Harley Davidson Five Forces Analysis Essay

In our present competitive world in the business where customer preferences are continuously changing, prices of raw materials and cost of labour are increasing and global economy is becoming unstable, it is always been a difficult task for companies to stay and perform business. And these barriers have been a familiar scene in the global business. That is why for most companies in order to overcome such of these difficult challenges, innovativeness and the desire to be very critical and most anticipative of the changes in the industry and the whole global economy is highly necessary. Just like for Harley Davidson as the main focus of this study, even though the company currently established itself for being the highly rated motorcycle brand in the world, it is still not enough for the company to be relaxed and feel that they can be profitable and enticing to the market as years goes on. That is why in this paper it will directly focus on how do Harley Davidson’s competitors are doing at the present, what are some of the strategies that they do to compete. With this information about the competitors, how does this information be used by the company in terms of opportunities for them to use it as a strategy against them? Also, making use of this information to handle future threats as well, this is in order for them to anticipate and provide some immediate actions. In the second part of this paper, it will focus on how the company can apply Porter’s five forces tool in order to continually achieve competitive advantage over its competitors. Also at the second part of this study it will discuss on how motorcycle companies like Harley Davidson, can still earn above average return even though the company falls at the high-end market with more on the luxurious and recreation side and not as necessity for customers. Also, with that, what are the actors or contributors that will lead to that conclusion or will help attain that goal? Study of Harley Davidson’s Major Competitors As the pioneer and one of the oldest known brands in the motorcycle industry in the world, Harley Owners Group has been in the industry since 1983 and due to its growing influence worldwide, it already has over 1,000 chapters and over a million members worldwide. But, not all of its members own a bike; it is only the prestige and respect about the Harley machines that made them decide to be a member. As one of the strength of the company, it has been continually establish its brand as the number one brand in the world, with over 5 billion USD annual revenue annually. In terms of its competitors, the company’s main competitors, most specially in terms of design are the following: BMW, Victory, Honda, Suzuki and Yamaha, but among these lists, Honda has become the closest and toughest competitor of Harley Davidson’s motorcycles. (Harley Davidson Motorcycle, n. d. ). With the company’s main focus on design, quality and most specially durability, it continuously has been in the forefront of the high-end and luxurious motorcycle business in the world. That is also why 80% of the total revenue of the company comes from motorcycle sales. With regards to the company’s competitor, even though the company clearly dominates the American market as its origin, which has registered in the 2006 market share, the company has eaten up half of the market or 50% while far second and third are Honda and Suzuki with 15. 1% and 12. 9% respectively. But the question now is not just the American market but instead what this paper is focusing is what the competitors are doing in the global scene. Which is actually smaller, like for Canadian market, it drops to 38. 4% still relatively high, but what is more alarming and needs to be focus on by the company is on the European market which is only 10. 2%, but still the company has a noticeably high market share globally as it generates at an average of 33%. And this is more alarming because it will also follows that the company’s net revenue growth also shows very small in other major regions in the world. With this event, it is necessary for the company that it needs to strengthen its presence in these main regional markets, because in the long run, it will be a problem that the company needs to focus on. The two main reasons why these competitors starting to entice substantial number of customers are: (1) they have greater financial resources, like Honda and Suzuki, with their global presence, they have enough financial support in every region that they operate. Meaning to say these companies knows that they know how to make use of their money in enticing potential customers and retaining current customers as well and they can even compete with price and that will soon be a serious problem with Harley Davidson, since the competition is on how to innovate with technologically funded studies that will still provide quality as well as make the product still not that so expensive. Lastly, (2) these companies, like Honda and Suzuki are obviously more diverse than Harley Davidson; they sell a lot of products with a lot of brands and choices that customers can choose, from cars, to simple scooters up to high-end luxurious brands of motorbikes and not only that with wide variety of choices to choose from. This is another serious problem by the company in the long run, since these competitors knows how they can be well-trusted by the customers and if you made such products with quality in all of it, it will be a positive sign for these companies and that will create problem for the company. With these two main reasons, Harley Davidson needs to formulate a strategy that will address these problems in order not to further add problem in the future and also not to wait until the company’s edge in the global market be removed or at least be reduced. Also, based on this study, the company must also look forward in addressing these issues while they are still room to operate due to its continuing edge in the global market. (Harley Davidson (HOG), n. d. ). In the second part of this paper, the main focus is on how the company can effectively apply Porter’s fiver forces model in attaining competitive advantage. The five forces of Porter’s method that are popularly applied by companies are: (1) Potential entrants, (2) Buyers, (3) Substitutes, (4) Suppliers, and (5) Industry competitors. In each of these five forces, there is an important factor that contributes to the success or failure of each forces and this will be discussed separately as to how the company can effectively apply it. In the entry barrier, where it mainly focus on the potential entry of new products or brands, the company must continue to be very pro-active in this part as the competitors are becoming very aggressive in this area. What Harley Davidson should do is to increase the customer awareness of their motorcycle brand in some of the regions that they are starting to have a very low market share like in the European and Asian market. Studying cost advantage and relatively access to distribution are two of the most important focus that the company should do. Also, can be added to that is to have an in-dept study on the Government policies which might be the effect of low market share, because the territories that the company operates must also need to be well represented and not just putting up a business. In the rivalry determinants, which mainly focus on both the industry competitors and new entrant forces, the company should be mainly focus as usual on how they can have advantage over its competitors by not only anticipating future challenges and innovation that their competitors may bring but also be able to establish a well defined marketing and research and development study that will help the company confident enough in dealing with the market.  particularly, the factors that it needs to focus are: industry growth, always look on the potentials in the business and be first in formulating it to the market, product differences, at this point, which is already been the strength of the company, but still needs to do more and that is innovativeness where it also been the main focus of its competitors. The company must look on how they can provide its clients new and very attractive designs, but it should also have to look on the cost side as well. And lastly, is switching costs, for any company there should also be some intelligent cost study on how the company can still be appreciated by the customers and these can either come from service and parts and of course these should be well accompanied with excellent service and availability of parts which is also a big factor during actual competition. In the side of threat, what the company should look closely on how the innovative trend and pricing strategy trend that competitors is doing. Most of the time these is what is being target to Harley Davidson, since it has been recognized as a very expensive brand and at the same time more on respecting traditional design, competitors compete through these factors. So, what the company needs is that they have to anticipate these by introducing new and innovative styles and at the same time study some possibilities of offering some not so high cost brands which may also give additional leverage for the company. Another important study and important advantage of Porter’s Five Forces is supplier power, in this side it is also important for the company not only to look for the most efficient supplier but also study closely in terms of cost. Harley Davidson must be careful in forming up agreement with suppliers. Like they can have global partnership with some suppliers, most specially if some of these suppliers are proven that they serve the company well. This reduces the cost by having different suppliers in the different regions. That is why there are two ways that the company may apply: (1) the company must carefully look into suppliers that are effectively performing for the company, if there is, Harley Davidson must look into how they can formulate a global partnership in order to lessen the cost. And lastly (2) the company must also re-visit some suppliers that are not performing well and be able to replace it or make some better arrangement on how the company as well as the partner can have a more favourable output. Lastly, in terms of buyer concern, where two of the important force involved, buyers and competitors. At this point these are the greatest challenges that the company must look at since the competitors are very aggressive in this area, most specially in the price sensitivity and not much on the bargaining leverage. Price is always a problem with the company, since it continuously in the high-end brands. What the company should do is on how they can study on introducing brands that may target other markets which will still not compromise quality and cost. In the bargaining leverage, the company must look on how they can provide some better offers for some big markets, like in terms of wholesalers. Lastly, with regards to the question how can motorcycle companies like Harley Davidson, where its business falls more on luxurious and recreation brand of products which also targets high-end markets, which the question is on how they can continue to earn above average returns. It is obvious that for company like Harley Davidson, they have to focus more on how to deal with innovations is one aspect that they need to do. By strengthening its research and development and the usual attention to customer needs and preference is the key to continually achieve above average returns. Most specially the latter where still it is considered as the most important factor in the business. The main actors or contributors that needs to work on this one in order for it to materialize are the following: (1) Company’s human resources, which means that it should continually strengthen the technical expertise of the company, and lastly, (2) is to build partnership with some of the global and most recognized industries or companies which is what is lacking with Harley Davidson. People expertise and partnership through reliable and very influential companies are very important to the success of company’s these days. That is why with the help of the management team and its top executives, they need to recognized it as the main key to continually have a better return in the business. Conclusion In this study, it shows that for any company to survive in this very competitive world of business, company’s needs to be sensitive enough in understanding the competition and on how they can overcome it. In this paper it shows that even company like Harley Davidson, who still has substantial edge in the market, it still needs to be aggressive and continue to study on how they can attain competitive advantage. Like what resulted in this study that even though the company seems to have control in the American market, competitors are however starting to focus on targeting on market outside the American region, which shows that the company starting to slow down and competitors like Honda and Suzuki are rising up. This also resulted that due to financial capabilities and diverse status of these competitors which starting to give problem to Harley Davidson. That is why the company must look on these growing advantages and be able to formulate a strategy that can offset it. In the second part of this paper, it also shows that in order for the company to be aggressive and effectively achieve competitiveness, Porter’s five forces has been presented and for each forces, there are important discussions on how the company can apply it effectively and efficiently.