HARLEY DAVIDSON COME BACK

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Summary of the facts

In 1903 the Arthur’s brothers, Walter and William started the Harley -Davidson Motor Company. The Milwaukee, Wisconsin Davidson family’s backyard is where the business was first started and it later got relocated to an office in 1904. AMF Inc, acquisition of the company favored them mainly due to their profits which were mostly short term as compared to retooling and development or investigative research. While the competitors focused on their motorcycles constant improvements, Harley on the other hand focused on motorcycle sales.

The company as a result of this recorded a weak profit and downtime. The company in 1981 was bought out under new management team. However, in 1993 the Buell Motorcycle Company during this period was bought by the Harley-Davidson Inc. Harley-Davidson due to this investment saw the gradual entry into the performance and sports motorcycles market .Eagle mark was later acquired by the company n 1995. Eagle mark which is a financial service company provides product and financial advice to manufacturers, their customers and dealers in Canada and the United States concurrently. The Harley-Davidson management team in 1981 performed a purchase of the company from AMF in a leveraged buy-out. The motorcycles overall demand within the first year dropped dramatically while the share unit of Harley also reduced within the first year. For Harley this even greater reduction in sales saw the beginning of a large unsolved issue with the revenue in their unsold products inventory. At their current position, Harley knew that it would not be possible for them to continue transacting any business at their current operational cost, production and level. With this, the company production, was therefore drastically cut, and an approximately 1,800 – 4,000 employees got retrenched. In 1983 the states motorcycle industry move to help the Japanese motorcycle model got a boost from the United States motorcycle industry to increased tariffs. Currently, the company boasts of having employed over 4,694 workers that mainly consist of Chicago, Illinois. Based Eagelmark Financial Services Inc employees and Milwaukee based Harley-Davidson Motor Company (Wagner, 2003).

In addition throughout the United States there are nearly 600 dealerships. The growing economy has forced many companies to look for alternative means of increasing their market shares globally. Due to this many excellent firms have learnt how to implement new manufacturing, marketing and management techniques as means of beating their competitors. Harley-Davidson can be regarded as one of those companies that have deviated from the traditional ideas by rebranding and restructuring its management, manufacturing and marketing departments to be its driving force through its comeback period mainly 1985-2008.

Problem that the Case Presents

The problem that the initial Harley Davidson manufacturing process faced can be viewed from the aspect of the processing plant. In that the old systems design centralized on batching process to control its products frequency and materials flow into the plants floor. The main issue with this system is that there is neither a specified formula nor batch format for the materials outflow or inflow while the process was activated, and this contributed to the company’s costs per units produced and high labor and in addition it made it hard to function when there was need for large-scale production. It also contributed to very high rates for set up while recording low output and this caused a strain in the company’s finances especially for AMF (Eldridge, 2003).

In marketing, even though the Harley-Davidson company for many decades had enjoyed unprecedented monopoly in the motorcycle industry. The entry and flooding of the American market with low price but high quality Japanese models in the 1970’s, affected the market shares that the Harley’s initially had as seen with their shares falling from 77.5 percent to a recorded 23.3 percent in the period of 1973-1985.Since they could not stand up to the Honda and compete in price or quality they lost out since their products were not consumer driven and as such could not counter the recession the country was undergoing at the time.

The problem with the company management can be described as one that did not place any relevance in its customers or workers since it had no significant bonds with either of them. With this problem the roles of the company were never understood and its customer base was not understood or fully exploited to its advantage.

Causes of the Problem

Harley bike had poor quality level as compared to their Japanese competitors and this directly affected their products sales. The drastic drop of the products shares and demand after the leveraging and buying out of the company from the AMF this not only affected the prices but the company’s inventory in the process which led to a backlog of unsold products. Operations and Production level costs cut downs which saw more than 1800 of the initial workers losing their jobs. The decrease of the initially placed tariffs for the Japanese products by the President Ronald Reagan in 1983 also affected the company.

The status change during the 1970’s after the buying out when the new owners conducted an analysis and discovered that the main problems with the management involved issues like most of the corporate management implementation of short term returns as their main focus. There was no responsibility given to the employees on the quality of work they did in addition the management they never even tried to listen to their suggestions. High inventory reduced productivity and parts wasted cash on maintenance. Carelessly thrown fixes to main problems like management implementing machinery to generally improve productivity. The company left vulnerable due to the high break-even points of the unpredictable markets. Management not addressing the foreign competition issue since they did not notice their potential.

Another cause to the problem would involve the fact that due to the foreign manufacturers flooding of the market with their products, the company market shares were directly affected and this forced the Harley Davidson company to reevaluate their initial quality and products value so as to return the company to its original standing .this restructuring was not easy at the period since the country was also undergoing a recession at the time mainly on the customer base since most of the loyal customers were getting old and this forced the company to reevaluate its clientele base as well. This was essential since its initial strategy was one dimensional and lacked any diversity in its packaging so as to target new market base like women and youth. This change urgency prompted the company to change from one that dictated the customers to one that relied on direct input from the customer’s philosophy after gathering data from their surveys, analysis and interviews.

Another contributing factor is loss of the financial support and backing of the AMF after going public in 1981 this time was still very short for it to become a relevant or successful company. Due to the finance constrains it could not implement any changes to its production, management or marketing due to the tight budget and lack of technological knowhow since the management constantly changed and this did not give the company enough time to settle and get used to one type of leadership which would have been effective.

Alternative Solutions

Available alternatives for the company at this particular period included outsourcing for their materials from cheaper locations, and through this implication they could sort out their products quality. They could have also targeted mew markets and tried to expand more to avoid the unnecessary competition they had locally. They could have also opted for merger with other company so as to maintain their relevance but also as a way of entering into new markets and maintaining their presences locally. They could have opted to diversify their products so as to be unique and while creating and added advantage against the competition. They could have also changed their production schedule to not correlate with the competitors (Bedbury, 2002).

Recommend Solution

In their manufacturing the first step management had to make was on the determining specific areas that specifically needed changing or improvement. Through this evaluation a synergy would be maintained that would address the ineffective processes flow. The proposed and implemented process helped create the productivity triad synergy in the company. The three processes include employee involvement (EI), just-in-time inventory (JIT), and statistical operator control (SOC) these are not new concepts in the business world their implementation since the reforms has helped improve the company’s manufacturing process.

In their management practices the proposed change would include a proposed establishment of a system to better bring closer the management and the staff. In that there would be genuine bonds being forged through the process as they interact, this would build efficiency and loyalty throughout the company from distributors, management and workers. Building an institution for the employees like the Harley-Davidson Learning Center, they can go and better advance their knowledge on company practices, better improve themselves through continuous learning and interaction and get the sense that they belong to something better and big like a community in which it demanded loyalty and efficiency as a means of its survival.

On their marketing strategies I would recommend they adopt one that was more based and developed around customer based marketing philosophy. Through this they could improve their general image globally. Their customer relations would also improve since like by implementing programs like the (HOG) which is a membership to the Harley Owners Group for one year would keep the people active with their Harley and they will be inclined to keep up to date with the company to get the promotions and through the national rallies, and charity events not only the customer relations but also the customer gets closer to the company.

The new customer based philosophy would also help with the products promotion as in the case of the HOG activities. That during the rallies, free rides and all family activities the company can get a chance to show case new products and get response directly without having to rely on third party reviews this will be an effective way for its improvement. Through this the company can strengthen the customer impression while on the other hand managing to eradicate bootlegging of their merchandise since the customers will be aware of their brand and its quality and this will be another advantage for the company.

Improvements on the initial products to be more customer and environment friendly would also be another added advantage. Through exploring other production niches like on products customizing and invention of other products apart fro their initial trade like how they did with street/sports and touring/sports motorcycles as means of finding strength on the market. Reevaluation of their price by the management to involve a system that prioritizes value over the products price could be used effectively by the management to address the foreign competition reduced price rates. This they can achieve over a short time span if they took advantage of the parts construction and the many available mini niches in the market, such implementations would go a long way in making prices and sales one of their strong points.

They can also stand to gain if they use the distributors effectively unlike in the previous system that did not care. In the proposed changes the distributors should be viewed more as partners in the business and should then be entrusted to play majorly in the development and implementation of improvement, financial, consultancy management, and in support and implementation programs. In my opinion by bringing, those on board the change process and having them own shares in the company will allow them to feel they belong and that they are part of the company. This will make for an effective marketing strategy since he will now have a motive and share the company’s vision of prosperity.

Justification

Justification for the above claims can be seen through aspects like through the implementation of the productivity triad namely; employee involvement, statistical operator control and employee involvement aspects to their manufacturing. The company not only recorded an improvement in their production but they managed to make all their initial inventory reusable and this made even the initial suppliers to be recommended to use the JIT into their products process. Other impressive turn around and improvements that the manufacturing department recorded included; a reduction on the initially required space by 25 percent, there were turn ups from the initial inventory from 5 to 20, there was increase in the productivity sector by almost 50 percent, Improvement in the inventory levels by almost 75 percent, this was a good sign for the company costs. Rework and scrap was recorded to have reduced by almost 68 percent. There was a complete recorded improvement of 76 to a high 99 percent on motorcycles that were being completed and coming of the production line. Through this explanation it is clear that the management implementation of the productivity triad is justifiably and the relevant according to these statistics (Teerlink and Ozley, 2008).

The company developed strategy of value over price can be explained as being effective since unlike their competition they used steel instead of plastic in their products. Through this they could rebore and recycle the product and this helped them reduce on production costs mainly accumulated through the materials. This was in line with their caution of not over producing the motorcycles as a means of creating a gap to increase its demand since it will be produced according to customer demand. Through their development of heavy construction parts and mini-niches over time their motorcycles have managed to maintain their brand and image in the market as quality products and this has helped enhance their demand. This claim can be justified by the fact that currently as compared to a new Harley the price of a year old DH motorcycle is 25 to 30 percent higher and a client can wait up to eight months for theirs to be delivered, this shows the value and level the company is placed by their customers making it hard for them to always satisfy the customer demands due to the high rate of request and demand for the products.

The assessment of the above discussed issues and their recommendations can be reviewed by the management on a regular basis in that they can occasionally take time to check if their company is still adhering to the implemented changes or if there are any new ones that are necessary since they can be flexible and susceptible to evolve.

References

Bedbury, Scott. (2002)A New Brand World: Eight Principles for Achieving Brand

Leadership in the 21st Century, Viking Press.

Eldridge, E. ( 2003). Investors fear Harley’s thunder grows faint. USA Today.

Teerlink, Rich, and Ozley, Lee: (2008) More Than a Motorcycle: The Leadership Journey

at Harley-Davidson, Harvard Business School Press.

Wagner, Herbert (2003). At the Creation: Myth, Reality, and the Origin of the Harley-

Davidson Motorcycle, 1901–1909. Wisconsin Historical Society Press.