Harvard Case - Harley-Davidson 2018: Trump, Tariffs and the Future
"Harley-Davidson 2018: Trump, Tariffs and the Future" Harvard business case study is written by Jonas Gamso, Michael Moffett. It deals with the challenges in the field of International Business. The case study is 11 page(s) long and it was first published on : Aug 1, 2019
At Fern Fort University, we recommend that Harley-Davidson pursue a multi-pronged strategy focused on globalization and innovation, while strategically managing its international business operations. This strategy should prioritize emerging markets, product diversification, and strategic alliances to mitigate the impact of tariffs and ensure long-term sustainability.
2. Background
Harley-Davidson, a renowned American motorcycle manufacturer, faced a significant challenge in 2018 due to the imposition of tariffs on its motorcycles by the European Union. These tariffs were a retaliatory measure against US tariffs on European goods, creating a complex geopolitical situation that impacted Harley-Davidson's international trade and global market entry strategies. This case study examines the company's response to this crisis and explores potential solutions for its future.
The main protagonists of the case are:
- Harley-Davidson: The iconic American motorcycle manufacturer facing a critical juncture in its global expansion.
- Donald Trump: The US President who initiated trade wars with several countries, including the EU, impacting Harley-Davidson's operations.
- European Union: The retaliatory tariffs imposed by the EU on Harley-Davidson motorcycles significantly impacted the company's international business.
3. Analysis of the Case Study
Harley-Davidson's situation can be analyzed using the Porter's Five Forces framework:
- Threat of new entrants: The motorcycle industry has a relatively high barrier to entry due to significant capital investment, manufacturing expertise, and brand recognition. However, emerging electric motorcycle manufacturers pose a potential threat.
- Bargaining power of buyers: Buyers have moderate bargaining power, with limited choices in the premium motorcycle segment. However, the increasing popularity of electric motorcycles could shift the power balance.
- Bargaining power of suppliers: Harley-Davidson relies on a diverse supply chain with moderate supplier bargaining power. However, potential disruptions due to geopolitical tensions and tariffs could impact its operations.
- Threat of substitute products: Electric motorcycles and other forms of personal transportation, such as scooters and cars, pose a growing threat to Harley-Davidson's market share.
- Competitive rivalry: The motorcycle industry is characterized by intense competition, particularly in the premium segment where Harley-Davidson operates.
This analysis highlights the need for Harley-Davidson to adapt its competitive strategy to address these threats.
4. Recommendations
Harley-Davidson should implement the following recommendations:
- Diversify Production: Shift production to countries outside the EU, leveraging foreign direct investment (FDI) in emerging markets like India and Southeast Asia. This will reduce reliance on European manufacturing and mitigate the impact of tariffs.
- Develop New Products: Invest in research and development to create new motorcycle models, including electric motorcycles, to cater to evolving customer preferences and diversify its product portfolio.
- Strategic Alliances: Form strategic alliances with manufacturers in emerging markets to access local expertise, distribution networks, and manufacturing capabilities. This will facilitate global market entry and enhance its global supply chain management.
- Focus on Emerging Markets: Target growth in emerging markets with strong motorcycle demand, such as India, China, and Southeast Asia. This will diversify its revenue stream and reduce dependence on mature markets like the EU.
- Enhance Brand Management: Strengthen its brand identity through global marketing campaigns that emphasize its heritage, craftsmanship, and riding experience. This will solidify its position as a premium motorcycle brand, even in the face of competition.
- Engage with Governments: Proactively engage with governments to advocate for favorable trade policies and address concerns related to tariffs. This will require strong business and government relations and effective international relations management.
5. Basis of Recommendations
These recommendations consider the following factors:
- Core competencies and consistency with mission: The recommendations align with Harley-Davidson's core competencies in motorcycle manufacturing, brand building, and customer experience. They also support its mission of providing a unique riding experience and fostering a strong community of riders.
- External customers and internal clients: The recommendations address the needs of both external customers seeking premium motorcycles and internal clients, such as employees and investors, seeking long-term growth and sustainability.
- Competitors: The recommendations aim to position Harley-Davidson competitively by diversifying its product portfolio, expanding its global reach, and strengthening its brand image.
- Attractiveness: The recommendations are expected to generate positive returns on investment through increased sales, market share, and brand value.
- Assumptions: The recommendations assume that Harley-Davidson can successfully navigate the challenges of international business, including cultural differences, regulatory environments, and exchange rate fluctuations.
6. Conclusion
Harley-Davidson faces a challenging environment marked by trade wars, geopolitical uncertainty, and evolving consumer preferences. However, by embracing globalization, innovation, and strategic partnerships, the company can overcome these challenges and secure its future. By diversifying its production, expanding into emerging markets, and developing new products, Harley-Davidson can maintain its position as a leading motorcycle manufacturer and continue to inspire generations of riders.
7. Discussion
Other alternatives not selected include:
- Relocating production to the US: This option would be costly and could lead to higher production costs, making Harley-Davidson less competitive in the global market.
- Focusing solely on the US market: This option would limit growth potential and make the company vulnerable to economic downturns in the US.
- Ignoring the tariff issue: This option would leave Harley-Davidson exposed to significant financial losses and reputational damage.
The recommendations are based on the assumption that Harley-Davidson can successfully implement its strategy and navigate the complexities of international business. Key risks include:
- Geopolitical instability: Continued trade wars and protectionist policies could further disrupt Harley-Davidson's global operations.
- Economic downturn: A global economic downturn could reduce demand for motorcycles, impacting sales and profitability.
- Competition: Increasing competition from electric motorcycle manufacturers and other forms of personal transportation could erode Harley-Davidson's market share.
8. Next Steps
Harley-Davidson should implement the following steps to execute its strategy:
- Phase 1 (Short-term): Within the next 12 months, identify and secure new manufacturing facilities in emerging markets, establish strategic alliances, and initiate product diversification efforts.
- Phase 2 (Medium-term): Over the next 3-5 years, expand production capacity in emerging markets, launch new product lines, and strengthen brand presence in key growth markets.
- Phase 3 (Long-term): Over the next 5-10 years, establish a robust global supply chain, develop a comprehensive global marketing strategy, and continuously innovate to maintain a competitive edge.
By taking these steps, Harley-Davidson can navigate the challenges of the current environment and emerge as a stronger and more sustainable global brand.
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Case Description
In June 2018 Harley-Davidson Inc. (NYSE: HOG), the iconic American manufacturer of motorcycles-hogs as they were affectionately referred to - announced that it would shift some United States-based production to a foreign country. Harley explained it had little choice if it was to remain competitive in foreign markets, specifically, Europe. The EU (EU) had the previous month announced an increase in the import duty imposed on Harley-Davidson motorcycle manufactured in the U.S. in retaliation to President Donald Trump's imposition of increased tariffs on European steel and aluminum. But Harley's problems went much deeper than simply European import duties. Harley was suffering from a decade-long slump in sales and profitability. Would shifting production out of the U.S. be the appropriate solution?
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