Identify Harley Davidsons Strategy

Identify Harley's strategy and explain its rationale.

Harley is a globally recognised brand firmly associated with large motorbikes with a historic emphasis on style, individuality and freedom rather than on technology, speed or sports. From a segmentation view they belong in the heavyweight motorcycle market and are particularly strong within a sub-segment of super heavyweight. Their bikes are strongest in the Cruiser motorcycle segment, feature in the Touring bikes segment (focus on their style and image) and through acquisition of Buell, now have a presence in the Performance models segment. The Harley-Davidson image and the customer loyalty earned and sustained by the unique 'Harley Experience' are its greatest assets.

The appeal of the Harley brand was central to the corporate strategy. The focus of the strategy was to reinforce and extend the relationship between the company and its consumers. The Harley Owners Group was established to be a vehicle to unite management, employees and customers in a special community and to foster relationships and shared experiences towards a bonding with the brand and the company. The loyalty of Harley owners is evident in their repeat purchase behaviour - over 50% of sales between '99 and '05 were to previous owners, while brand attraction helped account for a 20% share from first time buyers. The brand was also successful in effecting a demographic and socioeconomic shift away from young workers to middle-aged, higher income owners.

Harley lagged behind its competitors in terms of technological innovation and rapid progress but insisted on playing the game on their home strengths of distinctive features and traditional designs. They lacked the economies of scale of their competitors who could spread the costs of research and development across higher unit volumes of products and multiple product lines. Instead they concentrated on incremental improvements to their engines, frames and gearboxes to increase reliability and power and reduce vibration. In 2006 they had 36 models available with lots of customisation options so that each purchaser could virtually have a personalised motorcycle. This captures their reconciliation between differentiation and economies of scale - a wide range of customisable options while standardising on key components. Sales of parts, accessories and merchandise had grown to a 20% share in 2000.

Harley established a dealer development program to improve its distribution and position it in support of the brands requirement for a sustained 'Harley Experience'. The program increased support for dealers while imposing higher standards of pre- and after-sales service and better dealer facilities. Training programs, test ride facilities, rider instruction classes were all initiatives designed to differentiate the Harley products from their competitors and success is evident with sustained demand.

Not all initiatives were so successful, the intent of the Buell acquisition was to broaden the customer base by merging the comfort and style of a Harley cruiser with the performance attributes of a sports bike. While by no means a failure the Buell strategy has performed steadily but has not attracted the same demand from the market and annual shipments now approach just 12 to 13 thousand.

Compare Harley's resources and capabilities to those of Honda. What does your analysis imply for Harley's potential to establish cost and differentiation advantage over Honda?

Harley has continuously upgraded its manufacturing operations and invested in plant and machinery both to introduce advanced process technologies and to expand capacity. Despite constant development and investment, Harley's low production volumes relative to Honda and the other Japanese manufacturers imposed