Harley Davidson is an iconic American motorcycle manufacturer with a rich history dating back to 1903. Best known for its heavyweight cruiser and touring motorcycles, Harley Davidson has a loyal customer base and strong brand recognition. The company has a long history of successful marketing and product innovation, which has helped it maintain its position as a market leader in the heavyweight motorcycle segment.
Despite being the leading motorcycle manufacturer in the U.S., with 31.1% of the market share, Harley Davidson faces several challenges that threaten its position in the market. These challenges include intensifying competition, declining sales in key markets, and an aging customer base. To stay ahead of these challenges, Harley Davidson must continue investing in new product development and marketing initiatives that appeal to a broader range of customers.
This Harley Davidson SWOT analysis breaks down the company’s strengths, weaknesses, opportunities, and threats. Investors and other stakeholders can use this information to understand the company better and make more informed decisions about its future.
Bottom Line Up Front
Harley Davidson is a leader in the heavyweight motorcycle industry and has been for many years. It stands out as a brand that’s synonymous with quality, strength, and power. While the company has had its challenges in recent years, it’s to maintain a strong presence in the market and continues to be one of the most popular motorcycle brands.
Harley Davidson Company Overview
Harley Davidson has its headquarters in Milwaukee, Wisconsin. Its founders, William Harley and Arthur Davidson, started the company in 1903, intending to “build the best-motorized bicycles in the world.” Over the years, Harley Davidson has become an icon of the American motorcycle culture, known for its heavy cruiser and touring motorcycles.
The First World War played a significant role in Harley Davidson’s success. The company supplied 20,000 motorcycles to the U.S. military, which significantly increased its brand visibility and helped it establish a strong reputation for quality and durability. In the post-war period, Harley Davidson’s main competitors were British manufacturers, who had a virtual monopoly on the U.S. market. The company gained market share by positioning itself as an “American” company and appealing to patriotic sentiments.
In the ’70s, the company wasn’t just selling motorcycles; it was selling a lifestyle. And that proved to be a very successful marketing strategy as Harley Davidson became the best-selling motorcycle brand in the United States. The company remains a crucial player in the global motorcycle market with a 4.4% share on a value basis.
The company went public for the first time in 1965, but the American Machine and Foundry Company (AMF) acquired a majority stake just a few years later. AMF’s company ownership proved disastrous as quality control problems and poor management decisions led to a decline in sales.
In 1981, a group of 13 Harley Davidson executives led a buyout of the company from AMF. This buyout was a turning point for Harley Davidson. The new management team embarked on a program of quality improvements and cost-cutting measures that helped to revive the company’s fortunes.
It went public again in 1986 and currently trades on the New York Stock Exchange under the ticker symbol HOG. Institutional investors hold 92.65% of the shares, with Vanguard Group, BlackRock, H Partners Management, and BlackRock Fund Advisors being some of the largest institutional investors.
Harley Davidson Revenue Model and Financial Performance
Harley Davidson’s primary source of revenue is the sale of motorcycles. The company also generates revenue from selling motorcycle parts and accessories, general merchandising, licensing, and financial services. In 2021, Harley Davidson’s total revenue was $5.336 billion, up 32% from the previous year. Motorcycles accounted for $3.477 billion in total revenue, while parts and accessories sales cost $742 million.
Revenue from general merchandising and licensing was $228 million and $38 million, respectively. Other services, including financial and dealer services, brought in $55 million. It’s important to note that while the 2021 financial performance was strong, it was partially due to easy comparisons with the 2020 results when the pandemic caused a significant decline in sales. The company’s sales in 2020 were the lowest in 20 years as the pandemic forced people to stay home and cut back on discretionary spending.
According to Motorcycles Data (McD), Harley Davidson’s global motorcycle sales recovered 7.8% in 2021 to 194,252 units. The U.S remains the company’s largest market, accounting for 126,276 in total sales, followed by Europe, the Middle East, and Africa (EMEA) with 31,101, the Asia Pacific with 25,090, Canada with 8,137 sales, and Latin America with 3,652 sales. Still, it hasn’t recovered to its pre-Covid levels. In 2019, Harley Davidson sold 218,273 motorcycles globally.
FY2021 also marked an end to the first year of the Hardware Five Year Strategic Plan announced in February 2021. The company’s primary goal is to increase profitability and see growth of low double-digit EPS through 2025. Its full-year GAAP diluted EPS increased to $4.19, up by $4.18 compared to 2020. Adjusted diluted EPS reached $4.21, up from $0.63 in 2020. The company expects a 5% to 10% HDMC revenue growth in 2022 with an operating margin of 11% to 12%.
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Harley Davidson SWOT Analysis
The following is a detailed SWOT analysis of Harley Davidson.
- Strong Brand Equity
Harley Davidson is one of the most recognizable brands in the world. The company has a rich history dating back to 1903, and its motorcycles are synonymous with the American way of life. According to a 2018 consumer survey by Statista, Harley Davidson ranked as the brand with the most loyal customers in the United States. Given the company’s brand equity, it can charge premium prices for its motorcycles.
- Diversified Product Portfolio
Harley Davidson offers a wide range of motorcycles that cater to different market segments. The company’s product portfolio includes cruiser, Sportster, Dyna, Softail, V-rod, Touring, and CVO motorcycles. This diversification helps mitigate the impact of economic cycles on the business and allows Harley Davidson to tap into new growth opportunities.
- Strong Financial Performance
Harley Davidson is a financially strong company with a healthy balance sheet. As of 2021, the company had $2.004 billion in cash and $4.596 billion in long-term debt. Despite a pretty high net debt to equity ratio of 3.33, Harley Davidson’s interest coverage ratio for fiscal 2017 to 2021 averaged a healthy 21.3x. This ratio is relatively lower than Honda’s (HMC) 51.7x and Suzuki’s (SZKMY) 36.4x. Harley Davidson’s strong financial position gives it the flexibility to invest in new growth opportunities and weather economic downturns.
- Wide Network of Dealerships
Harley Davidson has a network of over 1,400 dealerships in more than 100 countries. This broad geographic reach allows the company to tap into new growth markets and better serve its existing customers. The company’s dealer network is also a crucial source of competitive advantage as it gives Harley Davidson a better understanding of customer preferences and helps the company quickly respond to changes in the market.
- Strong Manufacturing Capabilities
Harley Davidson has a world-class manufacturing facility in York, Pennsylvania, with an annual production capacity of approximately 450,000 motorcycles. The company also has assembly operations in Brazil, India, and Thailand. These manufacturing capabilities give Harley Davidson the scale and efficiency to produce motorcycles at a lower cost than its competitors.
- Experienced Management Team
Harley Davidson boasts an experienced management team with a deep understanding of the motorcycle industry. The company’s CEO, Jochen Zeitz, has over 30 years of experience in the automotive industry. He previously served as Puma SE’s CEO and a supervisory board member at Volkswagen AG. Under Zeitz’s leadership, Harley Davidson embarked on a strategic transformation to revive growth.
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- Strong Research & Development Capabilities
Harley Davidson invests heavily in research and development to bring new products to the market and stay ahead of the competition. In 2019, the company launched LiveWire, a new electric motorcycle. Harley Davidson also has a strong portfolio of patents, providing a competitive advantage.
- High Dependence on the U.S. Market
Harley Davidson is heavily dependent on the United States for sales. In 2021, the U.S. accounted for 65% of the company’s total revenue. This dependence exposes Harley Davidson to the risks associated with the health of the U.S. economy. A slowdown in the U.S. economy could lead to a decline in demand for Harley Davidson’s motorcycles, impacting the company’s financial performance.
- Low Market Share in the Growing Asian Markets
Harley Davidson has a very low market share in the Asia-Pacific region, which is the world’s largest and fastest-growing motorcycle market. In 2021, Harley Davidson only sold 25,090 motorcycles in the Asia-Pacific region, accounting for less than 1% of the region’s total motorcycle sales.
- Declining Number of Baby Boomers
One of Harley Davidson’s key customer segments is baby boomers. This demographic is gradually declining in the United States, leading to a decline in demand for Harley Davidson’s motorcycles. As this key customer segment declines, the company will need to find new ways to grow its business.
- Miscalculated Entry into the Electric Motorcycle Market
2019 was quite late for Harley Davidson to enter the electric motorcycle market. The company’s LiveWire electric motorcycle was met with mixed reviews and failed to gain traction with customers. This miscalculation put Harley Davidson behind its competitors, who had already established a strong presence in the electric motorcycle market.
- High Costs
The Harley Davidson brand is a premium brand with high costs. The company’s prices are generally higher than its competitors. This high-cost structure puts Harley Davidson at a disadvantage in terms of price competition. The company will need to reduce its costs to compete more effectively on price.
- Minimal Success outside Core Products
With an aging customer base in the United States, Harley Davidson has been trying to expand its product lineup to attract new customers. However, these efforts have largely been unsuccessful. The company’s foray into the electric motorcycle market is a prime example of this failure. Harley Davidson will need to reevaluate its strategy for expanding its product lineup if it wants to be successful in the future.
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- Growth of the Electric Motorcycle Market
According to research by Markets and Markets, the electric scooter and motorcycle market is projected to grow at a CAGR of 33.1% from 2021 to 2027. With the launch of its LiveWire electric motorcycle, Harley Davidson is well-positioned to capitalize on this growth opportunity.
- Expansion into Emerging Markets
Emerging markets are a key growth area for the motorcycle industry. As these markets develop, a growing middle class with more disposable income will grow. For instance, China is the world’s largest market for motorcycles, with sales of 17.9 million units in 2021. It could be a key growth market for Harley Davidson in the future as the demand for motorcycles in China increases.
- Expansionism of Demographics
Harley understands that to stay afloat, it has to adjust its market. The company’s target demographics aren’t just baby boomers but also Generation X and millennials. By focusing its marketing efforts on these new demographics, Harley Davidson can expand its customer base and grow its business.
- Sell Directly To Its Customers
Cutting the middleman is a key opportunity for Harley Davidson. The company can sell its motorcycles directly to its customers like Tesla. Eliminating dealerships will allow Harley Davidson to reduce costs and price its motorcycles more competitively.
- Strategic Partnerships
Harley Davidson can form strategic partnerships with other companies to expand its reach. For instance, the company has a partnership with Marvel Entertainment. This partnership resulted in the development of a line of co-branded merchandise. Further partnerships could help Harley Davidson grow its business.
- Increasing Competition
Harley Davidson faces increasing competition from both domestic and foreign competitors. Harley Davidson’s main competitors in the United States are Indian Motorcycle and Victory Motorcycles. These companies are aggressively trying to gain market share from Harley Davidson. Moreover, Harley Davidson faces competition from Japanese motorcycle companies such as Honda and Yamaha.
- Economic Uncertainty
The global economy is currently facing significant uncertainty. This economic uncertainty could hurt Harley Davidson’s business. For instance, a recession could cause a decrease in demand for motorcycles. Moreover, the high cost of gasoline could also lead to a decline in motorcycle sales.
- Rising Costs
Harley Davidson’s costs are rising due to the increasing price of steel. The company’s main raw material is steel, and the price of steel has been rising in recent years. This cost increase could hurt Harley Davidson’s margins and make it difficult for the company to compete on price.
- Regulatory Uncertainty
Harley Davidson operates in a highly regulated industry. The company must comply with various environmental, safety, and emissions regulations. Any changes to these regulations could significantly impact Harley Davidson’s business. For instance, if implemented, the Trump administration’s proposed rollback of emissions standards could hurt Harley Davidson.
- Changes in International Trade Policy
Suppose the United States enacts changes to its international trade policy. In that case, Harley Davidson could be negatively impacted since the company relies on imported parts and materials to manufacture its motorcycles. For instance, if the United States imposes tariffs on imported steel, Harley Davidson’s costs would increase. Other changes, such as the withdrawal from NAFTA or the renegotiation of trade agreements, could also impact Harley Davidson.
Harley Davidson Competitive Strategy
Harley Davidson uses differentiation as its main competitive strategy. The company differentiates itself from its competitors by offering a unique product and brand experience. Its long history as an American icon and its focus on customization gives it a competitive advantage. Harley Davidson also has a strong brand and a loyal customer base. These competitive advantages allow Harley Davidson to charge a premium price for its motorcycles.
Some of its competitors include;
- Hero MotorCorp
- TVS Motor
Competing in the global market, some of these competitors have a more significant footprint than Harley Davidson. However, the company’s competitive differentiation strategy has allowed it to remain successful.
Harley Davidson SWOT Analysis (FAQs)
Question: What is the target market for Harley-Davidson?
Answer: The main target market for Harley-Davidson is middle-aged adults, both male and female. However, the company has been working on expanding its appeal to younger riders in recent years. Most of these age groups are in the United States, but Harley-Davidson also has a large international following.
Question: What is Harley-Davidson’s strategy?
Answer: The company’s strategy is to expand into Adventure Touring and Electric vehicles while continuing to grow its core business. In addition, it intends to broaden its customers, tailoring its products and marketing to attract more women and young adults.
Question: What is the brand personality of Harley-Davidson?
Answer: Harley Davidson’s brand portrays a rebellious, independent, and rugged personality. The company’s advertising often focuses on the freedom and rebelliousness associated with riding motorcycles. This approach resonates with its target market of middle-aged adults who may be seeking to recapture some of the spirits of their youth.
As one of the most iconic motorcycle brands in the world, Harley Davidson has a lot going for it. However, the company faces significant challenges that could impact its future success. Rising competition, regulatory uncertainty, and changes in international trade policy are all potential threats to the company. Nevertheless, Harley Davidson’s strong brand and loyal customer base give it a competitive advantage that should allow it to continue to be successful in the future.
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