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Market Impact of a Consumption Subculture: the Harley-Davidson Mystique


John
W.
Schouten,
University
James H. McAlexander, Oregon State University, U.S.A.

of

cite

to

Portland,

U.S.A.
]:

John W. Schouten and James H. McAlexander (1993) ,"Market Impact of a Consumption


Subculture: the Harley-Davidson Mystique", in E - European Advances in Consumer Research
Volume 1, eds. W. Fred Van Raaij and Gary J. Bamossy, Provo, UT : Association for Consumer
Research, Pages: 389-393.
[

direct

url

http://acrwebsite.org/volumes/11476/volumes/e01/E-01

European Advances in Consumer Research Volume 1, 1993

Pages 389-393

MARKET IMPACT OF A CONSUMPTION SUBCULTURE: THE HARLEY-DAVIDSON MYSTIQUE


John W. Schouten, University of Portland, U.S.A.
James H. McAlexander, Oregon State University, U.S.A.

]:

[We wish to thank the people of Harley-Davidson, Inc., especially Steve Piehl, Frank
Cimermancic, Jim Paterson, and Willie G. Davidson, for their time and support in this project.
We also respectfully note the financial support of The University of Portland, Oregon State
University, and Iowa State University.]
ABSTRACT Subcultures of consumption are distinct, homogeneous groups of people united by a
common commitment to a particular set of consumption items or activities. This paper
discusses the market impact of one such subculture, i.e., Harley-Davidson motorcycle
owners. In prolonged engagement with the subculture, the authors have utilized participant
observation and depth interviews to investigate the marketing implications of the "Harley
subculture." Four main phenomena are presented: Consumer-initiated new-product
development, mass-marketed mystique, extraordinary brand identification, and
transcendence of national and cultural boundaries. Existence of these phenomena in other
subcultures of consumption is documented, and their implications are discussed.
Subcultures are intriguing social units for market research and segmentation (Zaltman 1965)
due to their relative homogeneity of norms, values, and behaviors. Past studies of
subcultural consumption patterns have focused on ethnic or other ascribed subcultures,
such as African American, Hispanic, Italian, Jewish, and WASP (see, e.g., Hirschman 1981,
1985; Wallendorf and Reilly 1983) which, despite some general commonalities, often display
such diversity of consumption preferences as to severely limit their potential as market
segments (Deshpande, Hoyer, and Donthu 1986). This research examines instead
subcultures that self-select on the basis of shared consumption interests (cf. Donnelly and
Young 1988). United by commitment to particular careers, avocations, or lifestyles, certain
non-ethnic subcultures, like surfers, skateboarders, hot rodders, and Deadheads, exhibit
high degrees of homogeneity that not only carry over into consumer behaviors but actually
become articulated as unique ideologies of consumption.
The homogeneous styles and activities of these subcultures of consumption make them
significant to marketers as self-defining market segments that tend to transcend cultural
contexts (Stratton 1985), demographic cohorts (Pearson 1987), and ethnicities (Klein 1985).
Furthermore, their commitment and innovative behaviors carry their market impact far
beyond the bounds of normal consumption. Hard-core or high status members of a
consumption subculture act as innovators and opinion leaders (Fox 1987), imbuing certain
products with meaning that ultimately is shared or consumed by a much larger market
peripheral to the core. For example, hard-core punk rockers create styles which are copied
faithfully by soft-core members of the subculture and are imitated more loosely by
"pretenders" who are peripheral to the core subculture (Fox 1987).
A review of extant ethnography of consumption-oriented subcultures reveals the existence
of apparently symbiotic relationships between such subcultures and the marketing
institutions that supply the products and services that support the subculture's ideology of
consumption. Our data reveal four interesting characteristics of relationships between
marketers and consumption-oriented subcultures:
1) Consumer initiated new-product development

2) Mass-marketed mystique
3) Extraordinary brand identification
4) Transcendence of national and cultural boundaries
METHOD
This paper draws from both secondary and primary data. General theoretical and
methodological guidance were gleaned from a review of extant ethnography of various nonethnic subcultures (see, e.g., Fox 1987; Kinsey 1982; Klein 1985; Pearson 1987; Young 1988).
Themes suggested within the literature were probed and developed in the context of the
authors' ongoing ethnographic study of Harley-Davidson motorcycle ownership.
Ethnographic Work
The first author began ethnographic work as a non-participant observer at the 50th Black
Hills Motor Classic in Sturgis South Dakota in August of 1990. Data consisted of field notes
based on observation and brief interviews, and of photographs, taken not only at the rally
but also along the road from the author's starting point in Ames, Iowa. During the week of
the rally an estimated 300,000 motorcyclists, the majority on Harley-Davidsons, passed
through the small town of Sturgis. Published accounts of the rally (e.g., Urseth 1990) served
to triangulate the researcher's observations.
Rallies provided excellent opportunities to participate in and observe certain aspects of the
subculture of motorcycle enthusiasts. In March of 1991 the second author observed retail
preparations for Bike Week at Daytona, the nation's largest rally. The first author conducted
participant observation at two motorcycle rallies in the company of key informants during
June and July of 1991. The first was attended primarily by BMW owners, however other
brands were represented including Harley-Davidsons and British bikes. The second, a
"Freedom Rally" sponsored by ABATE (a national organization that lobbies for legislation
affecting biker liberties, most notably helmet laws) of Iowa, was attended almost exclusively
by Harley-Davidson owners, although a handful of European and Japanese bikes were
observed. In August 1991, on motorcycles provided by Harley-Davidson from their test fleet
in San Dimas, both authors participated in the Western Region Rally of the Harley Owners
Group (HOG) in Santa Maria, California. HOG Rally participation was limited strictly to Harley
owners. We rode in the company of a Los Angeles based chapter of the organization that
took us in and treated us as fellow chapter members.
In addition to observation at rallies, we have also gathered extensive interview and
observational data in other venues. We developed close research relationships with several
key informants who provided interviews as well as access to various formal and informal
settings with other motorcyclists. Interviews were conducted conversationally in naturalistic
sites such as informants' homes (or more commonly garages), motorcycle swap meets, club
meetings, rallies, rides, bars, and restaurants with field notes recorded afterward via
microcassette recorder and subsequent transcription. Immersion in the subculture has also
led to familiarity with publications targeted to various subgroups of bikers. Close reading of
such magazines as Biker, Easyriders, American Iron, Supercycle, Enthusiast, and Hog Tales, as
well as rally publications and newsletters, assisted in the interpretation of interview and
observational data.

In order to gain a marketer's perspective of Harley ownership we conducted interviews at


Harley-Davidson's corporate offices in Milwaukee with key members of the organization
including the president of the motorcycle division, the vice-president of motorcycle styling,
the public relations manager, and the director of business planning. In addition, we have
conducted interviews with four Harley-Davidson dealers in Iowa and Oregon and with
dozens of vendors of biker accessories, clothing, and paraphernalia at swap meets and
rallies.
Sampling
Informants have been selected purposefully to represent different types of Harley owners
identified in the course of ethnographic inquiry. For example, the first author attended
meetings of one HOG chapter comprised almost exclusively of "Ma and Pa" bikers (semiretired or retired, working-to-middle-class couples) with a preference for "dressers" (Electra
Glides with hard saddle bags, trunks, fairings, and other amenities). In contrast, we rode to
and from the Western Region HOG Rally with a HOG chapter comprised largely of "RUBs"
(rich urban bikers), richly costumed in leather and riding customized "Low Riders" and
"Softails" (bikes with more "chopped" appearances and laid back riding positions). Another
group we have begun to access is a club which stages "runs" (organized rides), dons "colors"
(uniforms of gang affiliation), and conducts business at a clubhouse in much the same
fashion as is documented for outlaw clubs such as the Hell's Angels. One informant (who
sees himself as an anti-yuppie) maintains no formal group affiliation; nevertheless, he
frequently rides with an informal group of friends who recently also have become Harley
owners. Yet another informant, a quintessential yuppie who rides primarily with enthusiasts
of European cycles, traded his late model BMW for a new Harley Electra Glide Sport which,
after a year of riding, he traded back in to reclaim his former BMW.
Purposive sampling (Lincoln and Guba 1985) proceeded in such a way as to provide coverage
of and access to the wide variety of bikers identified in the course of the field work. The
validity and scope of emerging interpretations were challenged by actively seeking limiting
exceptions, and by triangulating data with multiple primary and secondary sources.
Analysis
Direct analysis of observational and photographic data was in part a function of interpreting
symbols, especially those of widespread manifestation in modes of dress, grooming, and
motorcycle customization. Analysis of the meanings of biker symbolism served two
important functions: first, it proved revelatory of the underlying ethos of the subculture
(including values both common and divergent among subgroups), and second, it allowed us
to track the movement of embodied meaning through the subculture. Because of the public
nature of biker display the meanings of biker signs and symbols were determined in the
context not only of their use within the subculture of consumption but also of their broader
use outside the subculture. Meanings attributed by the researchers to various symbols were
derived and validated through interviews, member checks, and close readings of biker
literature both scholarly and popular. Although most symbols allow for multiple
interpretations, certain meanings make more sense than others when viewed in the context
of an holistic pattern, system, or constellation of symbols taken together. By considering
such constellations of symbols, subtle differences in the usages of individual symbols by
different subgroups could be determined.

Data from interviews and observation field notes were coded, compared, collapsed to
categories, and abstracted to yield interpretive themes. For example, the emergent theme
of "grass-roots research and development" was derived as an abstraction of categories with
such labels as "shade-tree mechanics" and "armchair design." These categories were created
to encompass individual coded observations such as "Chrome-Magnon's custom controls"
and "consumer-commercialized belt drive." Variations on this process of abstraction are
described by McCracken (1988), Miles and Huberman (1984), and Glaser and Strauss (1967).
A back and forth process of data analysis and literature review yielded the four themes that
form the basis of this paper.
FINDINGS
There exists, centered in North America, a subculture formed about an ideology of
consumption with the Harley-Davidson motorcycle as its principle icon. Perhaps the most
obvious impact of the subculture is its existence as a tight cluster of market segments united
by common thread: commitment to a particular product, its symbolism, and the values it
represents. The structure and ethos of the subculture are discussed elsewhere (Schouten
and McAlexander 1991); this paper deals with the marketing implications of the relationship
between the subculture and the Harley-Davidson Motor Company. In doing so it draws
parallels with other consumption-oriented subcultures and their symbioses with marketing
institutions (Fox 1987; Klein 1985; Moorhouse 1986).
Consumer Initiated New-Product Development
One of the most interesting phenomena observed among Harley owners is their tendency to
develop both technological and stylistic advancements in motorcycle equipment and
clothing. Such "grass-roots r & d" is not unique to the biker subculture, but is in fact visible in
many subcultures or groups that exhibit extraordinary commitment to a particular class of
products or consumption activities. For example, many important technological
advancements in skydiving equipment have been conceived and produced by skydivers
themselves in cottage industries (Lyng and Snow 1986). A similar phenomenon is highly
visible in the surfing subculture, the core members of which have typically been responsible
for major advances in both surfboard and clothing design. The hot rod subculture, dedicated
to technical and aesthetic modifications of American production automobiles made an
indelible impression on the Detroit auto industry stimulating demand for production hot
rods, accessories, and special interest magazines (Moorhouse 1986).
Harley-Davidson's heritage is one of responsiveness to grass-roots innovation. The company
itself began as a backyard operation in 1903. In Harley's "modern age", Harley-Davidson
continues to maintain an intimate relationship with riders through activities like corporate
sponsorship of and participation (by top level executives, managers, staff, dealers, and
assembly-line workers) in rallies. Consequently, the design of production motorcycles,
accessories, and clothing continues to echo styles originated at the core of the biker
subculture. Examples include slightly extended forks, highway foot pegs, pullback
handlebars, sissy bars, and a proliferation of chrome and tooled leather, all engineered to
create the look of the biker's custom "chopper." Official Harley-Davidson clothing is also
suggestive of styles created by hard-core bikers. For example, the black leather vest with
insignias that serves as the uniform for members of the Harley Owners Group bears a

striking resemblance in form and function to outlaw colors, i.e., the insignia laden, sleeveless
jackets that identify members of various outlaw motorcycle clubs.
Despite Harley-Davidson's wide range of official accessories, field research suggests that a
high level of consumer-initiated innovation still continues. For instance, a photocopied flyer
posted in Oregon Harley dealerships advertises a belt drive "designed by an old Harley rider
for Harley riders" that can be retrofitted to old Harleys. Another example comes from field
notes from a HOG rally in Santa Maria, California. One key informant, whom friends jokingly
have dubbed "Chrome-Magnon," has designed a full set of foot pegs, shifter, and brake
pedal to provide a more comfortable, extended riding position while accommodating an
oversized, side-mounted carburetor on his Harley Softail. This hardware has recently been
given to production and distribution through a large Southern California accessories retailer.
Casual conversation with rally participants also turned on occasion to ideas for other
accessories such as chrome clocks mounted on gas caps or handlebars.
Mass Marketing the Mystique
Although many custom alterations to motorcycles and clothing may be interpreted as
personal, expressive manifestations of product involvement as leisure behavior (cf. Bloch
and Bruce 1984), certain cultural innovations, such as the raked profile of a "chopped"
motorcycle, appear to emanate from the core of the subculture, ultimately to be adopted
more broadly in some form. Certain designs or developments may even be coopted by
marketing institutions, "sanitized" or softened, and promoted for mass consumption. For
example, the commercialization of rap music has followed this pattern; a cultural form
created by the hip-hop subculture of African Americans, rapping has become prevalent in
pop music and even in advertising jingles for children's products (Blair and Hatala 1991).
Competitive body building, a true subcultural phenomenon, through the promotion of its
own icons and mystique to health conscious Americans, has helped establish a very lucrative
industry in health clubs, special foods and clothing, exercise equipment, and special interest
magazines (Klein 1985, 1986).
The cultural products of subcultures, especially of countercultural groups such as punks or
outlaw bikers, may have strong stylistic appeal to certain segments of society while being
regarded with fear, revulsion, or awe by others. When confronted with counterculture
people may experience simultaneous positive and negative responses. In part at least it is
the tension between the resonance and the dissonance with social norms that gives
subcultural styles their mystique. Maintaining this tension is a managerial challenge for
Harley-Davidson Inc. Their product draws totemic strength from its link with outlaw
counterculture; yet a link that is too tight, i.e., that sullies the company image with the dark
side of outlaw bikers, may alienate the upscale market that purchases new HarleyDavidsons.
Harley-Davidson, in its promotion of the HOG (Harley Owners Group) organization and
product line, has successfully coopted, sanitized, and marketed the mystique of the "outlaw"
motorcycle club. The company adroitly preserves many of the symbolic appurtenances of
gang affiliation while, at the same time, distancing itself sufficiently from the negative side of
gang membership to avoid alienating the relatively conservative and affluent purchasers of
new Harley-Davidson motorcycles. Retained from the outlaw mystique are a sense of
brotherhood and outsider status. These are reinforced symbolically by HOG's uniform vest

and insignias reminiscent of the outlaw's colors. The organization of a HOG "chapter" (this
term parallels gang terminology) resembles that of an outlaw club chapter, especially on the
road. The two-column formation adhered to on a run such as the ride to the West Coast
HOG Rally mirrors a gang's road organization (McQuire 1986). The psyche of the HOG
chapter on a run is a ganglike exhibition of machismo and (albeit mild) intimidation of other
motorists achieved through the collective noise of the bikes, the movement through traffic
in a solid phalanx, and the overall appearance of the black-leather clad group. However, just
as notable as the similarities are the differences between a HOG chapter and an outlaw club.
Grooming is more upscale and less intimidating among HOG members. Tattoos are less
prevalent. The motorcycles and clothing are newer and more obviously used as costumery.
The HOG sponsored rally exhibited none of the outrageous behavior (such as public nudity
and sexual exhibitionism) found at Sturgis and ABATE rallies. Instead, activities at the HOG
rally included lectures on motorcycle safety and maintenance, and a focus group that
discussed HOG merchandise. HOG members appear to be able to partake of the outlaw
mystique without ever really venturing into the realm of the outlaw biker.
Extraordinary Brand Identification
Our findings indicate a strong sense of brand identification among Harley owners that
translates to extraordinary brand loyalty. Furthermore, we find that very strong brand
identification often precedes the purchase of the first Harley, sometimes by years,
manifesting as a desire or longing that results in highly motivated brand preference. When
discussing their first Harley purchases informants commonly report always having wanted
one. Some report memories of their fathers or grandfathers on Harley-Davidsons, and
intergenerational and family-centered Harley ownership are featured regularly in
publications like Enthusiast and Hog Tales. Other informants are unable to pinpoint the
genesis of their loyalty to the idea of Harley ownership, only the general sense that until
they owned a Harley any other motorcycle was just a stop-gap. Still others begin riding
motorcycles without any particular brand loyalty and eventually develop a specific interest in
owning a Harley that may or may not develop into a driving passion. One thing is certain:
among Harley owners a sizable share is fiercely loyal. One key informant categorizes loyalty
to Harley-Davidsons in the following manner: "There are two types of Harley riders, those
who if Harley-Davidsons were no longer available would just stop riding altogether, and
those who are devoted to motorcycles first, and who happen to like Harleys."
The most Harley-loyal group appears to be those people closest to the core of the traditional
biker subculture, i.e., those who most closely approximate the look created by outlaw clubs.
Signs of their loyalty frequently include Harley-Davidson related tattoos, bumper stickers on
their other vehicles, and the frequent wearing of Harley-licensed apparel, even at work or
other non-motorcycling activities. Informants from this group tend to have long (even
lifelong) histories of Harley ownership. A common pattern is to have begun with a "basket
case" (a bike in need of extensive repair) and to have traded up several times to newer or
more desirable models. Their predominantly blue-collar status often precludes the purchase
of a new Harley; however, their tendency to customize their bikes makes them a good
segment for after-market parts and service. Although many perform their own mechanical
work, many do not. Mechanical work among this group will sometimes fall to an authorized
Harley dealer, but much of it is also done by private shops or by individuals who are
themselves Harley owners and who perform mechanical work as favors or for extra income.

An ironic twist to Harley loyalty is that much of the customization of Harley-Davidsons


involves the removal of stock Harley parts and their replacement with other, non-Harley
parts that are perceived to deliver higher performance. For example, according to several
informants (and born out by observation at rallies) it is standard procedure for Harley
enthusiasts to replace the stock Harley exhaust pipes for noisier custom pipes.
Lavish spending on custom accessories is also typical of RUBs, or upscale, baby-boomer
enthusiasts. Having come lately to Harley ownership, however, their longevity as owners
cannot be determined. Similar to the "preppie punks" described by Fox (1987), RUBs tend to
dress and play at the role of biker on weekend rides, at rallies, or for other special riding
occasions, but they return to their suits and imported cars the rest of the time. Such signs of
peripheral affiliation with the biker subculture would seem to suggest a passing infatuation
indulged by relatively high discretionary incomes. If Harley ownership were to pass out of
vogue, maintaining the loyalty of such owners might present a significant challenge. On the
other hand, certain signs of high commitment (e.g., owner-initiated innovation) among the
RUBs may also indicate the formation of a separate subculture with a life and longevity of its
own. Longitudinal research with a group of such owners could prove extremely valuable to
anticipating the needs and behaviors of this lucrative market.
The subgroup of retired or semi-retired "Ma and Pa" bikers presents a different picture of
brand loyalty. Motivated in their motorcycling by travel and comfort they tend to choose
fully dressed bikes with features such as radios, intercoms, heated handgrips, floorboards,
and full, protective fairings. The same needs that steer them toward Harley dressers also
place them squarely in the target market for the very successful Honda Interstate and similar
bikes from other Japanese manufacturers. Several informants have owned both Harleys and
Hondas, and some profess no particular loyalty. Those that are Harley loyal tend to point to
Harley's American heritage and manufacture as their main reasons; they also identify the
Harley's unique sound and feel as important. Those who are non-loyal cite performance,
features, and overall value as their decision criteria. If Honda becomes successful in
positioning the Interstate as an American-made motorcycle for American riders (as current
advertising is clearly aimed to do), Harley-Davidson's "Ma and Pa" segment might suffer
attrition.
Crossing Cultural Boundaries
Subcultures that form around unique ideologies of consumption possess a uniformity that
may transcend racial, ethnic, or national differences. For instance, Klein (1985) found that in
the bodybuilding subculture racial and gender differences virtually disappear as members
identify themselves foremost as bodybuilders. Stratton (1985) determined that
consumption-oriented youth subcultures are prone to cross national boundaries and cultural
contexts. Outlaw motorcycle clubs forming outside the U.S. (see, e.g., Harris 1985; Wolf
1991) utilize the same organizational structure, perform the same kinds of activities, and
display the same symbols as U.S.-based clubs (cf. Hopper and Moore 1983, 1990; Quinn
1983; Reynolds 1967; Thompson 1966; Watson 1990). At the Black Hills Motor Classic the
first author observed rally participants with license plates representing several Canadian
provinces, Sweden, and Australia. A group of enthusiasts in Russia, having gone to great
lengths to preserve WWII military-imported Harleys, has recently extended a hand of
fellowship to other bikers through a letter to the editor of Biker. In an equally surprising

development, Swedish composer Jan Sandstrom has created a "Motorbike Concerto"


wherein Swedish trombonist Christian Lindberg imitates the sounds of various HarleyDavidson motorcycles as part of a musical production touring Europe, Japan, and the United
States (The Oregonian 1992). To what extent certain aspects of the American biker ethos
(e.g., American patriotism) carry over may be suspect, but given the implications for
marketing Harley-Davidsons internationally, the phenomenon merits further investigation.
CONCLUSION AND LIMITATIONS
An ethnographic study of Harley-Davidson motorcycle ownership has begun to reveal
important marketing implications associated with consumption-oriented subcultures. Seeing
owners as part of a subculture provides a theoretical foundation upon which to base
understanding and perhaps even prediction of important behaviors. The knowledge, for
example, that highly committed consumers, in modifying existing products to meet their
personal needs, also tend to become involved in the development of new products may be
of real value to a company that monitors such activity through appropriate consumer
research.
For firms that sell a mystique as well as a hard product, understanding and managing the
mystique may be critical to long-term profitability. Likely, the management of mystique has
direct implications for issues such as licensing, brand equity and promotion. For example,
the marketer must consider trade-offs between short-term gains through brand extensions,
and the potential dilution or debilitation of the mystique associated with the core brand or
product (Aaker 1992). Harley-Davidson as a marketer to a subculture may be in a special
position to benefit from brand extension to products like apparel. An important component
of the Harley mystique is the creation of envy among non-Harley owners (Schouten and
McAlexander 1991). For Harley owners, the donning of Harley licensed apparel by nonowners serves as a visible symbol of envy, strenghtening the mystique and providing an
additional hedonic benefit. Another trade-off to be considered lies between identification
with and renunciation of deviant aspects of the core subculture. Harley-Davidson has
successfully borrowed from outlaw biker symbolism while balancing the deviance inherent in
that association with such wholesome activities as rider safety seminars and family and
children's activities at company sponsored rallies.
One manifestation of the Harley mystique that has important implications for merchandising
is extraordinary brand identification to the Harley-Davidson name among motorcycle owners
and non-owners alike. For motorcycle owners, Harley licensed products provide a means to
include Harley Davidson symbols in non-riding facets of their lives, serving as reminders to
themselves and others that they are part of the Harley brotherhood. For one informant, a
physician in an upscale clinic, a Harley-Davidson tie tack serves to elicit conversation with
patients and peers relating to Harley ownership. Again, pride and the creation of envy
appear to be strong motivators, but the conversations he remembers most are those that
have introduced him to other Harley riders and led to the sharing of experiences and a sense
of brotherhood. Harley-Davidson licensed products facilitate such linkages to the community
of Harley owners. For non-owners, Harley licensed products, especially apparel,
demonstrate an allegiance to the Harley concept and aspirations to become Harley owners.
Although they currently may not be able to afford a Harley-Davidson motorcycle, they can

through symbolic identification share in the mystique keep and the dream of ownership
alive.
The full cross-cultural implications of a subculture of Harley-Davidson owners are not yet
known. However, two factors appear to indicate significant international opportunities for
marketing Harley-Davidson motorcycles and accessories, apparel, and other branded
products: first, the general tendency of consumption-oriented subcultures to transcend
cultural, national, and generational boundaries; and second, the proliferation of American
popular culture abroad, evidenced by the ubiquity of American youth fashions, music, and
fast foods, and crowned by the recent opening of Euro Disneyland. We have encountered
direct evidence of the internationalization of the Harley-Davidson subculture; however,
additional research is needed to determine the nature, reach, and longevity of the Harley
mystique in non-U.S. Cultures. Furthermore, it is important to learn how the basic symbols
of the subculture are used, altered, or reinterpreted when overlain on a non-U.S. cultural
background.
The results presented here are drawn from an on-going and emergent study. As a result,
there are questions raised in the analysis that cannot yet be answered. For example, the
longevity and degree of commitment to the subculture on the part of new, upscale bikers
are issues that can only be resolved with more prolonged engagement and longitudinal
observations. Additionally, regional and international differences that have suggested
themselves in our ethnography need further exploration. Additional research will help us
better understand these variations in the interpretation and expression of the HarleyDavidson subculture, its symbols and its mystique.
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I.

Executive

Summary

Harley-Davidson is the largest market share holder of motorcycles over 750 in


the United States. After the expansion of our production and distribution
capacity, we will be in the position to meet the increasing demand for our
motorcycles and other products, including a new line of clothing specially design
for women. Growth potential appears very good especially in the overseas
market and the young and mature women and younger market. Gaining a larger
market share in this area may require a further increase in production and
distribution capacities.
II.

III.
We must plan for expansion and build new strategies how to target the woman,
younger market, as well as the already HD owners and continue to grow as a company.
II.

The

Challenge

HD has chosen the strategic direction of targeting women and the younger market that is
technologically conscious in order to increase its share in the first time motorcycle owner
market space. With the introduction of the new VRSCS, and the new lowered sporster 833 L
and the 1200 L, design for small riders who want more power, also promoting the already
existing HD motorcycle owners to step forward and purchasing a bigger model. HD is in a
position of attaining a sizeable share in the first time motorcycle owners, the young males,
and females marketplace. To target the women and the young market with the new product
line, the company has adopted the following marketing objectives: to expand its current
market (market expansion), diversify its product line (product diversification), and modify its
marketing
mix
to
target
women
and
the
younger
demographic.
III.

Situation

Analysis

Company
Analysis
During the 1970's, HD was facing a decline in market share due to increased competition
with Japanese companies. By phasing out weak models, becoming more selective, and
limiting sales and promotions, HD was able to carve out a niche in the marketplace which it
enjoys today. Now again faced with a period of decline, HD is relying on its newly adopted
marketing objectives. First, HD needs to expand its potential customer base to include
enthusiasts and non-enthusiasts young males, and females into buying HD motorcycles over
any other competitor. This thought is accomplished through the introduction of the VRSCS,
and the lower and narrow Sportsters, Dynas, Softails and positioning them in the market to
a younger demographic. Secondly, HD needs to position the VRSCS, Sporster, Dyna and
Softail to also appeal to first time buyers of motorcycles. HD's strong brand identity can help
pull in new clients. Third, HD has to set an appropriate marketing mix that will help attract a
younger consumer base. By using the low-end approach, which involves attracting a young
audience to a brand name product with a low price tag (similar to what Jaguar and BMW
have done), HD can expand its popularity to the domestic and international market.
Harley-Davidson's (HD) positioning strategy can best be defined by its mission statement:
"We fulfill dreams through the experience of motorcycling- by providing to motorcyclists and
to the general public an expanding line of motorcycles, and branded products and services in
selected market segments." Now in its 105th year, the ideal of owning an 'American Icon'
has slowly dwindled out of the public's mind, due mostly to the competition from Japanese
manufacturers like Honda and Yamaha, HD is aiming to change this, bringing back the true
American pride and sense of freedom and liberty. HD's strength's of its powerful brand
image, maintaining good customer relationships, strong financial position, and superiority of

technology and design are hindered by its weaknesses related to product capacity and
unfulfilled
demand
for
their
products.
Customer
Analysis
Approximately 51 percent of the population is women (Health Resources and Services
Administration
U.S. Department of Health and Human Services), and about 12 percent of all Harley
motorcycle sales are to women, roughly 32,000 new bikes in 2006, compared with 4 percent
in 1990, 9 percent in 1998 and 10.6 percent in 2003. Women will spend about $300 million
on Harley bikes this year in the United States, not including accessories, riding gear and
clothes.
(MIC)
According to the Motorcycle Industry Council, the number of women in the country
operating motorcycles increased 34 percent to 4.3 million in 2003, from 3.2 million 1998.
The number for men rose a little more than 20 percent in that period.
Today American women are the fastest-growing part of the motorcycle business, buying
more than 100,000 of them a year. Even though aging baby-boomer men, with money to
spend and time on their hands, have played a big role in expanding the market in recent
years, motorcycle companies are trying hard to win women buyers.
Competitor
Analysis
For all of Harley-Davidsons new marketing efforts, it lags slightly behind its competitors
Kawasaki and Suzuki in percentage of motorcycle sales to women in large part because the
Japanese companies offer a wider range of smaller bikes that are less intimidating to many
novice female riders. Suzuki last year introduced a new line of clothes called Suzuki Girl with
tight-fitting riding jackets in pink and baby blue. Few companies, though, are doing more
than Harley in reaching out to this group. Its dealers hold frequent garage parties for
women, to let them learn about bikes, including the best way to stand up a 750-pound
motorcycle that has tipped over (crouch down, with the small of your back against the seat,
and
push
up
and
back
while
holding
onto
the
bike).
IV.
Market
Segmentation
Description
HD is producing more motorcycles that are low to the ground so women and short people
can plant their feet firmly at rest with narrower seats and softer clutches, and adjusting
handlebars and windshields to make bikes more comfortable for smaller riders, also HD is
selling more clothes, too, in bright colors and with rhinestones, rather than the standardissue black and orange leather jackets. Even the skull motif that appears on some clothing
sold at Harley outlets has undergone a friendly makeover to include wings and flowers.
Introducing to the public entire clothing lines especially design for women.
Percentage
of
sales
American women are the fastest-growing part of the motorcycle business, buying more than
100,000 of them a year. Approximately 51 percent of the population is women (Health
Resources and Services Administration U.S. Department of Health and Human Services), and
about 12 percent of all Harley motorcycle sales are to women, roughly 32,000 new bikes in

2006, compared with 4 percent in 1990, 9 percent in 1998 and 10.6 percent in 2003. Women
will spend about $300 million on Harley bikes this year in the United States, not including
accessories,
riding
gear
and
clothes.
(MIC)
According to the Motorcycle Industry Council, the number of women in the country
operating motorcycles increased 34 percent to 4.3 million in 2003, from 3.2 million 1998.
The number for men rose a little more than 20 percent in that period.
Collaborators
Harley Davidson North America (Canada, USA, Mexico), Europe (over 16 countries), Asia
(China,
Japan),
and
Oceania
(Australia
and
New
Zeland).
Selected
Marketing
Strategy
Harley-Davidson has begun a new Web site aimed at women (harleydavidson.com/womenriders), with more products for women, more fit sizes for small and
tall and XL women riders who like to still maintain their feminity. Also HD is advertising in
womens magazines with a striking black-and-white image of a rider using the chrome
plating on a bike as a makeup mirror. For years, women bought the Harley Sportster 883
Hugger because it was low to the ground, but many found the ride a bit rough. The company
put rubber engine mounts on all of the Sportster models for the 2004 model year to reduce
vibration and then replaced the Hugger with the Sportster 883 L the next year. Today the
Sportster 883 L has become a favorite among beginner women riders looking for a low seat
and a smooth ride. The company lowered the Sportster 883 L even more and also introduced
the Sportster 1200 L, a low bike for smaller riders who want more power and plus a new line
of clothing and accessories just for women. Before women start considering which model to
buy, Harley-Davidson has to stoke their dreams and eliminate their fears. That is what its
garage
parties
are
all
about.
Garage parties is where not just women but new riders learned the fundamentals about
motorcycling riding and which motorcycle is best for you. At the end of the each party, they
will feel more comfortable and ready to take lessons. I want to get away from the fear,
said Leticia Andrade, a 40-year-old business systems analyst who wore a V-neck HarleyDavidson T-shirt festooned with roses and a butterfly. My kids are grown and gone, Im a
grandma now, and its time for me. HD is trying to inject vitality and sense of adventure to
middle age people as well, by giving them the opportunity of fulfilling their dreams, with
affordable motorcycles and giving them the privilege of becoming part of the true American
legend. It is relevant to say that more than 31% of already HD owners are college grads. The
profile of the typical Harley owner has steadily gone up during the past decade, in both age
and household income (from 32 to 44 years and from $30,000 to $72,000), as more whitecollar baby boomers have bought the bikes to fulfill a lifelong dream.
V.
Alternative
Marketing
Stratergy
Product: Sportster Line, Dyna, Softail, VRSC, Touring. (Ads, TV commercial, show HD as a
permanent
promoter
of
current
hot
music
bands)
Price:
Sportsters
from
$6,695
to
$8,895.

Dynas:
from
$11,995
to
$17,620
Softails:
from
$15,895
to
$19,495
$99 per month, applies to models under $17,620 makes you one step closer of owning a true
American
legend.
Distribution: Locations nationwide and online shopping special pricing. Overseas: HD
locations
and
easy
shipping
around
the
globe.
Promotion: special internet pricing/ incentive to previous HD owners. With the purchase of
your new HD, all the ladies walk out with an authentic HD helmet, previous owners get a
free
HD
gift
up
to
$200.
VI.
Short
&
Long-term
Projections
Increase in sales, doubling sales each year including motorcycles, accessories and clothing.
Increase in recognition. Implementing and maintaining actual HD strategies and customer
relations
with
HD
owners
and
future
owners
Becoming one the fasters and largest growing motorcycle business chosen by women and
younger
crowd
nationally
and
internationally.
VII.
Conclusion
HD's strength's of its powerful brand image, maintaining good customer
relationships,

strong

financial

position,

and

superiority

of

technology

and

design.
Increase in recognition. Implementing and maintaining actual HD strategies and customer
relations
with
HD
owners
and
future
owners.
Harley-Davidson has stoke their dreams and eliminated womens fears with more products
for women, including more fit motorcycles, unbeatable pricing and financing, more fit
clothing sizes for small, tall and XL to women riders who like to be less like everybody else,
womens who like to taste their liberty and experiment their wild side and still maintain their
feminity
Last but not least HD will become one the fasters and largest growing motorcycle business
chosen by women and younger crowd nationally and internationally.
How Harley Davidson Revs Its Brand
Harley-Davidson has been able to build a community of enthusiasts around its brand that
includes members from very diverse groups, and with almost no advertising. How does the
king of heavyweight motorcycling keep its fans so loyal? It gives them a reason to
"belong."
by Glenn Rifkin
In the pantheon of powerful American brands, most, like Coca-Cola, Tide, McDonald's, Levi's
and Nike, have reached icon status through long-term, high-visibility campaigns marked by a

consistent trumpeting of a simple message. Theirs is a story of deep pockets and relentless
promotion.
Occasionally, however, a brand emerges without the panoply of wall-to-wall advertising and
in-your-face marketing. Instead, recognition comes from a quiet, behind-the-scenes effort to
sell a product more directly on its merits, in its own time and in its own way. And the brand's
idiosyncratic path to success becomes a rich field for marketing gurus and academics to
mine, offering lessons not only for other offbeat efforts but also for those seeking to better
the odds of mainstream campaigns.
Perhaps no product exemplifies this non-traditional route to
brand excellence more than America's freewheeling symbol
of the road, the Harley-Davidson motorcycle. Twice at the
brink of bankruptcy since the 1960's, the Harley-Davidson
Motor Company and its parent, Harley-Davidson Inc., have
undergone a stunning metamorphosis in the past decade,
fueling a level of demand that is the goal of corporate
chieftains everywhere.
The change has not only enhanced Harley's standing in the highly competitive and lucrative
market for big motorcycles, where it had been pummeled for years by waves of aggressive
Japanese imports, but it has also extended the brand's reach to previously untapped
businesses as far afield from two-wheel behemoths as fashion and food. Having largely
reinvented itself, as both a company and a brand, the Milwaukee-based motorcycle maker is
now reaping the benefits of a hip, with-it image even as it prepares to celebrate its 95th
birthday next year.
With its feet firmly planted in both the present and the past, Harley offers traditional -- many
say retro -- styles and the best, most-refined 1940's technology around. That approach -marked by ample bulk (some models weigh almost 800 pounds, about twice that of
otherwise comparable BMW machines), twin cylinders and a throaty growl -- has been
derided by high-tech motorcycling enthusiasts as an inefficient relic of a bygone era. But to
Harley's customers, the motorcycles are lovingly crafted works of art. And many genuine
artists agree. In a recent exhibit of global design held at London's Victoria and Albert
Museum, the object chosen to represent America's design sense was a Harley-Davidson.
How Harley came back from death's door to reach this enviable state is a story of marketing
and brand enhancement that can apply as much to tools and furniture as to motorcycles. In
large part, the revival stems from a hard-eyed comparison of the competition's strengths (in
particular, the ability to quickly turn out new products studded with high-tech innovations)
with its own (a unique tradition and a powerful mystique).
The company's conclusion, said Clyde Fessler, vice president for business development, "was
to turn left when they turn right. 'Let's be the alternative and do the things they can't do.'
And that became our strategy in everything we did and still do."
That meant hitching a clearly defined marketing plan to the goal of capitalizing on the
company's special place in American pop culture, including its retro look. By finding new
ways to reach out to three core constituencies -- customers, employees and dealers -- Harley
managers fanned a lingering loyalty for their products into a revived passion, one powerful

enough to prove contagious to many thousands of new buyers. Along the way, the company
reversed a painful decline in quality that caused some of its old customers to cross the street
to the foreign competition. (See box on page 38.) And it softened its outlaw image just
enough to entice a new generation of clean-cut buyers to join a club that had long been
synonymous with the Hell's Angels -- yet without taking away the frisson of excitement that
came from being a member.
Indeed, membership now doesn't even require a driver's license. Shoppers dropped $100
million last year on Harley-Davidson Motorclothes and an unknown amount on hamburgers
and other fare at the Harley-Davidson Cafe in midtown Manhattan. Even kids can join, with
toys for the boys and leather-clad Harley Barbie dolls for the girls. (See box on page 34.)
The company accomplished all this by spending very little on advertising -- in fact, by running
no ads at all last year. This year, it plans to spend a minuscule $1 million on advertising out
of a total marketing budget of just $20 million.
Harley's return has almost been too successful for its own good.
Sales have grown at a compound annual rate of 16.2 percent since 1987, with profits up
even more, soaring at a comparable rate of 29.2 percent. Last year, the company reported
net income of $166 million on sales of $1.53 billion. To get to those numbers, it moved a lot
of metal, posting worldwide sales of 118,000 big bikes -- those with engines of 650 cubic
centimeters or more -- up from 55,000 in 1989. This year, the company plans to sell 130,000.
But that will not be enough to satisfy demand. The appetite for Harley motorcycles is now so
strong that it can take a year or two to get one, even if a customer is willing to pay the
thousands of extra dollars that some dealers are tacking onto the usual list price of $15,000
or more.
To catch up, the company has committed $200 million to expand production capacity to
200,000 units by 2003, its centennial year. In the meantime, the inability to meet demand is
decidedly a mixed blessing.
On the plus side, Harley enjoys some of the production economies that have made direct
computer sellers like Dell and Gateway 2000 such spectacular successes. Every motorcycle
that Harley makes has already been sold; in effect, the company is now building to order.
That means no steep inventory costs for the big bikes relating to storage, financing and other
expenses. (The company is reducing inventory costs for spare parts and accessories in
another way: through a sophisticated intranet system that connects its nearly 1,000 dealers
worldwide to a central customer data base. See article on strategic uses of information
technology, page 80.)
The downside to not keeping up with demand, of course, is the loss of business to the
competition. Just how much of a loss is not clear. Harley's share of the heavyweight
motorcycle market in the United States was 48.2 percent in 1996, virtually unchanged from
the 48.5 percent share it held in 1991, according to R.L. Polk & Company, a market research
firm based in Detroit. Harley managed to hold its own during that period even as the overall
big-bike market in the United States nearly doubled, to 166,000 units. But some Harley
dealers say they could easily sell twice as many bikes as they now get.

Whatever the actual number of lost sales, Harley's gap between supply and demand
represents an opportunity for Japanese and other importers to exploit, giving them that
much more of a perch from which to build their own brand loyalty.
Why the shortfall? Harley executives say they have been reluctant to expand too fast for fear
of compromising their renewed commitment to quality. But there is a "Depression
mentality" at work as well, said Christopher Hart, a management consultant in Boston who
has worked with the company. Having gone to the edge of bankruptcy twice before, Harley's
top brass are in no hurry to tempt the fates again.
The bottom line, then, is rich in irony: the senior managers of one of the most recognized
symbols of American excess -- the chrome-laden, ultraheavy Harley is known affectionately
as "the hog," after all -- turn out to be conservative keepers of the flame.
And therein lies still another lesson for managers in other industries who wouldn't know a
Harley from a Ducati: fashions change. If the hog fell out of favor before, it might fall out of
favor again. But by guaranteeing quality, rather than pushing for every last sale, the
company can count on a core group of customers to remain loyal. And by extending the
brand's good name in different directions, Harley is finding new customers who don't
necessarily want to own a motorcycle at all. In both ways, Harley's managers are tapping
into a more stable revenue stream that should help to keep the company afloat during
whatever bad times lie ahead.
The Lifestyle Hook
What kept Harley going in its darkest days, and what is driving it now in high gear, is the
plain fact that the motorcycle it makes is not just a product but rather the centerpiece of a
lifestyle -- even for its managers.
The Harley management team, in fact, has a visceral
connection to the brand and to its customers that is
difficult to match in most corporate boardrooms. The
senior executives own the motorcycles and ride with their
customers. Indeed, they are customers, journeying to
Harley rallies and taking their places on the same waiting
lists to get new bikes.
"We are committed to motorcycling," Richard F. Teerlink,
Harley's chairman and former chief executive, said in a
recent interview. "It's not hardware; it is a lifestyle, an
emotional attachment. That's what we have to keep
marketing to."
As an American icon, Harley has come to symbolize
freedom, rugged individualism, excitement and a sense of "bad boy rebellion."
"Harley reflects many things Americans dream about," said Benson P. Shapiro, a consultant
and a marketing professor at the Harvard Business School. "They're a little bit naughty, a
little bit nice, which is a very attractive brand image to have."

Significantly, Harley benefited from its unsought association with outlaw bikers and films like
"The Wild Ones" and "Easy Rider." Harley riders like the awe the bikes inspire at stoplights or
when groups ride into small towns. Many Harley owners and employees (at least of the old
school) feel such a bond to their bikes that they have a weakness for tattoos of the
company's logo.
Rather than quietly observe this strange cultural phenomenon, Harley executives publicly
boast about it. In the 1996 annual report, Mr. Teerlink wrote: "Most people can't understand
what would drive someone to profess his or her loyalty for our brand by tattooing our logo
onto his or her body -- or heart. My fellow employees and I understand completely. We also
understand very clearly that this indescribable passion is a big part of what has driven and
will continue to drive our growth."
Harley has marketed this emotion across a broad consumer population, from blue-collar
craftsmen and bearded, beer-bellied "motorheads" to a growing legion of chief executives,
investment bankers and high-profile entertainers, including Arnold Schwarzenegger, Jay
Leno and Billy Joel. The profile of the typical Harley owner has steadily gone up during the
past decade, in both age and household income (from 32 to 44 years and from $30,000 to
$72,000), as more white-collar baby boomers have bought the bikes to fulfill a lifelong
dream. How many boomers are holding the handlebars? One rough measure: 31 percent of
all Harley owners are college grads.
Yet while catering to this new upscale market, Harley has managed to avoid alienating its
traditional customer base, the hard-core Harley lovers, whom Mr. Teerlink referred to as
"the enthusiasts." "It's an honor to be a status symbol," he said, "but status symbols go
away. We want to be part of your life."
To keep that role, Harley-Davidson has become adept at fostering "customer intimacy" -and even extending the concept to dealers and employees. Harley's 5,500 employees, for
example, vie with each other to attend rallies and other company-sponsored events during
the year. Being a Harley employee at a rally is a "badge of honor," said Joanne M.
Bischmann, the company's marketing vice president.
Indeed, it would be difficult, said Mr. Hart, the Boston-based consultant, to find a
management team that stays as close to its customer base. "I don't know of any company,
and I've worked with all sorts of companies," he said, "where the senior executive team goes
out to the Four Corners and spends over a week riding with a group of customers to an
event celebrating the product."
And Harleys, without question, are celebrated products, functional works of art to their
owners, much like a Rolex watch, a Bang & Olufsen stereo, a Wurlitzer jukebox.
George Conrades, the chief executive of BBN, a software company in Cambridge, Mass.,
owns six motorcycles, three of them Harleys. "They are Barbie dolls for grownups," he said,
explaining the propensity of many Harley owners to spend thousands of dollars adding
customized parts and accessories to their machines.
Mr. Conrades, a former senior vice president for marketing at I.B.M., chatted rationally
about Harley-Davidson's marketing challenges -- including the need to take more advantage
of the customization craze, which the company has largely ceded to third-party vendors. But

his eyes lit up -- and emotion took over -- when he mentioned a new Harley model. "Have
you seen that Heritage Springer?" he asked. "You don't know whether to ride it or put it in
your living room. It's just gorgeous."
That kind of passion explains how Harley has been able to cross so many socioeconomic
boundaries. Its owners are buying much more than a mode of transportation. What bonds
them to the bikes -- and ultimately to each other, at rallies and other events -- is a mutual
appreciation of the look, feel and sound of the machines.
The Japanese competitors, such as Honda, Kawasaki, Suzuki and Yamaha, along with German
giants like BMW, have taken straight aim at the heavyweight or so-called cruiser market,
which accounts for about 45 percent of total motorcycle sales in the United States. And
while they have captured a bit more than half of that market -- producing high-quality
machines that look and sound something like Harleys, while costing less -- they have been
unable to match the Harley mystique, at least so the Harley camp says.
"The people buying the other bikes are new to the cruiser market and don't know any
better," said Mark O'Neil, the marketing manager at Cycle-Craft, a 38-year-old HarleyDavidson dealership in Everett, Mass. "But to those who already own a Harley, they just
laugh and say, 'Good try, bad result.' Harley's heritage evolved over a long time. You can't
just come in and say, 'We have that, too.' "
The Bumps In The Road
But for many years, from the 60's to the early 80's, it was far from clear that Harley's
heritage would continue to be a living one. Time and again, the company seemed to be
heading into a wall.
By the mid-1960's, Harley was the last of more than 200 American motorcycle makers to
survive. But poor family management, a decline in quality and the sudden onslaught of
Japanese motorcycles were all pushing it to the brink of bankruptcy. A rescue came in 1969,
when the American Machine and Foundry Company purchased Harley for $21 million.
But A.M.F. saved Harley only to run it back into the ground. To its credit, A.M.F. started by
pouring millions into the company. By 1973, Harley was turning out 37,000 motorcycles a
year and pulling in $122 million in sales. A.M.F. forced the company into overproduction,
however, further compromising quality. Harleys, which already had a reputation for leaky
engines and creaky temperaments, were now almost
untouchable.
In the mid-70's, A.M.F. went too far when it replaced the
Harley name with its own. Apparently unaware of the
magnitude of that marketing blunder, which sent sales
plummeting, A.M.F. soon began looking to unload the
troubled company. In 1981, Vaughn Beals, Harley's chief
executive at the time, pulled together a dozen other
company officers who found outside financing and became the new owners.
Saddled with $70 million in debt from the buyout amid a terrible recession and a continued
push by Japanese competitors, Harley-Davidson was a company on life support for several

years. It lost more than $50 million in 1981 and 1982 and by 1983 was facing bankruptcy
again.
In desperation, management publicly railed against the Japanese for allegedly "dumping"
their bikes on the American market below cost in a bid to capture a bigger slice of the
business. Harley squawked loud enough to persuade President Ronald Reagan to impose a
stiff tariff on the Japanese imports, gaining the American company some breathing room.
Ironically, at the same time, Harley executives were touring Japan and bringing back such
vaunted production methods as just-in-time inventory control and quality circles.
Mr. Beals later acknowledged to The New York Times that after years of blaming the
Japanese, Harley finally admitted that its troubles were internal. "We realized the problem
was us, not them," he said.
With a complete make-over of its manufacturing processes focused on quality, Harley
commenced its rebirth. Desperately needing cash to finance the revival, the company went
public in 1986 and quickly became a darling on Wall Street.
Mr. Beals and Mr. Teerlink were clear with investors from the outset that the company's
main asset was its brand, which had managed somehow to survive all the corporate miscues.
The company certainly was in need of a jump-start in the marketplace, they conceded. But,
they quickly added, once it got moving again, Harley knew where it wanted to go.
A road map had already been drawn by Mr. Fessler, now the company's vice president for
business development. Mr. Fessler joined Harley in 1977 as the advertising and sales
promotion manager and became part of the marketing strategy team in the early 1980's,
with a mandate to put a new face on the company's tarnished image.
He recently recalled a four-day strategy meeting he held back then with Harley's new ad
agency, Car-michael Lynch of Minneapolis.
"On a big piece of paper, we drew up a list of comparisons between the Japanese bikes and
ourselves," he said. "We put down all the strengths and all the weaknesses. The Japanese
were global, into long-term strategic planning, did a lot of advertising and had great diversity
in their global markets. They could take a concept from idea to product in 18 to 24 months.
"As for Harley, we had heritage, tradition, mystique. How were we going to compete against
these giants? We looked at where they had been the previous five years and were able to
project where they were going in the next five -- new engines, new frames, new
suspensions, very high-tech. So we decided to be the alternative."
Out of that decision came a number of key concepts that determined Harley's fate:
Back To The Future: Harley made a clear choice to stay with its traditional styling, a
classic 1940's and 50's design that aficionados believe motorcycles were meant to have. In
Willie G. Davidson, the grandson of one of the founders, the company had a vital link to its
design heritage. Dressed in black leather and beret, Mr. Davidson, now the 64-year-old head
of the design department, took to the road and met with Harley customers, listening to their
comments. Voicing disdain for the slick Japanese machines, they expressed nostalgia for old
Harley models and the outlaw touches that had turned Harleys into "choppers." Willie G.

designed new lines like the Softtail to mimic the beauty and elegance of 40's classics like the
Hydra Glide.
"We experimented with radical designs inside," Mr. Fessler said. "But every time we did that,
we found out the customers didn't want it and we had to fall back."
Build A Community: In 1983, at the urging of Mr. Beals, Mr. Fessler set out to create a
company-sponsored club for Harley riders. The Harley Owners Group, or H.O.G., was started
as an organization that would sponsor rallies, offer special promotions and keep Harley
owners in close contact with the company and each other. For as long as anyone could
remember, Harleys had been called hogs, but the connotation was a negative one, of outlaw
bikers like Hell's Angels. "My thought was to turn a negative into a positive," Mr. Fessler said.
For many Americans, the sight and sound of an entourage of Harleys roaring into town
meant a nasty motorcycle gang had arrived. So Mr. Fessler pushed hard to get H.O.G.
associated with the Muscular Dystrophy Foundation. Under the club's banner, groups would
ride for charity. Slowly, the perception began to change. Today, H.O.G. members constitute
the fourth-largest contributing group to the Jerry Lewis Telethon each September.
Give Them A Reason To Belong: At the first H.O.G. rally in 1984
in California, 28 people showed up. Today, H.O.G. has 365,000
members in 940 chapters throughout the world. The organization
sponsors hundreds of rallies around the country each year,
including massive gatherings in Daytona Beach, Fla., and Sturgis,
S.D. With the Fly and Ride program, H.O.G. members who are on
vacation or traveling on business can call ahead and rent Harleys
through local chapters. And every five years, the company and
H.O.G. sponsor anniversary reunions in Milwaukee. More than 100,000 riders are scheduled
to converge next year to mark the company's 95th birthday. Already, there are no hotel
rooms available for that weekend within 100 miles of Milwaukee.
Extend The Brand: Mr. Fessler realized that legions of Harley
riders in black leather jackets and black T-shirts also hurt the
company's image. Unfortunately, that is what the company sold
them. So in 1986, he launched Harley-Davidson Motorclothes,
which offered shirts with collars, denim blue jeans, baby clothes
and bright-colored fashion items for women.
At the same time, Harley began to license its popular shield-and-bars logo for hundreds of
products, from train sets to Christmas ornaments to the special edition Barbie. In Europe,
L'Oreal licensed the name for a line of cologne. Mr. Fessler insisted that the merchandise
had to be durable and high quality. The logo was licensed to a Zippo lighter, for example,
rather than a Bic disposable.
Each decision to go upscale in ancillary products led to another. Realizing that most of its
dealers were ill-equipped to sell fashion items, Harley began to require them to remodel
their stores (at their own expense) to showcase the merchandise. Despite grumbling from a
few of the 600 domestic dealers, the clothes operation has become a big success, helping to
boost sales of Harley parts and accessories, which now account for $210 million a year in
revenues.

Meanwhile, the Harley-licensed restaurant in Manhattan, modeled after the Hard Rock Cafe,
will soon be joined by another, in Las Vegas. And Harley-Davidson stores selling clothes and
other paraphernalia have become familiar tenants in malls around the country.
Mr. Fessler acknowledged some bad decisions -- like licensing the Harley name to a line of
cigarettes -- and the company's licensing department now has strict operating guidelines.
The idea is to give people access to the Harley experience, whether they own a bike or not.
"We always ask, 'Does it somehow lead back to the motorcycle?' " said Ms. Bischmann, the
marketing vice president.
She added that Harley toys, built by the likes of Mattel and Kenner, are an excellent way to
extend the passion for Harleys to a younger audience, and with an aging customer base, this
is a key marketing challenge. "What better way is there to get a 3-year-old to feel the Harley
motorcycle experience?" Ms. Bischmann asked.
Critics suggest that Harley is "selling out" and diluting its brand by putting its logo on so
many products. But Harvard's Professor Shapiro disagreed. "As long as they don't get
distracted from their core business, this helps build the mystique," he said. "If you don't
continually change and extend the brand, you die. If you change too much, you also die. But I
don't believe Harley has come close to burning out."
Extend The Enterprise: Even through its bleakest period,
Harley has maintained close ties to its dealers. Of the 600
domestic dealers, most have been with Harley for decades; many
dealerships have been in the same family's hands for three
generations, with one family tracing its ownership back to 1914.
The company holds quarterly meetings with an elected 10member dealer advisory council. In July, every senior Harley
manager is expected to attend the annual dealer meeting, where
new models are previewed and problems get aired. Six years
ago, the company opened Harley-Davidson University, where
dealers can take three-day courses in such topics as "How to Manage Your Business" or
"How to Create a Succession Plan."
Harley, said Mr. Hart, the consultant, is cognizant of the fact that it was the dealers who
came to the rescue as the company went through its rebirth during the mid-1980's. During
the first years following the management buyout, "the quality of the bikes was terrible and
Harley counted on the dealers to fix them," Mr. Hart said. "They went through the war
together and the dealers didn't charge the company back for any of this."
Of course, the dealers make more money from service and the sales of parts and accessories
than from sales of the motorcycles, so few are complaining. The relationships are long, deep
and symbiotic. Harley understands that the dealer is the customer's conduit to the company.
Indeed, for many Harley owners, the local dealership is a second home, a gathering place. "I
can set my watch by certain people coming in every day," said Mr. O'Neil of Cycle-Craft.
Add Value: Like Mercedes and Porsche, a Harley holds its value to an astonishing degree,
and the company has taken advantage of that fact. In the late 1980's, Mr. Fessler created a
marketing campaign called Ride Free, designed to move owners up to bigger, more
expensive motorcycles. The company promised owners who bought new Harley Sportsters,

the entry-level bike which sold at the time for $3,395, that they could trade them in a year
later for a bigger Harley and get the full $3,395 credited toward the price of the new bike.
There is also a huge aftermarket for Harley parts and customizing kits, which Harley shares
with legions of independent third-party "chop shops." Personalizing a Harley by innovative
paint jobs, scads of new chrome and pricey saddlebags has become its own time-honored
Harley tradition. In fact, industry watchers agree with Mr. Conrades that Harley could get a
big boost in sales by focusing on this market more than it does.
Not surprisingly, as production shortfalls over the past six or seven years have led to waits of
up to two years for new bikes, the value of used Harleys has skyrocketed and owners can
often sell their machines for more than they originally paid.
Sometimes they don't have to wait very long at all to make a profit. John Atwood, owner of
Cycle-Craft, recalled the day, some four years ago, when he sold a new Harley Road King to a
customer who then walked out the door and resold it to someone else in the parking lot for
$2,000 more. "He didn't even have the decency to leave my lot," Mr. Atwood said. "I felt like
I had a big 'stupid' sticker on my forehead."
Looking Ahead
Harley is quite sensitive to the production shortfall. A new plant, scheduled to open next
year, should ease the wait considerably. In the meantime, management watches nervously
as some dealers take advantage of the situation by adding $5,000 or more to the suggested
retail prices, inevitably turning some would-be customers off for good. Dealers like Mr.
Atwood, who have held the line on prices, believe Harley will solve the backlog by 1999.
"When Harley gets the bugs worked out with expanded production, things will explode," he
said.
Company executives agree that the backlog is far too long. "Our mystique has never been
about being hard to get," Ms. Bischmann said. "We don't want the waits; our dealers don't
want the waits. This is just an obstacle we have to overcome."
Customers like Mr. Conrades worry that in a society of instant gratification, the supply
shortfall "gives people a reason to go elsewhere and explore the other options."
That is Harley's worry, too, of course. The big fear is that significant numbers of motorcycle
enthusiasts will opt for the Japanese competition, form their own groups, gain their own
cachet and, perhaps, even become accepted by hard-core Harley riders. To prevent this,
consultants say, Harley must drive its brand deeper and deeper into the culture, yet without
cheapening its image.
Mr. Teerlink agrees, but he says customers will be patient as long as Harley makes it clear
that the wait is because "we want to guarantee the same level of quality."
Beyond that, Harley can always count on the staying power of its brand, and on customers
like Mr. Conrades. "If I had only one bike," he will tell you, making a vow that sounds
unshakeable, "it would be a Harley."
Leveraging The Brand
How powerful is the Harley-David-son brand? The tangible evidence is compelling:

In 1996, Harley spent not a single penny on advertising. It didn't


have to. Madison Avenue thinks the company's bikes are so cool
that it puts them in ads for countless other products, giving Harley
millions of dollars' worth of free exposure. While companies paid $1
million for each 30-second spot during the 1997 Super Bowl, 100
Harleys were on the field as part of the half-time show, again at no
cost to the company. Harley's marketing vice president, Joanne M.
Bischmann, reports that she is constantly barraged by requests from
celebrities to serve as the company's official pitchman. Since Harley
has no national television advertising and only a small print campaign , Ms. Bischmann
politely declines all requests.
With or without paid advertising, Harley motorcycles -- there are four basic categories,
with about 20 different models -- are in such demand that dealers consistently report
waiting lists of a year or longer. Even the wife of Harley's chairman, Richard F. Teerlink, had
to order a new bike nearly a year in advance to get it in time for his birthday.
The company now regularly reports record sales and earnings each year -- $1.53 billion
and $166 million, respectively, in 1996. Harley has quadrupled production in the past
decade, to about 130,000 this year, but still can't keep up with
all the orders.
Nearly out of business in 1985 because of its own mistakes
and stiff Japanese competition, Harley now has such cachet
that its name adorns everything from a popular Manhattan
restaurant to L'Oreal cologne to a limited-edition Barbie doll.
Harley-Davidson Motorclothes -- mixing black leather
jackets with French-cut women's underwear and fashions for
tots -- is now a $100 million-a-year business. To sell the
merchandise, most of Harley's 1,000 dealers around the world have transformed their
greasy showrooms into airy boutiques.
Competitors are so intent on grabbing market share in the lucrative heavyweight class
that they sometimes try to copy Harley's styling and even its sound. Accordingly, Harley has
filed papers with the U.S. Patent and Trademark Office to protect its tailpipe rumble.
Harley employees, like those in every great marketing company, take personal
responsibility for maintaining the luster of the brand. That was so much the case at Harley
that the company shut down its branding department in 1995. "We didn't need it," Ms.
Bischmann said. "We're all brand managers." Harley employees model in the company's
Motorclothes catalogue, attend rallies and act as tour guides at the manufacturing plants.
Last year, more than 60,000 visitors toured the biggest plant, in York, Pa., where the bikes
are assembled.
All this has fueled shareholder value: $100 invested in Harley stock in 1986, when the
then-beleaguered company went public, was worth $3,488 a decade later.
Quality As A Survival Tool
"Buy a Harley, buy the best --ride a mile and walk the rest!"

In the 1970's, when Harley-Davidson was owned by the American Machine and Foundry
Company, the reputation of its motorcycles sank so low that sarcastic ditties about the
legendary bikes made the rounds of the riding community. Under A.M.F., Harley-Davidson
ramped up production sharply at the expense of quality. It almost drove the company to
ruin.
During that decade, Japanese motorcycles, known for their reliability
and lower prices, took over the heavyweight market and left the leaky
and temperamental Harleys in their dust, a relic of biker glory past.
Even Harley's cachet would not have been enough to save the day if 13
Harley executives had not bought the motorcycle maker from A.M.F. in 1981 and turned the
company around on quality.
"Quality became our method of survival," said Ken Sutton, vice president and general
manager of Harley's engine plant in Milwaukee.
Indeed, quality has driven the Harley turnaround story more than any
other factor. By re-engineering its production process, redesigning its
engines and instituting a raft of Japanese-style manufacturing and
quality-control methods, Harley coupled its survivor's mentality with
an aggressive revitalization of its brand.
After the 1981 buyout, Harley instituted a policy of building bikes strictly on advance orders
from dealers, rather than anticipated market demand. Every motorcycle has a dealer invoice
number on it before it leaves the
factory. This policy, followed later with such tremendous success in the personal computer
market, allowed Harley to do away with vast stocks of parts awaiting assembly by adopting
the Japanese just-in-time methodology. A continuous flow of quality parts into Harley's
factories not only reduces money tied up in inventory but drives quality throughout the
manufacturing process.
Harley employees take 80 hours of courses each year in such subjects
as statistical process control, learning techniques to enhance quality
and productivity. Harley has also instituted self-directed work teams
throughout the company, from line workers to senior management.
And a continuous open dialogue with management is not only
encouraged but rewarded.
"When we invite the president to our meetings, he comes," Mr. Sutton said. "People openly
ask for better tools, processes and systems to allow them to make better products."
Harley's salaried staff, for example, receives bonuses not only for financial performance but
for warranty performance. The fewer bikes that are returned, the better the bonuses.
Reprint No. 97403

Harley Davidsons Strategy According to Porters Generic Strategies: Harley


Davidsons has a Focus - Differentiation Strategy: differentiate within just one or a small
number of target segments Cost Advantage Differentiation Focus 4
5. Focus Strategy Basically, we do not believe in the lightweight market. We believe that
motorcycles are sports vehicles, not transportation vehicles. Even if a man says he
bought a motorcycle for transportation, its generally for leisure time use. The lightweight
motorcycle is only supplemental. - William Davidson, President of Harley-Davidson 5
Cost Advantage Differentiation Focus Focus on Heavyweight market with customers
who consider their motorcycle a luxury product
6. Differentiation Strategy Differentiation based on customers social and psychologial
needs Harley-Davidson is in the business of selling lifestyle, not transportation Internal
and external product integrity critical factor in such differentiation: Ability of
employees and customers to identify with one another E.g management wearing biking
leathers 6
7. Cont. Differentiation advantage by careful examination of activities customers
undertake: Creating customer value by providing: Test ride facilities Owners club
activities Various sponsored events for Harley riders Information gathering(e.g.
price,fuelprice) DealerNetwork visit Selecting Purchasing Customization Maintaining
Customer Value Chain 7
8. Strategic Importance RelativeStrength SUPERFLUOUS STRENGTH KEY
STRENGTHS ZONE OF IRRELEVANCE KEY WEAKNESSES HARLEY-DAVIDSONS
RESOURCES AND CAPABILITIES Brand & Customer Loyalty Distribution MAN
(Material As Needed) Customized Design Manufacturing R&D Product
Development International Exposure Public Relationship Resources and Capabilities 8
9. BRAND & CUSTOMER LOYALTY greatest asset Harley Davidson had long
recognized that it was not selling motorcycles it was selling the Harley Experience.
Brand of one of the worlds oldest motorcycle companies Appeal of the Harley Brand associated with an entire lifestyle - Riders emotional attachement to the brand 1983
Harley Owners Group (HOG) To increase involvement of customers riding experience
Played a critical role in building brand image and customer loyalty 9
10. DISTRIBUTION Harley believed that the quality and effectiveness of its dealer
network was a key determinant of the strong demand for its products. Dealership
Network: 85% of Harley dealerships in the U.S. Far more than any other motorcycle
manufacturer High standard of pre- and after- sales service New services to customers:
Test ride facilities, rider instruction classes, motorcycle rental 10
11. MAN (MATERIAL AS NEEDED) MAN (Materials as Needed): Just-in-time (JIT)
system and production scheduling program Reduce inventories & costs Improve
quality control Productivity gain from reorganizing around team- based production and
commitment to continuous improvement Cost Advantage 11 However, difficulties to
satisfy the surging demand for its products
12. Wide range of customization opportunities Mutliple options for: Seats bars Pegs
Controls Paint jobs Range of 7000 accessoires CUSTOMIZED DESIGN Every
Harley rider would own a unique, personalized motorcycle Competitive Product Strategy
12
13. Strategic Importance RelativeStrength SUPERFLUOUS STRENGTH KEY
STRENGTHS ZONE OF IRRELEVANCE KEY WEAKNESSES HONDAS RESOURCES
AND CAPABILITIES Product Diversification (R&D) International Exposure
Manufacturing Product Development Public Relationship 13
14. Ability to share R&D across cars and bikes Benefit from sharing technology,
engineering capabilities, marketing and distribution know-how across different vehicle
devisions PRODUCT DIVERSIFICATION - automobiles, motorcycles, power equipment,
robots, aircrafts etc. 14
15. PRODUCT DEVELOPMENT Honda offering V-twin cruisers styles closely along the
lines of classic Harleys At a lower price With more advanced technologies Harleys

smaller corporate size and inability to share R&D across cars and bikes (unlike Honda)
limited its ability to invest in technology and new products. 15
16. MANUFACTURING HARLEY-DAVIDSON Low production volume relative to HONDA
Significant scale & cost disadvantage Key cost disadvantage: purchasing components
HARLEY lacked the buying power of HONDA 16
17. INTERNATIONAL EXPOSURE Honda attracting younger customers International
Market Share European motorcycle market differed significantly from the American
market differences in style preferences 17 Harley needed to fight to take market share
from the established leaders in the heavy bike segment in Europe (like Honda)
18. Establishing Competitive Advantage Harley-Davidson lacks in their resources and
capabilities to have cost advantage over Honda low economies of scale and learning
curve due to low production Differentiation advantage is obtained through brand
recognition and the Harley experience providing the customers a unique motorcycle
However, Harleys international exposure as a key weakness demonstrates the inefficient
sales in order to sustain their other resources such as R&D and product diversification 18
19. Harley-Davidsons Threats Threats faced by Harley-Davidson creating a barrier to
sustain competitive advantage: 1. Brand Recognition 2. Customers 3. International
Exposure 4. Intellectual Property 5. Lack of Diversification 19
20. 1. Brand Recognition Everyone lost interest in the brand as HOG didnt feel like an
exclusive club for loyal customers anymore. Anthony Gikas, senior research analyst at
Piper Jaffray Increase in demand and sales led to loss of exclusivity Losing appeal
loss of their strongest asset Risk of changing consumer preferences (increasing interest
in sport models) 20
21. 2. Customers Harley-Davidson highly focused on American traditional style for
higher-class customers In 1987, 50% of buyers are under 35 and now less than 15%
Generation threat Current customers are ageing More focus on younger middle-class
customers To grow and thrive, they must create a deep emotional connection with
younger consumers. Gregory Carpenter, a marketing professor at the Kellogg School
of Management at Northwestern 21
22. 3. International Exposure EU and Asia prefer lightweight, high technology, sportive
and low-priced motorcycles Falling back on innovation and technology High cost due to
low production high prices for above average profit Acquired Buell in order to gain
market share outside America tried offering same experience as Harley- Davidson
Unsuccessful Low market-share in Europe and Asia 22
23. 4. Intellectual Property Company # Patents Level of Secured Innovation HarleyDavidson 90 Very Low Honda 3971 Very High Yamaha 2057 High Kawasaki 502 Medium
Suzuki 247 Low Offering average or similar product price will play the final role
Company Average Retail Price ($) Harley-Davidson 14.549 Honda 10.565 Suzuki 10.765
Kawasaki 9.299 Yamaha 9.340 23
24. 5. Lack of Diversification Portfolio consisted mainly Cruiser Motorcycles However,
competitors imitated Harley-Davidson loss of competitive advantage Touring
Motorcycles not up to customers requirements low on technology No market of
Performance Motorcycles most demanded by consumers Harley-Davidson maintains on
a vision of traditional heavyweight motorcycles lowers the potential of diversification 24
25. Sustain & Enhance Competitive Advantage Grant (2010) identified that superior
Economic and Financial performance is viewed as evidence of competitive advantage: As
identified, Harley-Davidson falls behind its competitors and therefore needs to sustain and
enhance its competitive position In 2008 Harley-Davidson Honda Income after tax $655
million $5,135 million Operating Cash Flow -$685 million $11,382 million R&D
Expenditure $164 million $5,703 million Return On Equity 19.50% 11.19% 25
26. Measuring sustainability: VRIO Framework Valuable? Rare? Costly to imitate?
Exploited by organizations? Competitive implications No No No No Disadvantage Yes No
No No Parity Yes Yes No No Temporary Advantage Yes Yes Yes Yes Sustained
advantage Harley Davidson Temporary Advantage However: Brand is losing perceived
customer value Faces threat of losing exclusivity Not costly to imitate 26

27. Cont. According to Grant (2010), sustainability can be achieved through price-based
strategies, differentiation, and lock in. 1. Price-based strategy 2. Differentiation 3. Lock-in
Accept reduced margin Create difficulties for imitation Achieve size/market dominance
Win a price war Achieve imperfect mobility of resources/competencies First-mover
advantage Reduce costs Reduce margin Reinforcement Focus on specific segments
Rigorous enforcement 27
28. 1. Price-based strategies Harley-Davidson? Potential cost reduction throughout
value chain Improvement in price transparency Increase of sales in European and
Asian market leading to economies of scale Increase production volume to lower cost
per unit 28
29. 2. Differentiation Strategy Harley-Davidson? Roberts (1999): Sustainable
advantage comes from innovation, pure and simple. Separate department for R&D
in order to realize and obtain consumer preferences Sustain intellectual property make
imitation difficult 29
30. 3. Lock-in Harley-Davidson? Sustain dominance in American market Aim to
achieve higher market share in Europe and Asia through lightweight motorcycles
Economies of scale through price-based strategy Reinforce intellectual property rights
such as more patents difficult to imitate 30
31. Conclusion Harley-Davidson remains to be among the market leaders in America
Many threats regarding losing competitive advantage Trends of heavyweight is going
down Temporary advantage needs to be retained with proactive strategies International
exposure is essential as it will open many new sources of cash flow for the company 31