Harley-Davidson: The India Chapter Company Overview: Fearlessness, fierce individuality, and the pursuit of freedom all serve

as defining characteristics for the rebellious brand personality of Harley-Davidson. Though strongly associated with the American lifestyle, Harley-Davidsons brand commands tremendous customer loyalty throughout the globe. Its bold, black and orange emblem can often be found tattooed on customers skin, a symbol of their intense devotion to both the brand and the lifestyle that the company exemplifies. Harley-Davidson is one of the oldest motorcycle manufacturing companies in the world and its rich history attracts and fascinates consumers worldwide. The company was one of the few motorcycle-manufacturing firms to survive through the Great Depression. However, it suffered greatly through the early years of the Great Recession. Sales, income, and stock prices plummeted as customers desire for luxury goods dropped sharply. In 2009, a new CEO Keith Wandell was appointed to make significant changes and ensure that Harley-Davidson rebounded and recovered quickly. Under Wandells direction, Harley-Davidson began targeting new marketing segments, closing unproductive plants, and expanding its global presence. Harley-Davidsons expansion into India was delayed several years due to high import tariffs and taxes. However, in 2009 Harley-Davidson was finally able to enter the Indian market by establishing a manufacturing plant in Bawal, India. Indias large population, cheap labor, and growing middle class, are all attractive to the motorcycle manufacturer, especially since the company seeks to diversify its customer segments. In 2014, Harley-Davidson introduced the Street motorcycle series, a line of middleweight and lightweight bikes. The Street line serves not only as the first new motorcycle line from

2 Harley-Davidson in 13 years, but also as the first series of lightweight models that HarleyDavidson has introduced in over 40 years. The bikes are lighter, easier to maneuver, and more affordable than Harley-Davidsons other models. The introduction of the Street 750 is a bold move for Harley-Davidson. Currently, the Street 750 faces competition from both domestic Indian firms and international motorcycle manufacturers. All of these companies are fighting to gain market share in the valuable Indian motorcycle market. Harley-Davidsons success or failure in India will reveal whether the company can overcome the liability of foreignness and succeed in a highly competitive market. Problem Statement: Can Harley-Davidson continue to prosper internationally by successfully marketing their modern, lightweight motorcycle model in the heavily competitive Indian market, while maintaining their rebellious big bike American brand image and staving off aggressive expansion while competing with other motorcycle firms? Case Description: The Indian market is currently a very profitable market because of its growing GDP and rising levels of annual income per household. This has attracted many multinational firms to enter the Indian market and conduct business there. In 2010, Harley Davidson opened its Indian headquarters at Gurgaon, Haryana. They have since opened up 12 dealerships across the country and currently sell 11 models of motorcycles. In 2011, Harley-Davidson built their first Indian assembly plant in Bawal, Haryana. This plant circumvents the excessive costs of high tariffs charged to the motorcycles assembled and imported from the US to India. The plant assembles the bikes from CKD (Completely Knocked Down) kits for the Indian market as well as exports the assembled bikes to the

3 Southeast Asian and European markets. The Bawal plant will not only assemble, but will also produce the new Street 750 and Street 500 motorcycles for those same foreign markets. Harley-Davidson has entered the Indian market of luxurious heavy weight motorcycles, but is starting to produce a new superbike which, could be described as a premium motorcycle which has an engine capacity more than 650 CC, could accelerate in few seconds and could sustain high speed on roads (Trefis). They are currently targeting younger buyers in India with their new lightweight motorcycle, the Street 750, which entered the market earlier this March. The Street 750 is currently their cheapest model of motorcycle priced at 4.1 lakh (around $6,700 U.S dollars). This pricing fits into the budget of most, luxury brand motorcycles in India. Although Harley-Davidson had a very promising market strategy on how to enter the Indian market, it faces many obstacles including competition. According to statistics provided by Trefis Out of the 16,000 units sold in the 500cc and larger category, the Indian brand Royal Enfield constituted nearly 12,000 unit sales in fiscal 2013. The automaker mainly operates in the 500 cc-800 cc segment and could possibly deter growth of the Street 750. Just last year British motorcycle maker Triumph entered the same premium bike market using the same market entry tactics Harley-Davidson is using. Triumph plans to open up nine dealerships throughout the country including assembling six of its street models in CDK units in India, therefore evading high import taxes like Harley-Davidson. Harley-Davidson does not only face threats from new entrants, but also from domestic firms with foreign partners like Hero, Bajaj Auto, and TVS Motor. Two-wheelers account for a whopping 76 per cent of market share in the automobile sector in Asias third-largest economy and, as many as 10 million two-wheelers were sold in

4 India 2011-12. Vehicles in the executive segment formed the bulk of sales at 6.5 million, followed by the economy segment (1.8 million) and premium segment (1.7 million) (5 Facts). Hero has a market share of around 56 per cent in the overall domestic two-wheeler market. At 25.5 per cent, Bajaj comes a distant second, but maintains a healthy lead over Honda and TVS, which have 7.5 per cent and 6.2 per cent market share, respectively (5 Facts). HarleyDavidson, which fits into the premium two-wheel segment, is also currently doing well in terms of increasing its cult status. Before the launch of the Street 750, they had a cult following of over 4,200 customers in the country, up from just 2,000 the same time last year. All these foreign partnerships between Indian motorcycle companies and international firms further threatens Harley-Davidsons success in India. Even though Harley-Davidson has set themselves up well in their new foreign market, they need to find a way to protect itself and to fully expand and flourish in the Indian culture. Case Analysis: Harley-Davidson motorcycles are recognized worldwide for their brand and the freedom of individualism that they operate by, but that brand was built in the United States. Now that they have decided to operate internationally, they need to appeal to a host of different consumers and not just the American culture for which they have been accustomed to. With the expansion of the new assembly plant in Bawal, India, Harley-Davidson has decided to design and build a smaller bike than what they have had in their previous lineup of motorcycles, because of the culture and market change with their market diversification. The population of India and other Asian countries are accustomed to and rely on much smaller sized motorcycles and scooters. These demographics also use them as a means of purpose and not a means of luxury items like most of the U.S consumers.

5 Therefore, in order for Harley-Davidson to be able to expand on their brand in India one of our recommendations is to market their motorcycles with the use of celebrity endorsements. An idea would be; that a sports team, like a cricket team. When Mahindra Singh Dhoni became the captain of the Indian Cricket in 2007 all the sales of all the products endorsed by Dhoni, including TVS Star City motorbike increased about eighty percent (The Economic Times). This shows how much impact endorsements by sports team have an impact on Indian consumers. When they are shown riding their individual Harley-Davidson cruiser motorcycles which are 800ccs and above. They can talk about how they like to cruise on these motorcycles as a leisure ride, but the new Street 750 and 500 models allow them to maneuver the streets of Urban India with much greater precision and speed because of the smaller framed bike, but still equipped with the powerful engine that is customary on a Harley-Davidson. Our second recommendation is for Harley-Davidson to expand its financing options in India. A part of Harley-Davidsons business model includes Harley-Davidson Financial Services, which provides financing to Harley-Davidson dealers and customers in the U.S and Canada. If Harley-Davidson can partner with more banks in India, this will allow more dealerships to expand their reach within their markets, but it will also allow more Indian consumers the opportunity to purchase a newer model Harley. With the expansion of the Street 750 and the Street 500 models, these new models are closer in price to what the Indian population is looking to afford for a premium bike. Offering more options with financing companies can expand the market of the new Street series bikes. Our third recommendation is to increase Harley-Davidsons dealership presence, but we believe that in order for this to happen, Harley-Davidson should consider finding and leasing another piece of property in order to establish another assembly and production plant in India.

6 Since Harley-Davidson has already committed themselves to India and the Asian market by building an assembly plant in India, we believe that procuring another plant will help the existing dealerships grow in and around India as well as provide more stock of motorcycles to new dealerships. Currently there are ~11 motorcycles offered in the Indian market that are assembled in the Indian plant even though Harley-Davidson has a line of over 30 styles of motorcycles available. The models that are not assembled in India are available to anyone, but are subject to the high import tariffs of India. The new assembly plant could provide accommodations of some of the other models to be assembled in India and either sold there or exported to other countries. In addition, if the plant were leased it would save on costs associated with building a new plant. This new plant would also help for the near future when Harley-Davidson rolls out their Street 750 and 500 models because there will be higher demand for these smaller bikes. Harley-Davidson has also begun to research even smaller sized motorcycles to enhance their portfolio of bikes offered in the Indian, Asian, and European markets in the 250-300cc sizes. In conclusion, Harley-Davidson is doing many things right in expanding into the global market, but to keep ahead of the competition in India and stay ahead of the sales of their new Street 750 and 500 series motorcycles; we believe they should: 1) market with celebrity endorsements, 2) partner with more banks to offer more consumers more options to purchase a bike, and: 3) research into leasing another assembly plant in a different geographic location to expand its reach and offer a more diverse product line to the Indian, Southeast Asian, and European markets.

7 Reference: http://overdrive.in/news/hdfc-and-icici-banks-offer-new-finance-schemes-forharley-davidson-street-750-in-india/ http://www.livemint.com/Industry/Lufr6TOqkpx5xS6W5rnkoO/Triumph-gears-upfor-India-ops-with-a-change-in-plans.html http://www.trefis.com/stock/hog/articles/230574/harley-davidsons-bid-in-thegrowing-luxury-motorcycle-market-in-india/2014-03-17?from=filmstrip%3Atop http://articles.economictimes.indiatimes.com/2012-06-21/news/32352429_1_harleydavidson-superbikes-bawal http://www.harleydavidson.com/en_IN/Content/Pages/Company/company_profile.html?locale=en_IN&bmLo cale=en_IN http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=iroldemographics&locale=en_US&bmLocale=en_US http://files.shareholder.com/downloads/HDI/976877008x0x270386/1f5d64df-4adc4afd-9999-08b75f975dee/Factsheet.pdf Anita, M. M. (2008). Harley-Davidson: Market Entry Strategies in India. ICFAI Journal Of International Business, 3(2), 49-66. "Harley Davidson forays in Pink City." Economic Times 17 Dec. 2013. Business Insights: Essentials. Web. 30 Mar. 2014. Hector, D. (2011). Heavy Metal Thunder. Business Today, 20(20), 120-123. Mahanta, Vinod & Sangameshwaran, Prasad. The great Indian celebrity trap in advertising, The Economic Times, February 3, 2010.

8 http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfallbaby-boomer-demographics/