SWOT on "Harley Davidson, Inc. SWOT Analysis"

SWOT 6 pages (1693 words) Sources: 4

[EXCERPT] . . . .

Harley Davidson is one of the largest automobile companies in the world which specializes in the production of heavy weight motorcycles, parts of motorcycles, accessories, clothing as well as general merchandise. The company also provides financial services like wholesale as well as retail financing. They also provide insurance programs. The company operates primarily in the United States and is headquartered in the city of Milwaukee, Wisconsin. It employs close to 6,900 individuals (Datamonitor,2011).

Financial performance

Harley Davidson recorded a total revenue of about $4.9 billion in the 2010 financial year (FY2010). This was an increase of about 1.6% over the FY2009 earnings. The company's operating profits was about $0.2 billion during the FY2010 as compared to an operating loss of about $55.1 million that was recorded in FY2009. The company's net profit was about $146.6 million in the FY2010 as compared to a net loss of $55.1 million realized in FY2009 (Datamonitor,2011, Harley Davidson,2011a).Harley Davidson faces stiff competition from Honda, Kawasaki, Suzuki and Yamaha.

Porter's five forces analysis

Porters five forces analysis tool is an innovative tool that is important in the understanding of nature of power and influence that lies within a given business situation. It is important to us since we can use it in evaluating the strength of Harley Davidson's market position as well as the strength of the market position that they are moving into or operating within. A proper understanding of Harley Davidson's operating environment is important in providing us with an insight that is necessary for formulating the necessary strategies that can allow the company to operate successfully within the dynamic operating environment that is marred with stiff competition and financial uncertainty.

Threat of substitutes

The threat for substitutes ranges from low to medium. This is because customers may revert to other modes of exciting transportation like the 'sporty' cars as well as custom bicycles. In certain geographical areas, seasonality posses a serious threat since snow and cold discourages the use of motorcycles. The customers in these regions therefore prefer to purchase other modes of transportation such as the 'sporty' cars.

Threat of new entrants

The threat of new entrants is considered low. This is due to the fact that the capital requirement for a given company to begin production, marketing etc. is extremely large and the process of organizing the logistics can be time consuming. Harley Davidson has a very strong corporate culture that is built on sound reputation. This makes it extremely hard for new competitors to take over.The market is already saturated with competition arising from other firms. This makes it extremely difficult for new entrants to successfully come in.

Competitive rivalry

The level of competitive rivalry for the company is very high. This is due to the fact that it faces stiff competition from various competitors in the foreign markets. The company's primary motorcycle segment is tasked with designing, manufacturing as well as selling of premium motorcycles for the U.S. And global heavyweight market. Harley Davidson has for main competitors comprising of Honda, Kawasaki, Suzuki and Yamaha. These competitors even attempted to merge in the U.S. market so that they may have the highest market share. They howver dis not manage to have a significant market share since their productions as well as sales were actually lower that the one for Harley Davidson. Their winning portion/segment was in the selling of heavyweight motorcycles having traditional styling which in actual sense competed against the products of Harley Davidson (Wheelen and Hunger).

Bargaining Power of buyers

The buyer bargaining power is somehow low. Close to 633 Harley Davidson dealerships operated within the U.S. In 2006 while close to another 725 operating internationally (Wheelen and Hunger,2006). Because the dealerships are very many, they find it very difficult to reduce prices, bargain for higher quality products or even request more services. Because the number of buyers is relatively high, the company would not suffer any considerable loss if it losses a customer. This renders an individual customer somehow unimportant to the company.

Bargaining Power of Suppliers

The bargaining power of suppliers ranges from low to medium. The company has made efforts to establish a long-term as well as mutually beneficial relationship with its numerous suppliers. The company uses these relationships in gaining access to important commercial as well as technical resources that it employs directly in the design of a product, its development as well as manufacture. This strategy has allowed the company to ensure that its products are of high technical integrity through the application of several new features as well as innovations. This arrangement also helps in the reduction of the lead time necessary for producing products. The company developed an e-business portal (web portal) that it uses an account payable network for its numerous suppliers. The suppliers can then conduct their own reconciliation. This move helps in reducing the level of supplier phone calls by up to 90% (Wheeler and Hunger,2006).More than four thousand suppliers serve the company. Therefore, the cost of switching from one supplier to the next would be extremely low.

SWOT analysis

Strengths

Strong brand

Harley Davidson is regarded as the strongest brand name in the motorcycle brand locally and abroad (Thornton,2001; Adweek,2011). This fact has seen it sell several units as well as perform quite well in its financial services segment.

High resale value

Harley Davidson motorcycles have high resale value (Harley Davidson,2011b). This makes it a favorite brand for most enthusiasts.

Broad product as well as service portfolio

The company ventured into apparel and financial services in order to supplement its motorcycle earnings

Weaknesses

High price

Harley Davidson is one of the most expensive motorcycle brands. It also mainly targets older individuals. This means that the youth would most likely resort to more affordable brands like Honda.

Declining market share

The company has seen its market share steadily decline as result of the increasing competition from Honda, BMW, Kawasaki, Suzuki and Yamaha. Its market share reduced by 1.9% to 53.4% for the Q1 FY 2011 (Harley Davidson,2011c)

Opportunities

Fast growing market segment

The company has realized that Women offers the fastest growing market segment for its motorcycle products (5% annually)(Viva Group,2011). Strategic chance for global expansion

New product launches

The company has an opportunity of launching new and innovative products and services to the markets under its strong brand name.

Threats

Competition

The company faces strong competition from Honda, BMW, Kawasaki, Suzuki and Yamaha. This competition has been shown to be responsible for the recorded decline in market share.

Rise in fuel prices

The rise in fuel prices is forcing several motorcycle owner to resort to other ways of transportation (public busses and bicycles)

Stringent government regulations (New emission standards for the two wheelers)

The New emission standards for the two wheelers could adversely affect Harley Davidson's profitability.

Business seasonality

The seasonality of the motorcycle market which is attributed to changing weather pattern adversely affects business

Recommendations

Strengths

Strong brand

Harley Davidson is regarded as the strongest brand name in the motorcycle brand locally and abroad (Thornton,2001; Adweek,2011). This fact has seen it sell several units as well as perform quite well in its financial services segment. The company can venture into other services like real estate and perfume industry. It can also venture into complementary services like Lubes production.

Opportunities

Fast growing market segment

The company has realized that Women offers the fastest growing market segment for its motorcycle products (5% annually)(Viva Group,2011). It can therefore target this market aggressively with its Diva Collection (Accessories,2011) among other products.

New product launches

The company has an opportunity of launching new and innovative products and services to the markets under its strong brand name. The company can therefore launch brand new products and services under its powerful brand name.

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