Saturday, May 18, 2019
Harley Davidson Case Study Essay
Harley Davidson, established in 1903, is the largest manufacturer of motorcycles in the unite States. trance Harley Davidson dominates the moto food market in the linked States, it is very sm all in all compargond to the international market which is infiltrated with large Japanese firms such(prenominal) as Kawasaki, Honda and Yamaha who develop various categories of motorcycles. Harley Davidson has deep rooted daub equity in the United States and stiff loyal in its style. It has excessively remained consistent in manufacturing lone(prenominal) heavyweight motorcycles. By showcasing only a single model type, Harley Davidson has established itself as a leader in the United States market. otherwise international markets, especially Europe and Asia, produce numerous lines of sports motorcycles (street bikes, scooters etc), as this meets the demands of these markets. Harley Davidson classifies their bikes into three main heavyweight categories (1) Touring Bikes, (2) habit Bi kes, and (3) Sportster Bikes. More than half of Harley Davidsons taxation is generated from gross revenue from within the United States, with a much smaller presence in Europe, Asia and Latin America. Harley Davidson has seek unsuccessfully to acquire additional motorycle companies twice since its origination only ultimately has continued to keep its product lines simple and focused around a few elementary products. Description of Data and SourcesInitialal research was conducted on the history of Harley Davidson bicycles by researching their website. Data was then obtained from a transmutation of sources including industry journals, annual sales reports, and company websites. By comparing sales and annual (10k) reports to those of its competitors, we were able to restrict market patterns and explain the market structure in which Harley Davidson Motorcycle competes. Sales reportscompared units exchange by the Harley Davidson , as well as competition among firms internationall y displayed by the type of bikes sell and in which geographic areas. commentary of MethodsIn order to establish initial market structure and competitiveness, we collected data on the wide units of Heavyweight motorcycles sold in 2012 in the United States. We gathered data on the numbers of units sold by Harley Davidsons top three competitors, which we learned were Honda, Kawasaki and Yamaha, respectively. In order to establish a toll per unit, we took the median price of each firms heavyweight inventory and then took an average establish on these figures.The number of units sold multiplied times average price per unit gave us an correct reflection of over sales for 2012 when cross referenced with annual report data. Our data had several(prenominal) limitations as some firms data did not highlight units sold or sales revenue from the heavyweight market. We had to deduce and infer with the data we were given. Another limitation in data collection came when gather information ab out price mark up and marginal cost. We sought information from industry experts who had keenness in this area. Analysis and ResultsThe C4 four-firm concentration ratio of .880 indicates that there are only a few firms who produce most of the industrys siding. The heavyweight industry is highly concentrated. Most of this industrys output is produced by Harley Davidson, Honda, Yamaha and Kawasaki. The Herfindahl-Hirschman Index (HHI) is 3,586 out of 10,000. This suggests that there are multiple firms in the industry who consume a considerable part of the market share. The top four firms account for almost 40% of the market. This number would warn an investor when considering a possible merger. Demand and Pricing Structure/Lerner IndexThe Lerner Index for a Harley Davidson is .25 and the mark-up is 1.3. HD charges a price 25% over the marginal cost or 1.3 times the actual marginal cost. In other words, for each dollar paid from the consumer towards the purchase of a new motorcycle, $.25 is markup. Market StructureHarley Davidson (HD) Motorcycles have many different aspects that contribute to the market structure, specifically the classification of motorcycles by size, the number of firms in the market two national and international, brand equity merchandising which includes entry to the apparel, accessories and licensing markets, barriers to entry and various merger attempts in the past.HD Motorcycles are classified into heavyweight classes such as Touring, Custom, or Sportster. In 2011 Touring motorcycle accounted for 92,002 bikes out of a centre of 233,117 bikes sold for Harley Davidson (Harley Davidson Inc., 2012). Second leading in sales were Custom bikes at 91,459 bikes (Harley Davidson Inc., 2012). Overall, Harley Davidson sold 152,180 units in the United States and 80,937 units internationally for FY 2011 (Harley Davidson, Inc., 2012).In international markets Harley Davidson sold 83,505 units compared to 151,683 units in the United States (Harley Dav idson, Inc., 2012). Outside of the United States, sales in Europe and surrounding regions were the second largest region for Harley Davidson with 44,340 units sold in 2011 (Harley Davidson, Inc. 2012).Units sold in the Asian field came in third at 21,416 units, and the least number of units sold for Harley Davidson was in the Latin American Region, at 7,247 units. All regions saw an increase in the number of units sold from 2010 to 2011 but the United States still remains responsible for 68% of total units sold (Harley Davidson, Inc., 2012). In 2012 HD experienced continued growth as they sold 145,391 units globally in the first 6 months this is a 9.3% increase from the year before. Retail sales also increased by 12% in the US with a 16.5% increase in Asia/Pacific and a 58% in Latin America (Harley Davidson, Inc., 2013). Harley Davidson has seen steady growth in recent old age.Harley Davidson has not eer sustained yearly growth. As the economy was slowing slipping during the rece ssion of 2008, Harley Davidson was forced to make some endings in order to survive. In 2009 Harley Davidson announced they would discontinue the Buell Motorcycle brand from their line to focus all of their resources on producing their primary products in order for Harley Davidson to stay afloat (Crowe, 2009). In 1994 Harley Davidson became a 49% possessor in Buell Motorcycle Company, a company that was founded by a former Harley Davidson engineer, Erik Buell (Autoevolution, 2013).In 1998, four eld after entering business together Harley Davidson purchased an additional 49% of Buell Motor Company leaving the antecedent with only 2% ownership (Autoevolution, 2013). Harley Davidson would continue operating with Buell motorcycle brand for the next eleven years creating over 17 models of innovative motorcycles, however in 2009, as profits decreased, HD made a decision to end business with Buell.In 2008, during these same difficult economic times, Harley Davidson acquired an Italian m otorcycle company MV Agusta for $109 million hoping to increase sales and market expansion overseas in an area dominated by Japanese competitors (Barrett, 2010). Shortly after acquisition the market tanked and Harley Davidson had recorded $162 million in losses with the MV Agusta line (Crowe, 2009). The relationship lasted just over a year before Harley Davidson decided to sell the brand in 2009, at the same time it discontinued its relationship with Buell.Finally, accessories and licensing sales is another segment of the market heavily dominated by Harley Davidson. During the economy crash while bike sales slowed revenue generated from the sales of apparel and merchandise helped to contribute to the overall bottom line for Harley Davidson. In 2012 $69.3 million was generated from the sales of command merchandise trademarked as MotorClothes was up 12.8% from FY 2011 (Harley Davidson Inc., 2012).Summary and ConclusionAlthough Harley Davidson dominates the market in the United States , it has been the smallest in Europe and the 4th in Asia/Pacific region which is dominated by Japanese brands. One contend for Harleys smaller market share in the Europe and Asia region is that the company cannot produce replete motorcycles to meet the demand and its prices tend to be higher than competitive models. Shortages of Harleys lead many consumers to purchase competitive bikes as there are 2-year waiting lists for some Harley models (Company spotlight Harley-Davidson).This would lead us to think that Harley Davidson acts as a leader in a Stackelberg Oligopoly as it chooses its level of output in the market. In the United States Harley Davidson is one of a few firms that create motorcycles for touring or cruising. Harley Davidson produces differentiated products and remains the leader in selling them. Competitor firms such as Honda and Yamaha sell a significantly smaller number of motorcycles in the US markets compared to Harley Davidson. Barriers to entry have been exemp lified by companies such as Polaris and Triumph who have tried to enter the market but remain at 2-3% of market share.Market PercentageIn United StatesUnits Sold(in K units)Revenue (in M $)Harley Davidson57%161$2,500Honda17%48$744Kawasaki9%25$587Yamaha5%14$217Other12%34$527ReferencesAutoevolution. (2013). Buell Brand History. Retrieved from http//www.autoevolution.com/moto/buell/history/Barrett, R. (August, 2010). Harley Davidson takes whipping on MV Agusta. Retrieved from http//www.jsonline.com/blogs/business/100759404.htmlCompany Spotlight Harley-Davidson Motor Company. (2006). MarketWatch Global Round-up, 5(10), 14-19. Crowe, P. (November, 2009). Harley Davidson and Buell Unfinished Business. Retrieved from http//thekneeslider.com/harley-davidson-and-buell-unfinished-business/DATAMONITOR Harley-Davidson, Inc. (2011). Harley-Davidson, Inc. SWOT Analysis, 1-9.Delmont, J. (2013). list INTO THE CURVE. Dealernews, 49(1), 20. Harley Davidson, Inc. (January, 2012). Harley Davidson Ea rnings, RetailMotorcycle Sales Shows Continued Strength. Retrieved from http//investor.harley davidson.com/phoenix.zhtml?c=87981&p=irol-newsarticle&ID=1651657James B. Kelleher, R. (2013, June 30). Harley-Davidson looks beyond the aging clean male. St. Paul Pioneer Press (MN)M.L. Johnson The Associated, P. 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