Hog Case Study

Industry and Competitive Frame

Industry Structure: Fragmented

Product Differentiation: Differentiated

Technological Change: Slow

Product/Service Technology: High

Location: Global

Model of Transition: Industry Life Cycle

Phases of Transition: Late Growth / Early Maturity

Product Life Cycle: Late Growth / Early Maturity

I. Uncertainties that may affect industry structure &

II. The plausible assumptions about each important causal factor

The uncertainties that exist for the Motorcycle Industry are fluctuations in the following categories: government regulations, price of supplies, Fuel Cost, Global Demand for motorcycles, Product innovation, customer loyalty value (CLV), target market, and market share.

The casual factors that drive these uncertainties are an important factor when forecasting the future of the Motorcycle Industry. The most likely scenario for government regulations will push the industry towards going “Green” and becoming more environmentally friendly by requiring lower emissions. They will require the industry to improve these emissions standards. Currently the average motorcycle averages 40 MPG (miles per gallon) in the city and 50 MPG on highway but they still emit smog into the environment. The industry will most likely use the fuel consumption statistics to their advantage by relating to the current price of gasoline and the fact that the average car gets 20 MPG and SUV’s get even less at about 16 MPG.

Price will be a major uncertainty for the industry. The industry relies on other companies to provide them with materials so that they could assemble the bike. The increasing cost of transporting these materials from the manufacturers to the motorcycle assembly plants are going to increase and therefore lead to increase in the operating cost for the industry and lead to higher price for the finished product resulting in no value added. The price of the finished product is a very important factor for the industry because all the players in the industry are trying to attract the younger target market and are competing on price. The Japanese manufacturers have a mindset that they are willing to incur short-term loss so that they could gain market share. This strategy is bad for the industry because every company will try to reduce its prices and will eventually not be able to make significant profit. This fact needs to be carefully monitored so that no one player tries to influence the overall industry.

Economic conditions in the U.S. significantly affect the firm’s performance from year to year. During an economic recession, Harley-Davidson will feel its effects since consumers tend to tighten up discretionary spending during rough times resulting in no value added to the company. This is what is currently happening in the economy.

Global demand fluctuation also is an important factor to the overall success of the industry. The global demand for the heavy weight motorcycles grows at an average core rate of 7% to 9% per year and has averaged 8.6% since 1991 for Harley Davidson. This trend will most likely continue because of the Baby-Boomers who previously purchased these bikes will continue to do so as they live more active and adventurous lives then previous generations. The baby boomers are more affluent then previous generations. The global demand will rise because of this fact. It will also rise because they are not only catering to the older consumers but also towards the younger generation and women. The industry is creating bikes that are cheaper and faster that appeal to the younger consumer. This trend will spread globally because of the Blue Ocean created by Harley Davidson because of the Rental Programs, and the Riders Edge programs that will be emulated by the other players in the industry. This will lead to the Red Ocean scenario again and companies will compete at the same level within the industry.

We also believe that players in the industry will make strategic alliances with other industries to cross sell their products such as Harley currently produces clothing and accessories to increase and diversify its revenue sources. The industry will continue to compete on all aspects such as price, quality, and functionality. This intense competition will lead to a Red Ocean until a new innovator can emerge. The industry will most likely continue to invest in Research & Development to improve the quality of their products, to try to innovate, to get a better product out to the market and even innovate the way they assemble and market their product to the consumer. Also, personalization and customization of motorcycles will increase as television programs such as American Choppers, and West Coast Choppers are glorifying them.

All these factors will lead to an expansion of the Target market and more intense competition. Customer Loyalty Value will most likely rise for the industry because many of the individual producers have a wide variety of products that they can offer to their customers. The industry will most likely target previous customers more to get them to purchase a secondary bike. This trend will continue since the largest buyer group numbers are steady for the next several years, currently there are 41 million US men in the age group of 35 to 54 and that number increases to a little over 41 million in 2020. Also currently there are 80 million baby boomers of those the oldest ones are entering their late 50’s and the youngest boomers are just entering earlier part of their 40’s. These groups will be heavily targeted by the industry to either purchase their first motorcycle or 2nd motorcycle.

III. Plausible assumptions about each important casual factor

The most important casual factors are the level of quality of the motorcycles, product innovation and marketing.

These three factors are predetermined meaning that change is likely to happen and is largely predictable and they are constant meaning that these areas in the industry are unlikely to change. However, product innovation is uncertain meaning that product innovation depends on other irresolvable uncertainties in the industry.

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