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Global Marketing

Harley Davidson: Globalizing to Survive

Harley Davidson

Photo Credit: Photo by Mikes Photos from Pexels

Founded in 1903, Harley Davidson is an iconic American motorcycle brand with a rich history and loyal brand following. The company is known for its heavyweight motorcycles with engine displacements greater than 700 cm³ but has broadened its product offerings to mid-sized and smaller motorcycles in order to remain competitive. Due to the passion that Harley Davidson’s community has for the brand, it has also been able to successfully licensed a wide range of products, including apparel, home decor, toys, accessories, and more.

In more recent years, the company has been challenged by the changes in the sociocultural environment of its primary market, the United States, and the legal environment internationally and domestically, in the form of trade barriers. In reference to this shift in US market demand, an article in The Guardian noted that “gas-guzzling hogs” are not appealing to younger consumers and the core Harley Davidson community is aging out of the market. The company has also faced challenges with trade tariffs in its attempts to expand outside of the United States market. In order to get around some of these tariffs, Harley Davidson has opened assembly plants in India to avoid 100% of tariffs and Brazil to take advantage of the free trade zone. More recently the company is facing the potential impact of steel tariffs on United States imports, which according to the investment firm, Wedbush Securities, could add $30m to Harley Davidson’s costs.
India Thailand Locator
In addition to the challenges that Harley Davidson is facing in its domestic market and in trying to keep most factories in the United States, the company is seeing increased opportunities internationally. Countries that are becoming more developed represent an increasing market of demand and the improved infrastructures of these countries are allowing for better distribution and usage of motorcycles. The company has taken advantage of some of these opportunities with the opening of factories and stores in both Brazil and India over the past few years. A recent article in The Times of India explained that Harley Davidson’s opening of new stores in the Northeast region of India was a strategic choice based on the higher demand for fashion in the selected locations and the upcoming highway that will connect this region to Thailand through Imphal.

Harley Davidson recently announced the closing of its Kansas City, MO factory, one of its five factories in the United States. The timing of this factory closing being close to the opening of Harley Davidson’s Thailand plant and recent steel tariffs has brought a lot of publicity to the story. Many have claimed that the company is offshoring these jobs and are blaming Trump for the impact of recent steel tariffs and for pulling the United States out of the Trans-Pacific Partnership last year. Harley Davidson has stated that the factory closing is due to excess capacity in the United States and is unrelated to the opening of a Thailand factory, which was a decision made to avoid the 60% import tariff on motorcycles to Thailand and to gain tax breaks when selling to neighboring countries.
Harley-Davidson shop. - Budapest District V
As an iconic American brand, Harley Davidson is currently in the difficult position of trying to grow the foreign market it sees as crucial to the company’s survival while retaining its image in its domestic market. The United States market for heavyweight motorcycles is shrinking, international demand for Harley Davidson products are growing, and domestic operations are becoming less profitable. Harley Davidson anticipates a 50% growth in international sales by 2027 and sees its Thailand factory as a key resource in selling to the Southeast-Asian market. However, the loyal community that Harley Davidson has relied on in building its brand and staying in business for over a century looks unfavorably upon shifting jobs and operations internationally.

Harley Davidson’s struggle is one that many American brands are facing or will soon be facing due to shifting sociocultural, economic, legal, and political environments. There is an increasing number of countries where demand for many products is growing due to economic improvements and sociocultural changes in preferences.  Additionally, legal and political factors that impact trade are creating an environment in which it is often more profitable to manufacture outside of the United States in order to sell into these growing markets. As more traditional American brands continue taking advantage of these opportunities, one thing to watch will be the whether any brands attempt to compete by keeping manufacturing in the United States and if America will begin to care enough to significantly impact sales.

References

https://www.theguardian.com/us-news/2018/mar/10/harley-davidson-tariffs-trump-motorcycles

https://timesofindia.indiatimes.com/business/india-business/harley-brand-stores-skip-metros-for-north-east/articleshow/63673938.cms

https://www.bizjournals.com/kansascity/news/2018/03/19/harley-davidson-union-donald-trump-appeal-letter.html

http://www.industryweek.com/leadership/us-leaving-tpp-spurred-harleys-plans-thailand-plant

https://www.washingtonpost.com/national/not-real-news-missouri-plant-closure-not-tied-to-trump/2018/04/27/1571d288-4a6c-11e8-8082-105a446d19b8_story.html?noredirect=on&utm_term=.911e93feb1bd