Case Study

1. Harley Davidson Creating An Enduring Mystique Case Study

2. Contents 1st Part Snapshots Challenges Bounce Back Success The Take-away 2nd Part Information Box Quality Circles Internal vs External Marketing Orientation Issue Box Should We Be Aggressive or Conservative in Our Planning What can be learned from the case study? Q&A

3. 1st Part Snapshots 1903 • Harley Davidson founded & manufactured 1963 • Has a solid 70% market share in U.S 1965 - 1983 • Honda lightweight cycles had successfully penetrate US market, having 44% of the market by 1983 1973 - 1983 • Harley's market share went from 77.5% to 23.3% in 1983

4. 1st Part Challenges • 1. Refuse to change from (a) to (b)

5. 1st Part Challenges 2) High in parts inventory 3) Down in quality and reduce productivity

6. 1st Part Challenges • Taken from: Reginald A. Bruce, Ph.D.College of Business and Public AdministrationUniversity of Louisville Year 2000 • Corporate management focused mostly on short term returns. • Belief in quick fixes for problems, such as throwing in computers and state-of-the-art machinery to improve productivity. • High break-even point that left the company vulnerable to unpredictable market fluctuations. • Management that woke up too late to the threat of foreign competition because of the "it can't happen here" syndrome.

7. 1st Part Bounce Back • The Top Management initiated • Participated and learned about customers concerns and complaints at Harley Owners Group (HOG) rallies & creates changes • Learned about Japanese plants and Honda • Implement the production improvement thru Just-in-time (JIT), Materials-as-needed (MAN), Quality Circles (QC) & Statistical Operator Control (SOC) • Educate the middle management and front line people in turning the plant to profit center by reducing defect products and increase productivity • Implemented product improvement thru new engine, stereo system, etc

8. 1st Part Bounce Back • The Top Management initiated • Enhanced its presence in Europe - Harley opened a branch office of its HOG club in Frankfurt, Germany, for its European fans • 1997 - A new engine plant in Milwaukee • 1998 – A new assembly plant in Kansas City

9. 1st Part Bounce Back • Recreate the public image with high quality licensed goods • (i.e leather jackets, cologne, jewelry, pajamas, sheets, towels etc)

10. The Harley-Davidson production plant has improved, between 1981 – 1988 Inventory reduced by 67% Productivity up by 50% Scrap and rework down two-thirds Defect per unit down 70% 1st Part Success

11. 1st Part Success • Harley Owners Group (HOGs) • The trailblazers for the successful growth and mystique to come

12. The branded merchandises/licensed goods has created New customer segment – Rubbies (the rich urban bikers) In 1992 the merchandises contributed $155.7 million in sales (alternate revenue for dealers) 1st Part Success

13. Harley- Davidson’s Growth in Revenue & Income (milllions of $), 1983 - 1994 1st Part Success

14. Motorcycle Shipments (Domestic & Export) 1st Part Success

15. Revenues & Income 1st Part Success

16. IMAGE 1st Part The Take-away The Harley-Davidson symbol is based on a pattern of associations that include the American flag and the eagle; reflective of the passion and freedom Americans enjoy. Harley promotes: a mystique appearance, individualism, the feeling of riding free, and the pride of owning a legend. • PRICE Developed a strategy of value over price. By not being able to meet demands, an attitude of must-have has developed. Customized products.

17. 1st Part The Take-away LISTEN TO CONSUMER DESIRES & CREATES QUALITY NOT QUANTITY "What the Harley management crew, who are masters of marketing, do well is listen to their customers. The result is that Harley cannot keep up with demand at current production levels" (Croghan 31). “Quantity isn’t the issue, quality is the issue. We learned in the early 1980s, you do not solve problems by throwing money at them” (Gary Slutsker, “Hog Wild,” Forbes, May 24, 1993, p.46)

18. 1st Part The Take-away LEADERSHIP It takes a leader who has the vision and confidence that things can be changed for the better PRESERVE THE STRENGTH OF BEING HARLEY DAVIDSON – CLASSIC & LEGENDARY

19. 2nd Part Quality Circles • To Apply Japanese management techniques which is Quality Circles • Quality Circles (QCs) – worker-management committees that meet on weekly basis:- • to talk about production problems • plans to improve productivity and quality • resolve job-related gripes on both sides. • QCs to increase employee involvement in quality goals and to improve communication between management and workers.

20. 2nd Part Internal vs External Marketing Orientation • Internal is appropriate…….. • When demand for product exceeds supply • When the product cost is high and the market can be expanded only if costs can be brought down • Where there is a lack of significant competition, and no competitive threat is expected either because: • Severe entry requirements in the industry or • The market is limited (H-D miscalculated)

21. 2nd Part Internal vs External Marketing Orientation • External orientation focuses on • External market environment (e.g. customer needs/wants) • External forces (e.g. major competitive pushes, changing laws and regulations, economic conditions) • Do all firms need marketing? • No • (e.g. health, and charity firms)

22. 2nd Part Should We Be Aggressive or Conservative in Our Planning • In growing market; to be conservative will result into inability of….. • firm to handle its resources expansion sufficiently • to control potential growth • On the other hand; it is good because it is not clear the growth is temporary or permanent • Do you think Harley-Davidson made the right decision to expand conservatively? • Yes • To improve its core business quality and • to ensure the growth is lasting

23. 2nd Part What can be learned from the case study? • That a firm can come back from difficulty • Leadership of high order. • Preserve the Core Business at all cost and strengthening its position • The power of enduring mystique for firm • Product uniqueness

24. 2nd Part Q & A • 1. Yes, Beals steps were correct • collected $81.5 million form Citicorp and solved financial ties against the firm • stopped Honda domination by tariff increase 4 -45% • increased owners moral by rallies, meetings, and promises • Finally increased qualities

25. 2nd Part Q & A • 2. The infatuation of Rubbies will last long due to……… • HOGs creates loyalty and enthusiasm • High price for bikes did not bother them • Beals capitalized on heavyweights’ quality

26. 2nd Part Q & A • 3. Not abdication; • Preserve the core quality and careful expansion. • 4. Yes, • I would invest due to….. • High value of Brand name • Strategic core business • Positive diversification

27. 2nd Part Q & A • 5. Resurgenceis not only luck; but is the combination of.. • good leadership, • preserve the core business and strengthening its position. • the power of enduring mystique • 6. Absolutely correct; politic is more important than management in some situations; this is what the case proved. Without congress tariff increase HD would be passed away.

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