Factors Affecting Global Economy Assessment

Global Economy / Factors Affecting Global Economy

Right now the global economic outlook is relatively positive. According to figures projected by International Monetary Fund (IMF) the world GDP continues to decline, and even the modest growth figures previously projected have been minimized (IMF, 2012). In 2011, the global economy was expected to expand at a rate of 4% over the following year, but based on certain global and local factors those numbers have been reevaluated. The current guess is that year-end numbers will show only a 3 1/4% growth rate (IMF, 2012). This is due to the many obligations and economic tragedies that face the European Union, and the fact that emerging countries such as China and India are far below growth expectations. For one, this means that companies wishing to expand internationally have to realize the problems that they may encounter because of the decrease in individual wealth relative to the real increased cost of necessary goods.

One company that wishes to pursue expansion due to the promise of its recent business successes is Harley Davidson Motorcycles. There are many reasons why motorcycle companies, in general, may see growth over the coming years (lower cost, greater fuel economy), but risks are also very real when expanding in the current global market. The global economic outlook projections prove that this may not be the easiest time for a charge into new markets. Any expansion must be careful when managers are considering new markets.

Harley Davidson has rebuilt itself into one of the best known and respected worldwide brands, and the company has been reinvented in recent years into a very solid financial organization. The company is motivated to continue this upward trend by seeking expanded entry into foreign markets where customers have not had the benefit of the types of machines that Harley Davidson provides. However, the company also realizes that because all strata of society are being affected by the global economic slowdown, there may not be the interest in products such as Harley Davidson sells. It is possible the these goods will be thought of as extravagances rather than necessities which could diminish the success of expansion efforts.

One of the main issues then that Harley Davidson may face is to determine which markets are the best fit for its business. Since most of the motorcycles built by the company are at the higher end of the price range that most enthusiasts will pay, it is crucial that the company either determines markets that will accept machines that are already in production, or determine new motorcycles that they can market. Harley’s competitive advantage is that the product they make is unique in many world markets. Harley Davidson produces luxury motorcycles that are meant to be ridden on the street, but are not conducive to racing (Harley-Davidson, 2012). This uniqueness also produces a customer base that has proven extremely loyal to the brand. By focusing less on what is already available in new markets and more on what has made Harley Davidson a success in the U.S., it should be possible to make a strong entry into new markets that have been closed in the past.

As with most modern companies, Harley Davidson has to have an electronic presence that lends itself to modern sales and promotion. The company has already taken steps to increase its brand by using social media to help current owners share their experiences, but this promotion has an added benefit to the company also. By effectively using social media, the company has been able to project its brand around the world and make its products desirable to new customers. Prospective customers can both see new products on the company’s website and buy the custom machine that they desire. Then the buyer can use social media to connect with other Harley riders. The company’s use of the internet only serves to increase the brand loyalty that has made Harley a very successful American brand.

Corporate Leadership

Because the global economy has been slowed in recent years by the 2008/2009 financial crisis, Harley Davidson, like many other companies has had to reevaluate how it conducts business. The company wishes to expand to other markets, but to accomplish this the management team realized that they needed to strengthen the manufacturing base in the United States (Barrett, 2011). Thus the company changed an organizational design that had become cumbersome and proved too unmanageable in the current global marketplace. To streamline operations the company has retooled its manufacturing facilities and redistributed some of the jobs that were previously done exclusively by Harley Davidson employees. Some of the manufacturing duties were outsourced to specialty companies, and a system of using seasonal workers was implemented (Barrett, 2011). The seasonal work was set to coincide with the greatest needs for production increases throughout the year. Unfortunately, this meant that a large number of employees were unable to keep their jobs, but it has made the company financially stronger.

Recent studies have shown that the employees who remained at the company were more dedicated to the work they were doing, and they were more loyal to the Harley Davidson brand than previously (Harley Davidson, 2012). The company made the cuts to ensure that the workforce that remained would have a more stable workplace, and that Harley Davidson would be able to thrive in the future. This has proven to be true as the company has shown increases in revenue and stock price in each of the last five quarters (Fraser, 2012). The fact that the company has been able to keep operating during difficult financial times is a testament to the management team that maintained as many jobs as possible while making changes that would benefit Harley Davidson for many years to come.

Most companies also realize that unless they are operating ethically, towards their employees and customers, they will have a difficult time being successful in the present business environment. Harley Davidson has commitments to the MDA through rides that the company sponsors and other fund raisers. The company has also presented a stance on providing a secure, diverse workplace that honors individuality and person responsibility. However, it does not seem that Harley Davidson has publicized a commitment to the environment or social responsibility (other than its contributions to the MDA). Although the company may be very responsible in these areas, it does not make significant mention of that fact on its website.

One area that the company does widely publicize is its commitment to its employees and their continued ability to grow with the company. According to the company website, employees are given constant opportunities to better their education and to increase the company-specific training they need to advance within the company (Harley Davidson, 2012). However, the focus of the company seems to be more customer than employee focused. The focus seems to be one of customer enjoyment of the products and social activities rather than shared enjoyment. The employees have training and education available to them, but with the cuts recently made in the workforce, it may be more difficult for these employees to take advantage of the reduced amount of advancement opportunities that exist.

Strategic Plan Summary

The general conclusion to the plan that the company has put in place is that it seems that Harley Davidson is working hard to reestablish itself after some difficult financial times in 2008/2009, and the focus has been less on expansion than streamlining the current operations. Harley Davidson, like many other large corporations has had to deal with diminishing stock prices and decreased revenue in recent years, and this has colored any attempts they have made at expanding their reach into the global market. However, because of the recent success the company has had regaining lost revenue in the U.S. market, there is renewed talk regarding global expansion.

Because the success in the United States has more to do with a lifestyle than just the product, it seems imperative that Harley Davidson use this same approach with its foreign business. Many countries use motorcycles in the same way that cars are used in the United States, but they are generally of a much smaller and less powerful variety than Harley makes. It seems that to build the community the company wishes to establish among foreign customers, they will need to tailor their products to those countries. However, as the standard of living increases in countries such as China, and as the citizenry westernizes, it may be possible to sell the same products that U.S. customers have enjoyed for many years.

The way to implement these changes is to determine a very few tests markets that seem most likely to welcome Harley Davidson’s expansion efforts. Besides China, India and other Asian countries (South Korea, Viet Nam) may be the best fit. Europe remains a difficult market because of the financial crisis that continues to grip the EU, and most African nations are not yet ready for such a company because of economic and infrastructure concerns. By testing advertisements in Asian nations that seem ready for a new motorcycle brand, Harley Davidson could find a new customer base that is ready for its products. China seems the most likely candidate because of its strong growth and increasingly compatible infrastructure.

This type of expansion is risky as is any other large investment. Foreign customers may not want to change the type of motorcycle that they are used to and adopt a more Americanized vehicle. The very fact that the company is based in the U.S. could present a problem in marketing. Also, because of the recent financial downturn, there is still the risk of expending large amounts of capital on such a venture. It is wise to put feelers out before committing a great deal of assets to any new enterprise.

References

Barrett, R. (2011, April 30). Harley-Davidson is changing to adapt here and globally. Retrieved from http://www.jsonline.com/business/121029763.html

Fraser, C. (2012, September 11). Harley-Davidson: Born to rise. Retrieved from http://www.investingdaily.com/15643/harley-davidson-born-to-rise

Harley-Davidson. (2012). Company. Retrieved from http://www.harley- davidson.com/en_US/Content/Pages/Company/company.html?locale=en_US&b mLocale=en_US

International Monetary Fund (IMF). (2012). Global recovery stalls, downside risks intensify. World Economic Outlook. Retrieved from http://www.imf.org/external/pubs/ft/weo/2012/update/01/pdf/0112.pdf

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