Harley Davidson`s Motorcycle: Complexity of Internationalization
1. Executive Summary
The study finds that the entry market strategy conducted by Harley Davidson is effective and favourable for the firm though it has several potential risks. This study provides an analysis on international market expansion, with Harley Davidson as the case study. The context of this study is based on the complexity of internationalisation. Internationalisation could bring both opportunities and threat for an MNE. The opportunity to gain a larger market is interesting, however, there are various barriers to overcome before reaping the favourable gains. The objective of this study is to describe and evaluate the entry market strategy conducted by Multinational Enterprises when entering new foreign markets. A special case to explore in this paper is the strategy of Harley Davidson to open up a new markets in Europe and Asia. The United Kingdom is chosen in Europe to do the specific market analysis and India is chosen to represent Asia. Data is collected by documenting information yielded from publicly available documents of Harley Davidson, including an annual report in qualitative and quantitative form. The qualitative data were analysed systematically in a matrix comprising stakeholder, cultural and strategy aspects. Quantitative data were descriptively reported to see the trend of Harley Davidson's profitability before and after entering the Indian and the UK market. The detailed macro-environmental risk associated with entering the both markets is discussed. And geopolitical risk, as well as opportunity, is analysed. Then, a SWOT analysis was conducted to discuss the case as well as to formulate strategic recommendations.
2. Introduction
Harley-Davidson is a major US motorcycle manufacturer that sells its bikes worldwide through a network of more than 1,400 dealers. The company offers heavyweight cruiser and touring models, sportbikes, and dual models that can be used on- and off-road. It has a corporate office in the United States. The US generates almost 70% of Harley's revenue. Outside the US, Harley's manufacturing plants are in Thailand, Brazil, India, and Australia, with regional offices in England and Singapore. Harley operates through two segments. It's core motorcycle manufacturing operations (HDMC) generate more than 85% of revenue each year, and Harley-Davidson Financial Services (HDFS) contributes the remainder. Harley-Davidson's revenue has remained static for the last several years, hovering around the $6 billion mark. The company increased e-commerce sales by more than 30 percent in 2018 with its product debut on Amazon in the US and T-Mall in China. Harley's long-term strategy includes launching 100 new motorcycles by 2027, developing a broader customer base, and improving dealer performance. Harley-Davidson’s marketing strategies are primarily focused on providing a personalized experience to its customers to allow them to connect with the brand. The company has also introduced a multi-year manufacturing optimization plan to reduce costs, which includes consolidating its assembly plant in Kansas City, MO to its York, PA plant and closing its wheel operations in Australia. Basically, the company has its regional office in England to represent Europe and in Singapore to represent Asia. About 16 percent of all new Harleys are sold in Europe, the company’s second-strongest market behind the U.S. Harley-Davidson has viewed the European Union as a growth opportunity, going wheel-to-wheel with Euro competitors Ducati, Triumph and BMW, whose bikes are especially popular. Harley-Davidson continues to face tough competition from other Japanese and European motorcycle makers in the European market.
3. Literature review
Globalisation is the worldwide movement toward economic, financial, trade, and communications integration. The Market extension strategy in across the border should consider several aspects namely, political economy, national culture, and international business strategies such as intended strategy, deliberate strategy and emergent strategy.
I. Macro-Environmental risk in India
The macro-environment generally refers the broader context within which a company conducts its commercial operations. It is the fundamental guiding factor throwing light on the overall market conditions like nature and kind of people, society, culture, lifestyle, the role of government, economical conditions along with the presence and use of technology. One pf the popular tools to assess the risk of macro environment risk id PEST analysis. PEST analysis assesses the influences of political, economic, social, and technological factors of a business to be conducted across the border.
Economic
The current slowdown in the global economic scenario affected almost every industry across the world. There has been increasing in unemployment and low consumer spending power. This leads to consumers not opting to buy expensive and luxurious motorbikes. This further pressurizes the companies to reduce the prices for their bikes.
Political
Political factors will have a greater influence on the organization and industry and it is the duty of the organizations to comply with it. It is necessary for the organizations to comply with the legislation implemented non-conformance of which may lead to serious implications on the organization. The government has implemented certain restrictions in the import policies.
Social
The lifestyles and culture of India is changing drastically. The population of India is increasing every year and this will have a direct impact on the automobile industry. Although the population of India is increasing every year the population growth rate is decreasing over a period of time.
Technological
Advancements in technology boost the manufacturer with enhancements in standards. Organizations began to adopt e-business to improve brand communication and marketing. Technological advancement makes the supply chain and transactions along the chain simple. Organizations reduced costs with effective IT technologies and increased the rate of information transactions.
II. Macro-Environmental Risk in The United Kingdom
The external environment analysis of UK can be done by evaluating political, economic, social, technological and legal factors as they direct the business to a great level.
Economic Factors
In the economy of the UK, the contribution of the UK motorcycle industry is notable through having an annual turnover of about 5billion pounds. In the overall economy of the UK, motorcycle manufacturing adds a value of about a 2.8billion pounds. Sports and leisure are also a prominent sector of the UK motorcycle industry that signifies a favourable point for the business of Harley Davidson as its bikes are highly suitable for sports and leisure activities. Due to the recent economic crisis purchases of motorcycles have declined, but indigenous motorcycle manufacturers have even gained good growth in their market share.
Political Factors
The motorcycle manufacturers in the UK have strong political support in order to create growth of the economy. This is a favourable symbol for the business of Harley Davidson in the UK. The government’s objective in the UK is the development of clean manufacturing technologies and to a reduction in carbon emissions. For the motorcycle manufacturing companies, it is a significant aspect to keep the improvement in safety aspects of the motorcycle products in order to keep traffic regulations followed properly.
Social Factors
In the UK, the adult population uses motorcycles to a good level. In the UK per 1000 people have 22 motorcycles. More than 3 million people in the UK hold a driving license for motorcycles. In UK, riders want motorcycles that can provide them convenient riding experience, which are time-saving and can be easily parked.
Technological Factors
In the UK, the existing players in the motorcycle manufacturing industry research and development are the main dominating activities for the motorcycle manufacturing companies. All manufacturers of motorcycle products in the UK are following advanced and expert engineering processes. Suzuki the keen competitor of Harley Davidson is working with Intelligent Energy of Loughborough University for the production of hydrogen-powered motorbikes.
III. Geopolitics Risks and Opportunities in UK and India
Geopolitics is the study of how geography and economics influence politics and the relations between countries. Understanding geopolitical risk is important in a world that has become more closely intertwined. It also can have a direct relationship to the amount of risk investors are willing to take. Every business needs to follow international politics and economics in order to have a knowledge of the interrelationships of the nations of the world, their political and economic relationships, alliances and conflicts. Geopolitical risk is the number one global corporate risk. Internationally it poses increasing management challenges, particularly at the board level. The physical locations of premises, complex supply chains, geographically-mobile workforces and cyber connectivity have led to greater risk exposure emanating from the cross-border transfer of goods and currency exchange, as well as employee and customer movement and increased technical integration of businesses. The intellectual property right if Harley Davidson can be in danger because the IP rights are not always taken as seriously by international governments or business rivals as they are in the United States. There are various legal compliances in these markets. Culture and business operations are different in each country and as such can present some challenges. Understanding geopolitically driven risk impacts and managing them across the company is essential.
There are numerous geopolitical opportunities as well. There are various free trade agreements (FTA) between The United States The UK and India. After the trade agreement removes subsidies given by the local government and those funds can be put to better use. There are open opportunities for foreign direct investment (FDI) that the US companies can make to the UK and Asian countries including India. These agreements increase the possibility of expansion of business. There are lots of bilateral agreements which eliminate tariffs and other trade taxes. This gives companies within both countries a price advantage. It works best when each country specializes in different industries. They agree to not copy the other's innovative products. They adopt each other's copyright and intellectual property laws. Another opportunity is that the company can stay on top of several other competitions.
4. SWOT analysis (The United Kingdom market)
Before entering any market, an adequate analysis should be undertaken. The strengths the company possess makes it different in the market. It is very essential for any company to pursue more opportunities and to know their upcoming threats; it gives a better chance to develop a competitive advantage.
Strength
Harley Davidson has brand loyalty amongst the target customers of the company. Also, the wide variety of products of the company according to standard, performance, touring and custom adds to the strength of the company. Unique product and brand value. Symbol of strength, power and machismo.
Weakness
Harley Davidson bikes are highly-priced products which may not fit the reduced buyer power of the consumers. The general idea about the company is that the motorcycle manufactured by the company is a luxurious product. In which the quality and design are given more importance than the price of the product. The target customer is low range.
Opportunities
The United Kingdom's demands for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world. The population of youngster are increasing. The international heavyweight market is growing and is now larger than US heavyweight market. The US bikes has its own reputation in the UK.
Threats
Harley’s ongoing capacity restrains a shortage supply and a loss in domestic market share in recent years. Harley’s average buying age is 42 years old and increasing. The European motorcycles noise standards are more stringent than those of US standards. Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified.
5. SWOT analysis (Indian market)
Strength
Harley Davidson has many different models of motorcycles available. The manufacturing cost in India is very cheap as compared to other markets. The wide variety of products of the company according to standard, performance, touring and custom are the strength of the company amongst others.
Weakness
Harley Davidson bikes are highly-priced products which may not be suitable for the Indian market as the disposable income of the average population is very low. People are struggling for basic things rather than luxurious life.
Opportunities
Indian population is among the world’s largest populations. The economy grew rapid just after US and China. India has the highest number of young people.
Threats
The Indian market has lots of competitors. Competitor bikes like Kawasaki, Suzuki and Royal Enfield are threats to Harley Davidson. These competitors are fuel-efficient as well. So, the company should consider about the new launches and give something extra in its engineering performance it may affect in demand of this company product.s
6. Conclusion
The macro-environment factors enumerated in this case study emphasize major opportunities for business growth and resilience. These opportunities are based on conditions of the remote or macro-environment. Harley-Davidson is entering in to various markets all around the world. It has adopted the export method to inter into these markets. However, it has own production plant on Brazil and India. In the United Kingdom market, it has adopted the export method. This analysis indicates that Harley-Davidson should reform its marketing strategies. Such reform must address the opportunities based on increasing attitudes about leisure and women’s interest in chopper motorcycles. Harley-Davidson can significantly increase its business performance through these opportunities. The geopolitical risk is high as the company has its own standards and values that are different from the other motorcycle manufacturer.
