Harley Davidson

Harley Davidson, the famous manufacturer of heavyweight motorcycles, has dominated the U.S. market by successfully targeting and selling its customers not only a motorcycle but the lifestyle that accompanies it. However, due to its overemphasis of the American heavyweight segment, the retirement of its core demographic, lack of research and development, and the economic strain on its financial services, the American icon must remodel its business strategy to achieve profitability and sustainability (Exhibit A).

Analysis of Harley Davidson and Motorcycle Industry The motorcycle industry is segmented into different markets dependent upon the cubic centimetres (cc) of the engine. Harley Davidson is a key contender in the heavyweight (over 650cc) and super-heavyweight (over 850cc) markets, with its main competition coming from Yamaha, Honda, Kawasaki and BMW. Competition is fierce amongst the different producers as the industry is plagued with consumer brand loyalty. In fact, the switching costs of the buyers are not so much the cost of the motorcycles, but the prestige and style each bike brings. Harley Davidson’s success thrives on the loyalty of its customers. It has successfully marketed the experience, freedom and lifestyle that riding a Harley brings and for this reason it accounts for more than 50% of the U.S. heavyweight market.

Furthermore, to the advantage of Harley Davidson and its competitors, their presence and brand loyalty have successfully made the North American heavyweight market unattractive to any potential new entrants (Exhibit B). Harley Davidson and its competition are mature, consolidated and have established economies of scale. Even if a new entrant strategized itself to be a low cost producer, they would not be able to substitute the status and experience that took Harley Davidson over 100 years to build. Nevertheless, there is the possibility for new...