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Harley Davidson PESTLE Analysis

This section of the report is concerned with understanding the strategic position of Harley Davidson Inc. so that they can formulate tactical options for the company. It identifies three areas:

First the changes that is happening in the surroundings and exactly how these changes affects H-D and its own business activities.

Second the reference strength and capabilities of H-D.

Finally the prospects and affects of H-D's stakeholders.

THE ENVIRONMENT

In order to understand the environment which H-D runs in the following frameworks are used with the purpose of helping to identify key issues and problems and ways of coping with complexity and change.

PESTLE ANALYSIS

In 2009 H-D stood to gain from the Economic Stimulus Package deal, passed into legislation by the Barack Obama Administration. "The federal stimulus package gives taxpayers breaks if indeed they purchase a new car, light truck, RV, or motorcycle. "(Wachter, 2009). In addition, Coachman industries also a maker of leisure vehicles, and a rival of H-D was eradicated from the brand new York STOCK MARKET.

According to the Datamonitor report "the Motorcycle Industry section has had monetary growth for the past 3 years, and has only been recently experiencing decline. In 2007 it declined 2. 3%, yet is forecasted to recover 4. 3% by 2012. An financial factor in favour of H-D, despite this decline, is that the U. S. industry made total revenues of $10. 2 billion in 2007, of which 98. 8% were of motorcycles (not scooters, minibikes, etc. ). Furthermore, within the U. S. economy H-D holds nearly all motorcycle sales. Therefore, even while industry growth is declining, H-D sales and other motorcycle sales are still carrying on to increase. " (DataMonitor 2007). Physique 1 shows motorcycle industry expansion versus sales.

 

The Motorcycly Industry Council (MIC) discloses that leisure product market sectors are facing steep decline nevertheless the motorcycle portion though declining, is not doing so at a steep rate. Tim Buche, President of the MIC says " Overall motorcycle sales were down 7. 2%, not nearly as pointed a decline as much other consumer products in today's market/" (Wasef, 2009).

Socially H-D has a competitive border which is owed to its customer basic, strong brand devotion and demographic fads such as the increse in feminine operators. "This commitment is suggested in the average years of H-D consumers. H-D average consumer buying get older is 42 yrs. old and increasing (Gauvin 2005). H-D aspires to increse it consumer demographics, howevr "although the younger generation below 35 years has put up the largest gains in owernship, the generation that is on the border of the infant boomer section will be the key catalyst of development for the industry" (Koncept 2007).

One social factor which may negatively have an impact on the sales of H-D motocycles is the stigma that has been mounted on these leisure vehicles. Alot of men and women assume that motorcycles are dangerous which opinion is strengthened due to the high rate of fatalities and crashes. H-D stands the opportunity of escaping this stigmatisation if the general public views their bikes as "cruisers" and not "swiftness bikes".

Technologically H-D can take advantage of antilock brake systems. Antilock brakes wintry help riders avoid fatal crases regarding to a study done by the insurance industry.

2. 1. 2 PORTER'S FIVE Causes MODEL

Rivalry

"H-D operates within the Recreational Vehicles industry along with five other major competitors: Winnebago, Polaris, Thor, Arctic Cat and Marine Products. The most notable performers within the industry and keep 92% of the marketplace share by volume level with a market capitalization of 64. 653 Billion of a complete Industry of 7 Billion" (Yahoo Finance, 2009). "Other businesses in different industries that are immediate product rivals include Honda Motor Company Small, Yamaha Motor Co, Ltd. , and Suzuki Motor unit Organization" (Datamonitor, 2007).

"The presence of the large multinational corporations with exceedingly high assets improves the amount of rivalry within the industry. Due to the small variety of material rivals, the market's revenue is distributed between fewer firms and enhances the amount of rivalry for bottom line income. This rivalry pushes most competitors to try and diversify their business models through physical development or vertical growth, leading to passions and investments in a variety of other segments such as the automobile, watercraft, commercial and farming equipment areas. " (Datamonitor, 2004).

Threat of Substitutes

"The Recreational Vehicle industry faces threats from the auto Industry, from public transportation options and from Bicycles. The risk is largely reliant on the indispensability of motorcycles and other lifestyle products to the finish customer "(Datamonitor, 2008).

In most developed countries, motorcycles, jetski's and other recreational vehicles are leisure items which lack necessity and are therefore essentially dispensable or substitutable by more "practical" items such as cars or even more "affordable" method of transportation such as bicycles. This insufficient necessity increases the risk of substitutes and illustrates why the exterior market goes into decline during economic recession.

However, even though there is a lack of requirement, whenever a consumer possesses a motorcycle or other product, moving over costs to an alternative can range between low to high. Transitioning to general public transportation can be cheap, but moving over to a luxury vehicle involves a higher cost factor.

Because turning costs vary depending on the alternative means of transportation chosen, the entire threat of substitutes in this industry is modest.

Buyer Power

"Buyer electricity is weakened by a higher level of product differentiation and customer loyalty to dominating brands (Datamonitor, 2008). Because customer devotion regarding traders is high, as is the demand for specific and/or customized products, buyers' electric power is weakened since the consumers rely on companies to produce their preferred product. This high demand allows companies to increase their price anticipated to high product differentiation and low standardization.

Relatively large numbers of buyers within the US, coupled with a high level of product differentiation weakens buyer electric power. Thus giving Recreational Vehicle manufacturers a competitive border on the market because they can produce a product based on customer demand.

An increasing factor of buyer power is the actual fact that over half recreational vehicles sold in the U. S. are sold and bought through non-retail stations. This provides consumers with a choice for cheaper purchasing, and becomes a significant danger to the industry if they cannot move their services. Fortunately for the large competitors, who count on product differentiation, their customers desire customized products that are not available on the second-hand market.

Overall, buyer vitality is low credited to ecological competitive benefit of product differentiation which is impossible for other brand competitors to complement.

Supplier Power

Competitors within the Recreational Vehicle industry rely mostly on goods such as metals. There is a highly pressured importance on the quality of these recycleables which enhances provider electric power. Also, as global prices of principal recycleables (ie: steel, aluminum) increase, pressure is put on the manufacturers' to increase their margins. Furthermore, the increasing consolidation of the steel industry has the potential to lead to even higher raw materials costs and product differentiation. The opponents often deal with this high power of suppliers by putting your signature on agreements with manufacturers to ensure the delivery of quality raw materials at a set in place selling price.

Power of suppliers is lowered by the competitor's large size and the actual fact that manufacturers account for only a tiny portion of the suppliers' earnings. Large multinational companies such as Harley-Davidson as well as others can get materials from numerous international suppliers and face low turning costs anticipated to nominal product differentiation. This occurrence within the international market raises Industry market leaders' vitality. (Competitive Panorama, 2009)

Overall, supplier electricity is moderate.

Threat of New Entrants

The industry faces moderate risks of new entrants because of modest industry growth levels and high barriers to access. The Recreational Vehicle industry is growing, especially in America, as individuals are touring shorter distances and on weekends with less planning. New entrants are lured by good market growth, especially in the budget or low-cost areas credited to consumer, possession and demographic styles towards convenient travel patterns. (RVIA. org, 2009)

Barriers to entry include large capital requirements and high set charges for set-up of new development and company facilities, an exceedingly advanced of brand acknowledgement and customer loyalty. Modes of access include starting a new company, diversifying and existing company's operations into motorcycle or other vehicle processing, and beginning to export into the host country. Another barrier is the global tightening of emission requirements that further ramps up costs as motorcycle and other recreational vehicle redesigns are essential, increasing research and development costs. (Competitive landscaping, 2009)

Along with the tightening of emissions specifications is an upsurge in the global costs of raw materials such as metallic. As expectations and product costs increase, barriers to entry become bigger hurdles for new entrants. In order to be profitable, new entrants must spread large capital requirement, R&D costs and raw materials costs to their customers and reflect these in the costs of the done product. In the current economic recession, this becomes difficult because average consumers rather than willing to spend their small disposable income on leisure items.

Since sales are hypersensitive to price, another setting of entry is possible in the sales of budget vehicles. However, these businesses would still be subject to the top capital requirements and high set costs, producing a business that could not be ecological and therefore becomes undesired.

Overall, this hazard is modest.

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