Case Study: Harley-Davidson, Inc.
The Harley-Davidson case presents a unique example of a unique company that, due to their remarkable customer loyalty, was able to go from nearly bankrupt to successfully gaining a substantial portion of the market in a niche product.
The company was able to gain market share and profit by substantially restructuring their business plan. Harley-Davidson changed from a traditional large batch manufacturing philosophy to just-in-time strategy. They began involving employees in problem solving and they redeveloped and focused their marketing strategy to a smaller niche market.
In 1903, William Harley-Davidson, Arthur Davidson, Williams Davidson, and Walter Davidson started Harley-Davidson in a 10x15 shed in their backyard in Milwaukee, Wisconsin. Production started with three motorcycles in 1903 and increased to 8 in 1908. In 1969, AMF Incorporated acquired Harley-Davidson Motor Company and expanded capacity from 15,000 to 40,000 motorcycles.
Harley-Davidson, Incorporated was formed in 1981, when it was purchased from AMF Incorporated in a management buyout. In 1986, Harley-Davidson, Incorporated became a publicly held company.
The new management installed a just-in-time inventory system to reduce inventories and improve total quality. With a new quality focus Harley-Davidson began to invest heavily in research and development. In one year the new Harley-Davidson management reduced the break-even point by 18,000 motorcycles. Management's focus on efficiency in production and improvements in quality resulted in increased demand and a production capacity of 100,000 motorcycles in 1995.
Harley-Davidson operates in two segments. Motorcycles and Related Products, and transportation and vehicles segment. Total net sales for the first nine months of 95 were $1.3 billion, an increase of $174.1 million from the first nine months of 1994. Net sales increased in both the Motorcycles segment and the Transportation Vehicles segment. 1
Demand for motorcycles is continuing to increase at a rate faster than supply for most of the markets in which Harley-Davidson competes. Parts and Accessories market should grow at a rate similar to the annual growth in motorcycle market. From its beginning in a shed at turn of the century, Harley-Davidson has survived the Great Depression, two world wars and a manufacturing revolution to become a company with products so valued and sought after that they are a way of life for many owners.
* Company is the only United States motorcycle manufacturer, a definite marketing advantage in increasing domestic market share
* Exceptional name recognition
* Customer loyalty
* A established dealer network supported by ongoing dealer and sales force education and training
* Efficient manufacturing and inventory system
* Limited production capability
* Three product lines, two of which have declining profitability
* Limited model selection
* Unstable economy affecting demand on luxury products
* Questionable research and development resources
* Affluent customer base in peak earning years
* Company has purchased distribution rights to the Japanese market and increased potential market share
* Improved technology, increasing safety, ease of use, and reliability
* Increased customer base with women and affluent baby boomer market
* World sociocultural change, where self-fulfillment is increasing
* Intense competition from Japanese motorcycle makers
* Increased negative legislation regarding motorcycle safety, helmet use, and noise abatement laws that could decrease industry sales
* Aging primary market
* Shrinking home market
Harley-Davidson realized that in order to increase production efficiencies, improve quality, and meet their production goal, their workforce needed...
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