Harley
Davidson is an internationally renowned brand that is so loved by its
customers some take the “brand” literally – by having the company logo
tattooed about their person! But the company’s success is built on far
more than conventional brand marketing, as a case study in the upcoming
issue of the Journal of Strategic Marketing explains.
Since its inception in
1905, Harley Davidson has maintained its status as the manufacturer of
an iconic brand of American motorcycles. The bikes were used by the US
military during the first and second world wars, and later became
legends of the silver screen in movies such as Easy Rider, Pulp Fiction
and Terminator 2. But by the mid 1980s the company was under threat from
Japanese competition and an unsuccessful sale to American Machine and
Foundry (AMF). The company’s fortunes, however, were revived by a
management buyout and the implementation of an innovative new “strategic
fit” approach to marketing.
As Arpita Agnihotri of the ICFAI Business School (IBS), Hyderabad in India, explains in the Journal of Strategic Marketing:
“… Harley wanted to
sell lifestyle and not motorcycles to bike riders. …This required direct
communication and interaction between employees and customers of
Harley. The quality and nature of the interaction between employees and
customers influences their perceptions about the firm’s products and
services.”
The strategic fit
approach, first identified in 1985 by Michael E Porter, is a marketing
model that fosters tight integration of value chain activities. Before
implementation of the approach, Harley Davidson had a good reputation
for quality and styling, with special emphasis on style, but competitor
companies offer other value propositions, such as price, durability,
reliability, styling, quality, product features, customer preference and
warranties. Harley Davidson’s task, therefore, was to identify and
integrate primary and secondary value chain activities – as set out in
the strategic fit theory – in order to maintain its position in the
marketplace and facilitate expansion into new markets.
Agnihotri’s article,
“Turnaround of Harley Davidson – cult brand or strategic fit approach?”
describes the key factors in the company’s approach including primary
value chain activities such as the deliberate implementation of a
demand–supply gap, and active brand management such as the creation of
the Harley Ownership Group (HOG) and sponsored rallies and other
activities. But it is the secondary value chain activities that are more
revealing of the all-pervading nature of the strategic fit approach.
For instance, recognising the importance of direct communications
between employees and customers, the company embarked on a top-to-bottom
restructuring of human resources; removing the vertical, multi-layered
traditional management structure and replacing it with a horizontal,
flat structure of “natural work groups”. Furthermore, in order to
maximise external customer loyalty, Harley Davidson wanted to ensure
that internal customers (i.e. employees) remained loyal to the company.
As Agnihotri explains:
“Amongst the friendly
human resource policies implemented by Harley to ensure loyalty, the
most important was the ‘no layoff’ policy. In the era of competition and
the associated threats, where layoffs and downsizing are the first
tactical actions that a firm takes to ensure efficiency, Harley, in
order to reinforce its positioning of a cult brand with loyal customers,
announced a ‘no layoff policy’.”
The strategic fit
approach was also applied to strategic financial management – including
the company’s approach to the management of its capital and debt – and
to a new corporate strategy of diversification that was so successful
that by 2000 merchandising accounted for some 20 per cent of the
company’s revenues which in turn boosted the core business of selling
motorbikes.
As well as describing Harley Davidson’s successful turnaround, Arpita Agnihotri’s article, which is free to download from the Journal’s website, provides the theoretical background to the “strategic fit” approach and ably demonstrates how the theory can be more informative in illuminating complex company turnarounds than a conventional analysis of “restructuring and repositioning”.
However, he does
acknowledge the recent decline in the sales performance of Harley
Davidson, as well as its poor performance in international markets.
Nevertheless, Agnihotri concludes that the remarkable turnaround of the
company is a powerful demonstration of the benefits of the strategic fit
approach.
Turnaround of Harley Davidson – cult brand or strategic fit approach?” by Arpita Agnihotri, Journal of Strategic Marketing, published by Taylor & Francis.
