Harley Davidson Case

Harley-Davidson (Case No. 3)

        Harley-Davidson was started in 1903 by William Harley and neighbor Arthur Davidson. They created the first two-horsepower engine that fitted onto a bicycle frame. By 1907, Harley-Davidson had gained a reputation in motorcycle racing with numerous wins in the Milwaukee-area races. They soon were recognized as the motorcycles heavyweight manufacturers. By 2003, Harley-Davidson has reached its 100 years anniversary and as it enters its 101st year, they must re-think their strategy to maintain its reputation and to generate more sales and to increase its revenue.

1. Problem Statement

After reaching its centennial year, Harley-Davidson must face new challenges to keep growing the business further and to continue to deliver a continuous stream of exciting new motorcycles, related products and services. Harley-Davidson’s customer group, the baby boomers, are aging. The average age of customers had increased from 38 to 46. Also, generation X are not large enough to keep Harley’s sales at previous year's level. On the other hand, generation Y had little interest in the company’s motorcycles and they did not identify with the “Easy Rider” or “outlaw biker” images that once, used to appeal baby boomers.

Harley’s competitors have also increased. Japanese manufacturers have come with a similar motorcycle model that is more affordable.

Harley-Davidson will have to overcome these obstacles to maintain its reputation and its sales as high as possible.

1. Alternatives

1. Status Quo.
2. Market segmentation to target young people and future millennials.
3. New Product line to attract more customers in the European markets.

1. Analysis

1. Status Quo.

Do nothing about the problem and continue to do business as usual. Harley-Davidson can opt-in for maintaining its current strategy, targeting “baby boomers” customer group who are not “babies” anymore. The average age of customers has increased from 38 to 46. In 2003, the average age of purchasers of other brands was 38. Within 5 to 10 years, there will be fewer baby boomers and Harley-Davidson’s sales might begin to decline. Baby boomers were lured to the appeal of the “outlaw” image that Harley-Davidson provided but soon this group is going to disappear.

        Generation X is not a large group, so focusing on Generation Y is the next option. Unfortunately, Generation Y lacks interest on Harley’s products. They do not follow the “outlaw” trend. The motorcycles’ price tags are keeping 20-year old customers away from Harley-Davidson. They simply cannot afford it.

Harley-Davidson’s 14-month production run is causing an unfavorable short-term production problem since the company’s waiting list now requires only 90 days, from its previous 2 years to get a motorcycle. Having large quantity of invetory is pushing Harley-Davidson to offer financing with zero dollars down.  Dealers have started to have a decline in inventory and they have begun to charge premiums over the listing price. This will affect Harley-Davidson’s revenue.

Since Harley-Davidson is entering its 101st year, a change in strategy must be done. It has been too long since 1903 and a lot had happened in between. The world has changed so Harley-Davidson must change too. Focusing in baby boomers, Generation X and Y is feasible, unfortunately, if they continue doing so, Harley’s sales with decrease and its revenue will soon be minimal compared to previous years.

Pros: Harley-Davidson already knows its customer group, know its behavior and it is more likely to provide products that they want.

Cons: Baby Boomers are aging and soon they will disappear. Generation X is not as large as Baby Boomers. Generation Y is not interested in Harley-Davidson’s product.

This is a feasible solution, although, not recommended.

2. Market segmentation to target young people and future millennials. 

Generation X group is not as large as The Baby Boomers, therefore, Harley-Davidson is aiming to gain the attention of Generation Y which are millennials. Generation Y group lack interest in Harley’s motorcycle. A new market segmentation strategy must be implemented to grab Generation Y’s attention. Demographics, locations and buying behavior need to be analyzed to create a strategy that will make a millennial “crave” for Harley-Davidson’s products.

Generation Y is more technology wise and they are immune to most traditional marketing and sales pitches, since they grew up with these. Therefore, it is imperative to develop a plan of action that will increase Harley-Davidson sales and revenue.

Pros: A new market segmentation analysis will offer a better understanding of Generation Y’s behavior. Using this analysis will help Harley-Davidson to prepare for Generation Y and future generations and to keep customers engaged.

Cons: Doing a market segmentation analysis could be time consuming and costly. Available budget would be a constraint.