Harley- Davidson is an American manufacturer of heavyweight motorcycles. The company deals with two business segments, which include Motor Cycles and Related Products and financial services segment (Harley- Davidson, Inc., 2013). It provides wholesale and retail financing. It also provides insurance programs mainly to its customers and dealers. In the recent times, the company has struggled to compete actively in the market while the performance in returns is not impressive by the company’s standards. It has gradually recovered from a major plunge in the sale of motorcycles that occurred in recent times. The top management at Harley- Davidson requires strategic management choices in helping to turn the fortunes of the company around, and keep the business relevant, especially with the emerging foreign competition. In strategic management, political, economic, socio-cultural and technological environment analysis is a tool used to determine the choices to be used. This is compared with the Porter’s five forces analysis. Two tools of analysis can be used to determine the most suitable strategic choice for the Harley-Davidson Company; the Porters 5 Forces analysis is the best method.
The PEST Analysis tool of strategic management, deals with the Political, Economic, Social and Technological aspects in determining the strategic management choices that can be undertaken to reap maximum profitability by a company (Jeffs, 2008). Political factors refer to the degree of government’s intervention in the economy. The specific part in this is towards political factors such as labor laws, tax laws, tariffs, trade restrictions and environmental law. The political stability of the country also greatly influences the political tool of analysis. In reference to Harley- Davidson, the only political aspect mentioned in the external analysis refers to the European market. There was a restriction on the new standards on emission. The companies that failed to effect the changes on the standards would face penalties leading to higher operation costs. Such implementations would also mean redesigning of the company’s two-wheelers. The company has however, got the unions to enact flexible working rules.
On the economic aspect of the analysis, the parameters that are looked at include current economic and projected growth, interest and inflation rates, labor supply and unemployment, globalization impact, the business cycle of the company, levels of income distribution and disposable income. In reference to Harley- Davidson Company, the major economic factors affecting the firm include concerns on the world economy and the company’s hefty-price tag on its heavyweight motorcycles. There is also stiff competition from foreign companies that claim to make motorcycles that are American and have infiltrated the global market including the American market.
The Socio-Cultural aspect of the analysis refers to the response by the demographic nature of the people. This includes the health, education, social mobility and attitudes of the people, public opinion, social taboos, lifestyle choices, socio-cultural changes, age profile and population growth rate, the employment patterns, job market freedom and attitudes towards work. Under these parameters, the discussed external analysis featured in the Company’s performance, the reliance on the old white male targets is categorical. Similarly, the reliance on American-based product is prominent. In the Technological aspect of the analysis, the parameters featured include emerging technologies and their impact, research and development activities, impact of the internet and technology transfer. Under these, Harley- Davidson Company has extensively dedicated large sums of money towards research and development of new technologies.
Porter’s Five Force Analysis
The framework for Porter’s five forces analysis is centered on development in business strategy and industrial analysis (Jeffs 2008). It derives forces that determine intensity in competition and market attractiveness. The attractiveness is overall profitability of the industry. The five forces refer to three external sources, while the remaining two are the internal threats. This gives a balanced and comprehensive analysis. The first threat is of the new entrants. It states that markets, which yield high profits, attract new firms. This has a great effect on the incumbent companies. In this case, Harley- Davidson stands to lose its profitability. The company is recovering from a major plunge in sales. The parameters involved are scale economies, differentiation of products, capital requirements, policies of governments, absolute costs, equity of the brands, distribution access and expected retaliation.
The second threat is of the substitute services or products. This refers to depreciation of quality, number of available substitute products in the market, substandard products, ease of substitution and substitute’s relative price performance. Harley- Davidson Company faces a stiff battle with the substitute products in the form of jet skis, all- terrain vehicles and snowmobiles that are being embraced. These are manufactured with the rival companies. The company itself is on the path to having its new products launched for various markets. The third threat on the analysis is the bargaining power of buyers or customers. The parameters include sensitivity of the buyer price, uniqueness of industry products, bargaining advantage, prices force down, degree of dependence on existing distribution channels and ratio of buyer concentration to firm concentration.
The fourth aspect of the analysis is bargaining power of the suppliers. It is also referred to as market of inputs. Parameters include solidarity of employees, impact of inputs on differentiation, distribution channel strength, degree of input differentiation and competition in suppliers. Its lone supplier of raw materials has affected the company, its high pricing of its products, product recall issues and dependence on the United States Market. The fifth force of the analysis focuses on the intensity of various rival competitions. The parameters associated with this force include, transparency degree, competitive advantage and sustainability through innovation, expense on advertising and power in competitive strategy. Harley- Davidson Company is particularly susceptible to regional factors with its transparency degree. Quite a number of recalls on the products have been done for quite some time now.
Harley- Davidson is a multi-million dollar international company that deals with the manufacture of heavyweight motorcycles. After undergoing a plunge in sales of its products, the company began recovering in its operational and functional basis. However, with the management set to make strategic choices on the way forward, Political, Economic, Social and Technical Analysis tool in comparison with Porter’s Five Forces analysis can be utilized to achieve this. PEST Analysis offers a safe strategy but Porter’s Five Forces Analysis tool is the ideal mode to be used. This is because it comprehensively covers a broad spectrum of the required means in achieving of profitability for Harley- Davidson Company. The main challenges facing the company include competition from foreign companies who claim to make American models, concerns on the world economy, the company’s hefty price tag on its heavyweight motorcycles, potential substitute products and consideration of alternatives. Porter’s Five Forces Analysis is the ideal tool for strategic management choices for the company.
Harley-Davidson, Inc. (2013). Financial and Strategic Analysis Review. Global Data, 1-4.
Jeffs, C. (2008). Strategic management. Los Angeles: CA. SAGE.