Business Unit Analysis on Harley Davidson

M2:A2

By: Rick Stevens

Argosy University

The Analysis of H-D’s External Environments

     There are major driving forces that call for change in the external environment of the motorcycle industry. Some of the forces call for better emissions testing, smoother and quitter rides and a more comfortable ride for the rider and passenger. In the past, the industry didn’t call for extreme comfort while riding a bike and left everything to the upper road. But now as the “baby boomers” get older and were the leading rush of the motorcycle fad in the 60’s and 70’s, there has come a time to make a ride more comfortable for this group. This now includes such things as radios, drink holders, headsets for the helmets, heated seats, and heated hand grips amongst other things. As some of the other motorcycle manufactures have started to work toward this type of ride, it hasn’t been as common for Harley Davidson. However, with time the company gets into the new comforts of riding. As the industry became stronger on racing bikes and the more sporty style motorcycles, Harley began to build its customer base on that side with the Buell motorcycle and have been quite successful.

     H-D can build its customer base by tailoring to more customers. By adding a driver school the company has been able to increase its interest in the riding population and by expanding strongly into the European market the company has the opportunity to increase its sustainability. The big changes in the crude oil cost has also been a driving factor into many new customers as the cost of fuel has peaked to $6.50 a gallon in certain areas in the country. Many people are looking for cheaper alternatives for transport and Harley Davidson can be part of that new change by adding a motor scooter division for a cheaper alternative or by increase the sales on their cheaper motorcycle line such as the Sportsters.

     During the analysis of the dynamics of competition with the help of the Porter’s Five Forces Model of Competition we were able to see many areas to cover:

• Rivalry - Our current strong competitors includes Ducati, Polaris, BMW and Honda.
  
• Threat of Entry – As the demand for motorcycles increase, so does the new competition coming in to help fill that demand and build their business. This has been lately shown to be an issue with custom motorcycles and chopper shops.
• Suppliers - As the demand increase on both parts and materials to build bikes, vendors are going to increase prices and can be more demanding on their wants to bargaining. This can also become an issue in adding new dealers when there is such strong competition from the other competitors with cheaper merchant services and no franchise cost for their specific bikes and less demand on what they can sell to be a retail store for the company.
• Customers – Because of the strong competition of all manufactures, customers have been given more bargaining power to purchase a bike at a cost that is more favorable with lower interest rates, small to no down payment as well as other customer incentives. This causes issues with staying on top of the competition and can overall decrease profitability as the company tries to meet customer needs and get their business. Because of this issue, customers are now getting a higher rate of return on their trade-ins and are ask for additional “freebie” items and services to make the purchase more desirable.
• Substitute Products - Another issue that needs to be looked at is the fact that many customers may buy a used bike from a private seller at a lower cost, which then makes no increase revenue for the corporation. Along with the fact that many customers may find a bike of equal or lesser cost with just as many if not more options as H-D offers. However, quality of product is lost. This is also the case of aftermarket parts that can be purchased for a Harley. Aftermarket parts are not usual covered if the bike is wreck somehow. But H-D offers to replace or add into the value of a wreck the parts that were added on to the bike that are licensed under their name.

     Some of the statistics showing the size of the motorcycle industry include many things such as this 4 year graph of motorcycle purchases. There is a continuous increase in sales every year and projections conclude the sales with continue to increase.

[pic 1]

Retrieved: Statista 2015.

     The below table show the sales revenue each of the largest competitors saw for the year 2014 ranked from the highest sales to the lowest.