In 1996, we wrote a case study on Harley-Davidson Motor Company. (Chapter 11 of my textbook on Operations Strategy, hereby shamelessly sneaking in some marketing…) At the time, Harley’s sales were growing exponentially (which they did for more than 20 years until 2006!) and the question of the case is to design an appropriate strategic operations response for this growing demand.
The last paragraph of the case states:
“… There were so many uncertainties. All that they could be certain about was that if they did not make a decision shortly, they would run the risk of losing further ground to their Japanese competitors and to new American custom bike producers. (Rumors said that Polaris and a new company, registered as Excelsior-Henderson, were planning to enter the heavy-weight custom motorcycle market.)…”
So how strong was that competition and what did they do?
First some quick history: By 1931, only three US manufacturers had survived the great depression so far: Indian, which produced its first motorcycle in 1902, Harley-Davidson (built its first motorcycle in 1903 in a shed in Milwaukee 1905), and Excelsior-Henderson (first bike in 1905). However, EH foresaw the continuing depression and stopped producing on March 31, 1931. Indian fought longer but sales continued to decline; it was forced to halt production in 1953. Only Harley-Davidson kept continuous operations. During that process it became one of the strongest brands on the planet and a darling of Wall-Street in the 90s.
During those go-go late 1990s, the Indian and EH brands were bought by investors and resurrected, but only a small number of motorcycles were produced. (EH went bankrupt again in 1999 after capacity over-investment.) In 1998, Polaris introduced “Victory® motorcycles, representing the first all-new American-made motorcycle from a major company in nearly 60 years.” Today, 13 years after introduction, Victory’s market share remains in the low single digits. Harley-Davidson remains the leader by far.
Interestingly, Polaris is not giving up: two days ago it announced the acquisition of Indian Motorcycle. Whether the new Indian ownership will be successful depends on many factors, brand marketing being one. I’m not a marketing expert but there are several interesting questions: How many current consumers will be significantly more attracted to the Indian brand heritage than the created-out-of-nowhere Victory? What brand investment is needed to communicate the meaning of Indian and to generate a loyal Indian Rider Group that feels so strongly that they tattoo the brand on their bodies? How many want something different than the well-known Harley? [I do have some personal experience with the latter: When I was riding my good-looking 1100cc heavyweight motorcycle before kids, I was regularly asked: “Nice bike! Is that a Harley?” Upon which I had to answer: “Uh, no, it’s a Honda…” One gets tired of this very quickly unless one is proud of the distinction. While I do love our Honda as the best minivan, it’s different for motorcycles. Indian here definitely can stand for some meaningful heritage.]
The other critical factor is whether Polaris can deliver on the brand promise, and that brings us to operations. Polaris brings several operational assets to the table, among which extensive vehicle engineering and manufacturing expertise of recreational and utility vehicles; 13 years of heavy-weight motorcycles design, manufacturing, and retail experience.
This merger of brand potential and operational capabilities suggests reasons for optimism (that must have been the reason behind the deal), but don’t go overboard: the reason I didn’t list their retail distribution network as a major asset is because it will need investment (like the brand). I’m not sure how many upscale yuppie Harley buyers (the target market) live in snowmobile country… A casual look at their network reveals that Polaris’s two closest motorcycle dealerships—Merrilville, IN and Marengo, IL–are both more than one hour drive away from Chicago. In contrast, there are 8 large, expensive, loyal, and attractive Harley-Davidson retailer facilities within 1/2 hour from downtown Chicago…