Although Harley is categorized as competing in the recreational vehicle industry, it is more logical to compare Harley to its direct product competition. This direct product competition consists of four major competitors, including Yamaha, Kawasaki, Suzuki, and Honda. Compared to Harley Davidson, who specializes in producing heavyweight motorcycles, the four Japanese competitors manufacture a wide array of motorcycles from lightweight to heavyweight, in addition to other products such as cars, watercraft, and music equipment.
This enables them to appeal to a wider customer base, while Harley solely relies on the sales of its heavyweight bikes. Yamaha, Kawasaki, Suzuki, and Honda used their brand image from their other products to break into the motorcycle industry and gain market share. The Japanese companies success in the heavyweight motorcycle industry began with copying other products, such as Harley Davidsons designs and look, but produced with cheaper inputs and an overall quality inferior to that of a Harley Davidson.
Over the years they have been able to improve their quality, innovative designs, technology and a cheaper price, but they have been unable to compete with Harleys brand image. It is this brand image, this aura, of owning a Harley Davidson that has enabled them to dominate sales in the United States holding a 53. 3% heavyweight market share in 2009, an 8% increase from 2008, as well as 39% of Canadian market share.
Further, Harley has been able to double its market share in Europe over the past decade from 6% to 12% On the other hand, Harley Davidson does not dominate the market share overseas, where its brand image is not as weighted and lacks the production facilities to keep up with demand. In 2009 demand exceeded the number of exported Harley motorcycles. Competition is based on a number of factors including price, quality, reliability, styling, product features, customer preference, warranties, and availability of financing.
New competition to Harley Davidson consists of small scale motorcycle manufacturers whose business is based heavily on reputation and appeal to serious motorcycle enthusiasts, mainly focused on completely custom bikes. Big Dog and IronHorse are two companies that compete with Harleys All American image while offering motorcycles that are fully customizable and have more engine power then Harleys, although a steeper price tag is attached.
These small custom builders do not produce enough motorcycles to threaten Harley Davidsons market position, but the recent appeal of these fully customized motorcycles is something that Harley may take into effect for its future plans. This recent trend has sparked TV shows, such as West Coast Choppers, and is an advantage the industry as a whole by helping to increase interest in motorcycles in the general public. Up until a few years ago the market for heavyweight motorcycles has seen double digit annual growth, but the market has been maturing and growth in the industry has decreased in recent years.
Competition is based on a number of factors including price, quality, reliability, styling, product features, customer preference, warranties, and availability of financing. Business Level Strategy Harley Davidson has always been known for its differentiated products that have continuously stood out from the norm. Harley Davidson incorporates a focused differentiation strategy in order to gain a competitive advantage over other motorcycle producers.
A firm differentiates itself from its competitors when it provides something unique that is valuable to buyers beyond simply offering a low price. Harley Davidson does not just sell transportation, it sells a lifestyle. Harleys ability to develop its image of ruggedness, originality, independence, and individuality supports its strong brand image of making quality motorcycles. Its the nostalgia of old time charm and quality that makes people not just want a motorcycle, but want a Harley Davidson motorcycle.
It is because of this, among other reasons, that they are able to charge a premium price, $10,000 $35,000+, for their product. An excerpt from their 2009 10-k Financial Statements states, the suggested retail prices for the Companys Harley Davidson motorcycles range from being comparable to being moderately higher than suggested retail prices for comparable motorcycles available in the market. The Company believes that its larger-displacement products continue to command a premium price.
Harley Davidson has been particularly effective at achieving its differentiation advantage through careful examination of the activities that customers undertake in selecting, purchasing, using, and maintaining their motorcycles. Harley gains customer loyalty and creates value for its customers through providing test ride facilities at its dealerships, financing, driving instruction classes, insurance, service & repair facilities, owners club activities, and various sponsored events for Harley riders.
The companies implementation of H. O. G. (Harley Owners Group) in 1983 and annual Harley Davidson Rides has vastly increased customer loyalty and continued to develop a sense of comaraderie between riders. In addition to its dedicated dealer network, the company also uses smaller, occasionally temporary retail outlets in high-traffic areas, such as airports, to sell accessory products like apparel, collectibles, and licensed products.
This gives Harley the additional exposure needed, without having to spend millions on other forms of advertising. With such a devoted following and strong brand image, the Harley Davidson name often promotes itself. Harley spent $143. 1 million on advertising and R&D in 2009. Although a decrease of $40 million from 2007 (mainly to boost the bottom line), the company still spends a significant amount on advertising and R&D to continue to produce innovative, quality, and highly differentiated motorcycles.
The reason that Harley applies a focused differentiation, as opposed to broad differentiation strategy, is because Harley focuses on producing heavyweight motorcycles of 651cc+ engine displacement. Harley Davidsons direct competition (Honda, Yamaha, and Suzuki) specialize not only in a wide array of vehicles such as watercraft and automobiles, but also produce a broader variety of motorcycles ranging from lightweight to heavyweight. In relation to its competition, Harleys focus on heavyweight motorcycles provides sufficient evidence of a focused differentiation strategy.