Analyze the use of resources and capabilities to achieve a competitive advantage by Harley Davidson.

A case study is a puzzle to be solved, so before reading and answering the specific questions, develop your proposed solution by following these five steps:

Read the case study to identify the key issues and underlying issues. These issues are the principles and concepts of the course module, which apply to the situation described in the case study.

Record the facts from the case study which are relevant to the principles and concepts of the module. The case may have extraneous information not relevant to the current module. Your ability to differentiate between relevant and irrelevant information is an important aspect of case analysis, as it will inform the focus of your answers.

Describe in some detail the actions that would address or correct the situation.

Consider how you would support your solution with examples from experience or current real-life examples or cases from textbooks.

Complete this initial analysis and then read the discussion questions. Typically, you will already have the answers to the questions but with a broader consideration. At this point, you can add the details and/or analytical tools required to solve the case.

Case Study Questions:

Analyze the use of resources and capabilities to achieve a competitive advantage by Harley Davidson.  

Are their differentiation advantages imitable by other companies? Why or why not?

How can opportunities for profitable differentiation be identified?

Can they effectively compete in the industry given the nature of the differentiation advantages that underpin their existing strategy? 

Case 7 This case was prepared by Robert M. Grant. ©2019 Robert M. Grant. Harley-Davidson, Inc. in 2018

For us and for our loyal customers, the motorcycles we build aren’t just motorcycles. They are living pieces of American history, mystique on two wheels. They are the vehicle with which our riders discover the power, the passion, and the people that defne the Harley-Davidson Experience.

Harley-Davidson, Inc. was far from being the world’s biggest motorcycle manufacturer. In 2017, it sold 241,498 bikes; Honda sold 11.2 million. In relation to the world market for motorcycles of about 132 million bikes—of which Asia accounted for over 80%— Harley’s market share was about 0.25%. Yet, Harley-Davidson was also one of the world’s most famous motorcycle companies. On Interbrand’s ranking of the world’s most valuable brands, it placed #77 in 2017 with a brand value of $5.7 billion. In 2018, the company would celebrate its 115th birthday. On Labor Day weekend, tens of thousands of Harley riders would descend on Milwaukee WI for fve days of festivities. As one enthusiast explained: “It ain’t a motorcycle—It’s a way of life!” Harley-Davidson was also the world’s most fnancially successful motorcycle company. Since its listing on the NYSE in 1986, its revenues had grown 11-fold, it had earned an average return on equity of 27%, and average annual return to shareholders was 12.8%. However, since 2008, Harley had experienced headwinds. The fnancial crisis of 2008–09 had hit it hard and, despite a strong recovery, sales revenues and profts had declined after 2014. The decline in sales continued in 2018—exacerbated by the trade war initiated by the Trump administration. The European Union had targeted HarleyDavidson with 25% additional tariff on imports of US-made motorcycles. However, CEO Matt Levatich’s biggest concern was the longer term outlook for the market for its bikes. Was America’s long-running love affair with Harley-Davidson’s heavyweight motorcycles cooling? And, if it was, would international markets take up the slack? These concerns were fueled by demographic trends. Harley’s core market was the baby-boomer generation—and this cohort was moving toward retirement homes rather than outdoor sports. Would the next cohorts—Generation X, Y, and the millennials—have the same affnity for the motorcycles and the cultural values that Harley-Davidson represented? The evidence pointed to worrying problems for the entire US motorcycle market. Among the youngest age group—the under-18s—motorcycle ownership was declining sharply The History of Harley-Davidson From Birth to Maturity, 1903–81 Harley-Davidson, Inc. was founded in 1903 by William Harley and the three Davidson brothers: William, Arthur, and Walter. In 1909, Harley introduced its two-cylinder, V-twin engine with its deep, rumbling sound: this engine type would be the characteristic feature of Harley-Davidson motorcycles for the next 110 years. At that time, there were about 150 US motorcycle producers in the United States; by 1953, Harley-Davidson was the sole survivor. After the Second World War, the demand for motorcycles boomed. This encouraged a food of imports: frst the British (BSA, Triumph, and Norton) and then the Japanese (led by Honda). Following Harley’s acquisition by the leisure conglomerate AMF in 1969, sales declined and fnancial losses mounted. Rebirth, 1981–2008 In 1981, Harley’s senior managers led a leveraged buyout of the company. Despite a perilous fnancial condition, the management team embarked upon rebuilding production methods and working practices. Managers visited Japanese automobile plants and introduced their own version of Toyota’s just-in-time (JIT) system called “MAN” (materials-as-needed). Harley’s manufacturing plants adopted collaborative processes of quality management. The 1986 initial public offering of Harley-Davidson’s shares fueled investment in new models, plants, and dealerships. Harley’s share of the market for heavyweight motorcycles (over 500cc) grew steadily. Harley’s biggest challenge was satisfying the surging demand for its products. Between 1996 and 2003, it dramatically increased its production capacity. In 2006, Harley’s sales reached a peak of 362,000 motorcycles, a 10-fold increase on 1986. Figure 1 shows Harley’s growth in output.

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