Internationalisation at Harley-Davidson - Case Study Example

Case study 1: Internationalisation at Harley- Davidson

Introduction

Harley-Davidson (Harley) is a motorcycle manufacturer based in the United States and has a market presence in Japan, Europe, Canada, and Brazil. It specializes in production of custom, touring, performance, and standard group models. The company is weighing entry into new markets and adoption of new environmental management and pollution control mechanism.

SWOT and PEST Analysis

The company’s strength and opportunity is the ability to produce superior brands that compete competitively with their rivals while their weakness stems from high cost of their bikes that threaten their survival in some market amidst stiff competition. PEST analysis element includes the company’s commitment to recycling and effort to reduce greenhouse gas emission which is highly recommended.

1. Nature of international business environment and risks

Harley is a large scale producer of distinctive groups of motor cycle with about 35 models and a network of 1500 dealers. The company’s major market is the United States, which accounts for more than 66% of its $6 billion annual turnover. Other markets include Europe, Japan, Brazil, and Canada. The company faces stiff competition from international producers such as Honda, Yamaha, Kawasaki, and BMW. The firm’s main interest is large-size bikes which sell at a higher price than those produced by other companies making its product out of reach for low income earners.

As per the case study, the firm faces the challenge of environmental pollution risks. Their bikes are usually large in size implying heavy consumption of fuel hence more exhaust release in addition to manufacturing plant emissions. There are many upcoming new competitors and given its high pricing policy, the entity faces the risk of losing its market share in the near future. Investing in some country like China, for example, may result in production of imitations of their brand that sell at a lower cost eating into the target market.

2. Benefits of foreign expansion

The most vital benefit of expanding to foreign markets is enlarging market base to increase the number of buyers. From the case study, Harleys sales expanded by a third when the company ventured into foreign markets. There are models that sell more in the international market than locally. For instance, European market is said to be more sophisticated and diverse while Chinese market is purely transport driven with no room for luxury use of motor bikes. According to Capela (2015, p.38), businesses establishes branches abroad to protect themselves from stiff competition in the local markets. Some foreign markets offer more favorable tax policies for locally produced goods encouraging multinationals to start local branches to benefit.

3. Competing with rivals

Harley can borrow the best practices from its competitors without forsaking core values and quality of their bikes. For instance, Harley was about to dissolve in the 1980s due to expansion of the competing brands such as Suzuki, Yamaha, Kawasaki, and Honda all of which originated from Japan. Entry of a new Chief executive officer marked a new beginning after adopting Japanese models of production such as Just-in-time and total quality management. Adoption of these styles saved the company from dissolving and boosted its sales alongside its dilapidated image.

In order for management to expand smoothly in international markets, a thorough study of consumer behavior is crucial. Different markets show varying consumer habits. For instance, while users in United States tend to use the bikes for leisure activity, those in China use them as delivery and transportation means while the European would use them for sporting. Furthermore, different countries demand certain brands more extensively than others. Japan’s consumers can afford premium priced motorcycles while Brazilians market is said to be low as the incomes of persons are low. Harley can also establish production plants in other regions to solve the problem accruing to imports duty. Such a policy would appear favorable in a market like India whose imports duty makes the motorbikes price to customers double relative to that of their counterpart in the United States.

4. Competing with emerging firms

Haley can successively compete with emerging markets by establishing assembling plants in low labor cost regions such as Brazil, India, and China. The emerging markets main competitive edge is low labor cost which implies that the firm’s ability to compete depend on its flexibility to seize the same benefits. Its worthy to invest in learning about the emerging market demands and Harley should invest in research. Again, the emerging firms are able to sell their products at low cost due to their investment in technology. Harley should aim at reducing their products prices to compete favorably with these companies.

Harley can decide to focus on expanding in its current market, which enables it to sell expensive bikes earning a high return. For example, the company had sales of over 12,000 motorbikes in Japan in 2005 despite competition from local brands such as Honda and Kawasaki. In Europe, where customers have a more discerning taste to quality, the company can position itself as luxury bike producer and reap from the benefits of existing high speed lanes by improving the speed of their bikes.

If Harley decides to venture in the emerging market, it should invest in high powered technology to aid production of motorbikes at a low cost as many of these markets prefer low cost products due to their diminished purchasing power. Partnering with local producers who understand the market better would also be beneficial.

5. Environmental initiative sustainability

The firm launched a program to recycle motorcycles in Japan in an effort to address the problem of pollution. Harley is preparing to adopt lower-carbon economy in a bid to reduce its greenhouse gas (GHG) emissions which are largely attributable from their assembling plants and large engine size of their bikes. The case study reports indicate that Harley is making continued effort to safeguard the interest of stakeholders by recycling programs and observing GHG standards.

Case study 2: Barret Farm Foods

Introduction

Barrett Food Farm is one of the largest distributors of processed and raw foodstuffs in Australia. The general manager, Philip Austin, after attending a food fair in Germany, has proposed that the company venture into the US$ 30 billion export industry. A panel of three senior employees is tasked with the obligation of evaluating the idea and seeing its implementation amidst the various restricting factors.

SWOT and PEST Analysis

Barrett’s strength is its experience in food processing and strong presence in Australia which creates its upper hand opportunity to benefit from expanding internationally where demand for exotic products is high. The company’s weakness is the general’s manager diminished understanding of international business practices. The company is facing threat of competition. PEST analysis aspect arises in government’s involvement by recommending value addition of foodstuff exports. In addition, Australian products are considered safer in Europe as the country is less polluted.

1. Problem of expanding to Europe

The only information that Philip Austin has about the market is what he obtained from the trade fair. The information was obtained from individuals from their own point of view. Before taking any major steps and plans, the team should have conducted a more thorough market research, visit physical location of their potential buyers or agents, understand the terms and conditions of the agents, and consult current exporters especially those exporting unrelated goods to avoid perception of competition. Barrett’s success will depend on foreign intermediaries who know the market. The idea of relying entirely on agents whose reputation is unconfirmed yet is risky and a potential hazard should the agent become incapacitated.

A more systematic approach to exporting should involve large scale retailers, for example, the Italian Standa group represented by Luigi Cairati in the trade fair or Fauchon, a French food company whose purchasing manager, Gabrille Martin, showed interest in imported foodstuff. Dealing with clients directly will avoid agency cost and it is a better way to receive feedback.

2. Choice of exporting

Barret preference to exporting in comparison to other available options such as foreign straight investment and licensing could be explained by the nature of their products, which are locally sourced. Austin’s, the general manager, understanding of international trade is scanty. Given that the vision of the entity is highly dependent on the general manager, who in this case lack sufficient knowledge of foreign practices, the easiest thing to do is exportation as it is less demanding compared to the restrictive and demanding responsibility of direct investment. Furthermore, the corporation drive to exploring European market was due to the report that Australia had in the previous year exported foodstuff worth US$30. Barrett target is to be one of the firms that get a share of these billions in the near future.

The merit that accrues to Barret upon exporting their processed and unprocessed foodstuff is the new ability to reach a broader customer base for their products. The company will reap from the benefits of taxation that government awards to companies that bring home foreign currency. Diversification in overseas markets reduces risk of competition (Capela, 2015, p.38)

3. Challenges of exporting

Processing international transactions take time to finalize, which imply that the firm will have to plan for extra financing. Other challenges that the company faces include the fact that consumers’ tastes vary from one country to another, perishability of foodstuff that necessitate purchase of specialized carriers, price unpredictability due to exchange related complexities and other factors, managers and stuff lack of experience in international trade and physical distribution issues coupled with agents’ commissions.

If the firm is focused in managing its export transactions, there are several steps it must take. First, the company must begin hiring experienced employees in export businesses and recruiting some of its current employee. The enterprise must learn the skill of establishing international relationship and signing contracts, plan for additional capital to finance specialized foodstuff delivery channels, learn how to set competitive prices and finally, make every effort to comply with regulations and tariffs governing foreign trade to avoid sanctions and litigations.

4. Choosing between direct and indirect exporting

Indirect exporting will involve an intermediary or an agent like Peter Telford. There are cost and risk associated to intermediaries. Barret need corporate mediators who are highly experienced in processing transactions and have broad network of people who may be helpful. Direct exporting implies that the company export to large scale clients without going through any middle men. Barret can resort to bank loans to finance its intended expansion in foreign market or source for specific investors to put their money in their firm in return for benefits to be realized.

5. Competing with companies in Europe

According to Gabriella Martin, a French nationality and an executive of a food company, Europeans are seeking for exotic foodstuff. She stated that Australian products was more preferred as people consider the country less polluted. In addition, Luigi who work for Standa, an Italian Chain supermarket confirmed the craving of European consumers to exotic brands. To beat its competitors, Barrett needs to position itself as an Australian foodstuff company dealing with high quality exotic foodstuff. Proper identification, media advertisement, and a reliable website with detailed information may prove very effective.

6. Exporting processed foods

Processed foodstuff is part of value additions as some food perishability is reduced by packaging in special containers. In the international markets, value added commodities fetch a higher return. In addition, food processing companies create employment opportunities to natives. Companies that create more jobs receive more government support.