Internationalization at Harley-Davidson

Internationalization at Harley-Davidson
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Internationalization at Harley-Davidson
One of the emerging trends across the world is the increasing number of big companies crossing borders to do business. As seen in the case study, Harley-Davidson joined this bandwagon following a constrained financial situation. However, the international market is characterized by tough competition from competitors such as Yamaha, Suzuki, and Kawasaki who have already established their niche globally. Equally, Harley faces a market which is dynamic regarding tastes and preferences of customers. While the company has been focusing on heavyweight bikes, the international market requires flexibility due to the varying customer preference. For instance, we are told that in Europe customers prefer performance bikes because the streets are narrow thus making the heavyweight bikes unsuitable for this market segment.
Regarding risks, the company faces a number of risks as discussed in the textbook. First, the company faces the cross-cultural risk. As noted in the textbook, this risk is as a result of the differences in customs, languages, values, lifestyle and religious beliefs (Cavusgil et. al., 2015). In this regard, Harley agents may find it difficult to communicate with customers in new territories due to language barrier thereby leading to wrong strategies and perhaps poor customer relations. Equally, Harley faces a political risk which results from legal and business regulations in the foreign markets.

A case in point from the case study is the Chinese law that prohibits motorbikes from using highways, and this may lead to low sales in China. The company may also face the foreign exchange risk due to the fluctuating nature of currencies, consequently lowering the value of the foreign investment (Fitzpatrick, 1983).
According to Contractor (2007), companies stand to benefit from international trade in many ways. One of the key benefits is the growth of foreign markets. Multinational companies like Harley can benefit from the improved business environment in developing countries such as Latin America. Foreign markets are also opportunities for products that have been saturated in the country of origin. This may have been the case for Harley because it seems that the market for heavyweight motorbikes had reached a point of maturity in the US leading to financial difficulties. Therefore, by opening up new markets in Brazil, China and the rest of the world, the company may be viable again. Another key benefit of going global is the increased profitability and spread of risk. According to Buckley & Casson (1998), most multinationals get a large share of their profits from abroad. He cites companies such as IBM and Facebook whose overseas turnover is larger than the home turnover. Equally, by investing abroad, Harley will spread the business risk because if one market segment records low sales, it will be balanced by another region that has recorded high sales. Venturing into the international market will also help Harley improve its local operations. As rightly noted in the textbook, international trade is synonymous with harsh competition and dynamic customers. While dealing with these challenges, firms stand to gain new knowledge that can be applied in the local market (Cavusgil et. al., 2015). For instance, the just in time strategy adopted by Harley is a skill they acquired from a new market. The company may also benefit from their experience in Europe where customer preferences are many as they will work to develop new models to meet those needs.
There are numerous ways in which Harley can compete with its competitors from Japan and Europe. According to Agarwal & Ramaswami (1992), there is no single strategy that applies to all the new territories. The two also note that different factors or conditions determine the choice of strategy for a given market. Things such as economic factors, regulations, the level of acceptance of the good or service and production costs all affect the choice of strategy. Considering that Harley’s biggest problem was rigidity, the company can utilize the product differentiation strategy to compete with products from Japan and Europe. This will require them to move away from their strategy of majorly producing heavyweight bikes to manufacturing all classes of motorbikes to cater for different classes of customers. It is also evident from the case that only a few people can afford to purchase Harley’s motorbikes. This calls for a review of the pricing strategy. For instance, the company should adopt a mix of high pricing and low pricing strategy so that they can compete with low-priced motorbikes from Japan and Europe while still maintaining their HOG customers. Besides the pricing and product differentiation strategies, the firm should also acquire more overseas subsidiaries and use the existing markets available to those companies to make more sales. Subsidiaries are suitable when entering new markets because they have ready information about the local customers which can be used to the advantage of the parent company to make more sales. A combination of all these strategies when well executed will allow Harley to compete effective with market leaders and increase its regional sales.
The company must also work hard to maintain its competitive advantage in China even in the wake of emerging competition from Lifan and Zongshen. According to Shaw (2015), successful firms maintain a competitive advantage by using various strategies. Cost leadership is the key strategy that the company will employ to maintain its competitive advantage. This implies that the company should continue manufacturing high-quality motorbikes, but at a very affordable price. Cost leadership is achievable through optimal utilization of resources, use of low-cost labor coupled with the right technology. Product differentiation will also come in handy in the Chinese market. As seen in the case, the company is keen on introducing motorbikes driven for leisure, and this will only be possible through product differentiation. Such class of motorbikes will set the company apart from Lifan and Zongshen. Once they identify the customers who are interested in the new model, they should reach out for them thus maintaining the competitive advantage.
To get a wider market niche, the company should also explore markets in Brazil, China, and India. Recent economic reports have shown that these markets have huge potential markets despite the marketing and economic challenges facing them. For this reason, this market segment cannot be ignored. Since Harley wants to obtain large market segment in this region, the company should adopt strategies such as alliances and defensive strategies. By joining alliances with companies in the same line of business, the company can easily gain competitive advantage. For instance, in countries like India where trade barriers are preventing the company from making good sales, the company should look for local partners who will sell their products on their behalf depending on the agreed terms. A defensive strategy, on the other hand, will give the firm room to distance itself from competitors, leading to the creation of a competitive advantage.
Harley like many other companies has realized the importance of environmentally sustainable manufacturing methods. Aside from being a regulatory requirement, the company says that responding to climate change is in line with its shareholder’s expectations. That is why the company is working to reduce pollution and saving on water and energy. This move is also in line with international best practices because other countries such as Japan are adopting the greenhouse gas reduction methods. The decision to produce environmentally secure and sustainable goods make a firm more likable. Since most consumers are mindful of the environment, Harley will receive a good rating from customers and enhance its reputation. Consequently, the company’s sustainable action will attract more customers leading to improved sales.
Recycling is also a form of sustainable production, and the company as mentioned in the case has opened a recycling plant in Japan. Recycling cuts on wastage and saves on costs. The company’s decision to switch to a more efficient manufacturing process that saves water and energy consumption will equally reduce production costs. According to Shrivastava (1995), companies like Harley that practice green manufacturing may also benefit from tax incentives advanced by both the local and federal governments. He goes on to say that sustainable production encourages teamwork. When staff collaborates to implement safe and sustainable methods they create a bond that is beneficial to the company thus improving profitability. In the long-run, Harley will be cost effective, non-dependent on external factors, unlike its competitors, positioning the company for more profits in the future.
References
Agarwal, S., & Ramaswami, S. N. (1992). Choice of foreign market entry mode: Impact of ownership, location and internalization factors. Journal of International business studies, 23(1), 1-27.
Buckley, P. J., & Casson, M. C. (1998). Analyzing foreign market entry strategies: Extending the internalization approach. Journal of international business studies, 29(3), 539-561.
Cavusgil, S. T., Knight, G. A., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2015). International business: The new realities.
Contractor, F. J. (2007). Is international business good for companies? The evolutionary or multi-stage theory of internationalization vs. the transaction cost perspective. Management International Review, 47(3), 453-475.
Fitzpatrick, M. (1983). The definition and assessment of political risk in international business: A review of the literature. Academy of Management Review, 8(2), 249-254.
Shaw, K. (2015). Foreign Market Entry Strategies. China-USA Business Review, 395.
Shrivastava, P. (1995). The role of corporations in achieving ecological sustainability. Academy of management review, 20(4), 936-960.