This presentation illustrates the analysis of Harley-Davidson's competitive strategy. It is based on the case from Grant, R., 2010. Contemporary Strategy Analysis. 7th edition, pp. 636-654

1. 25th March 2014
Devendra Bhandari
Saliha Sahin
David Huckschlag
Amani Alkaddah

2. Outline
1. Harley–Davidson at a Glance
2. Harley–Davidson’s Strategy
3. Comparison of Harley-Davidson‘s and Honda‘s Resources and
Capabilities
4. Establishing Competitive Advantage
5. Harley-Davidson’s Threats
6. Sustain & Enhance Competitive Advantage
7. Conclusion
8. References
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3. Harley-Davidson at a Glance
 Founded in 1903: William Harley & Davidson brothers
 Represents a tradition of US engineering and manufacturing
 Focus in Heavyweight motorcycle market
 Harley-Davidson is a lifestyle people choose
We fulfill dreams inspired by the many roads
of the world by providing extraordinary
motorcycles and customer experiences. We fuel
the passion for freedom in our customers to
express their own individuality.
OUR
VISION
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4. Harley Davidson’s Strategy
According to Porter’s Generic Strategies:
 Harley Davidson’s has a Focus - Differentiation Strategy:
differentiate within just one or a small number of target
segments
Cost
Advantage
Differentiation
Focus
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5. Focus Strategy
“Basically, we do not believe in the lightweight market. We believe
that motorcycles are sports vehicles, not transportation vehicles. Even
if a man says he bought a motorcycle for transportation, it’s generally
for leisure time use. The lightweight motorcycle is only supplemental.”
- William Davidson, President of Harley-Davidson
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Cost
Advantage
Differentiation
Focus  Focus on Heavyweight market with
customers who consider their
motorcycle a luxury product

6. Differentiation Strategy
 Differentiation based on customers‘ social and psychologial
needs
 Harley-Davidson is in the business of selling lifestyle,
not transportation
 Internal and external product integrity – critical factor in
such differentiation:
 Ability of employees and customers to identify with one
another
 E.g management wearing biking leathers
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7. Cont.
 Differentiation advantage by careful examination of
activities customers undertake:
 Creating customer value by providing:
 Test ride facilities
 Owner‘s club activities
 Various sponsored events for Harley riders
Information
gathering(e.g.
price,fuelprice)
DealerNetwork
visit
Selecting
Purchasing
Customization
Maintaining
Customer Value Chain
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8. Strategic Importance
RelativeStrength
SUPERFLUOUS STRENGTH KEY STRENGTHS
ZONE OF IRRELEVANCE KEY WEAKNESSES
HARLEY-DAVIDSON‘S RESOURCES AND CAPABILITIES
• Brand & Customer Loyalty
• Distribution
• MAN (Material As Needed)
• Customized Design
• Manufacturing
• R&D
• Product Development
• International Exposure
• Public Relationship
Resources and Capabilities
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9. BRAND & CUSTOMER
LOYALTY
greatest asset
“Harley Davidson had long
recognized that it was not
selling motorcycles –
it was selling the Harley
Experience.”
 Brand of one of the world‘s oldest motorcycle companies
 Appeal of the Harley Brand - associated with an entire lifestyle
- Rider‘s emotional attachement to the brand
 1983 Harley Owners’ Group (HOG)
 To increase involvement of customers’ riding experience
 Played a critical role in building brand image and customer loyalty 9

10. DISTRIBUTION
Harley believed that the
quality and effectiveness of its
dealer network was a key
determinant of the strong
demand for its products.
 Dealership Network: 85% of Harley dealerships in the U.S.
 Far more than any other motorcycle manufacturer
 High standard of pre- and after- sales service
 New services to customers:
 Test ride facilities, rider instruction classes, motorcycle rental
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11. MAN
(MATERIAL AS NEEDED)
“MAN“ (Materials as Needed):
Just-in-time (JIT) system and production scheduling program
Reduce inventories & costs
Improve quality control
Productivity gain from
reorganizing around team-
based production and
commitment to continuous
improvement
 Cost Advantage
11• However, difficulties to satisfy the surging demand for its products

12. Wide range of customization opportunities
Mutliple options for:
Seats bars
Pegs
Controls
Paint jobs
Range of 7000 accessoires
CUSTOMIZED DESIGN
Every Harley rider would
own a unique, personalized
motorcycle
 Competitive Product Strategy
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13. Strategic Importance
RelativeStrength
SUPERFLUOUS STRENGTH KEY STRENGTHS
ZONE OF IRRELEVANCE KEY WEAKNESSES
HONDA‘S RESOURCES AND CAPABILITIES
• Product Diversification (R&D)
• International Exposure
• Manufacturing
• Product Development
• Public Relationship
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14.  Ability to share R&D across cars and bikes
 Benefit from sharing technology, engineering capabilities, marketing
and distribution know-how across different vehicle devisions
PRODUCT
DIVERSIFICATION
- automobiles,
motorcycles, power
equipment, robots,
aircrafts etc.
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15. PRODUCT
DEVELOPMENT
Honda offering V-twin cruisers styles closely along the lines
of classic Harleys
At a lower price
With more advanced technologies
Harley’s smaller corporate
size and inability to share
R&D across cars and bikes
(unlike Honda) limited its
ability to invest in technology
and new products.
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16. MANUFACTURING
HARLEY-DAVIDSON
Low production volume relative to HONDA
Significant scale & cost disadvantage
Key cost disadvantage: purchasing components
HARLEY lacked the buying power of HONDA 16

17. INTERNATIONAL
EXPOSURE
 Honda attracting younger customers
 International Market Share
 European motorcycle market differed significantly from the
American market – differences in style preferences 17
Harley needed to fight to take
market share from the
established leaders in the
heavy bike segment in Europe
(like Honda)

18. Establishing Competitive
Advantage
 Harley-Davidson lacks in their resources and capabilities to
have cost advantage over Honda  low economies of scale
and learning curve due to low production
 Differentiation advantage is obtained through brand
recognition and the Harley experience  providing the
customers a unique motorcycle
 However, Harley’s international exposure as a key
weakness demonstrates the inefficient sales in order to
sustain their other resources such as R&D and product
diversification
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19. Harley-Davidson’s Threats
 Threats faced by Harley-Davidson creating a barrier to
sustain competitive advantage:
1. Brand Recognition
2. Customers
3. International Exposure
4. Intellectual Property
5. Lack of Diversification
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20. 1. Brand Recognition
“Everyone lost interest in the brand as HOG didn’t feel like an
exclusive club for loyal customers anymore.”
– Anthony Gikas, senior research analyst at Piper Jaffray
 Increase in demand and sales led to loss of exclusivity
 Losing appeal  loss of their strongest asset
 Risk of changing consumer preferences (increasing interest
in sport models)
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21. 2. Customers
 Harley-Davidson highly focused on American traditional style for
higher-class customers
 In 1987, 50% of buyers are under 35 and now less than 15%
 Generation threat  Current customers are ageing
 More focus on younger middle-class customers
“To grow and thrive, they must create a deep emotional connection with
younger consumers.”
– Gregory Carpenter, a marketing professor at the Kellogg School of Management
at Northwestern
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22. 3. International Exposure
 EU and Asia prefer lightweight, high technology, sportive
and low-priced motorcycles
 Falling back on innovation and technology
 High cost due to low production  high prices for above
average profit
 Acquired Buell  in order to gain market share outside
America  tried offering same experience as Harley-
Davidson  Unsuccessful
 Low market-share in Europe and Asia
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23. 4. Intellectual Property
Company # Patents Level of Secured Innovation
Harley-Davidson 90 Very Low
Honda 3971 Very High
Yamaha 2057 High
Kawasaki 502 Medium
Suzuki 247 Low
Offering average or similar product  price will play the final role
Company Average Retail Price ($)
Harley-Davidson 14.549
Honda 10.565
Suzuki 10.765
Kawasaki 9.299
Yamaha 9.340
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24. 5. Lack of Diversification
 Portfolio consisted mainly Cruiser Motorcycles
However, competitors imitated Harley-Davidson  loss of
competitive advantage
 Touring Motorcycles not up to customers’ requirements 
low on technology
 No market of Performance Motorcycles  most demanded by
consumers
Harley-Davidson maintains on a vision of traditional
heavyweight motorcycles  lowers the potential of
diversification
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25. Sustain & Enhance
Competitive Advantage
 Grant (2010) identified that superior Economic and Financial
performance is viewed as evidence of competitive
advantage:
As identified, Harley-Davidson falls behind its competitors and
therefore needs to sustain and enhance its competitive position
In 2008 Harley-Davidson Honda
Income after tax $655 million $5,135 million
Operating Cash Flow -$685 million $11,382 million
R&D Expenditure $164 million $5,703 million
Return On Equity 19.50% 11.19%
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26. Measuring sustainability:
VRIO Framework
Valuable? Rare? Costly to
imitate?
Exploited by
organizations?
Competitive
implications
No No No No Disadvantage
Yes No No No Parity
Yes Yes No No Temporary Advantage
Yes Yes Yes Yes Sustained advantage
Harley Davidson  Temporary Advantage
However:
• Brand is losing perceived customer value
• Faces threat of losing exclusivity
• Not costly to imitate
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27. Cont.
 According to Grant (2010), sustainability can be achieved
through price-based strategies, differentiation, and lock in.
1. Price-based strategy 2. Differentiation 3. Lock-in
Accept reduced margin Create difficulties for
imitation
Achieve size/market
dominance
Win a price war Achieve imperfect
mobility of
resources/competencies
First-mover
advantage
Reduce costs Reduce margin Reinforcement
Focus on specific
segments
Rigorous enforcement
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28. 1. Price-based strategies
 Harley-Davidson?
 Potential cost reduction throughout value chain
 Improvement in price transparency
 Increase of sales in European and Asian market  leading
to economies of scale
 Increase production volume to lower cost per unit
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29. 2. Differentiation Strategy
 Harley-Davidson?
 Roberts (1999): “Sustainable advantage comes from
…innovation, pure and simple.”
 Separate department for R&D  in order to realize and
obtain consumer preferences
 Sustain intellectual property  make imitation difficult
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30. 3. Lock-in
 Harley-Davidson?
 Sustain dominance in American market
 Aim to achieve higher market share in Europe and Asia
through lightweight motorcycles
 Economies of scale through price-based strategy
 Reinforce intellectual property rights such as more patents
 difficult to imitate
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31. Conclusion
 Harley-Davidson remains to be among the market leaders in
America
 Many threats regarding losing competitive advantage
 Trends of heavyweight is going down
 Temporary advantage needs to be retained with proactive
strategies
 International exposure is essential as it will open many new
sources of cash flow for the company
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32. References
 Barney, J. (1991). Firm resources and sustained competitive
advantage. Journal of management, 17(1), 99-120.
 Grant, R., 2010. Contemporary Strategy Analysis: Text and Case.
7th Edition, Sussex: John Wiley & Sons Ltd.
 Porter, M. E. (2008). Competitive advantage: Creating and
sustaining superior performance. Simon and Schuster.
 Pugliese, M. J., & Cagan, J. (2002). Capturing a rebel:
modeling the Harley-Davidson brand through a motorcycle
shape grammar. Research in Engineering Design, 13(3), 139-
156.
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