Stratergy Essay

6139 words - 25 pages

Aftermath of the Honda Invasion: 1965-1981




Reaction of Harley-Davidson to the Honda Threat Faced with an invasion of its staid and static U.S. market, `how did Harley react to the intruder? It did not react-at least not uatil far too late. Harley-Davidson considered itself the market leader in full-size motorcycles. While the company might shudder at the image tied in with its product's usage by the leather-jacket types, it took solace in knowing that almost every U.S. police department used its machines. Perhaps this is what led Harley to stand aside and complacently watch Honda make deep inroads into the American motorcycle market. The management ...view middle of the document...

This intruder was a smallish Japanese firm that had risen out of the ashes of World War II and was now trying to encroach on the territdiy of a major U.S. firm-a company that had in the space 0f sixty years destroyed all of its U.S. competitors, and now had a solid 70 percent of the motor cycle market. Yet, almost inconceivably, in half a decade this market share was to fall to 5 per cent, and the total market was to expand many times over what it had been for decades. A foreign invader had furnished a textbook example of the awesome effec tiveness of carefully crafted marketing efforts. In the process, this confrontation between Honda and Harley-Davidson was a harbinger of the Japanese invasion of the auto industry. Eventually, by the late 1980s, Harley was to make a comeback. But only after more than two decades of travail and mediocrity. THE INVASION Sales of motorcycles in the United States were around 50,000 per year during the 1950s, with Harley-Davidson, Britain's Norton and Triumph, and Germany's 13MW accounting for most of the market. By the turn of the decade, Honda began to pen etrate the U.S. market. In 1960 less than 400,000 motorcycles were registered in the United States. While this was an increase of almost 200,000 from the end of World War II fifteen years before, it was far below the increase in other motor vehicles. But by 1964, only four years later the number had risen to 960,000; two years later it was 1.4 million; and by 1971 it was almost 4 million. In expanding the demand for motorcycles, Honda instituted a distinctly differ ent strategy. The major elements of this strategy were lightweight cycles and an advertising approach directed toward a new customer Few firms have ever experi enced such a shattering of market share as did Harley-Davidson in the l960s. Although its market share declined drastically, its total sales remained nearly con stant, indicating that it was getting none of the new customers for motorcycles.


In 1965, Harley-Davidson made its first public stock offering. Soon after, it faced a struggle for control. The contest was primarily between Bangor Punta, an Asian com pany, and AMP', an American company with strong interests in recreational equip ment including bowling. In a bidding war, Harley-Davidson's stockholders chose AMF over Bangor Punta, even though the bid was $1 less than Bangor's offer of $Z3 a share. Stockholders were leely of Bangor's reputation of taking over a companc squeezing it dry, and then scrapping it for the remaining assets. AMF's plans for expansioa of Harley-Davidson seemed more compatible. But the marriage was troubled: Harley-Davidson's 0ld equipment was not capable of the expansion envisioned by AMP'. At the very time that Japanese manufacturers-Honda and others-were flooding the market with high-quality motorcycles, Harley. was falling down on quality One company official noted, "Quality was going down jut as fast as production was...

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