Excerpted From Cavusgil S Knight G Riesenberger J 2012

Excerpted From Cavusgil S Knight G Riesenberger J 2012

What is the nature of the international business environments Harley faces? What types of risks does the firm face?

How can Harley benefit from expanding abroad? What types of advantages can the firm obtain? What advantages acquired abroad can help Harley improve its performance in its home market?

How can Harley effectively compete with rivals from Japan and Europe? What strategies should management apply to grow the firm’s sales in those regions?

Competitors such as Lifan and Zongshen are beginning to emerge from China, where they enjoy competitive advantages like low-cost labor and extensive experience with emerging markets. How can Harley compete against such firms? Should Harley more aggressively pursue emerging markets such as Brazil, China, and India? If so, what strategies will help it succeed in those markets?

Evaluate Harley’s environmental sustainability initiatives in the evolving regulatory environment on global greenhouse gas. What advantages does Harley gain by attempting to produce environmentally safe and sustainable products?

Paper For Above instruction

Harley-Davidson (Harley) represents a quintessential example of a US-based multinational motorcycle manufacturer navigating the complex landscape of international business. Its global environment is characterized by diverse regulatory standards, economic conditions, cultural attitudes towards motorcycles, and environmental regulations, all of which significantly influence the firm's operations and strategic decisions. Understanding these facets provides insight into the risks Harley faces and optimal strategies for international expansion and sustainability.

International Business Environment of Harley-Davidson

The international environment of Harley is marked by political, economic, social, technological, environmental, and legal (PESTEL) factors. Politically, Harley operates in nations with varying trade policies, tariffs, and legislative frameworks impacting import-export dynamics. Economically, fluctuating income levels, currency exchange rates, and economic downturns—such as the 2008 recession—pose risks to sales and profitability. Socially, regional differences in motorcycle preferences, cultural attitudes, and branding perceptions influence product acceptance; for example, Europeans favor smaller, performance-oriented bikes, contrasting with the American preference for larger touring and custom bikes.

Technologically, Harley has adopted Japanese-like management techniques, such as just-in-time inventory and quality management, illustrating how leveraging technological advancements can mitigate operational risks. Environmentally, regulatory standards on emissions and sustainability are tightening globally, imposing compliance costs and influencing product design. Legally, firms must navigate intellectual property rights, safety standards, and import/export restrictions, which vary across jurisdictions.

Harley's chief risks encompass increased regulatory costs, trade barriers, intellectual property challenges, consumer preference misalignments, and competitive pressures from emerging Chinese brands such as Lifan and Zongshen, which benefit from low-cost labor and established experience in emerging markets.

Risks Faced by Harley-Davidson

Among the most significant risks are trade and tariff barriers, especially in emerging markets like Brazil and India, which can inflate costs or restrict market entry. The risk of product misalignment due to cultural differences can lead to poor sales, as seen in Europe's preference for smaller bikes. Environmental regulations introduce compliance risks; failure to meet emissions standards can result in legal penalties and reputational damage. Moreover, the international motorcycle market is highly competitive, with low-cost Chinese manufacturers capable of undercutting Harley’s premium pricing — threatening the firm's market share.

Operational risks include supply chain disruptions, especially when expanding into countries with political instability or infrastructural challenges. Additionally, copyright infringement and counterfeit products, particularly prevalent in China, threaten brand integrity and revenue.

Benefits and Advantages of International Expansion

Expanding abroad offers Harley several strategic advantages. First, it diversifies revenue streams, reducing reliance on the U.S. market, which faces saturation and slow growth. Internationalization enables Harley to tap into high-growth regions like China, India, and Brazil, where rising incomes and urbanization increase demand for motorcycles.

Second, global expansion improves economies of scale—expanded production and sales volumes can lower per-unit costs and enhance bargaining power with suppliers. Additionally, entering diverse markets fosters innovation by exposing the company to different consumer preferences, prompting product adaptations like lighter, more maneuverable bikes suitable for European cities.

Locally, Harley's international presence enhances brand recognition and loyalty, especially through initiatives like the Harley Owners Group (HOG) and strategic acquisitions such as MV Agusta. These activities bolster the firm’s stature abroad and lead to competitive advantages in marketing and distribution.

In the domestic market, international operations bolster the firm’s prestige and perceived global stature, which can be leveraged to maintain brand allure among American consumers. Furthermore, insights gained from foreign markets can inform domestic product development, leading to innovations that resonate both locally and globally.

Competing with Japanese and European Rivals

To effectively compete in regions dominated by Japanese and European manufacturers, Harley must tailor its strategies. Diversification of product offerings—particularly expanding into the lightweight and performance segments—aligns with European consumer preferences. Acquiring or developing smaller, high-performance models like MV Agusta, as Harley has done, provides an entry point into urban European markets where maneuverability and style are prioritized (Holtbrügge et al., 2015).

Harley should emphasize branding that resonates with regional cultural values, perhaps adapting its American rugged individualism narrative to incorporate local themes of craftsmanship or innovation. Marketing campaigns emphasizing Harley’s heritage while highlighting adaptability and modernity can broaden appeal.

Furthermore, expanding dealer networks and enhancing after-sales services increases customer loyalty and market penetration. Strategic alliances, such as joint ventures with local firms, can facilitate smoother access to distribution channels and regulatory navigation, thereby reducing entry barriers (Ghemawat, 2001).

Innovation in emission technologies—such as adopting cleaner fuels and electric models—can also help Harley meet stringent environmental standards in Europe and Japan, positioning it as a sustainable and forward-looking brand.

Competing Against Chinese Low-Cost Manufacturers and Market Entry Strategies

Emerging Chinese competitors like Lifan and Zongshen pose a substantial threat due to their cost advantages and extensive experience in emerging markets. Harley can respond through several strategic measures:

• Innovation and Differentiation: Harley must continue to emphasize its brand heritage, superior quality, and customer experience rather than competing solely on price. Developing premium, technologically advanced models—such as electric motorcycles—can differentiate Harley from low-cost Chinese brands (Kotler & Keller, 2015).
• Cost Management: While defending premium positioning, Harley can optimize cost-efficiencies through supply chain improvements and localized manufacturing—e.g., assembly plants in key markets—to reduce costs and avoid tariffs (Bartlett & Ghoshal, 2013).
• Market Segmentation and Niche Focus: Targeting niche segments like luxury or custom bikes ensures premium pricing and reinforces brand exclusivity, shielding Harley from direct price-based competition.
• Strategic Alliances and Acquisitions: Entering partnerships or acquiring local brands can facilitate market entry and counter Chinese firms' advantages. For instance, Harley's acquisition of MV Agusta exemplifies leveraging local expertise and product diversification.

Regarding aggressive expansion into emerging markets such as Brazil, China, and India, Harley should adopt well-researched market entry strategies, combining localized production, strategic partnerships, and tailored marketing campaigns. For example, setting up local assembly lines reduces costs and mitigates tariffs (Cavusgil et al., 2014). Moreover, understanding consumer preferences—e.g., the popularity of smaller bikes in China—enables Harley to develop models suited to regional tastes, as seen with the company's purchase of MV Agusta.

Environmental and Sustainability Strategies

Harley's initiatives to produce environmentally sustainable products offer distinct strategic advantages. Complying with increasingly strict global GHG standards not only avoids penalties but also enhances corporate reputation among environmentally conscious consumers and regulators. Strategies include adopting cleaner technologies, such as electric motorcycles, renewable energy in manufacturing processes, and lifecycle recycling programs (Baron, 2018).

Proactive environmental strategies serve as a differentiator, positioning Harley as a responsible brand committed to sustainability. This can expand market share among eco-sensitive demographics and facilitate access to markets with stringent environmental regulations, such as California and Taiwan. Furthermore, sustainability initiatives often lead to operational efficiencies—reducing water, energy, and waste management costs (OECD, 2019).

In conclusion, Harley-Davidson operates in a multifaceted international landscape fraught with risks yet ripe with opportunities. By leveraging technological innovations, strategic market positioning, and sustainability commitments, Harley can navigate these complexities, strengthen its global footprint, and secure sustainable growth for the future.

References

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