Harley Davidson External Analysis Harley Davison's External Essay

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Harley Davidson External Analysis

Harley Davison's External Analysis

PEST analysis

Political

Economic

Socio-Cultural

Technological

Porter's five forces

Harley Davidson is an American motorcycle manufacturing company that sells motorcycles above 700 cc engine capacity. The company was founded in 1903 at Milwaukee, Wisconsin. With approximately $5.3 billion in Fiscal Year (FY) 2011 as revenues, the company is now facing tough challenges in the international motorcycle market as new companies have entered to share the market fortunes (Harley Davidson, 2011). The Italian Ducati is one of the leading competitors that HD has come across during last couple of decades.

The paper is aimed at analyzing external environment of Harley Davidson (HD) by using two external analysis tools i.e. PEST (Political, Economic, Social, and Technical) and Porter's five forces (Threat of new entrants, Threat of substitutes, Threat of Supplier power, Threat of buyer power, and Threat of Rivalry with the industry). PEST helps analyze the strength of bigger forces of change present in a company's external environment. It is these macro-forces in a society that shape the overall business environment. After broad external environment of a company, next most important aspect that businesses need to know about the details and dynamics of specific industry they are operating in. For this purpose, Porter's five forces model provides an effective tool for the firm's and analysts to assess the appropriate industry context in which business is operational. These tools will help generate an appropriate picture of HD's external environment and help assess company's likely opportunities and threats in the future.

PEST analysis

Political

Political environment that prevails around the business of HD can be termed as

"every president (and most presidential wannabes) except Obama has made a conscious effort to link himself to the American manufacturer (HD) since Reagan made an appearance at an assembly plant in 1987-especially the Republicans" (McBee, 2011).

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The political governments, specifically those of Republicans have openly supported protecting HD's market share, most striking instance was when Reagan administration increased import tariffs on heavy duty motorcycles from 4% to 49.4% in 1980s (McBee, 2011).

Economic

Economic environment in which HD operates has been worsening ever since competition has increased in the U.S. heavy motorcycle market. Another important impediment in HD's continuous growth has been 'recessionary' economic phases, last one being post 2008 global financial crisis (GFC). Due to decreased sales of its motorcycles and competition from Honda, HD had to cut 50% of its jobs at one of its manufacturing plant in York, PA (Looney, 2011).

Socio-Cultural

The socio-cultural environment has also been changing since late 1980s. Prior to this, American's were heavily engaged in purchasing fast motorcycle machines and HD was a 'symbol of freedom' and American ingenuity. Of late, entertainment avenues such as vacations, travelling abroad and purchasing technology oriented gadgets has increased. This has exerted a negative influence on sales of expensive and heavy duty motorcycles.

Technological

There remain significant technological challenges for Harley Davidson to counter in the motorcycle industry. Part of these challenges have stemmed from the presence of competitors such as Honda that have effectively challenged H-D's position in the U.S. market. New innovations in motorcycles such as turbo-chargers exhaust system, aerodynamics to help increase the acceleration of motorcycles, and other technological changes have exerted significant pressure on H-D's product development division to come up with innovative and competitive technological changes in their motorcycles.

Porter's five forces

Threat of New Entrants: Medium: It is observed that barriers to entry in the heavy motorcycle industry….....

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