HARLEY DAVIDSON: SIMON’S SLIM STRATEGIC ANALYSIS OUTLINE (DON’T NECESSARILY BELIEVE IT) INTRODUCTION Harley Davidson appears to be doing well, being financially sound and growing. This analysis will examine whether there are strategic problems ahead and propose strategies for the future. The standard procedures of strategic analysis, as outlined in Lynch (2000) will be followed: first an external analysis, from which opportunities and threats will be identified, then an internal analysis, that will highlight strengths and weaknesses. Finally, some strategies for the future will be proposed and justified. STAKEHOLDER ANALYSIS A full analysis of all the potential stakeholders is shown in Appendix A. From this analysis, two inter-linked stakeholder groups are identified as the most important: the shareholders and the employees, most of whom are also shareholders. The Shareholders are looking for growth in profits, the employees for long-term job security and good conditions, and maybe the ‘HD spirit’, at work. Their interests are similar in seeking growth and long-term success for the business, and ensuring that employment prospects at the firm’s home base are retained. EXTERNAL ANALYSIS Remote and Near Environments A full scan of the remote & near environments has been undertaken (see Appendix B.) Table 1, below, highlights the most relevant and important trends. TABLE 1: SUMMARY OF MAIN TRENDS FACING THE MOTORCYCLE INDUSTRY Aspect Trend Political Lowering tariffs world wide could encourage Japanese & European competition within the US Economic Growing world economy leading to growing demand; Greater use of low cost manufacturing countries to cut costs Social More diverse lifestyles mean that our old customers may be less loyal, but gives potential to new types of customers Technological New materials and other technologies are giving potential for better large motorbikes at the same or lower cost Competitors Increasing consolidation in the industry, resulting in two world player competitors, & a plethora of small ones. Customers Customers are decreasingly loyal to brands or identities; Increasingly like ice cream Suppliers Suppliers of manufactured products are increasingly global rather than local. Labour force Increasingly concerned with ice cream and less loyal to the companies they work for From this, the most important trends are concluded to be …….. Industry Analysis An industry analysis was undertaken using Porter’s five forces framework (Porter, 1980). The full analysis has been given in Appendix C, but is summarised in Figure 1, below. FIGURE 1: PORTER’S FIVE FORCE ANALYSIS OF THE MOTORCYCLE INDUSTRY New Entrant Threat: Medium & Growing Buyer Power: Medium Supplier Power: Rivalry: Medium & could well increase Low & decreasing Increasing Substitute Threat Medium/ Low, increasing from ice cream In brief, four of the five forces, though currently not strongly prejudicial to industry attractiveness, are moving against industry attractiveness, in particular because …. . To conclude the industry analysis, the motorcycle industry is reasonably attractive now, but the future is looking more difficult. From the foregoing analysis, the following Industry driving forces, Key/Critical success factors, Opportunities and threats can be concluded, as presented and explained in Tables 3 and 4, below. TABLE 2: INDUSTRY DRIVING FORCES TABLE 3: KEY SUCCESS FACTORS IDF Explanation & Implications KSF Explanation & Implications Globalisation is cutting …. Low cost world sourced …. company costs and increasing manufacture of reliable quality competition in manufactures Lifestyles and leisure styles are …. Strong & adaptable brand …. becoming more diverse image Technology is improving all …. Marketing /distribution strength …. aspects of the motorcycles globally TABLE 4: OPPORTUNITIES AND THREATS Opportunities Explanation Threats Explanation Growing leisure interest in bikes worldwide: …. Growing competition from small companies with …. continues market growth lower costs; threat that they could join with larger companies Increasing ease of trade makes the exploiting a …. Strong & effective large globally based competitors …. world market and lowering costs more feasible in a consolidating industry; Industry concentration gives the potential to …. Decreasing brand loyalty means that purchase …. form useful relationships with firms in other decisions are increasingly being made on the basis of countries price & performance In conclusion, HD is facing an increasingly hostile environments with a number of specific threats, particularly …… Never the less, there are a number of changes that could represent opportunities, particularly …. INTERNAL ANALYSIS The process of industry analysis will use a number of techniques described in Lynch (2000) and Johnson & Scholes (1999) to ascertain the main strengths & weaknesses of HD. A resource-based approach will first identify especially unique and intangible strengths & weaknesses. Then two market-based approaches (functional Audit & Key Success Factor audit) will help compare HD with 2 competitors (Honda & BMW), important given the increasing competitiveness of the heavyweight motorcycle industry. Tangible & Intangible Resource Analysis A full appraisal of the tangible and intangible resources can be found in Appendix D. Table 5, below, summarises this analysis. TABLE 5 TANGIBLE AND INTANGIBLE RESOURCE ANALYSIS Resource Strengths Weaknesses Tangible Financial Resources Currently Financially sound Small compared to competitors: limited ability to invest in new areas Tangible Physical resources Good plant and operations in the US. Probably less efficient than competitors; no assets outside US Intangible Technological resources Only strength is an agreement with Porsche Very weak technologically; no record/reputation technologically Intangible Reputation resources Very strong brand in the US Brand of some but limited value outside the US Human Resources Extremely loyal and valuable workforce, who No or weak abilities in marketing and manufacture in other countries themselves strengthen the brand In conclusion, this analysis highlights ….. Value Chain Analysis A full description of the Value chain analysis can be found in Appendix E. Figure 2 summarises this analysis. Firm Infrastructure: Good senior management has transformed the firm, but it remains small compared to global competitors Margin: Adequate but possibly insuff- technology or mar- icient for financing major new model, HRM: Excellent, but no skills or abilities outside the US ket development Tech Development: Very Weak, so the brand relies on its lack of technology. Procurement: Very good relationships with streamlined supplier base, and new Brazil operation can reduce costs further Inbound logistics: Operations: Outbound logistics: Marketing & Sales: Service: good advanced JIT Excellend highest level very good because ….. Excellent relationships Excellent in the US; very procedures US operations and brand strength in US. weak outside…. Very weak outside US FIGURE 2: VALUE CHAIN ANALYSIS This analysis highlights that ….. Functional audit comparison with competitors A full appraisal of HD’s functional areas can be found in Appendix F. Table 6, below, summarises this analysis. TABLE 6 FUNCTIONAL AUDIT COMPARISON WITH COMPETITORS Function HD Honda BWM Corporate management Proven itself in recent changes ? Not Known ? Not Known MIS in the US outside US in the US and workdwide in the US ?? worldwide R&D practically none; dependant on access to larger motor group access to larger motor group traditional product Manufacturing very good but limited scope for access to larger motor group access to larger motor group further improvement Design Marketing Excellent in traditional niche only & able to develop in new niches Sales & Distribution in US; outside US Worldwide Worldwide From this analysis, a number of important issued emerge ….. Key Success Factor audit with competitors A full appraisal of HD’s abilities in the KSF areas can be found in Appendix G. Table 7, below, summarises this analysis. TABLE 7 KEY SUCCESS FACTOR COMPARISON WITH COMPETITORS Function HD Honda BWM Low cost world sourced manufacture of reliable quality Strong & adaptable brand image Strong ; adaptable Strong ; adaptable Strong; adaptable Marketing /distribution strength globally US; outside US worldwide worldwide This analysis highlights some important problem areas …….. Conclusions: Strengths and Weaknesses Table 8, below, summarises and explains the main Strengths and Weaknesses that emerge from the aforegiong analysis. TABLE 8: STRENGTHS AND WEAKNESSES Strengths Explanation Weaknesses Explanation Adaptable, and change oriented workforce and …. Limited ability do develop new non-traditional and …. manufacturing/management orientation technologically sophisticated products leaves HD very vulnerable strategically Very strong brand, marketing, distribution and …. Limited global marketing/distribution constrains …. service ability in the United States growth potential …. Lack of international orientation limits scope to cut …. unit costs if the industry becomes more competitive In conclusion, HD is currently doing OK and has a number of important strengths, but there are a significant range of weaknesses that could well present major dangers for both the shareholders and employees for the future. If HD does not work out some radical strategies and visions for the future, now, when it is still doing well, it may well, like Volvo and British Airways did during the 1980s & 1990s, end up in a very weak position within a few years. DETERMINING STRATEGIES Table 9, overleaf, shows a TOWS matrix which presents a number of ideas for addressing numbers of combinations of Strengths, weaknesses, Opportunities and Threats. Some things must be done immediately for the immediate survival of the organisation. These are … Others present great potential for future strategic success. These are ….. Drawing these together, two major strategic options emerge that the HD management should seriously consider: (Remember, you can suggest anything) 1. Horizontal integration/Concentration, through full merger/alliances/ joint ventures with other motorcycle companies. The industry is consolidating, and to survive against BMW & Honda, HD need to supply different types of bikes with different brand images to appeal to different and changing types of customers with different and changing aspirations. Other bike companies in the US and World-wide face a similar situation, and common problems & interests can be combined to offer new products with strong individual brands, & to better market HD bikes world-wide. Companies could include CZ, Motoguzzi, Suzuki, Triumph, etc etc. Stockholder returns will be improved, and the potential dangers to the employees’ futures lessened. 2. Ultimately merging/ being taken over by a major motor manufacturer. Ultimately, both HD & other smaller manufacturers need access to high level technological capabilities, as Honda and BMW have now. The car industry is consolidating. The right merger, negotiated now at a time of strength, will be better for shareholders and employees than one forced on the company later due to competitive difficulties. Likely groups could be Renault/Nissan, who have a record of successful integration and who would bring Japanese manufacturing skills. and Volkswagen, who have excellent Eastern European and US experience. Both have caring policies and values towards employees, which is important. Daimler/Chrysler, Ford and Toyota would also bring many skills, but all have a less caring employee philosophy, and the former is facing difficulties.
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