Harley-Davidson Plans to Lay off 200 Workers

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- Product development

If you haven’t developed any new and exciting products or services that capture the interest of your customers in the last two years, you could be headed toward stagnant or even declining revenues. The competition is active and your customers’ preferences are constantly changing. New product ideas don’t just appear spontaneously, and research, prototyping, testing and launching can’t happen without a budget.

Continuous expansion of product offering is an interesting strategy to boost the sale. As seen in Polaris, which include both Victory and Indian motorcycles, increased 94 percent in the 2013 fourth quarter to $68.8 million due to the initial shipments of the new model year 2014 Indian motorcycles. Consumer retail demand for the Polaris motorcycle division was up over 100 percent with strong initial retail sales for the three all-new 2014 Indian Chief models and continued strong demand for Victory motorcycles with retail sales up in the mid-single digits percent range in North America[6].

- Pricing strategy

In this case, what the motorcycle manufacturer could do is reduce its model prices, and risk its margins. Much of the rest of the industry, such as Polaris, maker of the Indian and Victory motorcycles, has resorted to discounting. Polaris Industries (PII), parent of Indian Motorcycle, is offering some models for no money down, with a complimentary five-year warranty and a $1,500 credit for accessories[7]. This strategy is working. Polaris reported its motorcycle sales were up 67% for the full year compared to 2014[8], fueled by strong demand for Indian, Victory and Slingshot bikes in 2015.

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Assumptions and Comparative Analysis

Price Assumptions

My estimated number on costs for each strategy and increased sales will base on reliable sources of Polaris Industries, which is a competitor of Harley-Davidson, such as annual report and other dependable data from the internet, in order to make this report as verifiable as possible. The first reason that I chose Polaris because the Polaris motorcycle portfolio is focused on cruising and touring bikes, many of which compete with Harley-Davidson's motorcycles. Second, Polaris’s total revenue ($4.7 billion) is similar to Harley-Davidson’s total revenue ($5.3 billion) in size. The last reason is the fact that while 2015 was a difficult year, Polaris did manage to grow market share and increased sales for the sixth consecutive year[9]. Moreover, Polaris motorcycle sales growing 67% last year and Harley-Davidson's falling almost 2%. If those trends continue, Polaris will be selling more motorcycles than Harley in just three-and-a-half years[10].

Strategy

Estimated cost

Estimated sales increase

in dollars

Estimated sale increase in percentage

1. Repositioning

$316,700,000

2,595,609,500*

55%

2. Product development

$166,400,000

2,925,959,800**

62%

3. Pricing strategy

$63,340,000

3,161,924,300***

67%

Estimated costs on repositioning and product development are based on Polaris annual report 2015[11] on operating expenses section. I couldn’t find exactly number of how much Polaris spent on its pricing strategy. However, a research that I have studied shows the estimated allocation of pricing strategy is approximately 20% of the total marketing budget[12]. I generally multiply 0.2 to marketing expense, which is $316,700,000, and the result for estimated cost for pricing strategy is $63,340,000.

*According to Polaris’s annual report in 2015, revenue is $4,719,290,000, I will use this number as a base for projected an increased sale for Harley-Davidson. Polaris acquired and then repositioned Indian Motorcycle, which resulted in 55% increase on sale[13]. Hence, if Harley choose to reposition its brand, an increased sale would be $4,719,290,00 × 0.55, which resulted in $2,595,609,500.

**Following the launch of Polaris’ three Indian motorcycles- Chief Vintage, Chief Classic and Chieftain, sales of the company’s motorcycle division surged by a whopping 94 percent. Since Polaris did not offer a specific breakdown of numbers for each brand[14], I basically have to divide 94 percent by three in order to get 31 percent as a benchmark for an average increased sale in Harley-Davidson motorcycle if the company launches a new model. Let’s assume that Harley company will launch at least two new models after investing in product development, so $2,925,959,800 is the result of [(0.31×2) × $4,719,290,000].

***An increase revenue on pricing strategy based on the success strategy of Polaris in section 2. Therefore, $3,161,924,300 came from 0.67×$4,719,290,000.

Comparative Analysis

Strategy

Pros

Cons

1. Repositioning

Stronger competitive position One of the main goals of product repositioning is to improve the brand’s perceived positioned relative to competition. Thus, a successful repositioning of a product should create an ongoing market advantage.

Improved sales

Probably the other main goal of repositioning is to generate additional sales through a more relevant offering, which is more effectively communicated, perhaps to a different target market.

Lose existing sales

If a product is repositioned, then it moves away from its current positioning. It is likely that a significant proportion of any existing sales may be lost because the product will no longer be deemed suitable for the existing customers.

Cost and time

Repositioning requires the changing of many consumers’ understanding and perception.