External Analysis Motorcycle Industry

External Analysis of the Motorcycle Industry

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Harley Davidson

Harley Davidson, the the purpose of fulfilling dreams of personal freedom (Purpose: Harley Davidson, 2013). The company functions in segments of Motorcycles & Related Products and the Financial Services. It is however globally known for heavy bikes that have engine displacement of 651+cc (Harley-Davidson Inc. 2013). The company enjoys a unique position in the market yet it is exposed to many new market challenges in recent future. The demand for heavy bikes has increased among those that are not necessarily filthy rich and other companies are also entering the industry. Here is the PEST analysis of Harley Davidson to study what challenges it is facing in external environment.

PEST Analysis

The PEST analysis offers a detailed picture of how the macro environment factors affect the performance of Harley Davidson. The PEST stands for Political, Economic, Social and Technological factors. The components of PEST are discussed below:

Political: The Harley Davidson is symbol of biking adventure in USA. The company enjoys political connections that can be used to expand in the economies of China and India. The company, being the American icon, can capitalize and leave its competitors behind. The Environment Protection Agency regulates the industry and HD needs to comply with the ruled set for standard operations.

Economic: It was not merely America and its national markets that were affected by the economic recession after 2008. The global markets are also facing tough economic challenges. The HD is thus not alone in its quest but it should not let the economic pressures overcome its productivity. The price of the race materials has reasonably increased over past few years that can be an economic challenge given the fact that the per capita income has not significantly increased. The foreign economies are also of a great interest for Harley Davidson since McBee (2011) states that overseas markets will make up about 30% total sales thus HD plans to open new assembly line in India.

Social: Tough it may sound like the biking adventure is for the youth; Harley Davidson targets social groups that are married males in their adult age. The people near retirement are the major clients since they have fulfilled life responsibilities and are about to have excess of money for luxury. The lifestyle of people affects the purchasing trends of heavy bikes.

Lifestyles are changing globally as well as nationally. More and more people are interested in owning the heavy bike to enjoy freedom and power. There are clubs of Harley Davidson where male adults like to have the HD experience. The early retirement trends might affect the market for the Harley Davidson since it may decrease the of the social groups.

Technological: The economic and environmental concerns demand the energy efficient fuel alternatives. The customers are interested in technology driven to achieve environment friendly solutions. Harley Davidson is manufacturing V-Engine that is used in its bikes. Thus the company is interested in ever new technologies for producing Green solutions. Also the HD bikes offer a variety of bikes that can be used in different areas for example tourism, steep biking etc. Technology affects not only the design of bikes but also the communication systems that drive the marketing and advertisement campaigns.

Porter’s Five Forces

The Harley Davidson is a company that faces environmental challenges. These challenges can be discussed in the light of how Porter discussed them. These encounters are by substitutes, bargaining power and competitors.

Threat of New Entrants: The heavy bike industry requires heavy initial investment. There are many complexities in the business as well. It needs to have a strong research and development center and to master in technological understanding and use. This limits the access of new entrants into the market. Also, the brand name counts a lot in luxury item markets. The already established brands like Harley Davidson do not need to work additional to develop the brand but only to sustain it. This is an edge the existing firms have over new companies. The costs of production are also increasing which the already existing firms can overcome given their production experience. Thus it is concluded that the threat of entrance of new firms in the industry is low.

Market Rivalry: The heavy bike manufacturers fight in their marketing and advertisement campaigns to maintain and grow their market share. The Japanese firms like Honda, Yamaha and Suzuki offer aggressive competition to Harley Davidson. The companies cannot easily quit the industry thus they only want to fight existing firms as McBee (2011) says that Honda makes situation worse for HD. Thus the rivalry between existing firms is high. Even Polaris has introduced three new bikes that can significantly affect the market for HD (Engel, 2013)

Bargain power of Supplier: The suppliers have an average bargain power since Harley Davidson has assembly services within the company facilities. There are also some outsources services but they do not exert high pressure on the company thus the supplier’s bargain power is moderate.

Bargain power of Buyer: The buyers do not have too many options in the form of companies offering heavy bikes. Thus, they have a low bargain power. They cannot dictate the prices of the heavy bikes. Therefore we see that even in the summer season when the sales are quite high, the prices do not fall enough in HD.

Availibility of Substitutes: The heavy bikes have no substitute available currently in the market. The cars cannot compete heavy bikes in freedom and control. It is more about adventure thn the concept of traveling. People find themselves unleashed when they are riding a bike unlike when they are closed in a car. Also, the heavy bike is more fuel efficient than a car which makes it a better option. Thus the threat of substitutes is low in the industry.

Managerial Decision

As a manager, the comparison and analysis tools of PEST and Porter’s five forces are a blessing. These tools offer a broad picture of the company in its macro environment. It tells what competitors the company has and how tough they can prove to be. For example, the analysis has shown that Harley Davidson faces challenges from Japanese and Indian bikes. The new bikes by Polaris are design efficient as well as competitive in term of prices. This can offer an insight to the future of the company and industry so that the manager can forecast trends as well as upcoming challenges. The buyer social analysis and their bargain power suggest if the company needs to cut its prices or not. In case of HD, the company needs to focus more on offering efficient technology than merely cutting process. The technological trends have shown that on a very fast track, new technologies are arising that can help the company design bikes that will be customized and used for a wide range as well. The manager is also assisted by the supplier analysis. It helps to know if the supplier will have less or more bargain power in time to come. The PEST and Porter’s Five forces method are the tools that therefore help the management in making decisions regarding future strategy and operations of the company.


Engel, J., (2013), “ with 3 Indian motorcycles,” Retrieved

from: http://www.bizjournals.com/milwaukee/blog/2013/08/polaris-challenges-harley-davidson.html?page=all

Harley-Davidson Inc. (2013), Retrieved from:

http://topics.nytimes.com/top/news/busi ness/companies/harleydavidson_inc/index.html

McBee, R.D. (2011). “Harley-Davidson’s Future (Abroad).” International Journal Of

Motorcycle Studies, 7(2), 1-8

Purpose: Harley Davidson, (2013), Retrieved from: http://www.harley-davidson.com/en_US/Content/Pages/Company/company.html?locale=en_US&bmLocale=en_US