in all markets.
However, regulations are much more relaxed in many other nations, such as
developing countries. H-D has chosen to maintain the high level of standards
in its international markets, even though it may not be legally required.
Also, environmentally concerned movements have yet to catch up in those
countries.
B. TASK ENVIRONMENT
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
Several large multinational manufacturers dominate the global motorcycle
market.
• Threat of New Entrants: LOW
• Market is saturated.
Bargaining Power of Buyers: HIGH
• Many cheaper options for smaller and lighter motorcycles that
Substitutes: HIGH
• Cars, walking, public transportation, bicycles—some of these less
Bargaining power of Suppliers: HIGH
• H-D uses quality raw materials in its manufacturing process and
would be susceptible to any raw material cost changes.
Rivalry Among Competing Firms: HIGH
• Primary Competitors: Honda, Suzuki, Yamaha, Ducati, Kawasaki,
BMW, and Polaris.
Power of stakeholders: LOW
• H-D has connections with several Police departments, which would
be difficult for competitors to break into.
The customer has the most immediate impact on H-D. Its current target
customer is simply aging out of the motorcycle market and the potentially new
customers have cheaper alternatives. The company is designed and built around
selling “big and loud” bikes to the American baby boomer. This demographic
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
C. SUMMARY OF EXTERNAL FACTORS
External Factors
Weight
Rating
Weighted
Score
Comment
Opportunities
Rising Gas
Prices/Green
Movement
0.05
5
0.25
H-D is committed to R&D, even in
times of economic downturns.
0
Threats
Overall Economy
still Shaken
0.05
2
0.1
H-D is highly leveraged and needs
to improve its finances
immediately to combat any future
recessions
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
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youthful riders.
Difficult
Dedifferentiate on
Technology
0.05
5
0.25
H-D is committed to R&D, even in
times of economic downturns.
Rise in Culture of
Safety
0.05
3
0.15
Innovating on safety as best they
can, but motorcycles are
inherently more dangerous than
automobiles.
IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT)
A. CORPORATE STRUCTURE:
• Operations divided in two segments:
• Motorcycles & Related Products.
• Financial Services (HDFS).
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
• By the end of 2012, Harley operated over 695 full service dealerships
in the United States and seventy-three in Canada, and another 700 full
dealerships in Europe, the Middle East, Asia, and Latin America.
B. CORPORATE CULTURE
• Consistent with customer demographic, corporate culture reflects
“Rebel” lifestyle, supported by events, rallies, and rides.
• Rallies are a crucial part of H-D’s culture. Basically, they want every
motorcycle owner to wear a Harley vest, a Harley helmet, and Harley
Boots.
• Embracing a culture of “personal responsibility and stewardship of
C. CORPORATE RESOURCES
Marketing Objectives (Price, Place, Product, Promotion):
• H-D is the domestic leader in the touring and custom motorcycles
segment with approximately 50 percent market share. It offers prices
ranging from competitive to 50 percent higher than those from the
competition.
