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Harley Davidson SWOT & PESTLE Analysis

Last Updated : 30 Jun, 2017

OVERVIEW

Name of the Company: Harley Davidson

Business Sector: Automobile

Operating Geography: United States, North America, Global

About the Company: Harley Davidson was founded in 1903 operating in mainly two reportable segments – two-wheeler segment & financial services segment and. Both the divisions combined employ close to 6000 employees as of December 2016.

Revenue: USD 5.9 billion – FY 2016

SWOT & PESTLE Analysis

The SWOT analysis for Harley Davidson is presented below:
Strengths
Weaknesses
1. Huge global footprint – business in close to 100 countries worldwide
2. Strong marketing policies maintaining a high brand image, trust and consumer loyalty
3. Integrated services to the bike consumers including parts & accessories and financing options.
1. Greater reliance on third parties for company operating and administrative activities
2. Less market share outside domestic market in international countries
3. Decrease in net income for the company by 8%
Opportunities
Threats
1. Wide gamut of trade agreements by the home government with exporting countries coupled with global and domestic economic growth1. Rising competition from local players in global markets
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Strengths

1. Huge global footprint – business in close to 100 countries worldwide: Harley Davidson has business in 97 countries backed by 1461 dealerships worldwide. While, majority of the manufacturing facilities are in US, the company also operates facilities in Brazil (Complete knockdown), India (CKD and production for exports outside North America) & Australia. Harley Davidson has accomplished 51.2% market share among the new registrations in US and has been consistently more than 50% in its domestic market. The company has added 40 new dealerships in 2016 and international sales comprised of 37.9% as compared to 36.4% in 2015. Harley Davidson has been able to increase its sales in international markets in compared to last year. In US, market share has increased by 1% compared to 2015, retail sales increased in EMEA by 5.9%, 2% in Asia- Pacific, 5.5% growth in Canada as compared to last year

2. Strong marketing policies maintaining a high brand image, trust and consumer loyalty: Harley Davidson pioneers in the touring & cruising segment of motorcycles with engines capacity ranging from 600 cc to 1900 cc. Harley Davidson maintains a huge brand image and consumer loyalty through licensing various products among the bike enthusiasts which brought $38.1 million revenues to the company. Harley Davidson has strong marketing policy through digital and experiential activities – bikes available on rent for touring purposes, racing activities, music festivals, mixed martial arts, deeper engagement in biking through imparting of skills at training programmes and also through a company owned museum at Milwaukee, Wisconsin. The company also maintains trust among its consumers through voluntary recalls for any issues and has initiated 24 recalls in last 3 years.

3. Integrated services to the bike consumers including parts & accessories and financing options: Harley Davidson is a wholesaler for touring and cruiser segments motorcycles to the consumers. Harley Davidson also emphasizes the availability of parts & accessories, general merchandise offered both online & offline coupled with up to 100% wholesale as well as retail financing options, insurance services through its financial arm to the consumers. Thus, the company offers total biking solutions to the consumers.

Weaknesses

1. Greater reliance on third parties for company operating and administrative activities: Harley Davidson depends on third party suppliers for pricing and delivery of services. This sometimes leads to unfavourable pricing, delay in delivery of activities as well as poor quality.of services. The company also depends on third party suppliers for raw materials which sometimes lead to poor quality and untimely delivery of raw materials. Harley Davidson has only single supplier for certain parts that leads to greater supply risks for the parts.

2. Less market share outside domestic market in international stage: Harley Davidson is unable to address the needs of the consumers in the international market effectively. In Europe, Harley Davidson holds a market share of 10.8% in 2016 as the touring and cruiser needs are less in Europe than US. In the developing markets, there is little demand of 600+ cc bikes as a percentage of total sales which reduces the chances for Harley Davidson sales.

3. Decrease in net income for the company by 8%: Harley Division reported net income of $692.2 million in 2016 down from $752.2 million in 2015. Operating income has decreased by $102.1 million compared to last year. Independent retail sales through dealers have decreased globally by 1.6% compared to last year due to lesser shipments, unfavorable exchange rates and manufacturing costs. Operating income for Harley Davidson financial services also decreased by 1.7% or $4.7 million due to higher provision of credit losses.

Opportunities

1. Wide gamut of trade agreements by the home government with exporting countries coupled with global and domestic economic growth: Global economy is expected to grow at 3.5% in the current year along with growth of US by 2.25% in th current fiscal. This will be driving the increase in demand for automobiles across the globe due to increased needs of commuting and luxurious expenditure for the bikes among the young population. Also, US has free trade agreements signed with 20 countries across the globe as well as trade & investment framework agreements with various countries at different levels and currently is in process of forging a new Translantic Trade and Investment Partnership with European Union. These trade agreements provides plenty of opportunities for US companies like Harley Davidson to get access to the global markets and also transfer of skills and technologies amongst different countries. TTIP agreement will open new investment destinations in Europe for Harley Davidson which will help it to get better hold and increase sales in European market.

Threats

1. Rising competition from local players in global markets: Harley Davidson faces severe competition from the local players in the global market due to various consumer requirements apart from touring and cruising needs. Low cost manufacturers in the local markets pose a strong challenge to the company which has the advantage of local manufacturing and sourcing facilities doing away with the import taxes unlike Harley Davidson. HDFS also faces competition from the local & nationalised banks, insurance as well as dealer in-house programs companies serving regional markets. These factors coupled with forex rates of foreign companies compared to USD reduce price effectiveness of Harley Davidson’s products.

To get the complete detailed SWOT report on Harley Davidson please mail us at: support@swotandpestle.com. or contact us here.

Harley Davidson SWOT analysis has been conducted by Anindya Sadhu and reviewed by senior analysts from Barakaat Consulting.

References

1. Harley Davidson Annual report 2016

2. Top 10 Two-Wheeler Manufacturers In 2016 For India-http://www.drivespark.com/four-wheelers/2017/top-10-two-wheeler-manufacturers-india-2016/articlecontent-pf58114-020080.html

3. Bilateral Investment Treaties- https://ustr.gov/trade-agreements/bilateral-investment-treaties

4. Luxury bikes segment will expand in the next five years- http://www.sunday-guardian.com/business/luxury-bikes-segment-will-expand-in-the-next-five-years

5. Number of women riders hits all time high- https://www.revzilla.com/common-tread/number-of-women-riders-hits-all-time-high

6. Trade & Investment Framework Agreements- https://ustr.gov/trade-agreements/trade-investment-framework-agreements

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The PESTLE analysis for Standard Bank Group is presented below:
Political
Economical
1. New international trade policies owing to new elected president in US
2. Regional governments extending sops to local manufacturers
1. Improving global economy coupled with increase in global ridership and focused demand
Social
Technological
1. Inclination towards premium segment bikes in the global market
2. Increase in women ridership of motorcycles
1. Development of additional safety features in motorcycles
2. Incorporation of intelligence and automated technologies in motorcycles
Legal
Environmental
1. Stringent environmental protection standards for automobiles enforced by administrative authorities
2. Safety regulations imposed on motorcycle manufacturers
3. Expansion in regulatory authority of CFPB on financial products
1. Growing negative concern towards environmental pollution created by automobiles
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Political

1. New international trade policies owing to new elected president in US: New elected president of US- Mr. Donald Trump vows to make ammendments in the international trade policies. Free movement of labor from cheaper foreign countries and has already banned outsourcing labor from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. This is likely to spike labor costs for domestic sourcing of labor and thus manufacturing costs. On the other hand, domestic employment generation will grow as major outsourcing service industries wil have to hire US workers. This will generate more income for americans and is likely to increase sales of Harley Davidson. US government is also in process in renegotiating trade agreements like NAFTA and TTIP with EU for better investment and trade opportunities for home grown countries like Harley Davidson.

2. Regional governments extending sops to local manufacturers: Harley Davison is facing stiff competition over pricing from regional players in other countries as the regional governments are extending subsidies to the domestic manufacturers which makes Harley Davidson’s imported products less competitive in compared to the local brands.

Economic

1. Improving global economy coupled with increase in global ridership and focused demand: Global economy which is mostly driven by US economy which is expected to grow by 2.25% in 2017 due to various protectionist and domestic employment friendly measures taken by Mr. Donald Trump. Europe is expected to grow by 1.5% in 2017 which is consistent with labour market improvement for the last few years. The BRIC countries represents a huge share of pie of global economic growth close to 30%, amongst these automobile sales is expected to rise at a CAGR of 4.6% till 2020. Due to rising in oil demand, emerging countries expect gradual recovery in the commodity market as well as industrial commodities. This will lead to higher employment and stimulate consumer spending. China expects to hit growth target of 6.5% in 2017. It is mainly due to rising disinflationary pressures, reduced employment, easing fiscal policies. Thus, Harley Davidson can expect improvement in premium segment bike sales where currently it is operating in.

Social

1. Inclination towards premium segment bikes in the global market: Due to economic developments worldwide, there is growing inclination towards usage of premium bikes for touring and cruiser purposes.. Also in the developing countries there is little competition form local manufacturers in the premium segment biking which calls for more opportunities. According to Techsci report premium segment bikes is likely to increase at a CAGR of 20-22% in the next five years which opens up better opportunities for companies like Harley Davidson. In US, cruiser and touring bikes accounted for 75% of the of total new vehicle registrations while 600+ cc vehicle registrations accounted for 84% of the total new registrations which is a good indication for Harley Davidson.

2. Increase in women ridership of motorcycles: Motorcycle riding is no longer confined to male riders with growing attitude of women towards biking. In addition, women are preferring cruiser bikes at 34% to scooters at 33%. As per the MIC report, 60% of women are taking motorcycling safety courses compared to 42% by men. The numbers of female riders have doubled in the last decade standing at 14% in 2015 which opens up newer business opportunities for Harley Davidson bikes sales.

Technological

1. Development of additional safety features in motorcycles: There is growing passion for high powered engine motorcycles which calls for parallel development in safety features. Antilock braking features is set to be mandatory for all high power bikes to prevent locking of the wheels across all major global markets. Electronic controlled throttle systems, wheel traction control, development of high performance clutch and development of airbags technologies for the adventurous bikes is steadily becoming among the bikes portfolios.

2. Incorporation of intelligence and automated technologies in motorcycles: Rapid improvement in embedded technologies usage in automobiles has opened up new dimensions of improvement of automobiles. Adaptive headlights to focus correctly as per requirement during taking lean curves, auto headlamp on technology have the potential to check night time bike accidents by around 90%. Development of digital touchscreen dashboard for bike is underway. Thus, the premium bike manufacturers vowing to add to consumer’s ride experience and thrill should invest to stay competitive in developing more advanced technologies.

Legal

1. Stringent environmental protection standards for automobiles enforced by administrative authorities: In domestic market in US, Harley Davidson faces stringent regulations for environmental pollution control and its products are required to be certified by US Environmental Protection Agency and California Air Pollution Board which are expected to be more strict in coming years. In India, there is outlook for implementation of Euro 6 norms by 2020. In Europe, Euro 4 & 5 regulations are expected to cut emission allowance for vehicles – CO & NOx emission less than 1g/km and particulate emmissions less than 0.01g/km.Thus increased regulations are expected to increase R&D costs for the manufacturers.

2. Safety regulations imposed on motorcycle manufacturers: Harley Davidson is subjected to various legislations formulated by federal agency – NHTSA. This calls for effective record keeping for the products manufactured and sold with unique identification number. The motorcycles has to contain labels in specified content format & placement in the vehicle. Additionally, the guidelines also suggest specifications need to be maintained for the components of the vehicles for safety purposes. In India, government has given mandate on use of Auto Headlamp On technology for enduring road safety. Thus, the motorcycle manufacturers need to be aware of the regional safety rules across different countries and customise the vehicles in accordance to that.

3. Expansion in regulatory authority of CFPB on financial products: Dodd-Frank Wall Street reforms and consumer protection acts have granted regulatory powers to Consumer Financial Protection Bureau over consumer financial products which is expected to affect Harley Davidson Financial Segment operations. Also, HDFS is subjected to various federal regulations – Truth in lending act, consumer leasing act, equal credit opportunity act and fair credit reporting act. Thus, Harley Davidson Financial Segment has to update its operational procedures in accordance to new laws being made.

Environmental

1. Growing negative concern towards environmental pollution created by automobiles: There has been growing concern towards environmental pollution caused due to vehicle emissions and noise created by them. In Paris Peace conference 2015, 195 countries across the globe has committed to reduce carbon footprint in order to global warming to less than 2 degrees centigrade increase in a year. Noise created by automobiles is to be lesser than 80 DB (maximum) depending on the use of vehicles. There is significant attention towards developing greener technologies for automobiles through use of renewable sources of energy- solar power and thus reducing use of fossil fuel powered automobiles.

To get the complete detailed PESTLE report on Harley Davidson please mail us at: support@swotandpestle.com. or contact us here.

Harley Davidson PESTLE analysis has been conducted by Anindya Sadhu and reviewed by senior analysts from Barakaat Consulting.

References

1. Harley Davidson Annual report 2016

2. Top 10 Two-Wheeler Manufacturers In 2016 For India-http://www.drivespark.com/four-wheelers/2017/top-10-two-wheeler-manufacturers-india-2016/articlecontent-pf58114-020080.html

3. Bilateral Investment Treaties- https://ustr.gov/trade-agreements/bilateral-investment-treaties

4. Luxury bikes segment will expand in the next five years- http://www.sunday-guardian.com/business/luxury-bikes-segment-will-expand-in-the-next-five-years

5. Number of women riders hits all time high- https://www.revzilla.com/common-tread/number-of-women-riders-hits-all-time-high

6. Trade & Investment Framework Agreements- https://ustr.gov/trade-agreements/trade-investment-framework-agreements

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