The History of Harley Davidson Company - Case Study Example

Harley-Davidson Harley-Davidson is indeed one of the few American icons which has stood the test of time.We can include Coca-Cola, McDonald’s and just a few other names in a list of companies that are distinctively American, have deep connections to the American culture and are even seen as representatives of what America is about (Leffingwell, 2003). In fact, the name Harley itself has become synonymous with heavy motorbikes as much as the name Coke has become with a fizzy soda drink. The story of Harley-Davidson therefore, is important to any student of management, sociology and even cultural studies. As described by Holmstrom (2004) the story extends for more than a hundred years therefore knowing the history becomes important. This history gives Harley an advantage not only in terms of having an established brand but also in terms of being a long standing company which has stood the test of time. The company found its roots in 1901 when William Harley made plans for a small engine that was supposed to be attached to a bicycle. He and his friend, Arthur Davidson worked on creating and improving their motorbike which was ready for the race track by 1904. In 1905, Harley-Davidson had started making motorcycles on a small scale and started selling them as well. In their first year they sold nearly forty motorbikes and had enough capital to start their company in earnest. In 1906, the company’s first factory was established and to this day, that place remains the company’s corporate headquarters. Production levels started to increase as orders started coming in with small advertisements that had been placed in special interest magazines and trade journals (Leffingwell, 2003). When Harley had graduated from college in 1907, he expanded the factory which allowed for the production of 150 bikes in that year. The company also become incorporated and thus had the ability to start supplying bikes to police departments around the region (Leffingwell, 2003). The relationship which Harley had with police departments still continues to this day as Harley is the majority supplier for many police bikes that are seen on the streets of America (Stermer, 2007). In those times as they are now, the bikes were fast as well as agile enough to chase down cars on the highways. Undoubtedly, the competition was stiff since other smaller manufacturers were competing with Harley but with time and effort, Harley was able to outpace them all (Leffingwell, 2003). By 1911, Harley had not only improved its manufacturing systems, it also managed to make improvements to the engines it was using since it was able to coax greater amounts of power output from smaller engines. These advances allowed the company to race ahead of the pack and win race after race getting appreciation from buyers and the acknowledgement of enthusiasts. By the time the First World War started, Harley-Davidson was making more than 15,000 motorbikes per year (Stermer, 2007). While America entered the war at a much later stage, when it did the military demanded motorbikes from the company and Harley was more than happy to oblige them. The American forces were supplied with more than 20,000 units for use during World War One and this too established their links with the military. In fact, the sales of Harley-Davidson were so impressive and the product so well received that in 1920, the company had become the largest motorbike supplier in the world. It was being sold by dealers in more than 67 countries and the bikes produced by the company were breaking race records (Leffingwell, 2003). The company met its first real challenge in the industry when the great depression struck America in particular and the global economic system in general. Sales took a nose dive and from selling over 21,000 unts in 1929, the numbers stood at less than 4,000 units per year in 1933. To keep floating, the company had to diversify into other industrial products and managed to keep its head above the water. After the depression, the company was able to introduce new models which were successful for a world coming out of an age of being frugal to an age which celebrated success (Davidson, 2002). Reid (1990) reports that Harley was one of the few great American companies to survive the Great Depression and found its place in American history with the coming of world war two as it produced a large number of motorcycles for the American army. Production of models for civilian consumption stopped during the war years as all available production was down for the allied armies. Nearly a hundred thousand bikes were supplied by Harley-Davidson to the allied armies particularly to the American and Canadian military. While the Jeep remains the vehicle the army was most associated with during the Second World War, the Harley performed admirably in its escort and courier duties. After the war, Harley acquired the designs of a few German models and these were used to build a large number of bikes for the civilian market. These models were used on racetracks as well as for the purposes of private transport and Harley seemed to have found its place as an American icon in terms of motorbikes. However, tougher times were right around the corner as the image of the company as well as the product it was making came under threat as rebellious and law breaking (Leffingwell, 2003). The first threat to the image of the company came from the charges which were made against the company for seeking monopoly powers and being restrictive towards competition. The image of the product itself was tarnished as Harley-Davidson became closely associated with bike gangs, hells angels and other outlaw groups. This association was quickly picked up by Hollywood and remained in place till the 1970s as many films were produced with the product being shown associated with negative characters. The company itself was bought by the American Machinery and Foundry group which wanted to make the company a lot leaner than it was. Instead of focusing on brining change in a positive manner, the group strong-armed the close knit production setup by trying to optimize production while reducing the workforce drastically. This resulted in a backlash as workers went on strike and the output quality plummeted. The bikes produced became very low in quality while prices remained high. Even loyal buyers were turned off by what the company was producing and abandoned the brand (Teerlink and Ozley, 2000). The company returned to the ownership of the original families which founded it in 1981 as a group of investors headed by Willie Davidson bought the firm. Davidson began restructuring the company and organizing it on new lines as well as new management systems to improve the quality while reducing costs. Inventory management was done using the JIT system and the company was also able to get the US Trade Commission to impose a tariff on imported bikes that were competing with Harley-Davidson (Teerlink and Ozley, 2000). The recovery process for Harely-Davidson’s production used tools which were borrowed from the Japanese themselves. The manufacturing team introduced three new techniques which were taken from Japan and the first of which was to involve employees more deeply in the production process to gain their inputs and insights into optimizing the process. Further, the company used the JIT system and renamed it Materials As Needed. Additionally, the statistical process controls for improving quality were renamed to be Statistical Operator Control i.e. SOC. This three pronged approach based on Japanese techniques remains important to the company even to this day (Teerlink and Ozley, 2000). Instead of trying to emulate the sleek looks of Japanese competitors, Harley went a totally different route and focused on its retro styling which was later seen as an excellent decision since that approach became quite successful (Reid, 1990). The simple reason for the troubles facing the company was that, “Harley, beset by a high cost struction and poor quality, couldn’t fight off its Japanese competitors on its own (Teerlink and Ozley, 2000, Pg. 2)”. Not only was the company struggling, but the industry as a whole had to face competition from Japan which was simply too much for American manufacturers and motorbike producers to handle. In fact, the company was fighting for its very survival since the financial figures in 1982 were quite disastrous. The company barely had 15% of the market share, and only managed to ship 32,400 units around the world. The revenues generated from the sales of the units totaled $210 million while the operating expenses were high enough to show that the company was running at a loss of $15.5 million. The employee strength of the company was more than 2,200 of which many were redundant employees. To control this bleed, Harley had to get rid of almost half of its workforce of which salaried employees formed the majority as compared to the hourly workers (Teerlink and Ozley, 2000). These events were described by Teerlink and Ozley (2000) who discuss the early 80s by saying that that: “Harley’s precipitous decline in market share reached such alarming, nosedive proportions - nearly 80% of the 850cc+ category in 1973 to a meager 23% in 1983 – that the Reagan administration extended tariff protection to the struggling domestic motorcycle industry (Teerlink and Ozley, 2000, Pg. 2)”. Teerlink and Ozley (2000) were both managers at the company and have stated that the hierarchical systems as well as the resistance to change were the two primary issues which were keeping Harley-Davidson from being the success that it could be. However, the authors also note that, “In our experience, meaningful and positive change comes slowly (Teerlink and Ozley, 2000, Pg. 2)” and this was certainly the case for Harley-Davisdon as it took almost a decade for the company to recapture its lost glory. The company did not need new ideas to get back on its feet. It only needed the right application of the established paradigms of management and organizational structuring to come back to profitability and become accepted internationally as a quality producer. Of course the leadership of the company has to be credited as well since the managers of the company and the persons leading the organization were able to bring it back from the brink of disaster. Teerlink and Ozley (2000) note that Harley as a company had created its own definition of leadership which focused on a leader’s ability to bring the company back from difficult times and take it towards a more stable state. Further, the leaders at Harley were able to anticipate the changes which were coming to the market and could react to them before the competition could utilize the same to get a competitive advantage. Beyond recognizing the possibilities that could be exploited in a given market situation, leaders at Harley also managed to impose their vision and their solutions on a company which was very resistant to change (Teerlink and Ozley, 2000). Using these tools by the 90s, the company was outsourcing many of the different components that went into making the bikes in the first place but it also maintained an image of being American and representing the American ideals of freedom and liberty. Outsourcing the parts of the bikes also led the company to save a lot of money while keeping quality high with the use of technical innovations and improvements in the type of materials it uses (Teerlink and Ozley, 2000). In fact, the American made image which Harley takes as a part of its creed is largely a fabrication since the bike is more or less only assembled in America while the vast majority of the parts are shipped in from factories around the world. This cannot be taken as fooling the customer since Harley has been given and has made an American image with time and effort. Just because it engages in good as well as successful business practices of getting the best value for the parts it needs from anywhere in the world does not make it un-American. In fact, if anything their ingenuity is entirely American in nature as are their management practices which have led them towards diversification of their product lines and co-branding with other companies. For example, Harley-Davidson co-branded trucks are sold by Ford while other merchandise bearing the logo is quite popular amongst those who are fans of the company (Leffingwell, 2003). In recent times, Harley is seen as a mature company with a stable demand that has made it quite profitable. While the demand for motorbikes today is not at the level it used to be in the late 90s, there is still a lot of interest in bikes for the local and international markets. In early 2000, Harley went on an ambitious plan to expand the number of dealerships it had in the country in a market where there was a waiting list for up to a year to get a bike from Harley. It also faced some legal troubles in 2004 when the CEO, Jeffery Bleustein came under fire for charges of stock price manipulation. However, the company managed to get over its legal issues and came back to the market in force (Stermer, 2007). Of course, a lot of the credit which goes to bringing Harley back to the forefront of the American road goes to the design and the look of the Harley-Davidson vehicles. In fact, it was the product itself which saved the company in the early 80s as discussed by Teerlink and Ozley (2000) who say that: “Harley introduced the Evolution engine for model year 1984. This engine – combined with the exciting new softail product line – quickly began making money for the cash strapped company. The Softail was an elegant variation on the classic Harley look, and it stormed the marketplace (Teerlink and Ozley, 2000, Pg. 10)”. This situation of Harley can easily be compared to what Apple did for the computer industry with the use of design as a selling point rather than performance alone. With computer such as the iMac and consumer electronics such as the iPod, Aplle Inc. managed to make a comeback and be as successful as it used to be in the past. As described by Teerlink and Ozley (2000), good products make for easy marketing and Harley certainly marketed their products far and wide to give them acceptability instead of notoriety. To conclude, while the success of the company certainly connects deeply with the management, the leadership and the product itself, it cannot be denied that the legions of Harley-Davidson fans out in the world also help it be a success. Much as other companies which ignite passion in people, such as Apple, Harley-Davidson has fan boys and supporters who will gladly ride thousands of miles to come to the birthplace of Harley-Davidson in order to pay it their respects and give it the homage it deserves. Word Count: 2,558 Works Cited Davidson, W. 2002, 100 Years of Harley Davidson, Bulfinch. Holmstrom, D. 2004, The Harley-Davidson Century, Motorbooks. Leffingwell, R. 2003, Harley-Davidson History & Mystique, Crestline. Reid, P. 1990, Well Made in America: Lesson From Harley-Davidson on Being the Best, McGraw-Hill. Stermer, B. 2007, Harley-Davidson Motorcycles: Everything You Need to Know, Motorbooks. Teerlink, R. and Ozley, L. 2000, More Than a Motorcycle: The Leadership Journey at Harley-Davidson, Harvard Business School Read More