Sample Paper on Strategic Management: Internal Analysis and SWOT

Strategic Management: Internal Analysis and SWOT

Introduction

Organizations operate within an environment in which both the internal and external factors dictate the operational success of the organization. Internal factors include the strengths and weaknesses that the organization has, while external factors form the organization’s opportunities and threats within the operational environment. A SWOT analysis, therefore, audits these internal and external factors, providing means for the capitalization on the strengths and weaknesses, while at the same time offering avenues for minimization of the threats and weaknesses. Operating in the highly competitive motorcycle industry, Harley Davidson, America’s largest heavy motorcycle manufacturer operates in an environment in which its competition is fast decreasing its (Harley-Davidson) market share. This report analyses Harley’s internal environment, with an aim of presenting its major strengths and weaknesses, and possible measures to maximize the strengths, while decreasing the effects of the weaknesses, with an aim of increasing the company’s profitability.

One of Harley-Davidson’s strengths is its strong brand name. According to Global Data (2013), Harley-Davidson is among the top brands in the world, not only in the motorcycling industry but also as a company. This strong brand name has enabled the company to develop a cult-like following, especially in the United States. Additionally, the company has a 55.7 percent market share in America’s heavy market, in addition to being ranked position one and two in the heavy motorcycles markets in several countries across Europe (Global Data, 2013). The company brand name and image are majorly based on the proven quality, reliability, top performance, and the ability of loyal customers to customize Harley-Davidson’s products and services. These are the company’s intangible assets, of which maximization can allow it to improve its financial performance and grow its market base, especially in markets that the company has not yet made inroads such as the Caribbean, Australia, and Africa (TDI Media, 2010).

Another factor that is a great strength of the company is its technical excellence. Harley-Davidson’s customer loyalty, strong brand image, and name are all based on the fact that the company’s products are of high quality. The high quality of its products is therefore a direct result of the company’s unique technical excellence. This technical excellence and the quality of products and service have so far allowed the company to price its motorcycles highly, even above the prices set by its competition (TDI Media, 2010). Worth noting is that the technical excellence available at Harley-Davidson is proven by the fact that it is the only company that installs a Desmodronic distribution system, has unique and customizable designs as well as the twin power engines that drive the powerful machines. Such excellence in design and performance has allowed the company to use the price differentiation strategy, with that growing its sales.   According to Harley-Davidson (2012), the company’s worldwide sales had a 2.8-percentage growth in 2012, with a 4-percentage augmentation in sales in the domestic market. Such growths in sales are only possible with the delivery of high-quality products, which are a result of an excellent manufacturing, technical, and designing team.

Harley-Davidson’s improving operation efficiency is yet another strength that the company has. With decreasing operating costs of 82.07 percent in 2012 as compared to 84.37 percent in 2011 (Global Data, 2013), the company is therefore working at operational efficiency, which not only increases revenues but profits as well. The operational efficiency so far allowed the company to increase its revenue from $5.3 billion in 2011 to $5.5 billion in 2012, thus translating to a 5.1 percent increase in revenues.  Maximizing such operational efficiency is therefore recommended for the financial health of the company, in addition to its global expansion to the untapped markets.

Even with a strong brand image, technical excellence, and operational efficiency, the company’s dependence on the US market is one of its greatest weaknesses. According to Global Data (2013), Harley-Davidson derives 68.1 percent of its revenue from the US market. Only Europe contributes to a substantial share of the company’s revenues, accounting for 14.4 percent of the total Harley-Davidson revenues. Close home, Canada accounts for only 3.8 percent of the total company revenue, a similar percentage accounted for by Australia. Even in the home front where the company derives most of its sales, competition is mounting with companies such as BMW, Polaris, Honda, Yamaha among others are constantly growing their market share, especially the upstart Polaris, which has so far overtaken Honda to be the second seller of heavyweight motorcycles (Taylor, 2012).

The company’s strong brand name, customer loyalty, and revenues are in jeopardy from the company’s weakness in product recalls. Not only does this lose customer confidence in the company, but it also leads to a loss of revenue since some customers may demand refunds. The cost of fixing the technical issues also dents the company’s balance sheet by increasing its overall expenses.  According to Global Data (2013), Harley-Davidson’s product recalls and issues involved more than 29,000 units, which had hydraulic clutch problems. Additionally, the company had to repair more than 1000 units of a range of its motorcycles that had break problems. Such massive recalls have long-term effects on the company’s image, as well as significantly affect future sales.

To ensure survival in the increasingly competitive motorcycle industry, Harley-Davidson will need to expand its market penetration to other countries. Africa, the Caribbean, Asia, and South America present viable markets for the company’s products expansion and increase of sales (TDi Media, 2010). With temperate climates in Africa and the Caribbean, as well as South America, Harley-Davidson could provide alternative means of transport for these regions, given that it has a wide range of bikes that are fuel-efficient.

Most of the competition is gaining market share due to their low prices and high performance. A comparison of the same performance bikes of Harley and Polaris showed that while the two performed at par, Polaris products cost $1,650 less than Harley did (Taylor, 2012). It is important therefore that Harley looks into ways of improving the performance of its products while reducing their prices to keep up with the competition. Moreover, the technical problems experienced with its products should be alleviated. Investment in research and development will enable the company to produce fault-free products, lower operation costs, improve product performance as well as increase revenues with better sales.

A strong brand name, customer loyalty, and technical excellence remain to be Harley-Davidson’s most important strengths. However, with increasing competition in the domestic and international fronts and its reliance on the US market, there is a need for an expansion of the company to other markets such as India that are more welcome to motorcycles. Harley-Davidson still has a chance in the motorcycle industry if it can change its strategy, especially on pricing, while looking for ways of reducing its production and marketing costs.

References

GlobalData, (2012). Harley-Davidson, Inc. – Financial and Strategic Analysis Review.  Retrieved from: http://callisto.ggsrv.com/imgsrv/Fetch?banner=4d609cd7&digest=27b6b6d33026b58ef227e0025dda7d42&contentSet=SWOT&recordID=47405_GDAUT29887FSA

Harley Davidson, (2012).  Harley Davidson shows continued improvement.  Retrieved from:  http://www.harley-davidson.com/en_US/Content/Pages/HD_News/Company/news.html?article=en_US/News/1483_press_release.hdnews

Taylor, A., (2012).  The Hurdles at Harley-Davidson.  CNN Money – Fortune.  Retrieved from:  http://money.cnn.com/2012/10/03/autos/harley-davidson-polaris.fortune/index.html

TDi Media, (2010).  An analysis of Harley Davidson’s international business strategy.  TDI Media.  Retrieved from:  http://tdimedia.blogspot.com/2010/03/analysis-on-harley-davidsons.html