Harley-Davidson

Question 1. For the period before AMF took over Harley-Davidson:
Which of the three value disciplines would you say the company pursued? Discuss at least two specific points from the case, with supporting course material, to support your thinking.
How did Harley-Davidson’s culture align with the value discipline?

Marketing strategy, according to Tracy and Wiersema, should be based on one of the three value disciplines. These value disciplines are operational excellence, customer intimacy and product leadership. Companies choosing operational excellence provide the middle-market products at the best (lowest) cost. These companies do not build relationships with customers and do not deliver exceptional value. Instead, these companies offer low prices and thus attract customers who primarily focus on the cost of the products.

Product leadership value discipline implies constant differentiation, development of new products and services, delivery of high quality value to customers and pushing the boundaries of performance. The companies practicing product leadership innovate and diversify, and thus can operate at dynamic markets and outgrow competitors at the expense of the diversity of their products.

The strategy of customer intimacy takes place when companies deliver products for a certain group or for several groups of customers, cultivate relationships with their customers, satisfy their unique needs and tend to deliver value above customer expectations. These companies tend to operate in a specific market niche. Harley-Davidson also pursued this strategy before AMF takeover in 1969. The company initially started with the product leadership strategy and passed an impressive research and development phase, but when the original Harley-Davidson “tough” motorcycle was created, there definitely was a customer intimacy strategy. There is a lot of evidence of this strategy in the text of the case. First of all, marketing “image and lifestyle” approach of the company addressed a specific customer sector: young and mature males, bikers and people who wanted to express their individuality with the help of their choice. Secondly, Harley-Davidson tended to build stronger relationships with their customers though advertising in “biker” magazines, maintaining high quality and reliability and making their motorcycles an icon of the American lifestyle. Here marketing, design and manufacturing were united in order to match the tastes of their target audience. Finally, Harley-Davidson focused on the chosen niche and did not develop products which might suit other types of customers such as young women, older males and people who would prefer easier and cheaper motorcycles. Thus, Harley-Davidson pursued the strategy of customer intimacy and their organizational culture developed in accordance with this choice.

Question 2. During the period that AMF owned Harley-Davidson:
Which of the three value disciplines would you say the company pursued? Discuss at least two specific points from the case, with supporting course material, to support your thinking.
How did Harley-Davidson’s culture align with the value discipline?

AMF was an industrial conglomerate offering diverse leisure products, and it adopted the value discipline of product leadership or even operational excellence (for mass products). In fact, the takeover of Harley-Davidson was one of the steps aimed to reach a new market and to expand their set of leisure products, which perfectly fitted this strategy. However, AMF tried to set the unique inheritance of Harley-Davidson in line with other leisure products, which appeared to be a great mistake. AMF tried to change the value discipline of Harley-Davidson products from customer intimacy to operational excellence. Indeed, AMF forced the production from 15,475 units in 1969 to 70,000 units in 1973. However, such increase of production rates resulted in rapid decrease of quality. Unskilled workforce and the lack of control over quality allowed to reduce costs, but the quality fell dramatically along with the demand for Harley-Davidsons. About 50% of motorcycles were unable to pass final inspection of quality.

The fact that AMF changed the marketing policy and tried to advertise Harley-Davidsons as a common product for different customer groups also indicated that there was a trend towards operational excellence. However, the culture of Harley Davidson did not match this value discipline: all previous motorcycles were in fact handcrafted and the operations were implemented by skilled workers. In this way the company managed to create their unique product and to satisfy the needs of the target customer group. AMF missed the fact that the demand for a product designed to match specific needs cannot be equally high at the whole market. Therefore, before adopting a new value discipline it is necessary to ensure that the company’s culture, existing products and customer base are suitable for this transformation.