Tas 2015 : Harley Davidson in India
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A case study presentation on the various aspects of Harley Davidson entry into Indian market. The questions answered include organisational readiness, Leadership, Strategy, Marketing & Sales and Segmentation. Visit www.tas2014.wordpress.com to know more about TAS process
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Tas 2015 : Harley Davidson in India
- 1. TAS TAS 2015 In-house Selection Process Harley- Davidson in India
- 2. TAS Scheme of the presentation ORGANIZATION LEADERSHIP STRATEGY EXECUTION SALES AND MARKETING SEGMENTATION Harley-Davidson in India “The Hog”: An American Icon Recognized for strong masculine, even outlaw image. Best known for Touring Bikes and Cruisers Survived a period of poor quality control and competition from Japanese manufacturers in the USA in the 1980s Downturn in 2008 due to economic crisis and production overshooting in US. Revenues fell 30% and loss of $55mn incurred in 2009. Transformation of Harley Davidson begins with increased focus on international markets particularly India. Anoop Prakash joined Harley Davidson as Managing Director in March 2009 to finalize and implement Harley Davidson India Plans Source: Logo from www.wikipedia.org
- 3. TAS Scheme of the presentation ORGANIZATION Please comment on the organisational readiness of Harley Davidson for an international business operation. From the case description highlight specific observations about the organisation’s structure to support your views above. Source: Image from www.harleydavidson.com
- 4. TAS Four Pillars for successful global expansion Source: “Making Foreign moves pay off” Bain & Co. A Strong Core eg Vodafone A repeatable model for expansion eg Avon, Nestle Customer differentiation that travels eg Nike Favorable industry structure eg Razors Fig : Only 17% companies achieved sustained, profitable international growth
- 5. TAS • Very Small functional teams in subsidiaries.(only one person for P&A and GM in Europe). • “The T-shirt problem” Decision making still with headquarters resulting in delayed response and lost opportunities. • The company still has Matrix organization resulting in slow decision making. Need to move from product driven structure to channel and customer driven structure. (The marketing director for Europe reported to a general manager for marketing operations, who in turn reported to the CMO and dotted line to the managing director for Europe.) • Mangos for Motorcycles: Lobbied India to adopt Euro III standards thereby opening Indian market to heavyweight bikes ( above 800 cc) • Product clinics in Bangalore, Delhi and Mumbai : 541 potential buyers surveyed ( avg. age 25 yrs., median income $40,000). White space in the Indian Bike market identified ( 500-1000 cc) • Hired Anoop Prakash as MD in 2009 to set up a subsidiary in India. ( Expertise in growing and developing new businesses, market strategy and sales. Culturally familiar with both Harley Davidson and India). • Assembled a local executive team by getting top hires from German and Japanese auto companies operating with a “bamboo ceiling” ( Honda, Yamaha, BMW, Honda motorcycles) • Independent dealers who made substantial investment in Harley Davidson Marketing/Brand Low High Merchandising Low High Supply Chain Low High Internal Capability Assessment Dealership Network Low High Support Structure Low High Expansion Experience Low High Available Capital Low High Available Resources Low High Resource Assessment Reward Expectation Low High Risk Tolerance Low High Desired Timeline Low High Strategic Assessment Regulatory Support Low High Source: Various studies by Bain and Deloitte Organizational Readiness Score for Harley Davidson India: High
- 6. TAS Scheme of the presentation LEADERSHIP Comment on the leadership styles at Harley Davidson – Parent Organisation and India Business. Is the leadership style appropriate for the business objectives – globally and in emerging markets? Source: Image from www.harleydavidson.com
- 7. TAS Leadership Style in Parent organisation and India Tough Difficult but necessary decisions taken to right size everything and build the company back up. Harley Davidson cut costs and increased efficiency by eliminating excess capacity, restructuring production and labor contracts while exiting non- core businesses. Visionary “How many bikes can we sell next year?” To “How many bikes can we sell in the next 10 years with the right approach?” The company has a long term strategy in place. It has planned to enter into the new market with CBU offering, moving on to establishing CKD units and then developing a new bike suited to the needs of the customer. Passing off everything to customers when CKD unit started Understanding Customers and needs of market Trikes,XR1200, Street 750, country specific sizing of T shirts, two new regional headquarters established Rebranding and Market Positioning The company also focused on building Harley Davidson as a brand. Image makeover of Sportster from “girl’s bike” and “Compromise Harley” to an important player in the entry segment ( $8k - $12k) for yound adults Communication & Transparency A lot of Internal communication since Levatich and Wandell joined so that all the employees are on the same platform with the change in company strategy. Situational Once Levatich got hold of the T Shirt problem he got it sorted immediately Cultural Diversity Understanding that the same formula can not be applied everywhere. Use of intense market surveys and local leadership teams. Massive organizational tension Due to complex reporting structures, small decisions require lots of emails back and forth from Milwaukee. Harley's leadership has to find an optimal balance between centralized and decentralized decision making process by making reporting structures nimble.
- 8. TAS Leadership attributes required for global expansion Source: various articles published by Bain and Accenture, Moving from an Autocratic decision model to a Shared decision model Clarity of Focus Addressing “creative tension” A foot in the future Learning Agility Harley’s Leadership style is fit for Global Expansion
- 9. TAS Scheme of the presentation STRATEGY EXECUTION Please comment on the operational challenges of Harley Davidson business in India in the initial years. What would be your recommendations to address the challenges mentioned above. Source: Image from www.harleydavidson.com
- 10. TAS Strategy Execution Very High Tariff Rate on CBU bikes Increasing CKD business. In addition, looking at manufacturing some components in India Indian bike market is largely utilitarian. Small market for leisure driving in India Organizing events like HOG rally, social media campaigns, sponsoring college fests, IPL Customer expectations different from US & European markets Customizing a bike suitable for Indian conditions – low cost, water cooled, high ground clearance Poor Customer Service due to lack of service stations and unavailability of spare parts Improving Customer Service by increasing service stations (by collaboration with other players). Online HOG register the problem, spare will be shipped to nearest service station and will be fixed Decision making process – less authority at country level resulting in delayed decisions and lost opportunities Organizational restructuring to allow decision making by country managers in all functional units
- 11. TAS Scheme of the presentation SALES AND MARKETING Comment on the sales and distribution network of Harley Davidson in India. Highlight the areas of improvement in marketing of the Harley Davidson Brand in India. Source: Image from www.harleydavidson.com
- 12. TAS Areas of Improvement in Marketing • Focusing on the correct customer segment: ► Customers Willing to buy & able to pay : Personalised service and making them feel important ► Customers Willing to buy but not able to pay : Easy EMI and financing opportunities in partnership with banks ► Customers Not willing to buy but able to pay : Low Conversion factor • 1st Bike Harley Campaign : Targeting Management graduates and undergraduates from good Engineering and Medical colleges by active marketing and creating a strong fascination so that the 1st Bike is Harley Davidson • Digital and social media marketing: Official pages on Fb and Twitter missing • Improving servicing network by establishing synergy with some existing brand with non-overlapping product portfolio e.g.. Royal Enfield • Establishing a country wide Road side assistance program • Touch, Feel, Experience Harley Campaign : Keeping 1 Harley on Dynamo Rollers in showrooms or Auto expos so that anyone can get a feel of riding a Harley. • Custom Harleys market akin to US/Japan • Only 9 authorized dealerships all across India. • One CKD facility outside Delhi. • Small team of executives with Anoop Prakash as the country head. • Poor after sales support. Sales & Distribution network in India Inadequate
- 13. TAS Scheme of the presentation SEGMENTATION Comment on the market- size and buying behavior of customer segment of Harley Davidson in India. Would the global products of Harley Davidson succeed in India? Please support your arguments with data from the case. Source: Image from www.harleydavidson.com
- 14. TAS • Though India is world’s second largest motorcycle market, the market of leisure bikes is still very small and only 1810 heavyweight (800cc and above) bikes were sold in 2011. • However, India’s rapidly growing economy, rising middle class and significant investment in construction of new highways have opened the door to Leisure Motorcycle riding. • The market for premium motorcycles in India is projected to grow at a CAGR of more than 30% till 2019. Market Size of Harley-Davidson in India Male Financially successful Very committed to brand 35-45 yrs. old professionals & entrepreneurs Already own car or bike(s) WanttoReward themselves Lifestyle is the key differentiator Feature cloud of Harley Davidson India customers Source: TechSci Research “India Premium Motorcycles Market Forecast & Opportunities, 2019”
- 15. TAS • Indian customers have different expectations compared to US customers. So to succeed on a large scale, Harley Davidson needs some minor design changes in its US models. (Low Traffic speeds and high ambient temperature necessitated water cooling and low quality roads required bikes with higher ground clearance) • To suit the build and stature of Indian customers minor adjustments would be required in position of Handle and foot pedals so that the arms and legs of the riders are not too strained. • Style & Look and Brand play important role in premium segment. Harley-Davidson is number one premium segment brand in customer perception survey. Future of Global Products in India Source: TechSci Research “India Premium Motorcycles Market Forecast & Opportunities, 2019”
- 16. TAS Thank You
Notes de l'éditeur
- change commitment : (highly committed) Time to go global actively : Ruling the US markets for more than a century, HD had faced many ups and downs, had a global presence and brand recognition, but with approach, not much control or emphasis over revenue generation !! …..Though the US market for motorcycles was matured enough, but the slump in sales during the 2008 financial crisis, was an eyes opener, now HD started looking into the emerging markets as potential source of long term growth. leadership recognised that, for long term growth, there may be certain negative returns in near years. How many bikes can be sold in the next 10 years ?? All verticals namely Motorcycles, Parts and accessories (P&A), and general merchandise (GM) working towards the common cause. Redirecting resources, right sizing departments and funneling the money to global growth Setting up regional head quarters change efficacy : HD brand well recognized globally and also in India (world’s second largest motorcycle market) Financials ?? Team responsible for Indian expansion (past experience and leader ship) One assembling center (CKD units) already in operation near New Delhi. Need bring down costs.
- A company with a weak domestic business cannot win easily abroad. In our study, 90% of the companies with profitable foreign growth began with a strong core business at home. A relentless focus on its core propelled Vodafone from a small national cellular company to the global industry leader in a decade. Realizing it couldn’t compete against established players in fixed-line phone services, Vodafone placed its bets on mobile service. From a strong home base in the UK, it used acquisitions to build leading positions in the mobile business overseas. In contrast, many incumbent European telecom companies spread themselves thin, expanding in mobile while investing in fixed-line service, Internet service and directories. While the incumbents struggled with the debt and complexity brought on by their different moves, Vodafone vaulted to the top of the mobile market. By following one formula again and again, companies develop critical aptitude and knowledge. They improve their ability to execute quickly. A repeatable formula brings predictability to a process that is often experimental and chaotic. It helps companies avoid risk as well as complexity. A repeatable formula helped Avon Products enjoy strong growth in emerging markets from 1994 to 2004. Entering those markets, CEO Andrea Jung has said, is “Avon’s core competency.” The company’s direct-sales model, in which self-employed “Avon ladies” take orders and deliver items in return for commissions, allows Avon to operate where infrastructure is weak. In Brazil, for instance, Avon reps have been known to paddle kayaks up the Amazon to bring their wares to remote mining camps. Under that low-investment model, Avon would bring in experienced hands as general manager and sales manager in a new market, give them three years to train local managers, and then tackle another market. It also would send out teams that shared their expertise in emerging markets, teaching local executives to handle such challenges as pricing products during hyperinflation. Similarly, Nestlé has a formula that it too has applied throughout the developing world, from Brazil to China. Because many of these countries lack steady, hygienic supplies of milk, Nestlé regularly teams up with government to strengthen the dairy industry’s infrastructure. Tapping a team of 800 agronomists and field technicians, Nestlé teaches farmers how to increase their yield. It offers them loans to build the size and quality of their herds. Then it works to improve roads and set up milk collection systems with cooling tanks and weighing machines, built locally to Nestlé specs. Of course, sometimes the formula requires a cultural tweak: After finding that sun roofs for dairy cows in Brazil increased milk production, Nestlé tried to introduce them in Mexico. The Mexican farmers initially balked, saying, “Our cows are no princesses.” Developing a repeatable formula requires building capabilities to serve the same customer segments overseas as at home, with the same differentiated offerings. Only the geography is different. That way, companies can integrate marketing plans across countries. That has been Nike’s winning formula. It consistently targets the athletic customer with the same series of propositions: sports shoes, then clothing and equipment, endorsed by a top celebrity athlete. When it set out to conquer the global market for soccer, Nike followed the approach it took with the running and basketball segments back home. It built a leading position for footwear and launched a clothing line, both endorsed by the likes of Brazilian soccer star Ronaldo and the UK’s popular Manchester United team. Having established its brand and its distribution channels, Nike began selling soccer balls. The result: Nike, once seventh in the global soccer market, is now close on the heels of the number-one player, Adidas. And, as it has taken its customer proposition overseas, Nike has seen its international business surpass its domestic one, accounting for more than 60% of revenues Some industries are naturally global: In them, cost structures improve with global scale, customer requirements are similar worldwide or, in some cases, customers are literally the same around the world. But in other industries, the winners are those that build the largest local market share—or best appeal to distinctive local tastes. Razors, for example, are naturally global: lightweight and easy to ship, with customer needs the same everywhere. Beer is naturally local, because it’s heavy and costly to produce and transport. Plus, local taste preferences in beer vary greatly. When making overseas moves in local industries, companies need to capture local share and tailor offerings to local consumers. A clear understanding of the factors that drove profitability in its industry was one of the keys to Vodafone’s rise, for instance. Success in mobile phone service depends largely on gaining local market share. The European telecom companies that established minority positions in the mobile markets had only a weak platform for growth. Meanwhile, Vodafone, which acquired majority holdings in leading local operators, could capitalize on its local leadership to gain preeminence in each country. Understanding these four critical factors— a strong core, a repeatable formula, customer differentiation and industry economics—will help your company avoid risky cross-border moves. Moreover, the right kind of international growth can also be a launchpad for innovation for worldwide markets. For example, Unilever’s Indian unit recently introduced a detergent that reduces water consumption by a whopping 50%. That proprietary technology not only is a boon to that arid country but is likely to be in increasing demand as water supplies become stretched globally