The Leader and HR Factor in Harley Davidson - Case Study Example

Harley Davidson: An Overview One of the best examples of entrepreneurial ventures in the world, or the history of technology and vehicles can be contributed to the establishment of the company dealing with motorcycles – Harley Davidson. Today, this company has been able to ascertain a vast amount of goodwill which speaks more for its success than anything else. Of course, over the years, hard work and sincerity on the part of the founders, William S. Harley and Arthur Davidson have led to instituting such a major share hold of the market as well. The company has seen a lot of ups and downs since it commenced. It has faced a state of near expiration in the form of bankruptcy in the 70s, as well as a soaring growth in the 90s and has been ranked as one of the leading brands in the United States of America. (2002) (2009) The Japanese Invasion The late 1950s saw a crucial time for Harley Davidson because that was the time when the Japanese entered into competition in the market. This meant that Harley Davidson was not the only producer for motorcycles now and had to make certain changes in order to survive. Up till now, the company enjoyed a sort of monopoly over its customers because it could produce motorcycles according to the knowledge that it possessed, as customers were willing to purchase due to being left with no other options as well. This played on the demand-supply situation, pushing the company to continue with its sale of making motorcycles that had very distinguished engines, and were manufactured in a manner that they could be rectified by the customer itself. (Statkenov, Daniel K. 1900-1933.) The Japanese established themselves with Honda over the south Asian markets first, and then spread to the rest of the world in such a way that even in the United States of America, every second person was purchasing a Japanese manufactured motorcycle. Because of this, the sales in Harley Davidson obviously declined because as when compared with companies like Honda, and then emerging Kawasaki, Suzuki and Yamaha, Harley Davidson motorbikes were very costly, could not be afforded by the average consumer, and was not for every kind of bike rider. The Japanese took advantage of all the demerits that the American motorcycle company had, and took hold over it by producing more customer friendly bikes, that could be ridden by most ages, had simple engines, were east to maintain and repair, and most of all, were much lighter and cheaper. As the Japanese slowly took over the markets, at the same time, the profitability and goodwill that Harley Davidson had created for its self began to decline sharply. The company foresaw a great amount of debt and was unable to raise the complete by back price. In order to sustain survival over the market, the only thing that could be done by Harley Davidson was to cut back on the number of bikes manufactured in order to keep their costs at a minimum price. The company was under the leadership and guidance of people like Richard Teerlink and Jeffrey Bluestein as it underwent a complete transformation before it began soaring upwards and towards growth again. These people evaluated the performance of the company against that of not only its past performances but also performance of the Japanese companies and found out where they were going wrong. They critically evaluated the pros and cons that Harley Davidson faced and in accordance to that made the much needed changes within the organization. Transformation The first set of changes that were made within the company in order to stabilize it was in its human resource department. A proper change cycle was what the firm was made to go through as all unnecessary workers and employer positions were eliminated from the company. Having a good hold over the people that work within the company can really make or break its name in the market. Harley Davidson was started by two people and by 1907 had only a single permanent employee working with the founders. However, after the Japanese invasion into the market, Teerlink decided that it was time that alterations were made clearly in the inner workings of the company so that it could win back the repute that it had earned earlier by the public.( Kotha, Suresh & Dutton, John. 1996.) Many acclaimed that the working environment within the company was very hostile, and that is why the company faced a high rate of employee turnover during the time that the sales were also going low. In order to change this, better conditions were set for the employees in a number of ways. One distinct thing that was done was the introduction of proper training programs for employees. According to this, the workers could choose the kind of training and development they wanted to go in for; they were also given extra lessons in the accounting sector of the company as they were explained better about how to make more gains, how to maintain the cash flow statements of the company. The workers in each sector were explained their jobs better, so that they could be motivated in a more efficient manner. (2007) What the company lacked was a proper efficiency and effectiveness and that is what barred and stemmed it from helping it achieve its organizational goal. Efficiency deals with the proper use of resources – both physical and human. Effectiveness aims at the elimination of unnecessary methods in the process of production in order to minimize costs and reduce the amount of wastage of resources taking place to a grand minimum. If these two steps are adhered to, only then can a firm move towards the hope for a better future for itself. Within a period of a decade, the market share of the renowned 850 cc bikes had gone down from 80% to a mere 23% (Teerlink Richard, Ozley, Lee. 2000) leading to a great amount of discouragement among the workers and employees. However, today, after inculcating a vast amount of changes within the management of the human resource sector alone, the company’s turnout is much better and it had regained its stand in the market as well. The key attributes towards achieving a goal required the company to get its perspectives straight. It had to adopt better techniques of planning, organization, directing, staffing as well as establish a proper line of control over the entire management and workings. The best part was that only with the help of the Japanese was the American company able to realize its downfall and it was only a matter of time before it could take corrective measures to reduce the defects and move to a better place. Human Resource Management within the company Due to the stark problem of human resource management, the company faced a bigger problem which led to the loosening of its grasp on the market share. This was the internal problem of not being able to understand the values and objectives of the final goal that had to be reached, by each and every person that worked in it. People had to comprehend the main vision of the company and then join them with their personal objectives so that the common organizational goal could have been achieved. Had I had the opportunity to head the company, the first thing I would have done, was to make people understand that only by having a common goal can each and every person also achieve what they want individually. The main problem associated with this is the hierarchy and functioning of the work structure that built the entire company. Given a chance, I would have changed the hierarchy to a level where a certain number of managers have a grasp over every unit of workers that perform different functions in the process of manufacturing and production. Every manager would have been answerable to a subordinate, and also have a number of workers in turn to delegate work to. This would have created a lot of decentralization within the organization, giving workers the ability to participate in the management to an extent as well and thus by this method, making them feel that they were indeed contributing to the achievement of the final goal. A similar method was finally adopted by the company by way of which it was able to transform the thinking of its workers and make the human task force contribute in a better manner. The principles of management should have been adopted within the workings of this company much before so that it could have seen better results earlier. But better late than never! Figure 1 Harley Davidson Circle Organization (Teerlink Richard, Ozley, Lee. 2000) Creating Consumer Loyalty However, not only is it about the integration of workers and employees within the organization, but every company works better when it also has the support of its customers and consumers. Every brand tries its best to secure a strong foothold within the market scene and thus gain a certain amount of customer loyalty towards itself. Harley Davidson was able to approach this method in a very unique manner as well. The company developed the HOG or Harley Davidson Owner’s Group as well as the Ladies of Harley. These were associations that involved customer participation with a view to spread Harley’s message across the globe. This was a smart move established because of several reasons. Developing such a club made the consumers feel more part of the company and gave them a sense of belonging to it as well. (Hogan, Marc. 2006) This enabled the company to further diversify into products related to the bikes that customers could purchase in the form of jackets and other such merchandise in order to make the consumers believe that buying a Harley Davidson bike was just not a way of buying any other product but was actually a way of life, or improving upon one’s lifestyle. (Reid, 1990) This enabled customers to use their bikes more, especially for races. Slowly with time, those who owned a Harley were able to identify with other people just by this one commonality and created an identity for people as well. This was also a very discreet method of publicity and promoting the product by those who already owned it. Since owning this bike was gradually becoming a statement again, it played on the psychology of potential customers and made them want to own one just to have that level of prestige attached to them. (2000) Thus, proper marketing and an in depth analysis of the market, led the company to this very distinguished marketing strategy that helped it to grow even more. In a time where the internet was not something accessed by most people and televisions were not often used and were expensive, one of the ways by which fast visual advertising could be done was this and was grasped upon very well by the company. This truly was one of its first steps into innovative thinking in terms of creation and implementation of marketing strategies, apart from the innovation that it brought about in its engines and designs of the motorcycles. (Peak, M.H. 1993.) These were the advantages and disadvantages faced by the company on the outside, and with its relations towards people - both consumers and employees of the organization, and how it dealt with the same as well in order to climb the ladder towards success again. (Wilson, Hugo 1993) Willie G. Davidson, the grandson of the founder of the motorcycles was also in charge of keeping the customers loyal towards the brand during the period when it faced its downturn as he kept people informed of all the changes that the company was going through, and all the struggles and hardships that it was being made to face. Inner Workings: Inventory Control One of the main cons or challenges that Harley Davidson had to overcome in order to bring its self back into the market again was the problem related to proper usage or physical resources and raw materials. When it began, there was no hindrance towards the acquiring and using of resources because the company had a monopoly on the market and so did not really look into minimizing its costs as it knew that it had a single customer base. But with the advent of the Japanese companies, it was found that the main demerit of Harley Davidson could be traced back to its bad inventory control and management of raw materials. That is why, it took a look into the methods that were adopted by the Asian companies and tried to improve upon its performance. The first step taken was to reduce the number of units produced per annum in order to stay in the market still, and after that, various techniques were taken up, the most conforming of them, the JIT or Just In Time (1989) Inventory strategy. According to this, it could help to improve the status of the company in terms of getting more returns on the investment it made with regard to the inventory. By going over calculations, the annual carrying costs as well as the cost of raw materials purchased on a yearly basis could be reduced by going over this method. This brought about a lot of cost effectiveness within the firm because of obvious mentioned reasons. According to this, the company also began a certain amount of manufacture on the basis of the number of motorcycles that were ordered for, instead of randomly producing a large amount leading to excess stock. In turn, this also led to a better storage and warehouse plan because the finished products could be transported to the warehouses and other agents in the distribution channel as per the needs and not just without any strict calculation. The company faced a bad hindrance where quality was also concerned. The main attribute of any well known brand, especially something that has a global standing, should be the proper maintenance and looking after of the quality of its products and services. However, Harley Davidson, when it began, didn’t have the need to really go into these matters because of the monopoly that it had over the market. With time however, one of the main reasons that it lost out on a large customer base and market share was because it was proved to have degrading quality. After an analysis was conducted between Honda and Harley Davidson, it was found out that only 5% of every Honda bike manufactured had some defects with regard to quality, but on the other hand, 50% of bikes manufactured by Harley Davidson had some or the other quality defects in comparison. (Ibid, 1997) This exposed the company a great deal and made it lose a large number of customers, because when making a vehicle purchase, each consumer looks out for safety and quality more than anything else. After some more research, the company went in to making amends on these quality based differences in order to assure its customers in the future. Changes in the motorcycle engines A number of changes were made over the years in the motorcycles that were manufactured by the company. This was mainly done in order to make the customer base wider so that more and more people could reach out and be a part of the brand. The main reason for doing this lay in the fact that when the company was first launched, only men within the age group of 28-35 found it comfortable to ride the bikes manufactured by the company. However, as the company was expanding and diversifying in order to secure a better and firm foot hold over the market at hand, it had to reach out to more and more people. With the better use of technology and lifting of trade barriers, the company was able to move into making lighter bikes for women, as well as bikes for a younger age group so that people right from the age of 18 could start riding them. This was done not only to improve sales, but also to establish and brand a larger number of people that were otherwise opting for Japanese made bikes for their perusal. With time, the growling sound of the engine became a trademark for the company and so did the Big and Small V-Twin engines. (ODell, John 2000) Harley Davidson vs. Honda Harley Davidson started off in America and began facing competition from its counterpart Honda, from Japanese manufacturers. The main thing about the American company is that even though it went through a great depression within its management and workings during the launch of competition from Asia, it sustained itself through the ups and downs and managed to bring itself back in the market as the leading producer of motorcycles. One thing that Harley Davidson was able to establish better than Honda was goodwill and a brand name. The logo has marked itself on the minds of people today, creating a place for the brand in the international market. People recognize Harley Davidson more easily than they would recognize a Honda. Honda although has a merit over the market because its bikes are cheaper and more affordable by consumers today. Harley Davidson on the other hand is more of a status symbol, and a prestige good than a normal good that Honda is. Thus, the demand created for Harley Davidson can be met with high prices after all that it has done to improve its management and manufacturing process. People would go in for a Honda because it is more convenient to drive and does not attract as much attention as a Harley would. There is quite a difference in the manufacturing of the engines of both companies as well. Harley Davidson’s engines are faster and designed for better speed as well as dirt bike racing whereas Honda has designed itself in a manner that it suits the driving abilities of most common people. Harley Davidson has 750 cc bikes and its engine volume specifications have been increasing since. Honda’s bikes start from a range of 50 cc in order to provide comfort to most people as suggested above. They are also very sleek, whereas Harley Davidson sports a very technical outlook and design that has created recognition for its self. However, when one looks at the annual generated revenue and sales, Honda has a higher hand over Harley Davidson. This is also because of the advantage that it had gained over the company in the middle when Harley Davidson was exposed to all its faults and flaws in the process of production. In Conclusion All these factors today combined give an actual view of the standing of Harley Davidson in the market. Although the company gives a certain amount of credibility to its Japanese competitors for making it realize all its mistakes, it also must look at itself as an influence and true inspiration to other vehicle manufacturing production units across the globe. Not many companies have been able to recover from their sick status much the same way that Harley Davidson has been able to. This can also be credited to the leaders of the company who headed it and did not give up on it and took it forward. With the help of true entrepreneurs, the company was managed well and revived from its declining status as a global disappointment and turned into something that has paved the way for more and more people and a new idea of thinking altogether. The company has a better managed form of organization and follows a divisional structure split up in various parts of the world and is able to export its products to even developing nations like India and Sri Lanka.(2010) This truly gives a picture of the kind of market it has created for itself world over, and the kind of name it has portrayed, even from the profit making point of view. Reference List 2002. Will Harley Davidson Hit The Wall?, Fortune. 2009. Harley-Davidson Reports 2009 Results. Wall Street Journal. Kotha, Suresh & Dutton, John. 1996. Transformation at Harley Davidson. Stern School of Business, New York University. Reid, 1990. Well Made In America. New York: McGraw Hill, (p. 5) Teerlink Richard, Ozley, Lee. 2000 More than a motorcycle, the leadership journey at Harley Davidson. Harvard Business School, Press.  Statkenov, Daniel K. 1900-1933. Pioneers of American Motorcycle Racing. American Vintage Racing Motorcycles. 2007. "Striking Harley workers take hits in the pocketbook". The York Dispatch. 1997. Ibid, p. 18. 2000. Buell Blast - A Better Beginners Bike?  [Online] Available at Motorcycle.com. VerticaScope Inc.. Accessed 12 January 2011. Hogan, Marc. 2006. Harley-Davidson: High on the Hog. BusinessWeek. [Online] Available at http://www.businessweek.com/investor/content/aug2006/pi20060825_905406.htm?campaign_id=rss_null  Wilson, Hugo (1993). The Worlds Motorcycles: America. The Ultimate Motorcycle Book. London: Dorling Kindersley. p. 17 1989. A study of the Toyota Production System, Shigeo Shingo, Productivity Press, p 187 Peak, M.H. 1993. Harley Davidson: Going Whole Hog To Provide Stakeholder Satisfaction. Management Review, 82. ODell, John 2000. "Harley-Davidson Quits Trying to Hog Sound". Los Angeles Times. [Online] available at http://articles.latimes.com/2000/jun/21/business/fi-43145 2010, Economic Times. Harley Davidson Hogs Ride Into India. [Online] available at http://economictimes.indiatimes.com/news/news-by-industry/auto/two-wheelers/harley-davidson-hogs-ride-into-india/articleshow/6183046.cms Read More