A classic story from the land of American. Men with the mad ideas to yield a lot of money.One hundred celebration Harley-Davidson Motor Company celebrated all around the world. Giant snake road tours from city to city bearing a portable Harley museum. Stage the event is provided only for members of Harley Owner Group (HOG) to celebrate their special event.
Harley-Davidson makes more than motorcycles. They also make Harley-Davidson logo merchandise. A lot of that merchandise is worn by the vast majority of people in the United States who don't even ride motorcycles.
They may not ride, but they know the logo. The Harley-Davidson brand has recognition status rivaled only by the great multi-national brands like Coca-Cola.
As if that weren't enough there is great financial performance. Since going public in 1986, Harley has increased earnings at an average annual rate of 37 percent. Only one other company that went public that year has done better. That other company is Microsoft.
It's just about all a business could ask for. A brand that has achieved cult status and outstanding financial performance. That's what makes the story of Harley-Davidson so interesting. We want to know how they got there. And the answer is not in one story but in three.
The first story starts at the beginning. In 1903 William S. Harley (21) and Arthur Davidson (20) were acting out the story of inventor/entrepreneurs and tinkering in a 10 foot x 15 foot shed with a hand-lettered sign on the door that read, "The Harley-Davidson Motorcycle Company." They produced their first motorcycle right there.
Arthur's brother, Walter, joined them in 1907. Soon the business was going so well that his brother William, who had a great job with the railroad, came on board, too. "Firsts" followed one after the other.
The bar and shield logo was used for the first time in 1910. The first issue of Enthusiast magazine came out in 1916. It is now the longest continuously published motorcycle magazine in the world.
brought World War I to the United States and hardly skipped a beat. They sold twenty thousand motorcycles to the U. S. Army and emerged from the War even stronger.
By 1920 Harley-Davidson was the largest of more than one hundred motorcycle companies in the world. Sales peaked at 27,000 motorcycles a year. Then came the Depression.
The Depression hit everybody hard but it devastated motorcycle companies. By the end of it there were only two companies, Harley-Davidson and Indian, manufacturing motorcycles in the United States. At the bottom of the Depression only six thousand motorcycles were sold in one year in the entire United States.
But World War II revitalized Harley's fortunes. The company sold almost 100,000 of their WLA model to the US military. After the war ended it took just two and a half months to resume civilian production.
That's the first story. As the post-War economic boom began was in good shape. They'd grown up, survived the depression, and they were ready to grow even more.
In 1947 Harley-Davidson introduced the classic black motorcycle jacket. It was the start of the Wild One Era and Harley's second story.
In 1953 the Hollister incident was immortalized in the movie "The Wild One." It was Marlon Brando's first lead role. The incident and the movie established an "outlaw" view of motorcyclists in the popular mind.
Even though Brando rode a Triumph in the movie lots of folks associate the film and the outlaw motorcycle culture with Harley-Davidson. That's been fueled by the fact that Harley has been the motorcycle of choice for real motorcycle gangs like the Hell's Angels. For years Harley did pretty well, linked in popular imagination to Brando, the Hell's Angels, and outlaws in general.
When Honda began importing its motorcycles into the United States in 1962 they took the position that motorcycles in general, and their smaller motorcycles in particular, were for nice people, not outlaws. They told their story in one of the most effective advertising campaigns of all time, "You meet the nicest people on a Honda.
As one advertising historian says, "This breakthrough advertising shattered the myth that motorcycles were only for tough guys and rebels. It reached out and made Honda and motorcycling appeal to everyone."
Meanwhile, back on the economic front, conglomeration was the order of the day. Managers believed that they could manage any kind of company even without knowing much about the business. Harley bought a boat company. In 1969 a conglomerate named AMF bought Harley. That's where our third story begins.
Things just seemed to keep getting worse. Competition was hurting sales. Harley quality was pretty awful. And being part of AMF seemed like less and less of a good idea to both parties.
In 1981 thirteen senior executives of the Harley-Davidson Motorcycle Company signed a letter of intent to buy the company from AMF. It was all official by mid June. Changes started to happen almost at once.
Production quality started to improve. The company worked to improve profitability. In 1982, they began a system called, "Materials As Needed" (MAN), a just-in-time inventory system, designed to reduce inventories dramatically.
The company put in place an innovative system called "Circles of Management." They worked hard to bring both workers and dealers into the fold by gaining their participation in key decisions. Things began to look up.
In 1983 Harley introduced the Harley Owners Group (HOG). There are now over six hundred thousand members of six hundred HOG chapters at Harley dealerships around the world. It costs members forty bucks a year, and gives them a readymade community to go with their Harley and their logo merchandise.
In 1986 the company went public. In 1987, it made it to the New York Stock Exchange. Today, a hundred years after its founding and just about twenty years after it re-established its independence from AMF the Harley-Davidson Motorcycle Company has attained cult status in many areas.
Harley has achieved cult status with customers. Their customers simply think it is not only the greatest motorcycle in the World but the greatest vehicle. They not only ride Harleys, they wear Harley clothes and use Harley gear of all kinds. Probably the only other physical product that inspires that kind of devotion is the Macintosh computer. Both are fine products, to be sure, but they are also lifestyle choices.
Harley has achieved cult status among investors. That's based on more than that 37 percent annual increase in earnings since going public. It's also based on recent performance where Harley has been up when the entire market has been down.
From the books and magazine articles and analysts reports you might get the impression that Harley-Davidson can do no wrong. You could get the idea that the next Harley story will be more success heaped on the success of the last twenty years.
When a company has been successful for a long time everybody starts to think the success will never end. That's the most dangerous time of all.
Harley has done a lot right. They've revitalized product quality, management and profits. They've built a powerful cult following based on an outlaw aura. They've offered high-priced accountants and stockbrokers the opportunity to feel just a bit like an outlaw when they don their leathers and settle in for a cross-country ride on their Harley. But there are danger signs for the company as it begins its second century.
Harley buyers are getting older and older. The average age, according to Harley, is forty-six years old. That's increased from thirty-seven back in 1990.
A lot of the customers are Baby Boomers. They like the outlaw status and the independent image that Harley offers. They've got the money to buy the toys they want and a big motorcycle is a wonderful toy. The result is that Harley has a 45 percent market share in big cruiser bikes. Second place Honda has just 23 percent. But that cult status cuts both ways.
What is cult for The Boomers is definitely not for their children. If it's their parent's cult they want no part of it and besides they tend to buy motorcycles that are smaller and less expensive. In the last three years sales of those light sport bikes have increased by 90 percent. Harley has got only 2 percent of that market.
The company has made some moves to capture the younger buyers. The new V-Rod is aimed at younger folks. Harley has started up a subsidiary, the Buell Motorcycle Company, with products aimed specifically at this segment. But they still have only 2 percent.
The problem for Harley-Davidson is to attract the younger customer without alienating the customers that buy the big motorcycles and ride them to HOG events. That won't be easy.
There are other bad signs, too. Production backlogs are getting shorter and shorter. The premiums that Harley dealers have been able to get over the manufacturer's list price are getting smaller and smaller or in some cases going away all together.
There is certainly some hazardous road ahead. Will Harley's cooperative management style and the relationships with workers and dealers last if there's an economic downturn? They might, but they haven't been tested yet.
We've had three chapters of the Harley story so far and there's more yet to be written, but there's significant danger that this story could turn into a different kind of classic, the tragedy. It could go like this. Company overcomes adversity and achieves success. Company fails to deal with new challenges. Company fails. That is also a classic American story.
Harley-Davidson makes more than motorcycles. They also make Harley-Davidson logo merchandise. A lot of that merchandise is worn by the vast majority of people in the United States who don't even ride motorcycles.
They may not ride, but they know the logo. The Harley-Davidson brand has recognition status rivaled only by the great multi-national brands like Coca-Cola.
As if that weren't enough there is great financial performance. Since going public in 1986, Harley has increased earnings at an average annual rate of 37 percent. Only one other company that went public that year has done better. That other company is Microsoft.
It's just about all a business could ask for. A brand that has achieved cult status and outstanding financial performance. That's what makes the story of Harley-Davidson so interesting. We want to know how they got there. And the answer is not in one story but in three.
The first story starts at the beginning. In 1903 William S. Harley (21) and Arthur Davidson (20) were acting out the story of inventor/entrepreneurs and tinkering in a 10 foot x 15 foot shed with a hand-lettered sign on the door that read, "The Harley-Davidson Motorcycle Company." They produced their first motorcycle right there.
Arthur's brother, Walter, joined them in 1907. Soon the business was going so well that his brother William, who had a great job with the railroad, came on board, too. "Firsts" followed one after the other.
The bar and shield logo was used for the first time in 1910. The first issue of Enthusiast magazine came out in 1916. It is now the longest continuously published motorcycle magazine in the world.
brought World War I to the United States and hardly skipped a beat. They sold twenty thousand motorcycles to the U. S. Army and emerged from the War even stronger.
By 1920 Harley-Davidson was the largest of more than one hundred motorcycle companies in the world. Sales peaked at 27,000 motorcycles a year. Then came the Depression.
The Depression hit everybody hard but it devastated motorcycle companies. By the end of it there were only two companies, Harley-Davidson and Indian, manufacturing motorcycles in the United States. At the bottom of the Depression only six thousand motorcycles were sold in one year in the entire United States.
But World War II revitalized Harley's fortunes. The company sold almost 100,000 of their WLA model to the US military. After the war ended it took just two and a half months to resume civilian production.
That's the first story. As the post-War economic boom began was in good shape. They'd grown up, survived the depression, and they were ready to grow even more.
In 1947 Harley-Davidson introduced the classic black motorcycle jacket. It was the start of the Wild One Era and Harley's second story.
In 1953 the Hollister incident was immortalized in the movie "The Wild One." It was Marlon Brando's first lead role. The incident and the movie established an "outlaw" view of motorcyclists in the popular mind.
Even though Brando rode a Triumph in the movie lots of folks associate the film and the outlaw motorcycle culture with Harley-Davidson. That's been fueled by the fact that Harley has been the motorcycle of choice for real motorcycle gangs like the Hell's Angels. For years Harley did pretty well, linked in popular imagination to Brando, the Hell's Angels, and outlaws in general.
When Honda began importing its motorcycles into the United States in 1962 they took the position that motorcycles in general, and their smaller motorcycles in particular, were for nice people, not outlaws. They told their story in one of the most effective advertising campaigns of all time, "You meet the nicest people on a Honda.
As one advertising historian says, "This breakthrough advertising shattered the myth that motorcycles were only for tough guys and rebels. It reached out and made Honda and motorcycling appeal to everyone."
Meanwhile, back on the economic front, conglomeration was the order of the day. Managers believed that they could manage any kind of company even without knowing much about the business. Harley bought a boat company. In 1969 a conglomerate named AMF bought Harley. That's where our third story begins.
Things just seemed to keep getting worse. Competition was hurting sales. Harley quality was pretty awful. And being part of AMF seemed like less and less of a good idea to both parties.
In 1981 thirteen senior executives of the Harley-Davidson Motorcycle Company signed a letter of intent to buy the company from AMF. It was all official by mid June. Changes started to happen almost at once.
Production quality started to improve. The company worked to improve profitability. In 1982, they began a system called, "Materials As Needed" (MAN), a just-in-time inventory system, designed to reduce inventories dramatically.
The company put in place an innovative system called "Circles of Management." They worked hard to bring both workers and dealers into the fold by gaining their participation in key decisions. Things began to look up.
In 1983 Harley introduced the Harley Owners Group (HOG). There are now over six hundred thousand members of six hundred HOG chapters at Harley dealerships around the world. It costs members forty bucks a year, and gives them a readymade community to go with their Harley and their logo merchandise.
In 1986 the company went public. In 1987, it made it to the New York Stock Exchange. Today, a hundred years after its founding and just about twenty years after it re-established its independence from AMF the Harley-Davidson Motorcycle Company has attained cult status in many areas.
Harley has achieved cult status with customers. Their customers simply think it is not only the greatest motorcycle in the World but the greatest vehicle. They not only ride Harleys, they wear Harley clothes and use Harley gear of all kinds. Probably the only other physical product that inspires that kind of devotion is the Macintosh computer. Both are fine products, to be sure, but they are also lifestyle choices.
Harley has achieved cult status among investors. That's based on more than that 37 percent annual increase in earnings since going public. It's also based on recent performance where Harley has been up when the entire market has been down.
From the books and magazine articles and analysts reports you might get the impression that Harley-Davidson can do no wrong. You could get the idea that the next Harley story will be more success heaped on the success of the last twenty years.
When a company has been successful for a long time everybody starts to think the success will never end. That's the most dangerous time of all.
Harley has done a lot right. They've revitalized product quality, management and profits. They've built a powerful cult following based on an outlaw aura. They've offered high-priced accountants and stockbrokers the opportunity to feel just a bit like an outlaw when they don their leathers and settle in for a cross-country ride on their Harley. But there are danger signs for the company as it begins its second century.
Harley buyers are getting older and older. The average age, according to Harley, is forty-six years old. That's increased from thirty-seven back in 1990.
A lot of the customers are Baby Boomers. They like the outlaw status and the independent image that Harley offers. They've got the money to buy the toys they want and a big motorcycle is a wonderful toy. The result is that Harley has a 45 percent market share in big cruiser bikes. Second place Honda has just 23 percent. But that cult status cuts both ways.
What is cult for The Boomers is definitely not for their children. If it's their parent's cult they want no part of it and besides they tend to buy motorcycles that are smaller and less expensive. In the last three years sales of those light sport bikes have increased by 90 percent. Harley has got only 2 percent of that market.
The company has made some moves to capture the younger buyers. The new V-Rod is aimed at younger folks. Harley has started up a subsidiary, the Buell Motorcycle Company, with products aimed specifically at this segment. But they still have only 2 percent.
The problem for Harley-Davidson is to attract the younger customer without alienating the customers that buy the big motorcycles and ride them to HOG events. That won't be easy.
There are other bad signs, too. Production backlogs are getting shorter and shorter. The premiums that Harley dealers have been able to get over the manufacturer's list price are getting smaller and smaller or in some cases going away all together.
There is certainly some hazardous road ahead. Will Harley's cooperative management style and the relationships with workers and dealers last if there's an economic downturn? They might, but they haven't been tested yet.
We've had three chapters of the Harley story so far and there's more yet to be written, but there's significant danger that this story could turn into a different kind of classic, the tragedy. It could go like this. Company overcomes adversity and achieves success. Company fails to deal with new challenges. Company fails. That is also a classic American story.
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