Harley Davidson SWOT & PESTLE Analysis
ID : 52232353 | Jun 2017COMPANY PROFILE - Harley Davidson
Business Sector : Automobile
Operating Geography : United States, North America, Global
About Harley Davidson : 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.
Harley Davidson Revenue : USD 5.9 billion – FY 2016
Competitive Analysis of Harley Davidson
| 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% |
| 1. Wide gamut of trade agreements by the home government with exporting countries coupled with global and domestic economic growth | 1. 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.
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
| 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 |
| 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 |
| 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.
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
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