1. If you were CEO of Harley-Davidson, how would you compare the advantages and disadvantages of using exports, joint ventures, and wholly-owned subsidiaries as ways of expanding international sales?

2. Given Harley’s legacy of quality and craftsmanship, what complications might the Chinese business environment pose for the firm to manufacture there?

3. Now that more Harley bikes are being built outside the US than ever before, what qualities of global managers should the company seek for its assembly plant management?

Harley-Davidson celebrated a century in business with a year-long International Road Tour. Th e party culminated in the company’s hometown, Milwaukee. Harley is a true American success story. Once near death in the face of global competition, Harley reestablished itself as the dominant maker of big bikes in the United States. However, success breeds imitation and Harley once again faces a mixture of domestic and foreign competitors encroaching on its market. Can it meet the challenge?

Harley’s Roots

When Harley-Davidson was founded in 1903, it was one of more than 100 fi rms producing motorcycles in the United States. Th e U.S. government became an important customer for the company’s high-powered, reliable bikes, using them in both world wars. By the 1950s, Harley-Davidson was the only remaining American manufacturer.

But by then British competitors were entering the market with faster, lighter-weight bikes. And Honda Motor Company of Japan began marketing lightweight bikes in the United States, moving into middleweight vehicles in the 1960s. Harley initially tried to compete by manufacturing smaller bikes, but had diffi culty making them profi tably. Th e company even purchased an Italian motorcycle fi rm, Aermacchi, but many of its dealers were reluctant to sell the small

Aermacchi Harleys.

Consolidation and Renewal

American Machine and Foundry Co. (AMF) took over Harley in 1969, expanding its portfolio of recreational products. AMF increased production from 14,000 to 50,000 bikes per year. Th is rapid expansion led to signifi cant problems with quality, and better-built Japanese motorcycles began to take over the market. Harley’s share of its major U.S. market—heavyweight motorcycles— was only 23%.

A group of 13 managers bought Harley- Davidson back from AMF in 1981 and began to turn the company around with the rallying cry “Th e Eagle Soars Alone.” As Richard Teerlink, former CEO of Harley, explained, “Th e solution was to get back to detail. Th e key was to know the business, know the customer, and pay attention to detail.” Th e key elements in this process were increasing quality and improving service to customers and dealers. Management kept the classic Harley style and focused on the company’s traditional strength—heavyweight and super heavyweight bikes.

In 1983, the Harley Owners Group (H.O.G.) was formed; H.O.G. membership now exceeds one million members and 1,400 chapters worldwide. Also in 1983, Harley-Davidson asked the International Trade Commission (ITC) for tariff relief on the basis that Japanese manufacturers were stockpiling inventory in the United States and providing unfair competition. Th e request was granted and a tariff relief for fi ve years was placed on all imported Japanese motorcycles that were 700 cc or larger. By 1987 Harley was confi dent enough to petition the ITC to have the tariff lifted because the company had improved its ability to compete with foreign imports. Once Harley’s image had been restored, the company began to increase production. Th e fi rm opened new facilities in Franklin, Milwaukee, and Menomonee Falls, Wisconsin; Kansas City, Missouri; and York, Pennsylvania; and opened a new assembly plant in Manaus, Brazil.

In the 1980s, the average Harley purchaser was in his late thirties, with an average household income of over $40,000. Teerlink didn’t like the description of his customers as “aging” baby boomers: “Our customers want the sense of adventure that they get on our bikes. . . . Harley- Davidson doesn’t sell transportation, we sell transformation. We sell excitement, a way of life.” ……………..