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LearningInsight
QuestionAnswers
Case Content
Harley-Davidson
Ella Emily Derek Jordan Kevin Mok Maxwell
We ride free!
1
Arthur DavidsonWilliam S. Harley
1903 Serial#1 bike
2
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Background
High Performance1905, H-D motorcycle wins a 15 mile race in Chicago with a time of 19:02
1908, Walter Davidson scores a perfect 1,000 points at the 7th Annual Federation of American Motorcyclists Endurance and Reliability Contest
Distribution channel1917, one-third of all Harley-Davidson motorcycles produced are sold to the U.S. military
Early time success
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Background
Innovation
ReputationArmy-Navy "E" Awards
Endorser1956, Elvis Presley
Uncommonly quiet!
Early time success
4
Word of Harley-Davidson's extremely tough motorcycle spreads rapidly.
Had a solid 70% of the motorcycle market in its first 60 years.
5
But from then on....
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Honda’s invasion and Harley’s reaction
Early 1960s
1965 1981
AMF
1986
Vaughan Bealss
Struggle
back1989
Timeline1960-1989
Timeline (1960-1989)
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Case Content
•Honda began to penetrate the U.S. market, but with a distinctly different strategy.
•Lightweight cycles and an advertisements approach directed toward new customers
•Harley’s market share fell dramatically
•No reaction at all on the early stage!
•The management saw no threat in Honda’s thrust into the market with lightweight machines.
•The company actually attempted to fight back by introducing an Italian-made lightweight in the mid-1960s, but far too late.
Honda’s invasion and Harley’s reaction
Early 1960s
Timeline1960-1989
Timeline (1960-1989)
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Case Content
Timeline1960-1989
Timeline (1960-1989)
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Timeline1960-1989
From 1960 to 1981
Model Light weight motorcycle Heavy weight motorcycle
Function Transportation use Leisure-time use
Style Practical, functional, features Cool, stylish, American spirit
Target customers Mass People pursuit freedom, individualism, life style
Communication strategies
Aggressive, Direct approach to new customers
Passive
Production control Excellent Poor
Product quality Excellent
5% failed quality-control check
Poor
50%-60% failed quality-control check
Operating cost 30% lower than Harley-Davidson High
Timeline (1960-1989)
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Timeline1960-1989
Timeline (1960-1989)
• Promotion strategy
To compete with Harley, Honda adopted an advertising slogan that countered this tough image. The “You meet the nicest people on a Honda” campaign became the overriding theme of Honda. Armed with the slogan, Honda launched the SOHC inline 4-cylinder 750 in 1969 which became very successful.
• Product Strategy
Honda focused fully on lightweight motorcycle market, which is exactly different from Harley’s products.
1. Production advantage: Cheaper labor cost
2. Problem handling
• Distribution Channel
1. Store location: Honda established its stores in downtown area.
2. New market, new customers: renting service
Honda’s analysis
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•In 1965, the company faced a struggle for control soon after its first public stock offering, which made Harley with no choice to merge with AMF, an American company with strong interests in recreational equipment.
•The marriage was troubled, and quality was going down just as fast as production was going up”.
•AMF suffered an average $4.8 million operating loss for eleven years.
•Market share fall to a record low 3% in motorcycle market
1965 1981
AMF
Timeline1960-1989
Timeline (1960-1989)
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Vaughan Beals led a team that used $81.5 million to complete a leveraged buyout of Harley-Davidson.
•Who is Vaughan Beals? Why he was so magical?
•In 1983, Congress passed a huge tariff increase on Japanese motorcycles, from 4 percent to 45 percent!
•Key to rebuild market share was restoring confidence in the quality of its products.
1981
1986
Vaughan Beals
Timeline1960-1989
Timeline (1960-1989)
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Timeline1960-1989
Timeline (1960-1989)
1986Struggle
back1989
• Bealss and other managers visited Japanese plants in Japan and Honda’s assembly plant, then results of the production improvement
Management technique introduced Functions Results changed in 1988
Just-in-time inventory Control and minimize all inventories both inside and outside the plants
Inventory reduced by 67%
Material-as-needed (MAN) system
Quality circles (QCs)Increase employee involvement in quality
goals and to improve communication between management and works Productivity up by 50%
Scrap and rework down 2/3Defects per unit down 70%
Statistical operator control (SOC)Employees are responsible for checking
the quality of their work and making proper collecting adjustments
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1990s Harley Davidson is on its way
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Licensing Business
Marketing
Product Demand
Export Potential
Specifics of the Resurgence of Harley-Davidson
1990s Success1990s success
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1990s SuccessLicensing business
•Unauthorized usage of company logo on the products of poor quality
•image damage•Licensed goods were popular and were even being bought by new customer segments
•indicating high growth potential -> a great source of revenue•high customer loyalty
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All it seemed to take was the Harley name and logo.
Harley black leather jackets
$500
Fringed leather bras $65
Shot glasses $12
1990s SuccessLicensing business
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USD0
USD50
USD100
USD150
USD200
1991 1992
USD130.3000
USD155.7000
Non-cycle business sales of Harley-Davidson
Non
-cyc
le b
usin
ess
sale
s (M
illion
)
1990s SuccessLicensing business
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1983 t
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Case Content
1990s Success
•Product oriented Market orientedBealss Joined HOGs (Harley Owners Group), Hard-core loyalist of Harley-Davidson, to understand their concerns and needsThe company learned that it needed to give the customers a choice and now offers a variety of models, including Athletes, Super Glides, Low Riders etc.
Marketing
•Brand ImagePerfectly match with American Culture
•Customer relationsHOG was founded
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By 1993, Demand>Supply
High customer loyalty
1990s SuccessProduct Demand
21
“Quantity isn’t the issue, quality is the issue.” ------ Richard Teerlink
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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150.0
237.5
325.0
412.5
500.0
1992 1993 1996
280
345
420
Harley’s Output
bike
s m
ade
per
day
Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
1990s SuccessProduct Demand
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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- The European big-bike market grew by an
astounding 33% between 1990-1992. And Harleys
had become very popular in Europe.
- But company had promised its domestic dealers
that exports would not go beyond 30%.
1990s SuccessExport Potential
24
Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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- So, Harley could only maintain a 9% - 10% share
of this market.
- To enhance its presence in Europe, Harley
opened a branch office of its HOG club in
Frankfurt, Germany, for its European fans.
1990s SuccessExport Potential
25
Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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Year Revenue Net Income
1982 210 def.$25.1
1983 254 1.0
1984 294 2.9
1985 287 2.6
1986 295 4.3
1987 685 17.7
1988 757 27.2
1989 791 32.6
1990 865 38.3
1991 940 37.0
1992 1,100 54.0
1993 1,210 68.0
1994 1,537 83.0
stock sold$7
stock sold $39market share 63%
market share 12.5%
Harley-Davidson’s Growth in Revenue and Income (million of $),
1983-1994
1990s Success
Specific Resurgence of Harley Davidson
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Harley’s Recent Development
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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Case Content
- 1990s, demand grew with the mystique as
strong as ever.
- 1997, a new engine plant in Milwaukee.
- 1998, a new assembly plant in Kansas City.
Recent development
Recent Development
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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Case Content
U.S. Exports
1997 96.2 36.1
1993 57.2 24.5
Revenues ($M)
Net Income ($M)
1997 1,763 174.0
1993 1,217 18.4
Motorcycle shipments (in thousands of units)
Growth in revenues and income
Recent development
Recent Development
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
LearningInsight
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Case Content
- Despite continuous increases in production, U.S.
consumers still had to wait to purchase a new Harley
Davidson bike, but the wait only added to the mystique.
- 1998, Wolverine World Wide entered into a licensing
agreement with Harley to use its name for a line of boots and fashion shoes.
- In January 7, 2002 issue, Forbes declared Harley to be
its “Company of the Year”.
Recent development
Recent Development
30
Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
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- Jeffrey Bleustein was diversifying into small, cheaper bikes
to attract younger riders, as well as women, who represented only 9% of Harley riders.
- The cult image was stronger than ever.- Around 4,000 company’s employees rode Harleys around
the country for pleasure and to promote the company.
- In 2002, there were 640,000 owners and the Harley-Davidson name was on everything from blue jeans to pickup
trucks.
Recent development
Recent Development
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
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Recent development
Light sports bike designed for American men 25 to 34 rose to 90% from 1998 to 2001.
Trend: younger generations of Americans prefer the sleeker, sportier and lighter types of motorcycles as opposed to the big cruiser bikes so closely identified to Harley's brand.
Harley’s reaction this time?
Harley has introduced new models designed to attract the youth. The $17,000 Harley V-Rod is one of these bikes targeted for the younger generations.
Future: Harley will need to compete with Honda head-on.
Recent Development
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Harley-Davidson had such a loyal body of customers that delays in product gratification were not likely to turn many away to competitors.
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- 2003-2005, developed classic style
motorcycle. And clothes for not only men
but also women and kids .
- 2006, Harley-Davidson entered
mainland China’s market.
- 2008, an all-new museum opened in
Milwaukee.
Recent development
Recent Development
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Case Content
Vaughn BealssQ1&H1
DevelopmentQ3&Q4
MystiqueQ2&Q5&H3
Japanese Competitors
Q6&H2
Questions & Hands on exercises
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LearningInsight
QuestionAnswers
Vaughn BealssQ1&H1
Case Content
Questions & Hands on exercises
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LearningInsight
QuestionAnswers
Vaughn BealssQ1&H1
Case Content
Questions & Hands on exercises
“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Q1
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“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Case Content
Questions & Hands on exercises
Q1
“Beals’s rejuvenation strategy” 1. Production improvement by acquiring Japanese management techniques
2. From product oriented to market oriented
3. Massive lobbying in order to impose heavy tariff for the Japanese motorcycles import
4. Licensing program on merchandised goods
5. Sponsor HOGs to strengthen customer loyalty
“best” – the way or the solutions to make Harley Davidson re-lead the heavyweight motorcycle market as much as possible.
Definition
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“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Case Content
Questions & Hands on exercises
Q1
Internal Situation
• Harley was falling down on quality.
ı “If you’re buying a Harley, you’d better buy two - one for spare parts.” – Dexter Hutchins
• Passive Marketing Strategy
• Product-oriented
• Outdated management techniques and old equipment delay the development.
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QuestionAnswers
“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Case Content
Questions & Hands on exercises
Q1
External Situation
• Market Share fell down deeply.
ı Early 1960s – solid 70% market
1981 - Only contain 3% market after buyout
• Japanese manufacture flooded the market with high-quality lightweight motorcycles.
• 1977 - Honda grabbed 47% of the motorcycle market in U.S.
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Case Content
Questions & Hands on exercises
Q1
Other Possible Strategies
“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
1. No action
2. Switch the focus
3. Grab the customers
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LearningInsight
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“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Case Content
Questions & Hands on exercises
Q1
Comparison
Pros Cons
Bearl’s Strategy •Hit the core problem
•Reduce competition
•Learn but can not exceed
•No Action •No potential risks
•Good for company’s steady operation
•No good future
•dilemma situation
Switch Focus •May attract new customers
•Diversification for the company
•The company image will be diluted
•Need time and money to adjust strategy
Grab customers •May beat challengers •Head on competition
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“Do you think Beals’s rejuvenation strategy for Harley-Davidson was the best policy?”
Discuss and evaluate other strategies that he might have pursued.
Case Content
Questions & Hands on exercises
Q1
Beals’s strategy outcome
Tariff leads to entry barrier
Magnificent production improvementInventory reduced by 67%
Productivity up by 50%
Scrap and rework down 2/3
Defects/unit down 70%
Market share increase to 63% in 1993
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Vaughn BealsQ1&H1
Case Content
Questions & Hands on exercises
• Be a Devil’s Advocate. • Your mutual fund has a major investment in Harley-Davidson,
and you are concerned with Vaughn Beals’s presence at motorcycle rallies, hobnobbing with black-jacketed motorcycle gangs. He maintains this is the way to cultivate a loyal core of customers.
• Argue against Beals’s practices.
H1
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• Be a Devil’s Advocate. • Your mutual fund has a major investment
in Harley-Davidson, and you are concerned with Vaughn Beals’s presence at motorcycle rallies, hobnobbing with black-jacketed motorcycle gangs. He maintains this is the way to cultivate a loyal core of customers.
• Argue against Beals’s practices.
Case Content
Questions & Hands on exercises
H1
Definition
– “You”= Mutual fund investor, care about the profitability of HD
– “Loyal core of customers”=HOG members+ Rubbies
– “Beals’s practices”=present at motorcycle rallies,communicate with HOG members
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• Be a Devil’s Advocate. • Your mutual fund has a major investment
in Harley-Davidson, and you are concerned with Vaughn Beals’s presence at motorcycle rallies, hobnobbing with black-jacketed motorcycle gangs. He maintains this is the way to cultivate a loyal core of customers.
• Argue against Beals’s practices.
Case Content
Questions & Hands on exercises
H1
Arguments
• Beals’s practices would:• Harm the company’s public image
– The public will associate the company’s image with the CEO’s practice
– HOGs are regarded as the potsmoking, beer-drinking, woman-chasing, tattoo-covered, leather-clad biker
• Ignore the new market segment
– The Rubbies (rich urban bikers)• E.g, Bankers, doctors, lawyers, and entertainers
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MystiqueQ2&Q5&H3
Case Content
Questions & Hands on exercises
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MystiqueQ2&Q5&H3
Case Content
How durable do you think the Rubbies’ infatuation with the heavyweight Harleys will be?
What leads you to this conclusion? Q2
Questions & Hands on exercises
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How durable do you think the Rubbies’ infatuation with the heavyweight Harleys will be?
What leads you to this conclusion?
Case Content
Q2
Questions & Hands on exercises
Definition
“Durable” – The length that customers’ fascination to Harley Davidson lasts. ı
“Rubbies” – the rich urban bikers, and high prices for bikes did not bother them in the least.
“Infatuation” - The state of being completely carried away by unreasoned passion or love; addictive love for Harley Davidson.
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How durable do you think the Rubbies’ infatuation with the heavyweight Harleys will be?
What leads you to this conclusion?
Case Content
Q2
Questions & Hands on exercises
Rubbie’s infatuation
Harley-Davidson’s Share of the U.S. Heavyweight Motorcycle Market, Selected Years, 1983-1993
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How durable do you think the Rubbies’ infatuation with the heavyweight Harleys will be?
What leads you to this conclusion?
Case Content
Q2
Questions & Hands on exercises
Why infatuation?
• The company culture is fascinating.
ı Harley Davidson stands for “Strength”, “Style”, “Respect” and “Freedom”, which match with the American spirit.
• The company has earned high reputation through over a hundred year’s operation.
• Identity recognition.
ı It’s a symbol of identity.
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How durable do you think the Rubbies’ infatuation with the heavyweight Harleys will be?
What leads you to this conclusion?
Case Content
Q2
Questions & Hands on exercises
How long will the infatuation last?
• Environment Change (financial crisis)• Philosophy Change (Sense of worth)• Values and Tastes
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MystiqueQ2&Q5&Q9
Case Content
Questions & Hands on exercises
Q5
“Harley-Davidson’s resurgence is only the purest luck. Who could have predicted, or influenced, the new popularity of big bikes with the affluent?” Discuss
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“Harley-Davidson’s resurgence is only the purest luck. Who could have predicted, or influenced, the new popularity of big bikes with the affluent?” Discuss
Case Content
Questions & Hands on exercises
Q5
•Resurgence: its market share rebound from 3% to the leading position of heavy weight motorcycle market•Purest luck: the company did nothing and regained its market leader position•The affluent: bankers, lawyers, professionals or managers with high household income about $45000
Definition
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“Harley-Davidson’s resurgence is only the purest luck. Who could have predicted, or influenced, the new popularity of big bikes with the affluent?” Discuss
Case Content
Questions & Hands on exercises
Q5
•Its high quality and charismatic products which tailors the needs of the target customers•Its company culture, every employee engage in producing the best Harley Davidson motorcycles.•Its brand image which perfectly match with the culture of American
Not purest luck
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“Harley-Davidson’s resurgence is only the purest luck. Who could have predicted, or influenced, the new popularity of big bikes with the affluent?” Discuss
Case Content
Questions & Hands on exercises
Q5
•Vaughan Bealss•took a leading role in understanding the needs and concerns of HOGs and modified the products to cater the needs of target customers
•HOGs•Super-loyal customers to make HD survival during the down period•HD’s true spokesperson who are representing American Spirit which attract more Americans
Influencer
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QuestionAnswers
MystiqueQ2&Q5&H3
Case Content
Questions & Hands on exercises
H3
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this? • Be as specific as you can, and defend your reasoning.
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QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
– “You”= staff assistant to Bealss– “Mystique”= an aura of heightened value or
interest or meaning surrounding a person or thing
Definition
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
Ways to develop/acquire a mystique
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
Differentiation
• For a company to achieve a mystique, certainly its product has to be unique.
• Unique product can help a firm achieve differentiation, but far from mystique.
Focus on product differentiation
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
Image-building advertising
• Build brand identity and personality (HOGs/Rubbies)
• Attitude branding – the choice to represent a larger
feeling, which is not necessarily connected with the product or consumption of the product at al
• Highlight the people that customers might wish to emulate.
• Founder’s story– It's a classic American story. Boys get
idea. Boys start company. Boys make lots of money.
• Company museum
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
• Harley Owners Groups (HOGs)– The old group of core customers– Very loyal to Harley-Davidson– Represent the classic image of Harley-Davidson
• Rich urban bikers (Rubbies)– The new group of key customers– Loyal to Harley-Davidson– Rich and willing to spend a lot on Harley-Davidson bikes– The Rubbies brought Harley back to a leading position in the industry by 1989– Their demands are growing rapidly, from 10% (1983) to 63% (1989)
Focusing on the target buyers
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
Related/Unrelated Expansion
• Expand the reach of the name/logo to other goods– Related expansion• E.g Jackets,helmets,boots, etc
– Unrelated expansion• E.g Parjamas,sheets, towels, etc
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LearningInsight
QuestionAnswers
• As a staff assistant to Vaughan Bealss when he first took over, you have been charged to design a strategy to bring a mystique to the Harley-Davidson name.
• How would you propose to do this?
• Be as specific as you can, and defend your reasoning.
Case Content
Questions & Hands on exercises
H3
• Besides the strategy talked before, there’s some other ideas we could use. Like:
• Personalization: carve the customers’ names on their own motorcycle. Customers could join designing and the color choosing.
• Advertisement: consistent style (Black background), Broadcast time (Before action movies in cinema), Sponsor (for competition like boxing, car racing)
• Some standard or rules to the customers in order to increase their ownership and loyalty to HD. Also create a mystery image to potential market.
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QuestionAnswers
Case Content
Questions & Hands on exercises
DevelopmentQ3&Q4
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QuestionAnswers
Case Content
Questions & Hands on exercises
DevelopmentQ3&Q4
Q3
ı A Harley-Davidson stockholder criticizes present management: “it is a mistake of the greatest magnitude that we abdicate a decent share of the European motorcycle market to foreign competitors, simply because we do not gear up our production to meet the demand.” Discuss.
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QuestionAnswers
Case Content
Questions & Hands on exercises
A Harley-Davidson stockholder criticizes present management: “it is a mistake of the greatest magnitude that we abdicate a decent share of the European motorcycle market to foreign competitors, simply because we do not gear up our production to meet the demand.” Discuss.
Q3
• “Mistake” – no further actions while the demand in Europe is always larger than production
• “abdicate” – Harley Davidson won’t even consider the Europe market unless the domestic market is fulfilled.
Definition
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LearningInsight
QuestionAnswers
Case Content
Questions & Hands on exercises
A Harley-Davidson stockholder criticizes present management: “it is a mistake of the greatest magnitude that we abdicate a decent share of the European motorcycle market to foreign competitors, simply because we do not gear up our production to meet the demand.” Discuss.
Q3
• The abdication is reasonable
• Quality cycle & Distribution center• Loyal customers won’t leave.
• Harley Davidson is highly appreciated for its Customized motorcycle
• Also create a mystique to potential market.
At that time…
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QuestionAnswers
Case Content
Questions & Hands on exercises
A Harley-Davidson stockholder criticizes present management: “it is a mistake of the greatest magnitude that we abdicate a decent share of the European motorcycle market to foreign competitors, simply because we do not gear up our production to meet the demand.” Discuss.
Q3
What about now?
• Increase 31% market share in Europe (2007)• Buyout MVAgusta Group,Italy (2008)• 10+% increase of market share three years in a roll
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QuestionAnswers
Case Content
Questions & Hands on exercises
DevelopmentQ3&Q4
Q4
Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
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QuestionAnswers
Case Content
Questions & Hands on exercises
Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Definition
“You” means Public Investors
“NOW”=2005 (when the book was published)
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Case Content
Questions & Hands on exercises
Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Considering Factors
Financial statisticsStock MarketCompany Development
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• Range from $50 to $60
LearningInsight
QuestionAnswers
Case Content
Questions & Hands on exercises
Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Financial Statistics
2005 2004 2003
Net Income $959,604 $889,776 $760,928
Shares 280,303 295,008 302,271
EPS 3.42 3.02 2.52
•EPS is increasing steadily every year•PE is about 12 to 15, which is in average level
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• Range from $50 to $60
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QuestionAnswers
Case Content
Questions & Hands on exercises
Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Financial Statistics
2005 2004 2003
Total assets $5,255,209 $5,483,293 $4,923,088
Current finance debt
204,973 495,441 324,305
Long term finance debt
1,000,000 800,000 670,000
Total finance debt 1,204,973 1,295,441 994,305
Not much finance debt, cash flow will be good
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Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Stock Market
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Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Company Development
• Introduce new product line– the Street Bob and the
Street Glide
• Work with the dealers to create a better customer experience
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Given the resurgence of Harley-Davidson in the 1990s, would you invest money now in the company?
Q4
Answer
YesHOG is the
stock worth of investing
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Japanese Competitors
Q6&H2
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Japanese Competitors
Q6&Q8
Q6
“The tariff increase on Japanese motorcycles in 1983 gave Harley-Davidson badly needed breathing room. In the final analysis, politics is more important than management in competing with foreign firms.” What are your thoughts?
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“The tariff increase on Japanese motorcycles in 1983 gave Harley-Davidson badly needed breathing room. In the final analysis, politics is more important than management in competing with foreign firms.” What are your thoughts?
Q6
It depends.
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Q6
How did tariff save Harley-Davidson?
Direct competitor Japanese company, Honda, introduced lightweight cycles of good quality.
Harley-Davidson’s market share decrease dramatically to 3%.
US imposed a 45% tariff for coming 5 years.
New tariff policy increase the cost of Honda substantially. And it helps prevent the foreign automobile companies from entering US market.
Harley-Davidson began to rebuild market share by restoring consumer confidence on its products quality.
“The tariff increase on Japanese motorcycles in 1983 gave Harley-Davidson badly needed breathing room. In the final analysis, politics is more important than management in competing with foreign firms.” What are your thoughts?
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Q6
In the case, both politics and management are essential to the company competing with foreign firms.
Management Politics
Inventory reduced by 67%
Increased entry barriers for new foreign competitors
Productivity up by 50% Decreased the bargaining power of existing foreign competitors
Increased product quality
Benefits
“The tariff increase on Japanese motorcycles in 1983 gave Harley-Davidson badly needed breathing room. In the final analysis, politics is more important than management in competing with foreign firms.” What are your thoughts?
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Japanese Competitors
Q6&Q8
• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?H2
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• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?
– “You”=Vice president of HD in 1990s– “this change in strategy”= enter the lightweight motorbike
market
Definition
H2
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• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?
Arguments for entering the lightweight market
H2
• Heavyweight motorcycle market is just a niche market, whereas lightweights is a mass market and a growing potential one.
• There are more younger riders,as well as women, who ride smaller and cheaper bikes.
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• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?
Recommendations for such a new course of action
H2
– Introduce the Harley-Davidson lightweight motorbikes– Harley-Davidson lightweights can mainly target the
young females.– Promote the American values (seek for freedom and
adventure)
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• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?
Contrary arguments
H2
– Harley-Davidson might not be able to compete with Honda in the lightweight market.
– Harley-Davidson is only for men, not suitable for women.
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• As a vice president at Harley-Davidson in the 1990s, you believe the recovery efforts should have gone well beyond the heavyweight bikes into lightweights.
• What arguments would you present for this change in strategy, and what specific recommendations would you make for such a new course of action?
• What contrary arguments would you expect? How would you counter them?
How would you counter?
H2
– Honda is regarded as a transportation vehicle, while Harley-Davidson is an American icon. Harley-Davidson lightweight motorbike can target a different group of customers who appreciate the American culture.
– Harley-Davidson does not target at all the females. The feminist can be a perfect match to the Harley-Davidson lightweight motorbike.
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1. Quality vs. Quantity
Marketing ImplicationQuality first!!
Why?Focus on quality controlIncrease urgency of buyingShow high status
Richard Teerlink, “Quantity isn’t the issue, quality is the issue...”
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Limited Product Line
User-friendly nameMacbook ------ For common usersMacbook Pro ----- For more “Pro” usersMacbook Air ----- Thin as “Air”No R65 or VGN-Z550N
Controlled Distribution channelApple store (iTunes)Apple store (Retails)Other qualified distributors
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June 2008 “Starbucks to Close 600 Stores”
Global expansion From profit to loss
Lower cultural added valueLower service quality
Decentralized staff trainingCapacity challenge (e.g. queue)
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2. Relationship Marketing
Marketing ImplicationRelationship First!!
Why?Keeping a current customer is more profitableBuilding Brand LoyaltyWord-of-mouth Marketing from them
HOG
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Relationship Marketing is not only forLuxury ProductsBig Brandsbut everyone, like
Seth GodinMarketing GuruBestselling Author e.g. <Permission Marketing>
How does he build relationships with his readers?By his Blog (Most viewed one in the world)After you subscribe, you can getSample of his new bookPowerPoint of his new bookVideos which is talking about his new bookand you will spread it to your friendsYou are not only his reader, but also his evangelist!
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3. Yell out your brandMarketing ImplicationSpirit First!!
Why?Exposure to Icon to Spirit
Licensing
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Rebellion & Freedom
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Dream & Happiness
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