1. What is the nature of the international business environments Harley faces? What types of risks does the firm face?
The nature of the international business environments Harley faces are complex and varies due to cultural and regional needs of the diverse markets it competes in. This is shown by the differences of the sales mix in U.S. and Europe as revealed in exhibit 1 of the case. For example, in 2006, custom models accounted for 47.4% in U.S., whereas it accounted for 13.4% in Europe. In the U.S., other sales of models based on different criteria such as performance, touring, and standard accounted for 15.1%, 35.5%, and 2.1% respectively. Europeans have different preferences however. Performance, touring, and standard accounted for 41.4%, 26.1%, and 19.2% respectively. The reason Harley faces such diversification is clearly due to customer preferences and market demands. I believe that all four types of risks in international business are present: (1) Cross-cultural Risk: Harley operates in different facilities in the U.S., Brazil and Australia. Potential growth markets include Canada, Japan, Australia, Latin America (Brazil), India, and China. There are many cultural differences in languages, lifestyles, customs, and religion of the various countries.
These differences may lead to inappropriate business strategies and ineffective relations with customers. However, understanding the different markets would be beneficial to Harley. (2) Country Risk: Differences in the country’s political, legal, and economic systems may adversely impact firm profitability. Government intervention restricts market access and imposes many challenges on the company. As the case mentions, Brazil’s government initially “imposed high import tariffs that doubled the cost of bikes to Brazilian buyers”. To overcome the high costs of import taxes, Harley built a plant in Brazil. (3) Currency or Financial Risk: Risk of exchange rate fluctuations, inflation, and other harmful economic conditions create uncertainty of returns. The value Harley’s assets and liabilities may be substantially affected. (4) Commercial Risk: Harley can face this risk if the firm does not enter the potential markets at the appropriate time. Harley also faces competition from BMW, Yamaha, Honda, Suzuki, etc.
1. How can Harley benefit from expanding abroad? What types of advantages can the firm obtain? What advantages acquired abroad can help Harley improve its performance in its home market?
Harley can greatly benefit from expanding abroad. It can extend its product life cycle and create future brand awareness in other countries. One advantage Harley can obtain is its ability to reduce its costs of R&D, manufacturing, and service by sourcing plants in lower-cost locations such as Brazil in order to minimize distribution costs. Reducing the costs in other countries can greatly help Harley utilize their cash properly in the U.S., perhaps build even better motorcycles in the U.S. Harley could be the example of how internationalization optimizes cost structures, by minimizing expenses, leading to higher profits. Global expansion is vital to Harley’s sustainability. 2. How can Harley effectively compete with rivals from Japan and Europe? What strategies should management apply to grow the firm’s sales in those regions? The Harley image is a powerful weapon.
Advertising strategy should emphasize on its global branding, but hire local people. Harley can leverage global efficiencies in terms of technology, production, and distribution. However, tailoring motorcycle preferences to local markets is important. The heavyweight bikes are currently problematic in some markets. The European market is fragmented due to country differences and the diversity of European preferences. A functional rather than recreational focus has greater demand for the standard and performance motorcycle segments in Europe. However, if Harley were to collaborate with a Japanese partner, this mode of entry would enable market knowledge and branding economies with that partner. Harley Owners Group (HOG) has been one key to Harley’s success; therefore, Harley can initiate HOG in potential markets.
3. Competitors such as Lifan and Zongshen are beginning to emerge from China, where they enjoy competitive advantages like low-cost labor and extensive experience with emerging markets. How can Harley compete against such firms? Should Harley more aggressively pursue emerging markets such as Brazil, China, and India? If so, what strategies will help it succeed in those markets? Competing with Lifan and Zongshen, China’s emerging competitors, presents both challenges and opportunities. Harley can choose to take the more aggressive approach or implement a more defensive strategy. Either way, innovation and market research will be important. Harley must utilize its HOG marketing tool, continue to manufacture in low-cost markets to reduce costs, and customize products based on customer needs.
4. Evaluate Harley’s environmental sustainability initiatives in the evolving regulatory environment on global greenhouse gas. What advantages does Harley gain by attempting to produce environmentally safe and sustainable products? California, Taiwan, Japan, and various European countries are developing new standards aimed at GHG reduction on motorcycles. Most of Harley’s greenhouse gas (GHG) emissions derive from its manufacturing plants. “Management is moving to reduce pollution, energy and water usage, as part of an integrated sustainability strategy”. Harley is also preparing for the transition to a lower-carbon economy. In 2005, they launched a motorcycle-recycling program in Japan. These actions, and its recycling program help meet stakeholders’ expectations and strengthen their brand, which is in fact Harley’s competitive advantage.