Factors Affecting Global Economy - Case Study Example

? Strategic Business Plan-Harley-Davidson Table of Contents Table of Contents 2 Executive Summary 4 Introduction 4 Factors Affecting Global Economy 4Global Expansion Strategy 4 Motivating Factors 5 Risk Factors 6 Entry Strategies for Global Expansion 6 Competitive Advantages 8 Internet Marketing Strategy 8 Internet adds value 8 Internet Business Models 8 Competitive Internet Strategy Leveraging Business Capabilities 9 Corporate Leadership 10 Direction Setting 10 Organizational Design 11 Organizational Culture 11 Ethical Organization Characteristics 12 Leadership Traits 12 Organization Characteristics 12 Strategic Plan Summary 13 Conclusion and Recommendation 13 References 13 Executive Summary Harley Davidson, often called as H-D, is an America based motorcycle manufacturer. The head quarter of the company is based in Milwaukee, Wisconsin. The company was established in 1903 by Arthur Davidson, William S. Harley, William Davidson and Walter Davidson. In December, 2011 the company had 6,000 employees and total revenue was US$5.31 billion. The assignment will study the different aspects relating to the company under consideration that includes the factors affecting the global economy, corporate leadership and a summary of the strategic issues. Introduction The company under consideration provides over thirty models of customized product (motor bikes) through a worldwide network of over 1000 dealers. The main competitors of the H-D are BMW, Suzuki, Yamaha and Honda. The study looks to analyze the key motivating factors that have led to the global expansion of Harley Davidson, competitive advantage of H-D in global market, international market entry strategy and the digital marketing strategy of the company. Study also focuses on the overall organizational design, structure, culture and leadership traits of the company (Cowan, 2005, p.131). Factors Affecting Global Economy Global Expansion Strategy Global Marketing can be defined as the process by which a company looks to target the international customers by delivering high quality products to the foreign consumers. It is understandable that compared to domestic marketing global marketing there is much more complex, and risks are associated as the company has to deal with various political, social, economical and cultural issues. However, with great risks come great rewards (Henry, 2008. P. 251). Motivating Factors North America is the largest market for motorcycles. It includes USA and Canada. This market accounts for almost 60% of the sales. H-D is the industry leader in domestic market. However, over the last few years things began to take shape. The baby-boomer generation in North America started to get old. This happened to be premier target market segment of H-D. Therefore, the company decided to enter the markets of Europe and Asia. After America, Europe was supposed to be the most prospective market for H-D due to the high level of disposable income. However, things did not go very smoothly in the year 2008; Europe and U.S. in particular were badly hit by the recession. As a result there has been a change in the consumer behavior and dip in the purchasing power of the people. Hence the company decided to shift focus to the virgin yet perspective Asian markets. This included China, India, Taiwan and Korea. Among these, India and China are two of the most emerging economies in the world. Since 2007, China has become the largest automotive industry. The company looks to succeed in the foreign markets through effective marketing approach, efficient distribution network, robust after sales service. Add to this, the company also needs to understand the demand of the local consumers and satisfy the global standards (Brown, 2009, p. 351). Risk Factors Considering the modern scenario, one of the biggest risk factors in case of global expansion is going to be the economic factor. The global economy is still looking to get over the downturn since 2008. This has reduced the purchasing power of the consumers, especially in Europe. Other major factors the new costly environmental regulations have been laid by various governments round the globe to reduce carbon footprint. In the Eastern market the company will most definitely face steep competition from Honda, Yamaha, Suzuki, and Kawasaki. These companies have made strong presence in the market through high degree of brand awareness and strong distribution network. Also, the price of the H-D bike may be a risk factor. H-D is a very famous global brand and loved by the people all over of the world due to the cult figure of the product. However, people in the Eastern markets may not have enough disposable income to buy the bikes. Also, in a country like India people perceive motor cycle as a vehicle to be used for daily traveling. The youth however, treats them as a style statement. But still the youth prefers the sports bikes produced by Honda or Kawasaki as compared heavy metal figure of Harley (Kotler, 231). Entry Strategies for Global Expansion Global market entry strategy is probably the most important factor in global marketing. While developing the international market entry strategy a company has to keep various factors in mind. This includes the political factors, economic factors, social values, presence of competitors, etc. Some of the most probable modes of market entry are exporting, strategic alliances, joint venture, franchising, licensing, etc. However, Harley Davidson chooses to work on a completely different route. Let us consider the entry of H-D in India in the year 2009 and setting up of a manufacturing unit in Haryana. Figure 1: Matthew Levatich (left) COO and president with Anoop Prakash, Managing Director, Harley-Davidson India. Recently during an interview Mr. Anoop Prakash said that Harley will continue operating through the CKD or completely knocked down model. CKD model is one of the most widely used market entry strategy used in the automobile sector. In case of CKD, model disassembled items are brought into the targeted country and assembled into end product. This is how Harley operates in India. When asked about the difference in the distribution model used in India as compared to other countries, Mr. Prakash said that the market entry strategy of Harley was common for all markets across the world. Mr. Prakash added that the next focus of the company would be looking to appoint dealers in various cities of the country to develop a strong distribution network. Here it needs to be added that since the arrival in India Harley has sold round about 2000 bikes. The company is selling 13 models and the price of the models ranges up to 5 lakh. Competitive Advantages Globalization would lead to the increase in the number of units produced and hence it would decrease per unit production cost and help the company to gain economies of scale. JIT inventory, TQM, CAD/Cam system as well as the flat team based management would help H-D to achieve effective business process design. The growth of premium motorcycle brands in the Asian countries will also provide competitive advantage to the company. Also, the investments made by the country in product development will act as competitive strategy. Internet Marketing Strategy Internet adds value Internet has become the most popular medium to search information. Customers use internet to look for products and also buy them. If there is a business, there must be a website as it is considered as the face of the business. The rise of social media has made internet marketing an even more potent weapon. With the help of internet marketing companies can build awareness, create engagement, sell the products and build long term relationships. Most importantly, it is much cheaper than traditional marketing mediums. Internet Business Models There are three main internet marketing models. It includes selling own product, developing niche websites and affiliate marketing. Among these, major firms mostly use a model by which the company can sell own product to the customers. Harley is not an exception in this case. This is coupled with the social media presence (Zarrela, 2010, p. 311). Competitive Internet Strategy Leveraging Business Capabilities Digital marketing is all about building relationships. Many markets actually feel that once the company builds a brand, the community will follow. Harley is different as it feels that a community will actually promote the brand. Making relationships is a part of H-D marketing strategy even before the internet was around. Social media and the World Wide Web have been extension of the marketing strategy. Harley has used internet to acquire female buyers. Women are an integral part of the Harley Davidson culture, but more as a passenger not rider. Harley has used the digital medium to cater to the won audience also. Harley also has used the social media like Facebook to promote the products and build community relationships with the customers. Corporate Leadership Direction Setting Excellent corporate governance has always been an important and long lasting corporate direction setting for the company. Company believes that the motor cycling business is a lot of fun but corporate governance is something that needs to be taken seriously. The board of directors consists of leaders across various industries. The members meet regularly to review the future growth plan and the company objective (Dey, 2011, p. 129). Organizational Design Organizational Culture It is often heard that H-D products carry a ‘Cult of Personality’ Image. The same can be said about the company culture. H-D has a real cult atmosphere. The H-D culture provides opportunity to the employees for continuous growth and development. H-D treats the employees as a long term asset and respects the role of the human resource in gaining competitive advantage. The company culture reflects the company values and promotes self development and leadership development. For Harley Davidson, the corporate culture is just as strong as the iron and steel that is used to develop the bikes. Ethical Organization Characteristics Ethics is an integral part of the overall H-D organizational culture. The ethical values guide the actions and serve the structure for the contributions and decisions of the employees irrespective of the organizational hierarchy. The company values reflect the ethical business practices of the company as it says tell the truth, be fair, keep the promises, respect the people and encourage curiosity. Leadership Traits When it comes to leadership, Harley Davidson has seen a paradigm of shift. In the initial days, the company was to rely on the command and control management. The command and control leadership was quite successful during the 1980’s. But the management wanted to achieve continuous improvement. Therefore, under the leadership of former CEO Rich Teerlink the company started to sway from command and control management towards self directional non-hierarchical leadership style to create employee engagement. Organization Characteristics Among many of them one of the key characteristics of the company is the desire to achieve continuous improvement. The company never seems to satisfy with the status quo. The company feels that in order to achieve continuous improvement there must be extensive employee involvements. That is the reason the company swayed away from the control management towards self directional non-hierarchical leadership style. This included extensive team building exercises. In 1995 over 2000 employees went through training to embrace the new organizational culture. Top management involvement and employee participation is one of the most important characteristics of the company. Strategic Plan Summary Conclusion and Recommendation To conclude, it is to be said that the H-D is the largest motorcycle brand in US and one of the major brands in the world. The company has been able to achieve such tremendous growth due to the drive to achieve continuous improvement. The integrated marketing strategy and the overall HR strategy of the company have made it one of the most famous brands in the world. However, the next biggest challenge for the company would be to achieve success in the international market, especially the Asian countries like India and China as they happen to be one of the most emerging economies. In order to be successful in the international market, the company may have to reduce production to adapt to the economic downturn. The company has to focus on pricing and distribution network to be successful in the international market. The present modus operand following the CKD model is likely to be quite successful. However, the company may have to consider the social and cultural values of the people of foreign countries. The company has to find out new strategic means for operation without compromising the brand value and heritage. Maybe, keeping relatively large customer base in mind the company ought to focus on product differentiation strategy to gain competitive advantage. References Brown, L. (2009). Marketing and Distribution Research. Ronald Press Company: US. Cowan, A. (2005). Risk Analysis and Evaluation. Global Professional Publishing: UK. Dey, B. (2011). Strategic Management. Matrix Educare: India. Henry, A. (2008). Understanding Strategic Management. Oxford University Press: UK. Kotler, P. (2001). Marketing Management. Prentice Hall of India Pvt. Ltd: India. Zarrela, D. (2010). The Social Media Marketing Book. O'Reilly Media, Inc: CAN Read More