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PORTER'S GENERIC STRATEGIES AS APPLIED BY HARLEY DAVIDSON COMPANY
Harley Davidson uses two of the three Porter's generic strategies, that is, differentiation strategy and , segmentation strategy.
The Differentiation Strategy
This strategy is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique (Wikipedia). Harley Davidson's specialty is associated with its design, brand image and, its technology especially for the traditional bikes that are a favorite for the traditional rider group of its customers.
This strategy concentrates on a narrow segment and within this that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.
The traditional bike riding group form a large portion of the Harley Davidson motorcycle customer base. This group has a cult-like following to H-D and the company concentrates on satisfying its needs . Customers in this group, most of whom are in the United States, buy the brand and the image that Harley Davidson portrays rather than performance. The Porter Strategies Harley Davidson employs do not work in European countries because customers are more into performance rather than image or brands.
Porter's five force analysis and strategies employed by H-D in recent years
Harley Davidson is one of America's most successful manufacturing companies. It has been in existence for over 100 years and although it is sitting on a healthy position in terms of profitability, heavy competition and negative trends raises the question on the length that Harley Davidson will continue to be a profitable company. Rivalry in this industry is very high with very large companies dominating the markets. Growth in this market also adds to the level of competition as firms compete fiercely to gain more market share in terms of growth. In the most recent years, Harley Davidson has been able to acquire motorcycle manufacturing companies in Europe, that is, MV Agusta of Italy in 2006. H-D has also acquired outstanding shares of the Buell Motorcycle Company with the aim of expanding its presence within the motorcycle manufacturing industry. Buell is intended to attract younger and nontraditional riders to the H-D family while the MV Agusta brand, best known for its performance, is aimed at luring European customers to buy H-D products.
The threat of new entrance into the heavy motorcycle market is low because the barriers of entry make it difficult for new entrants, such as high capital requirement and economies of scale which therefore makes the industry more profitable. In 2008, H-D's strategy incorporated three objectives, among them is to invest in the H-D brand by increasing its market base and restructuring its operations. The market base expansion was directed at reaching out to nontraditional rider groups, including women and minorities. Change in operations on the other hand involved closing some plants e.g the Milwaukee plant and outsourcing to other companies like Vienomonee Fala, Wisconsin. Given the above observations, it suffices to say that Harley Davidson's strategies are quite prudent and smart business-wise.
Harley Davidson and its competitors
Harley Davidson is the largest manufacturer of heavyweight motorcycles in the world by market share, capturing half the market and a third of the global market. As a luxury good, Harley competes primarily on design and quality rather than price which keeps margins high; gross margin during 2009 was 31%, as opposed to 34.5% in 2008. In addition, Harley enjoys brand loyalty from its customers; something that most of its competitors lack and therefore, this gives it an edge over other companies in the market. Harley is arguably the only company whose customers have been known to regularly tattoo its trademark on their bodies and this group of customers has been the same for the past 20 years.