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Harley-Davidson
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SITUATIONANALYSIS
ArthurandWalterDavidsonandWilliamHarveyformtheHarleyDavidsonCompanyin1903.
Firstmajor
innovation
was
the
V
Twin
Engine
in
1909
Becomestheworldslargestmotorcyclecompanyin1918producing28000motorcycles.
Image
and
lifestyle
marketing
in
late
1930s
from
previous
campaigns
of
utilitarianvehicles.
AmericanmakeandmanufactureremainedoneofitsgreatestUSPs
JapanesemotorcyclemanufacturersledbyHondaenterUSmarketin1959
OtherJapanese
firms
included
Kawasaki,
Yamaha
and
Suzuki
and
they
targetedoldermalesandyoungerwomen.
In1965,1outofeverytwomotorcyclessoldinUSAwasaHonda.
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SITUATIONANALYSIS
HarleyDavidsongoespublicin1965toraisecapitalandexpandproduction.
Acquiredin
afriendly
takeover
by
AMF
Productionwasincreasedsubsequentlybutqualitysuffered.
BrandnewHarleyssittingonthedealershipfloorhadtohavecardboardputdownbeneaththemtosopuptheleakingoil.
HondaintroducestheGoldwing,a1000ccmotorcycleandisfollowedbyKawasaki.
HarleyDavidsonsshareinitstraditionalstrongholdofheavyweightbikesreduces
Between1970and1980HarleyDavidsonssharedeclinesby80%.
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SITUATIONANALYSIS
In1980,thereisabuybackofcompanysharesusingdebt.
Inthe1980sbenchmarkingagainstHondabegins.
HarleyDavidson
adopts
some
Japanese
managerial
styles
and
did
three
mainthings:
QualityCircles
Materialsas
Needed
(MAN)
StatisticalOperatorControl(SOC)
HarleyDavidsonseekstariffprotectionfromthegovernmentin1983toprotectitfromcompetition.
Changesinoperationsleadstoa50%productivityimprovementand80%increaseininternationalrevenues.
AsksUSGovernmenttolift5yeartariffprotectiononeyearinadvance
in1987.
In1989thefirmgoespublicagain
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EMERGENCEOFHARLEYDAVIDSON
OWNERSGROUP
Formedin1983toactivelyinvolveownersofthebikes
Industryslargest
motorcycle
enthusiast
organization
with900000membersattheendof2004.
InterestamongwomanriderswasgeneratedbyThe
Ladiesof
Harley
TeerlinkresignsasCEOin1997andissucceededbyJeffreyBleustein.
Revenuesgrown
from
$1.5
Billion
in
1996
to
$5Billion
in2004.
NetIncomegrewfrom$143Millionto$890Millionin
thesame
period.
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PREPARINGFORTHENEXTCENTURY
MedianageofHarleycustomerswas35yearsin1987and47yearsin2004.
Thiswas
because
most
of
the
loyal
customers
were
baby
boomers.
HarleyDavidsonacquiredBuellcompletelyin1998
Thesewere
cheaper
racing
bikes
compared
to
Harleys
and
cateredtoyoungerbikers.
ColdDayinHell
IntroducesThe
V
Rod,
a110
horsepower
motorbike
with
awater
cooledengine.
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PREPARINGFORTHENEXTCENTURY
Numberofbasicrulesgoverningthefunctions
Thebenchmarkforthevariousoperationneededtobechanged
Thelatest
production
techniques
needed
to
be
incorporated
Betterinventorymanagement
FocusofR&Dneededtobeincreased
TheRiders
Edge
and
Rental
Program
In1999Harleyoffersarentalprogramtohookcustomers
Surveysshowedthat32%ofcustomersrentingaHarleybikeboughtoneafterwardsand37%plannedtobuywithinayear.
RidersEdgeprogramwasamotorcycleridinglessonfor4daysandapproximately70%oftheparticipantsboughtabikewithin18
months.
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BENCHMARKINGHONDA
Parameter Honda HarleyDavidson
Productionline Streamlinedandorganized
productionlines
Clutteredandunorganized
Structure Minimizedpaperwork Hierarchical
and
bureaucratic
InventoryControl JustinTimesystemofinventory
controlandbikesbuiltorder
2million$computerized
inventorysystem
Management
Bettermanagement Quantity
targets
Multiple
qualitychecks
Measurementoferrorsin
production
Quality
95%passed
quality
inspection 50%
passed
quality
inspection
Productivity 30%higher Low
Valueadded
per
employee
23times
Suzuki
and
Yamaha Low
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BENCHMARKINGHONDA
Initiative Description Objective HRInterventions
Employee
InvolvementWorker
participationin
qualitycircles
Employee
Empowerment
JobEnrichment
Flatorganization
structure
Jobdescriptionsand
responsibilities
MANprogram
Just
in
Time
InventoryControl
practice
Increaseliquidity
Highlightsquality
problems
SOC
Trainingemployees
todetect,trackand
correctquality
problems
Minimize
productionsdefects
Incentivizeworkers
toimplement
initiatives
Payfor
performanceEmployeeincentive
programs
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BENCHMARKINGHONDA
JobRationalization Eliminatedauditor
positions(Sr.V.P.)
Maximizevalue
addedper
employee
Teambasedwork
culture
LeadershipInstitute Homogenousacross
hierarchiesand
voluntaryin
nature
Transformationtoa
learning
organization
Payfor
performance
Communicatingfairnessand
uniformity
Supplementary
Training
Interrelations
betweenproducts,
sales,profits
Nontechnical
explanationsof
financialprocesses
VisionMission
alignment
Visioncascaded
downto
all
levels
to
improvelineof
sightandownership
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Typicalmanagementpracticesincluded:
Corporatemanagementsfocusmostlyon
shortterm
returns
Lackofemployeeempowerment
Highinventoriesofpartsleadingtolow
liquidity
&
reduced
productivity Beliefinquickfixesforproblems
Highbreakevenpointthatleftthe
companyvulnerabletounpredictablemarket
fluctuations
Managementthatwokeuptoolateto
thethreatofforeigncompetitionbecauseof
the"itcan'thappenhere"syndrome
ContinuousImprovement
EagelmarkFinancialServices
ManagementInvolvement
in
Community
Development
CatalystforAction&Ideas
Listening
&
providing
hospitality CrisisIntervention(ThroughHOGsFlyn
Rideprogram)
ChangeinPeopleProcesseswithinthefirm
Changesintheperformancesystems
Empoweringemployees
MANAGEMENTTHEN
MANAGEMENT
NOW
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MARKETINGMANAGEMENT
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MoreEmphasis
On
MANUFACTURING
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S
W
OT
A
NA
L
Y
SI
S
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IMPACTSONTHEORGANIZATION
LOW
LOW HIGH
HIGH
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AMBIGUITYINTHEENVIRONMENT
FORHD
TheentryofJapaneselowcostproducers
TheLoss
of
the
market
share
Thesizeofthemarketpiehadincreased
AMFtake
over
Qualitystandardsandreliability
comparatively
lower Productivitywaslow
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NUMBEROFBASICRULES
GOVERNINGTHEFUNCTIONS
Thebenchmarkforthevariousoperation
neededto
be
changed
Thelatestproductiontechniquesneededtobeincorporated
Betterinventorymanagement
FocusofR&Dneededtobeincreased
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FLEXIBILITYOFOPERATION
DEPENDINGONSITUATIONS
Continuousimprovement
Moveto
ateam
based
approach
eg:
create
demandteam,productsupportteam
Complimentarychanges:
anew
reward
and
incentivesystem
AMOUNT OF UNCERTAINTY
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AMOUNTOFUNCERTAINTY
REMOVED
FROMTHE
ENVIRONMENT
EmergenceofHOG
Aloyal
customer
base
Alsoameanstogenerateinterestinthenew
marketsegments
Technologicalinnovations
Buell
Acquisition Productdiversification
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FUTUREPROSPECTS
ExpandalongtheValueChain
Grownew
products
&
services
Usenewdistributionchannels
Enternew
geographies
Addressnewcustomersegments(Modifythe
proven
product) Moveintoawhitespacewithanewbusiness
builtaroundthecapability
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CRITERIA
MarketAdvantage:IncreaseinthemarketsizeforHD
Harleyissuccessfulinselling400,000motorcyclesby2007
TheParentingAdvantage:HDbecomesthemostpreferredmotorcycleintheUS&otherpartsoftheworld
Annualearningsgrowthratesisinthemidteens
Feasibility:Harleyisabletoexpanditscustomerbase
Harleyattractsyoungerriders&womenasitscustomerbase
Accountability&
Flexibility:
Harley
is
able
to
sustain
the
changes&developnewstrategiesonanongoingbasis
UnitswithinHarley
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MARKETINGSTRATEGIES
OF
COMPETITORS
Honda
Intherecenttimesthefocushasbeenonexpandingtheirproduct
portfolio Venturedintotheoffroadsegmentaswell
Focusonthecustomization
Strategy
:
high
value
at
low
prices BMWmotorcylces
Openhouse,openthrottle
Heavyspendingontheadvertising.Havestartedfocusingononline
advertising
Advertisinginlifestyleandmassappealmagazinestofocusoncycleenthusiastpubs
Alaunch
of
record
5new
models
this
year
Guerrilla&eventmarketing
CUSTOMER DISSATISFACTION
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CUSTOMERDISSATISFACTION
ATHARLEY
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TECHNOLOGICALINNOVATIONS
Allthecompetitorsarefocusingonthedevelopmentofnewtechnology
Thefocus
is
on
developing
technology
catering
to
the
various
segments
100candbelow
Powerbikes
Sports&racingtechnologies
Focus
on
after
sales
services
has
also
increased:
aping
the
conceptoftheHOG
GROWTH STRATEGY FOR HARLEY
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GROWTHSTRATEGYFORHARLEY
Existing marketNew market
Marketpenetration
through
product
diversification
Developmentand
promotion
of
life
style
Existing market
Expandproductrange
anddeveloplowcost
productsand
capitalizeonthe
brandname
Movementtoglobal
marketsin
EuropeNew market
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FUTUREPROSPECTSFORHD
InternationalheavyweightmarketisgrowingandissignificantlylargerthantheU.S.heavyweightmarket
Europehas
the
largest
motorcycle
industry
Targetheavyweightandsportsmotorcycles(themarketisfourtimestheUSmarket)
BuildamotorcycleplantintheEuropeanbyusingstrategyallianceorjointventure
Reducetransportationcost
Increasecompanysinternationalexperience
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FUTUREPROSPECTSFORHD
TheimagebuiltinUSmightnotbesuitabletotheEuropemarket
Strategyalliances
is
suitable
in
this
case
since
the
company
cancreatevaluefromtransferringcompetenciesorsharing
resourcesbetweendiversifiedbusinessesinordertorealize
economiesof
scope.
Theyshoulddoresearchonthemarkets:learnfromtheinitialdebaclesintheEuropemarket
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ADAPTIVEORIENTATION
Hyperturbulent
RenewingTransformational Reactive
Satisfying
(HarleyDavidson)
SluggishThermostat
EnvironmentalStability
Stable
Adaptive
orientationHigh Low
HOW HD COULD GO ABOUT
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HOWHDCOULDGOABOUT
THECHANGE
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POTENTIALGROWTHPATH
Theabovefuturegrowthstrategycanbedoneoverthecourseofthreeyears
Firstyear
:Target
new
markets
and
develop
infrastructure
there
Secondyear:UtilizethesecondarymarketliketheHOGto
expandits
customer
base
Takeasurvey
UtilizetheHOGcustomerblogasasourceofdata
Thirdyear:Modifyproductsaspertheneedsofthemarket
Developlesspowerfulbikes
ORGANIZATION CULTURE EVOLUTION
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ORGANIZATIONCULTUREEVOLUTION
Need for action
Consensualculture
Hierarchicalculture Rationalculture
Development/
ideologicalculture
Long Term Short Term
DegreeOf
certainty
High
Low
PLANNEDORGANISATIONAL
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O G S O
CHANGESTRATEGIES
Participativeevolution
ForcedEvolutionDictatorial
Transformation
Charismatictransformation
Long Term Short Term
Incremental ChangeStrategies
TransformationalChange Strategies
Collaborativemodes
Coercivemodes
TIME FRAME
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ROLESTOBEPLAYEDBY
THETOP
MANAGEMENT
PractitionerStyle
ApproachtoChange
TeamInterdependenciestoConflictresolution
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PRACTITIONERSTYLE
CHEERLEADER
PATHFINDER
PERSUADER
STABILIZER
ANALYZER
High
E
FFECTIVEN
ESS
Low
High
APPROACHTO
CHANGE
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Thechangeagent
Technological
strategyStructural
strategy
Behavioural
strategy
Change instructure &designs
New Behavior Newrelationships
NewProcesses
Change inproductionmethods
Change inattitudes &values
IMPROVEDPERFORMANCE
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LESSONSFROMHARLEYDAVIDSON
ComplacencyKills
ApoliticalupperhandisatemporaryarrangementApassingphaseatthemost!
Empoweryouremployees
TheyknowalittlemoreabouttheProduct&managementthanyougivethemcreditfor
Strengthenyour
Distribution
Channels
Theyareatthereceivingend&knowyourcustomersbest!
Movingtointernationalmarketsdoesnotmakeyouanylesspatriotic
Ofcoursethebrandingcampaignswouldhavetobesignificantlydifferent
PerseverancePays!
Ifnotforthis,Harleywouldneverhavecelebratedits100thBirthday
THANK YOU
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