Harley-Davidson has chosen to compete in various country markets in Europe and Asia using an export strategy. Go to the Investor Relations section at www.harley-davidson.com and read the sections of its latest annual report related to its international operations. Why does it seem that the company has avoided developing production facilities outside the United States?
The question seems dated and doesn’t hold grounds in the current date as Harley-Davidson now already has its manufacturing factories in India and Brazil. The company also intends to have another one and the process for it has already started as they’re set to build another one in Thailand. Harley-Davidson once acquired in the year 2014 by Kawasaki Motor Company Ltd. - a Japanese company, the strategy changed with it as well.
Few months ago on June 25, 2018, the company announced that it’ll be shifting some of the manufacturing overseas. This is given the tax increase from the previous 6% to now be 31% while exporting to the EU market. This even stirred a reaction from the president of the USA, Donald Trump whose praise suddenly changed to anger in an instant (CBS Interactive Inc., 2018).
However, to answer the question they always avoided developing production facilities outside the United States as that would mean a lot of cost in the initial stage to set the factory up. Also, the required skill sets of the person, having them all get used to the new system and function in accordance would mean difficulties for the company. Also, there were concerns revolving around the quality of the products being compromised if it goes anywhere outside the states (Schembri, 2009). The whole focus of the company was on quality rather than just selling a product with lesser quality. Thus, even though most of the parts required are produced elsewhere, they assemble them all at US-based factory and market it while ensuring all the quality tests are successful. Another thing that held them back is their sales in the US overweighing the total sales of motorcycles elsewhere as their sales figure in the states totaled to 46,490 as of 2nd Quarter of 2018 while their international sales total was just 31,938 as of the same period (Harley-Davidson, 2018). Also, as the maximum sales were from the USA itself, moving it elsewhere meant that the import tax in the current home country would be higher which couldn’t be justified. This all trigged to the company not moving outside the USA until now when the sudden change in presidency and regulations around it made the company to think again.
Harley-Davidson Announces Second Quarter Results | Harley-Davidson USA. (2018). Retrieved from https://investor.harley-davidson.com/news-releases/news-release-details/harley-davidson-announces-second-quarter-results-0
Harley-Davidson, blaming tariffs, will shift some manufacturing overseas. (2018). Retrieved from https://www.cbsnews.com/news/harley-davidson-moving-some-operations-overseas-blaming-tariffs/
Schembri, S. (2009). Reframing brand experience: The experiential meaning of Harley-Davidson. Journal Of Business Research , 62 (12), 1299-1310.
Harley Davidson is considered an American Icon and has been producing under the label of made in the USA since 1903 in Milwaukee Wisconsin. This has been their unique feature and a means of differentiation with their rivals. It is presented as a premium bike and the experience compared to none. With starting its production facilitates outside the United States will be counterproductive to their strategy which they have worked so hard to build as a brand throughout the world. "Unwavering brand stewardship remained our guide during 2017 as we laid the important groundwork for an exciting future for Harley-Davidson (Harley Davidson, 2018).” With the change in their production facilities they may not be able to charge a premium price to the customers and will have to change their strategy as Enfield has done in the past years. One of the main reasons for outsourcing is to reduce cost. But Harley Davidson is not concerned with low cost as there market their product as a high end value proposition.
Even with their brand consciousness and strategy of delivering excellence, the recent tariff in steel by President Donald Trump has set aside their strategy to look towards overseas production as a viable means for sustainability. With such external factors that were aimed at retaining business in the country and increasing the job rates, Harley Davidson however has to face tariff from the EU from 6% to 31% which add an extra cost on average of $2,200 per motorcycle (KESSLER, 2018).
With the EU accounting for 16% of their sales in 2017 and with the demand in the US slowing down, Harley Davidson has been forced to build their manufacturing abroad as well. It has recently opened up a manufacturing in Thailand to cater to the South Asian market. "Harley-Davidson argues that steep trade barriers in a high-growth market, not a desire to cut American jobs, drove the move. Southeast Asia offers rapid development and increasingly affluent spenders, but many countries in the region levy high tariffs on imported goods that make its motorcycles prohibitively expensive, the company says (Gough, 2017).” In addition Harley Davidson has opened up manufacturing in Australia, Brazil and India as well. The manufactured bikes will however be sold in the region and will not be sold in the USA as their will be huge tax tariff on imported goods.
These are the reasons why Harley Davidson has strategized to prefer production domestic environment but has been forced by external factors to be flexible and start operations abroad.
Gough, N. (2017, May 23). Even Harley-Davidson Can’t Resist the Tug of Overseas Factories. The New Yorkk Times .
Harley Davidson. (2018, March 29). Harley-Davidson USAINVESTOR RELATIONS. Retrieved from Harley Davidson: https://investor.harley-davidson.com/news-and-events/letter-to-shareholders
KESSLER, C. (2018, June 26). Why Harley-Davidson Is Moving Production Overseas. FORTUNE .
Harley Davidson is a motorcycle company whose headquarter is located in Milwaukee, Wisconsin, US. This firm was founded in 1903 by William S. Harley, William A. Davidson, Arthur Davidson, and Walter Davidson. This firm is an American corporate icon and displays American culture. This firm is one of the world’s biggest motorcycle manufactures. Currently, Matthew Levatich is the president and CEO of this firm. As of 2017, this firm’s revenue was $5.647 billion, net income was $522 million, total assets worth $9.973 billion, total equity $1.844 billion and 5,800 staffs (OUR COMPANY, 2018).
As per my understanding, there are a few reasons the firm only focus its manufacturing inside America because the main aim of the company is to promote American culture through motorbike. If they outsource the manufacturing process outside from America then there might be a chance to mix the culture of different countries and no unique feature on the product may be a danger for the organization. They are popular in the market due to the unique product features so they never want to lose their uniqueness to their competitors so they never want to outsource or manufacture outside the country. The owner and founder of Harley Davidson are so nationalistic and they are American dreamer, they just not sell the product only they also try to make their brand as a big national proud so they never want to lose fame and name of American pride. The third strong reason is they wanted to create job opportunity for national American Citizens first so they never outsource their manufacturing process outsides the countries. Forth strong point is this bike are not pure company manufacturing product, some of the special parts are specially designed by manually and those resources are only available in America only not outsides the countries. These designed are especially symbolize the American culture so that it is difficult to outsource the manufacturing process outsides the country. The Harley Davidson motorbike are high priced in the market so every individual can’t afford it so they have special types of customer and they customize the bike as per their want so that their target customer easily reach to them for buying a product so there is no need of manufacturing unit outside America. Plus, Harley Davidson fears political and economic volatility in other nations and due to these reasons if manufacturing or other costs raises then it will adversely hamper the production and delivering of the motorcycles (Ara, 2014).
Ara, D. K. (2014). ‘Harley Davidson’ Success Speaks- Brand Image and Culture: An HR Perspective. International Journal of Industrial Engineering and Management Science, 4 (2), 48-56.
OUR COMPANY . (2018). Retrieved from Harley Davidson: https://www.harley-davidson.com/us/en/about-us/company.html
Harley Davidson is an American motorcycle manufacturer that manufactures and sell custom, cruiser and touring motorcycles. The heavy-weight and high powered bikes of this company feature leading edge styling, innovative design, distinctive sound and superior quality with ability to personalize. In addition to motorbikes, the company also provides riding events, accessories, riding apparels, casual apparels and motorcycle service part under its name (Harley Davidson, 2018).
The products of Harley-Davidson are distributed by 1500 dealers located at USA, Canada, Europe, Asia Pacific Region and Latin America Region (Harley-Davidson, 2018). The business strategy of Harley Davidson includes exporting and joint venture. Developing production facilities abroad could help the company lower the cost of production, eliminate shipping cost, increase profit and give widespread recognition but it chose to produce in USA and export overseas for longer time period.
The company’s strategy was to promote American dreams overseas through sales of bikes. The company wanted to protect the authenticity of its products with "Made in the U.S.A” label that was not possible by producing overseas (TDI Media, 2010). Similarly, adjusting the operations as per the prevailing laws in foreign country would also have been a big challenge for the company. The overseas production also meant loss of local jobs and shift of capital investments abroad which the company did not want. If we look at the data, more than 50% of the total bikes sold are in America (Statista, 2017). Since America is the largest market, it would be beneficial for the company to limit it production facilities in the country with higher sales.
Relating to the current scenario, the trade war between United States and European Union has created difficult situation for the company. The US government imposed additional tariff on import of steel and aluminum from EU while TU hiked tariffs on products made in America. This has put the company in difficult situation as the tariff has increased from 6% to 31%. To deal with this, the company has decided to start a new production plant in Thailand despite its American reputation. Prior to this, the company established production and assembling plant in India, Brazil and Australia (The New York Times, 2017).
Harley Davidson. (2018). Business . Retrieved from About Us: https://www.harley-davidson.com/us/en/about-us/company.html
Harley-Davidson. (2018). Our Company . Retrieved from Dealer Network: https://investor.harley-davidson.com/our-company/dealer-network
Statista. (2017). Harley-Davidson’s Worldwide Motorcycle Retail Sales in FY 2016 and FY 2017, by Country or Region (in units). Retrieved from The Statistics Portal: https://www.statista.com/statistics/252220/worldwide-motorcycle-retail-sales-of-harley-davidson/
TDI Media. (2010, March 1). An Analysis of Harley Davidson’s International Business Strategy. Retrieved from http://tdimedia.blogspot.com/2010/03/analysis-on-harley-davidsons.html
The New York Times. (2017, May 23). Even Harley-Davidson Can’t Resist the Tug of Overseas Factories. Retrieved from https://www.nytimes.com/2017/05/23/business/harley-davidson-thailand-factory-manufacturing.html