Harley Davidson Case Study

"Harley-Davidson: At Last" as presented in Hartley's Marketing Mistakes and Successes presents the circumstances around HD's near collapse and since rinse to near mythic success. This case is a great example of marketing myopia; HD saw them-selves as 'full-size motorcycles' manufactures, not in the transportation, or even the entertainment industry. They believed no one bought motorcycles for transportation, but rather for leisure time use.

Like the automotive industry of the time, Harley-Davidson thought its cure customers would buy its products versus those of any of its major competitors, chiefly because they were all foreign. Interesting enough this was true, HD annual unit sales never changed; they just did not grow with either the market or even the population. In the 1950s motorcycle sales were approximately 50,000 units annually, of which HD had 70%. By 1971, there were nearly 4 million motorcycles registered in the US and HD market share had dropped to 5%.

Harley-Davidson was founded in 1903 by four men in a wooden shed experimenting with the internal combustion engine. By the beginning of the'60s, HD had practically wiped out all of its domestic competitors. Its motorcycles were used by nearly every police department in America. This was soon to change.

The president of Harley-Davidson at the time, William E. Davidson was the son of the founder. He believed the lightweight motorcycles were no threat to Harley's business. By the middle of the 1960's HD realized its mistake an tried to compete in this segment by bringing motorcycles from Italy. These were of no better quality than the motorcycles Harley was producing in its plants, and no where no wear the quality of the Hondas, the market leader at the time.

Harley-Davidson went public in 1965, eventually becoming a division of AMF, a recreational and bowling equipment manufacture. After losing

money for more than a decade, Harley-Davidson was sold to a group lead by Vaughan Beals, the division's vice president of sales.

Beals and Willie G. Davison, grandson of the founder, who was also the vice president of designs, set out to remake the company. They attend rallies, talked with Harley owners and discussed their likes, dislikes and complaints. This set the foundation for Harley-Davidson's future.

The biggest challenge facing Harley-Davidson was poor quality. Beals and other mangers visited Japanese plants, as well as Honda's plant in Marysville, OH. There they learned that they were not being beat by automation or advanced manufacturing processes, but by a professional management team and motivated workers.

The key decisions facing Beals and his team included such issues as:

* Does Harley-Davidson maintain the status-quo?

* Do they go into other market segments? Develop their own, partner with, or buy a light-weight motorcycle company?

* Expand their product line to non-motorcycles interests?

* Do they change the industry/market segment they compete in?

I.e., motorcycles versus full-size motorcycles, transportation versus recreation, entertainment versus transport.

* How was society itself changing, and what future would Harley-Davidson play in it?

* Did they have the right target market identified?

To a certain extent, all except the first option was adopted. Harley-Davidson introduced a multi-prong approach. It was apparent to Beals that Harley-Davidson could not continue as it had, quality, customer service and operations had to be improved dramatically.

One of the approaches was the successfully petitioned of Congress to add a tariff to all full-size imported motorcycles. Additionally, Harley-Davidson introduced "Quality Circles", and JIT as well as making each department in the plant a profit center, very similar to the very same companies they were seeking protection from. Between 1981 and 1988 these manufacturing improvements reduced inventory by 67 percent, increased production by 50 percent, reduced scrap and rework by two-thirds and decreased defects by 70 percent per motorcycle.

Harley-Davidson had to remake its image and expand its core customer base. Much like Lee Iacocca and Chrysler had identified a growing number of well to do people buying sports vehicles (before they were known as SUVs) to go with their Cadillacs and Mercedes. Harley-Davidson would add even bigger, more costly, thus more profitable motorcycles to its product mix for this growing market segment. Thus the term rubbies was developed, which stands for Rich Urban Bikers.

As part of Harley-Davidson's image make over they enforced their logo trademark very aggressively. They went so far as to having marshals serve warrants to companies and individuals illegally infringing on their trademark. Next they introduced licensed novelties and clothing so Harley-Davidson was now accessible, via these items, to everyone. Furthermore, dealerships were strongly encouraged to upgrade their facilities. The new dealerships not only sold motorcycles, but also the latest licensed