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Change and Continuity in Contemporary Business

REPORT

On

Harley Davidson Case Study;

Change and Continuity in Contemporary Business

Hassan Shahzad

ID xxxx

Write your teacher name etc

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Report on CCCB Page 2

Abstract:

Change can be good or bad depending how it was anticipated by those who are responsible for

the smooth and sustainable running of the business organization. Lets think about those who

make things happen even in gloomy and uncertain surroundings, how do they do this? The

answer is simple they are the masters of the art or the leaders of the market. They can spark

life in weak and dismal environment. There is another question that may arise in our minds and

that is if any other person can do the same or even better but it is impossible to know because

we cannot go backward in terms of time. In 2003 Harley Davidson, under the leadership of

Jeffery Bluestein, celebrated its 100th

birthday. The company which almost went bankrupt in

1970, has gained new life and also its lost glory and once again successfully becoming the

market leader in heavyweight bike industry in USA and worldwide. This report is an effort to

analyze Harley Davidson case in particular and generally in the context of change and continuity

in contemporary business.

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Table of contents:

Introduction

Methodology

Analysis and Findings

Emergence of Harley and Davidson in America

Harley and Davidson in a glance; past, present and future

Japanese entry in US motor bike industry

Learning from Competitors

Shocking revelations

Lessons learnt; the productivity triad

What if I were the manager

Inference Drawn

Conclusion

References

Bibliography

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Introduction:

Organizations primary objective is to make profits but it should not be their purpose for

existence, an organization is driven by its leaders their vision make them leader in the market.

Average organizations have ordinary leaders, primarily limited to make profits or maximize

financial gain. On the hand iconic organizations also want to make profits but with an even

higher objective to contribute to the communities at large in the form of unique services and

products e.g., Google mission is organize worlds data and provide an easy access to it for all.

Robert M. Grant, (2005)

Harley Davidson was founded in 1903 to build motorcycles, and incorporated in 1907. After

Second World War company sales were declined somehow company manages to make profits

by introducing larger, more powerful motorcycles. 1950 can be stated as golden era of Harley

and Davidson with 60% of the market share. But time keep changing and 1970 was the time

when company was on the brink of bankruptcy.

In its early days Harley & Davidson established a unique image which can be attributed to its

specific character and appearance. It means that there are certain things attach when you think

of a motor cycle e.g. its sound, shape and design, speed and style etc but in case of Harley

Davidson you cannot match these characteristics with any other motorbike rather Harley &

Davidson has everything so unique. In 1930s Harley adopted an image and lifestyle approach

to marketing. The image of Harley bikes started to be part of American image or iconography.

Harley bikes were associated with American flag, Bald Eagle etc which increase brand loyalty to

unprecedented heights.

During 1950s Japanese entered into the American market. The first was the famous Japanese

motorcycle company Honda. Interestingly Honda motor cycle was absolutely different in every

aspect of Harley bikes. They started with 50cc engines to 250cc engines later on; they were

quieter, low on fuel and lighter in weight. Honda accidently discovers a huge market segment of

riders in the form of old people, women and very young people. Who want all that a Honda

bike offers. Japanese entry into US markets brought huge change in US motor cycle industry.

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Demand for motor cycle grew rapidly but at the same time Japanese manage to hold a big

chunk of the total market i.e. was about 80% of the total market share.

In 1975 Japanese entered into heavy bike manufacturing when Honda introduced its 1000cc

motor bike. It was a sophisticated reliable machine. Soon followed by others like Kawasaki and

Yamaha etc. it was directly affecting Harleys specialty and intrusion into Harleys territory. 1970-

80 were the worst years for Harley & Davidson and its share declined by over 80%.

Extra ordinary circumstances require unique and contemporary approach or course of action

which may include learning from your competitors. Sometimes firms need to go beyond

technology advantage because even if you possess better technology yet the need for good

mangers remains high, after all it is the human mind that drives everything including making

best use of any technology available. Technology is merely a tool if not properly used can even

become a disadvantage. Harley & Davidson management made an extra ordinary move to look

what their competitors were doing. It revealed shocking realities including the importance of

good managers or leaders, who have the ability to organize things, devise contemporary ideas

to improve performance with minimal resources at disposal. Harley & Davidson realized that

despite the fact that they were using the best computer system to control production, work in

process and inventory, their production system flawed and management style was stagnant.

Harley also realized that Japanese production line were neat and simple without any computer

system to help. Japanese were simply better managers their production is a function of demand

and supply mechanism with no work in process or inventory resulting in lower the cost of

production.

Finally, it is essential for organizations to have a purpose, values and mission which inspire

employees and enhance their commitment to contribute in achieving that purpose by adhering

to set values and mission.

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Methodology:

This section will elaborate how this report is produced. What was the objective of this report

and how successfully those objectives have been achieved by adopting relevant

methodologies?

This report is deductive and is a critical evaluation of a case study on Harley & Davidson a

renowned American heavyweight motorbike manufacturing company. The study is a story as to

how Harley Davidson was founded and what sort of motorbikes it used to build. It is also

narrates Harleys early production methods, engine size and design of the motorbikes. How in

1950s Harley bikes were top priority of the riders in America and around the globe. Its peak

time and the times when it was struggling to survive.

There are pre-requisites defined in the assignment asking to critically evaluate the change

process that took place in Harley Davidson, pros and cons of the process. It also requires think

and act as if the report writer was a manger in that time.

Further, it requires comparing Harley and Davidson policy with one of its main competitors at

that time to pin point the critical differences in successful.

The main source of data remains the case study on Harley and Davidson. However, it other

relevant literature has also been consulted for the purpose to support the argument and stands

taken by the report writer.

Analysis of the facts and contents were carried out on the basis of better managerial skills,

lower cost of production, market share and better understanding of the marketplace.

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Analysis and Findings:

Emergence of Harley and Davidson in America:

Harley and Davidson was founded in 1903 to built heavyweight motorbikes. It is interesting to

note that it was Harleys classical and unique design of motorbike and engine design which

made it market leader and a legendary and iconic American brand in and outside America. The

same legendary design and engine type happen to be its one of the prominent reasons for a

near fiasco. Once again the same unique characteristics of design and engine type are its

biggest assets and reason of success. It is important to note that apparently it was Harleys

design and engine type or size was the reason for failure after the Japanese entered US market.

It may be because their bikes were of smaller engine size, low maintenance high performance

machines and lighter in weight.

Harley and Davidson in a glance; past, present and future:

Since Harley and Davidson started its motorbike business it has seen enormous ups and downs

for various reasons. It started well and gradually become market leader and an American icon

in bike manufacturing. It was the time when Harleys operating against indigenous competitors.

One can depict that the management style of the competitors was not superior to Harley and

Davidson. Hence, they can not pose a threat or challenge which allows Harley and Davidson to

assess its weakness.

Point:even being market leader if there is no challenge or change in external environment it

would be impossible to identify weakness in management or quality of the product or services.

Change is not always bad; it allows you to explore new horizons by improving your weak areas

and fortifying strengths.

Post world war two when Harley sales were declining due to competitors from Europe, it first

time realized any change in market and introduced more heavy engines in terms of horse

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power and manage to control the situation. It shows that substitutes from Europe were not a

real challenge in terms of machine performance and reliability.

The real threat was posed by Japanese manufactures in 1950. Honda was the pioneer Japanese

motorbike manufacturer in US others follow the suit. Japanese were better in every

department then Harley and Davidson and the real crisis kick start for Harley and Davidson. In

1970 Harley and Davidson was on the brink of bankruptcy.

Harley and Davidson emerged once again in late 80s as market leader in heavy bike

manufacturer with 50% market share in US and 32% globally.

Recently in 2005 when share value of Harley and Davidson fell sharply around 17% despite its

profitable operations, Management once again realized to reexamine or change strategy to

counter external changes taking place.

Japaneseentry in US motor bike industry:

During 1950s Japanese entered into the American market. The first was the famous Japanese

motorcycle company Honda. Interestingly Honda motor cycle was absolutely different in every

aspect of Harley bikes. They started with 50cc engines to 250cc engines later on; they were

quieter, low on fuel and lighter in weight. Honda accidently discovers a huge market segment of

riders in the form of old people, women and very young people. Who want all that a Honda

bike offers. Japanese entry into US markets brought huge change in US motor cycle industry.

Demand for motor cycle grew rapidly but at the same time Japanese manage to hold a big

chunk of the total market i.e. was about 80% of the total market share.

In 1975 Japanese entered into heavy bike manufacturing when Honda introduced its 1000cc

motor bike. It was the time when the debate for free trade and globalization were hot subject

and companies were expanding their operation to capture opportunities globally. Herbert

Kitschelt, (1999). It was a sophisticated reliable machine. Soon followed by others like Kawasaki

and Yamaha etc. it was directly affecting Harleys specialty and intrusion into Harleys territory.

1970-80 were the worst years for Harley & Davidson and its share declined by over 80%. 1980s

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mark the survival years for Harley & Davidson and company was seriously trying everything to

survive. Huge amount of debt forced the company to cut costs and production.

Learn

in

g from Competitors:Change can be good or bad depending how it was anticipated by those who are responsible for

the smooth and sustainable running of the business organization. Lets think about those who

make things happen even in gloomy and uncertain surroundings, how do they do this? The

answer is simple they are the masters of the art or the leaders of the market. They can spark

life in weak and dismal environment. There is another question that may arise in our minds and

that is if any other person can do the same or even better but it is impossible to know because

we cannot go backward in terms of time.

The first attempt was a total fiasco, when AMFs took over Harley and Davidson. AMFs CEO

tries to act like Japanese but his approach was superficial and flawed. He set ambitious targets

of production by ignoring quality standards in terms of qualified technicians and other technical

staff. Huge production increase (from over 15,000 in 1969 to 70,000 in 1973) as a result

Harleys quality declined sharply and hence market share, it drop to 23% in domestic market.

The worst has yet to come in the form of Japanese substitutes for heavy bikes. Honda as

pioneer introduced its 1000cc bike. Japanese machines are known for reliability and

performance and this new heavy bike was up to mark. It has power, more compact design and

speed which can successfully provide the thrill element to riders. Soon other Japanese brought

their brands e.g. Kawasaki. Harley and Davidson sales drop by 80% in 1980s.

Now senior management made a very unusual move to visit its competitor Honda to learn what

is making difference and to imitate them.

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Shocking revelations:

This visit revealed shocking realities on the Harleys management. They discover that the most

critical difference was the Japanese management style. It was simply superior and more

productive. Japanese production line was far better, smooth and clean as compare to Harley

and Davidson. Japanese has no computer or automation support but yet there performance

was not only better but also cost effective as their production directly control by demand

function. Japanese were operation JIT (just-in-time) system which was manually operated. Rick

Delbridge, (1998). Due to this they do not have any WIP (work in process) or inventory to pileup

in warehouses.

It also revealed to Harleys management that their system was totally flawed as they gave their

workers responsibility for quantity and not quality. Last but not least Honda has only 5% ratio

for failure in final testing whereas Harley has a huge 50% failure rate in final testing.

Lessons learnt; the productivity triad:

The simple lesson was that Harleys whole system was scrap and need to be change or

transformed as quickly as possible. The plan was named as productivity triad.

The fundamental goals of productivity triad were to;

y Motivate and enhance employee involvement.y Adopt JIT system for inventoryy Improve quality assurance during production named statistical operator control (SOC)

SOC was meant to improve quality in production by providing training to employees to tract

quality related problems and how fix them during detection process. All this was followed by

employee incentive program. Louis E. Boone, David L. Kurtz (2010). Another tactical move from

Harley and Davidson sought tariff protection from government which helps to ease financial

stress or working capital flow.

These drastic changes and more investment in R&D brought positive results for Harley and

Davidson, as it was visible that before this Harley and Davidson turned its inventor twice a year

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and after it was increased to 17 times a year. Other significant improvements were reduction in

WIP by 75% and production up by 50%, scrap and rework reduced by 68% and revenue

increased by 80%. Once again Harley and Davidson claims it market position with market share

of 97%.

Then CEO Willie G. Davidson, one of the grandsons of one of the founder also focus on

customers relationship by improving communication with customers to keep them informed

about the challenges and struggle made to regain its glory.

Company continues to transform its priorities to meet emerging change and challenges by

adopting organizational learning program for its employees at all levels. This transformation

process was organization wide hence, not productive positions were eliminated and more open

accountability approach was adopted where people and customers to judge its performance.

Finally, the most amazing things to mention that employee incentives and pay linked to

performance and ability and willingness to lean and perform for all particularly for senior

management, as they the leaders and they have to lead from the front. Louis E. Boone, David L.

Kurtz (2010)

What ifI were the manager:

Well, it is really a difficult question to answer particularly after going through the case study

and exploring the greatest truth that unless you are faced with an extra ordinary situation or

someone with superior leadership styles it would be very difficult to perform up to the

optimum or to get the best out of you.

We can anticipate change but not all the time particularly if it is against the mindset, such a

change is not only difficult to anticipate but even difficult to adopt.

Inference Drawn:

As far as the Japanese competitors of Harley were concerned they were simply better in terms

of management, management style, commitment and involvement with their organizations.

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There were few things I would call them favorable incidences for Japanese manufactures e.g.

the design, engine sizes and light weight machines attracted a new segment of motor bike

riders whom you can say vulnerable to Harley and Davidson huge machines.

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Conclusion:

This section will provide the crunch of the whole discussion in a sequential manner. Lets start

with the year 1918 the year Harley and Davidson became worlds largest motorcycle company

by producing 28,000 motorcycles. Harley seems keen to improve on quality and reliability by

investing in R & D despite shaky economic conditions. It shows that management has the vision

to strengthen companys market leadership. Then the peak time of 1950 with 60% market

share Harley as undisputed market leader.

It is to be noted that until then Harleys competitors were not in position to challenge its

leadership because none of them has a management with vision, courage and mission to

accomplish unusual or extra ordinary.

First real challenge which push Harley and Davidson to the brink of virtually disappear from the

scene due to imminent bankruptcy. By the time Japanese entered the US market around late

50s. We can segregate Japanese superiority in to two distinct streams for better

understanding.

y The product that was Motor bike andy The management and leadership style which possess better skills and higher

commitment and involvement, it can state as vision, purpose and mission.

Japanese happen to superior in both but the first one by the virtue of luck but the second one

was the true strength and superiority.

There machine was smaller, economical and lighter in weight which incidentally explores a huge

segment of potential riders to whom attributes of Japanese bikes suit best. If it was the only

reason I can convincingly claim that it would be a short term advantage for Japanese and it

simply had not push Harley and Davidson to wall to struggle for survival.

Once Harley and Davidson senior management decided to visit its main rival Honda whatever

they learnt from them was about malfunction and poor management and style. The propose

plan to get out of the troubled waters i.e. the productivity triad was all about management

improvement, employee empowerment and organizational learning to improve knowledge and

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skills on an ongoing basis. They never think to adopt Japanese design or engine size etc. but to

improve their own design and engine type because they know that they have their very own

segment of riders who will never abandon their beloved and iconic Harley and Davidson. They

were losing on management issues and time proved it that once Harley and Davidson

successfully sorted its management issues it emerged again and attained same glory and love

from its riders.

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References:Herbert Kitschelt, (1999). Continuity and change in contemporary capitalism. UK: press

syndicate University of Cambridge. pp 101-103.

Louis E. Boone, David L. Kurtz (2010). Contemporary Business, US: john wiley & sons. pp 251-

255.

Rick Delbridge, (1998). Life on the line in contemporary manufacturing: the workplace

experience of lean production and Japanese model. new york: oxford university press. pp 2-9.

Robert M. Grant, (2005), Contemporary Strategy Analysis. The New 7th Edition Contemporary

Strategy Analysis, pp 33-37

Bibliography:

y Herbert Kitschelt, (1999). Continuity and change in contemporary capitalism. UK: presssyndicate University of Cambridge.

y Rick Delbridge, (1998). Life on the line in contemporary manufacturing: the workplaceexperience of lean production and Japanese model.

y Robert M. Grant, (2005), Contemporary Strategy Analysis. The New 7th EditionContemporary Strategy

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