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Porter’s Five force Model


The Porter’s Five Forces model can be used to analyse the industry in which Harley Davidson
Inc. operates, in terms of attractiveness through inherent profit potential. The information
analysed using the model can be used by strategic planners for Harley Davidson Inc. to make
strategic decisions. The Porters five force analysis of Harley Davidson is as follows:
a) Competitive Rivalry
The level of competitive rivalry for the company is very high. Rivals of Harley Davidson had their
rivalry on product style, design, ease of service, and performance features. The major rivals all
around the world are Honda Motors, Suzuki Motors, Yamaha Motors, BMW Motors, Ducati
Motors, and Kawasaki Motors. The following are the external factors that create the strong
force of competitive rivalry:

 High number of firms


 High availability of substitutes
 Moderate variety of firms
So, Harley Davidson must maintain competitiveness and improve product quality to stay strong
and stand out in this high rate of competition.
b) Bargaining Power of Buyers
The bargaining power of Harley-Davidson’s buyer is high. The following external factors
contribute to the strong bargaining power of customers:

 High availability of substitute products


 High knowledge of customers
 Low switching cost

c) Bargaining Power of Suppliers

The bargaining power of Harley-Davidson’s suppliers is weak. The following external factors
create the weak bargaining power of suppliers:

 Low forward integration


 High stability of supply for suppliers
 Moderate size of number of suppliers.
d) Threat of substitutes

The threat of substitute products against Harley-Davidson’s is moderate. The following external
factors lead to the moderate threat of substitution against Harley-Davidson:

 Moderate switching costs


 Moderate substitute variety
 High substitute availability

e) Threat of New Entrants

The threat of new entrants is moderate. The moderate force of the threat of new entry is based
on the following external factors:

 Moderate economies of scale


 Moderate switching costs
 High cost of brand development

A Five Forces Analysis of Harley-Davidson reveals competitive rivalry and the bargaining power
of customers as the most significant external forces that affect the motorcycle industry
environment. These factors must be among the priorities in Harley-Davidson’s strategies. For
example, Harley-Davidson can increase product development efforts, along with investment in
technological innovation. The external factors in the motorcycle industry environment also
point to the limited but significant effects of the threat of substitution and the threat of new
entrants. Harley-Davidson can address these concerns through strategic alliances, market
penetration, and global expansion.

CONCLUSION
H-D has a strong foundation and a uniquely powerful brand however this was not
enough to allow the company to escape the problems associated with the recent
economic downturn. H-D has to pursue strategies that will enable them to sustain
growth and market share to endure economic hard times and to keep away
competitors. The company has laid down their business strategy quite clearly in their
2009 annual report (See Appendix page 6) and this is an excellent start to do achieving
this.
If the company can turnaround itself around from the verge of bankruptcy in the 1980’s
then with the right tangible and intangible resources, current technology and the
knowledge of past strategies used Harley Davidson can become the leader in the
motorcycle industry internationally.

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