Harley-Davidson, Inc. – Harley-Davidson, Inc., founded in 1903, is the only remaining American motorcycle manufacturer, although there are some new upstart companies.
CASE: V Harley-Davidson, Inc.
Harley-Davidson, Inc., founded in 1903, is the only remaining American motorcycle manufacturer, although there are some new upstart companies. During the 1950s and 1960s, Harley-Davidson has virtual monopoly on the heavyweight motorcycle market. Japanese manufacturers entered the market in the 1960s with lightweight motorcycles backed by huge marketing programs that increased demand for motorcycles. These manufacturers, which included Honda, Kawasaki, Suzuki, and Yamaha, eventually began building larger bikes that competed directly with Harley-Davidson.
Recognizing the potential for profitability in the motorcycle market, American Machine and Foundry (AMF, Inc.) purchased Harley-Davidson in 1969. AMF almost tripled production to 75,000 units annually over a four-year period to meet increased demand. Unfortunately, product quality deteriorated significantly.
More than half the cycles came off the assembly line missing parts, and dealers had to fix them to make sales. Little money was invested in improving design or engineering. The motorcycles leaked oil, vibrated badly, and could not match the excellent performance of the Japanese products. Although hard-core motorcycle enthusiasts were willing to fix their Harleys and modify them for better performance, new motorcycle buyers had neither the devotion nor the skill to do so.
In late 1975, AMF put Vaughn Beals in charge of Harley-Davidson. Beals set up a quality control and inspection program that began to eliminate the worst of the production problems. However, Beals and the other senior managers recognized that it would take years to upgrade the quality and performance of their products to compete with the faster, high-performance of their products to compete with the faster, high-performance Japanese bikes.
To stay in business while the necessary changes in design and product were being accomplished, the executives turned to William G. Davidson, Harley’s styling vice president. Known as “Willie G.” and a grandson of one of the company founders, he frequently mingled with bikers and, with his beard, black leather, and jeans, was accepted by them. Willie G. understood Harley customers and noted:
They really know what they want on their bikes: the kind of instrumentation, the style of bars., the cosmetics of the engine, the look of the exhaust pipes, and so on. Every little piece on a Harley is exposed, and it has to look just right. A tube curve or the shape of a timing case can generate enthusiasm or be a total turnoff. It’s almost like being in the fashion business.
Willie G. designed a number of new models by combining components form existing models. These included the Super Glide, the Electra Glide, the Wide Glide, and the Low Rider. Although these were successful, Harley-Davidson was still losing market share to Japanese competitors that continued to pour new bikes into the heavyweight Market.
By 1980, AMF was losing interest in investing in the recreational market and sold the company to 13 senior Harley executives in a leveraged buyout on June 16, 1981. Although the company was starting to make money in the early 1980, its creditors wanted payment, and Harley-Davidson nearly had to file for bankruptcy at the end of 1985. However, through some intense negotiations, it stayed in business and rebounded to become a highly profitable company.
In 1996, Harley-Davidson controlled more than 47 percent of the heavyweight (651cc and larger) motorcycle market, far more than its all-time low of 23 percent. Its products are considered to have “bulletproof reliability” because of manufacturing and management changes that resulted in products of excellent quality.
Owners of Harleys are highly brand loyal, and more than 94 percent of them state they would buy another Harley. The company sponsors the Harley Owner Group (HOG), which has more than 1,200 chapters and 750,000 members worldwide. Executives of the company frequently meet with chapters to obtain suggestions for product improvements.
In 2002, Harley sold 215,454 motorcycles domestically and 48,199 in the global market. It also sold 10,943 Buell motorcycles in that year. Its net revenue for 2002 was over $4 trillion, about double its 1998 net revenue. Its net income for 2002 was $580 million compared to $213 million 5 years earlier. In 2003, its 100th anniversary product line included 7 Softail models, 7 Sportster models, 5 Dynaglide models, and 7 Touring models. In addition, its VRSCA V-Rod, a new-style, $17,000 Harley was selling quickly even though it was a departure for the retro look of traditional Harleys.
Harley-Davidson motorcycles are distributed worldwide by a network over 1,300 dealers. These dealers typically have upgraded facilities that merchandise not only motorcycles and service but also a variety of parts, clothing, and accessories. Clothing and accessories are highly profitable items that enhance the motorcycle-owning and riding experience. For more information, visit the company’s website at www.Harley-Davidson.com.
Question:
- What kind of consumer owns a Harley?
- What accounts for Harley owners’ satisfaction and brand loyalty?
- What role do you think the Harley Owner Group plays in the success of the company?
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