Harley-Davidson: Preparing for the Next Century
I. Nature of the case and decisions to be made
Harley has been one of the top growth stocks from 1989 to 2003 but is now facing challenges related to brand perception, an aging customer base and heavy competition. In 2005, the stock price declined as Harley announced reduced sales estimates. In the early 1900’s Harley was an innovator, standardizing parts, developing new technology and implementing a marketing plan that centered on becoming part of a lifestyle. Harley controlled the market for motorcycles until the late 50’s when Japanese manufacturers entered the market offering low-price, dependable bikes and taking more than 85% of sales. Harley relaxed its quality standards in the 70’s while Japanese firms differentiated themselves through low maintenance, high quality and low price products. Under new management in the 1980’s, Harley experienced resurgence following a retooling of employee incentives and empowerment to increase quality and sales. Harley also differentiated themselves from Japanese competitors by tapping into the “lifestyle” marketing introducing the Harley-Davidson Owners Group (HOG).
Since Harley’s core customers are baby boomers, they have attempted to expand their market through several methods. First, they purchased Buell motorcycles to enter the low-cost sport bike market. They then introduced a new sportster line of Harleys as well as rider’s edge and rental program to try and lure in the younger and women markets. The success of each of these programs has varied and resulted in the revised sales estimates in April 2005. However, Harley did not change their long-term forecasts and left projections in the mid-teens by 2007.
The questions that remain for Harley are: 1) whether they can meet its long-range goal of selling 400,000 motorcycles by 2007 given the market conditions; 2) can, or should, Harley make in-roads into the younger and women rider segments; and 3)...