Internationalization at Harley-Davidson

Founded in 1903, Harley-Davidson (Harley) is a U.S. motorcycle manufacturer that offers thirty-five models through a network of nearly 1,500 dealers. Its annual revenues are about $6 billion, mainly from sales of the big bikes that made the firm famous. Harley earns three-quarters of its total sales in the United States, where it also manufactures almost all its bikes to ensure quality control. The firm makes four distinctive groups of models:

■ Standard. Practical bikes used for low-cost commuting.
■ Performance. Sleek, sport-style racing bikes built for speed and easy handling.
■ Custom. Stylized bikes customized to customer tastes.
■ Touring. Long-distance, large-capacity, comfort bikes that typically include cruise control, stereos, and luggage racks.

In the United States Harley competes primarily in the custom and touring segments, which account for around 85 percent of “heavyweight” sales. Its numerous competitors are all headquartered outside the United States and include Honda, Suzuki, Yamaha, and Kawasaki in Japan, and BMW, Ducati, and Triumph in Europe. New competitors are emerging from China.
Harley heavyweight bikes sell for $17,000 or more, which puts them beyond the reach of many buyers. The average age of a Harley buyer in the United States is nearly 50. One key to Harley’s success is the Harley Owners Group (HOG), a club of loyal Harley owners with over one million members, including 100,000 in Europe. HOG is an important marketing tool for promoting sales. In the United States brand loyalty is fierce, and switching costs for Harley owners are high. Over time, the firm has created a mystique around its heavyweight bikes that helps drive sales. Indeed, many owners get Harley tattoos.

Threat of Foreign Competitors
Harley faced financial ruin in the 1970s and 1980s. By 1970, Honda, Kawasaki,