Harley Davidson SWOT & PESTLE Analysis

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.

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.

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.

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