In 2003 Harley-Davidson, Under The Leadership Of Jeffery Bluestein: Managing The Organization Assignment, NCI, Ireland

In 2003 Harley-Davidson, under the leadership of Jeffery Bluestein, celebrated its 100th birthday. The company, which almost went bankrupt in 1970, had successfully shed its product and marketing doldrums and was once again the market leader of the U.S. heavyweight motorcycle industry. For the last 18 years, the company had led the industry in retail sales with a commanding lead of 50% market share in the United States and 32% globally. Noted Fortune: “Harley . . . ranks among America’s top growth stocks since its 1989 IPO [initial public offering].   Its 37% average annual gain runs just behind the 42% pace of another ‘86 debutante: Microsoft.”1

While the company’s successful history was in his thoughts, Bluestein was aware of the formidable issues facing him and his top management team. The company’s customer base had grayed considerably since the early 1990s, and the average age of Harley riders rose from 35 to 47 years in the past decade. Younger Americans (25- to 34-year-old men) seemed to prefer the light sports bikes offered by Suzuki, Honda, Yamaha, and Kawasaki. Bluestein recognized these concerns by noting: “The only thing that can stop us is if we get complacent. Even though we’ve been successful, we can’t stand still.”

On April 25, 2005, the company’s stock price declined 17%, despite an increase in first-quarter profits and company sales. The steep decline was in response to the company’s revised estimates for planned 2005 sales; the company lowered its sales estimate by 10,000 units and noted that it planned to make 329,000 units for the year. The need to reexamine or change strategy became more urgent.

The Early Years2

Arthur and Walter Davidson and William Harley founded Harley-Davidson in 1903 to build motorcycles in a garage. Having sold 50 motorcycles, the company filed for incorporation in 1907 with one full-time employee. During these early years, the reputation of the company was linked to Walter Davidson’s riding a Harley motorcycle to victory in a 1908 race and innovations such as the V- twin-engine, clutch, internal expanding rear brake, and three-speed transmission that the company pioneered. This race was one of many that Harley would eventually go on to win as it transformed itself into the world’s leading producer of motorcycles.

By 1918 Harley-Davidson became the world’s largest motorcycle company by producing 28,000 motorcycles. During the 1920s, despite a sagging economy, Harley-Davidson invested in research and development (R&D), experimented with its now-famous V-twin design, built a new four-cylinder engine, and focused on improving the reliability of its machines. With the addition of the firm-developed electric starter, balloon tires, front brakes, and standardized parts, product quality also improved. With such innovations, consumers chose Harley motorcycles, 2 to 1, over those of the firm’s archrival, the Indian, the only other U.S. motorcycle manufacturer.

Post World War II, the company’s sales declined, and Harley-Davidson experienced pressure from imports from Europe.3 However, Harley managed to remain profitable by introducing larger, more powerful motorcycles and, by the mid-1950s, became the undisputed leader of the market with over 60% market share.

The Harley-Davidson Mystique

Throughout its early history, Harley-Davidson established an image of “raw power,” which became its major selling point. The most distinctive feature of Harley was the V-twin engine. Introduced in 1909, the V-twin engine derived its name from its cylinders, which were set opposite one another at a 45-degree angle. It gave Harley motorcycles an aggressive appearance of raw power and the ability to deliver broad but low-torque power. The V-twin engine’s simple design allowed owners to tinker with their engines—a necessity at that time since motorcycle mechanics were virtually nonexistent. Harley’s heavy use of chrome, its low-profile appearance, the styled tail fenders, and the chop of the front fork (i.e., the extension of the fork beyond plumb) also highlighted the firm’s unique image. The Harley motorcycle not only looked different, but it also sounded different. The growl of the Harley engine was, and still is, described as “a voice: a bassoprofundo thump that makes other motorcycles sound like sewing machines.”4

With the addition of new colors, decals, and stylized designs in the late 1930s, Harley adopted an “image and lifestyle” approach to marketing. (Before the 1930s, advertisements marketed the motorcycles as utilitarian vehicles.) Its motorcycles were advertised in “biker” magazines and promoted mainly by word of mouth. Harley motorcycles were used by the U.S. military, highway patrol officers, the Hell’s Angels, and Hollywood rebels, including actors James Dean and Marlon.