Laying the Foundation for Quality-Harley-Davidson (H-D) Case Study

Laying the Foundation for Quality-Harley-Davidson (H-D) Case Study

Background of the Company and Competition Faced

Harley-Davidson (H-D) is an American corporation headquartered in Milwaukee, Wisconsin, and founded in 1903. The company manufactures cruiser motorcycles for sale mainly in the U.S. market. Harley-Davidson motorcycle brands are part of the American culture. The motorcycle brand has maintained presence in the American market for over a century. During World War II, the American military used Harley-Davidson motorcycles in some of the combat missions (“Motorcycle USA Staff,” 2008). H-D faces stiff competition from other motorcycle manufacturers both in the U.S. and from overseas markets. The company faces stiff competition from Polaris, Ducati, BMW, Honda (its traditional competitor), and other entrants into the market. In the recent past, the company has faced increasingly difficult times as sales have stagnated for a long time. A competitor such as Polaris has seen their sales increase over a similar period. This has led to a shift in the engine design by H-D in a bid reverse dwindling sales.

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Specific Even or Issue

After the World War II, the American Indian motorcycle collapsed, leaving H-D as the sole motorcycle manufacturer in the region. The company realized increased sales, but made no efforts to improve on quality. According to Nimwegen and Kleiner (2000), the number of units produced increased by over 300 percent. From 1970s, Honda began making entry into the U.S. market – with more improved motorcycles. This led to intense competition, which eventually saw Honda take over the market. Honda’s ability to gain a significant market share previously dominated by H-D was due to its focus on quality. Honda employed Deming’s total quality management principles in manufacturing. This led to constant improvements in quality, rivaling the H-D motorcycles that had little or no improvements over the period (Nimwegen & Kleiner, 2000). In early 1980s, Honda had become the dominant player in the market. In 1981, H-D was making huge losses, and the efforts to sell the company were unsuccessful. To reverse this situation, the management adopted a just-in-time inventory approach and other two approaches similar to the ones applied by Honda.

Implementation Challenges

There are always challenges while implementing change in organizations. In Harley-Davidson’s case, the top leadership realized that the way out of the challenges was to focus on quality rather than cost reduction (Nimwegen & Kleiner, 2000). It was challenging to convince the employees that a focus on quality improvement was better compared to cost reduction. The employees felt that quality improvements would make sense if there were a direct financial justification. With multiple facilities across the United States, the management faced an enormous challenge of how to convince the employees on the need to improve on quality. While it was easy to develop the idea in the boardroom, implementation of this idea was a major issue (Nimwegen & Kleiner, 2000). The management considered the idea of implementing stringent rules on quality across all facilities. However, such an idea would hamper employee participation in the quality improvement process. To avoid this, the top leadership gave plant managers the freedom to choose how they would implement the new changes.

Results Achieved

Harley-Davidson implemented three total quality management approaches: employee innovation, just-in-time inventory, and statistical operator controls. The major aim in implementing the quality approaches was to improve the quality of the company’s products. The implementation of the quality approaches improved the financial performance of the company. The company was able to move from losses to making profits over the period. Through quality improvements, H-D was able to improve sales. By 1982, the company had achieved significant cost reductions that it only needed to make sales of 35,000 motorcycles to breakeven, a drop from the previous 53,000 required in 1980 (Gross, n.d). However, H-D sold 27,000 motorcycles in 1982, making a relatively small loss. In 1984, H-D made profits totaling to $2.6 million. In 1987, the company sold 43,300 motorcycles, bringing it back to profitability levels (Gross, n.d). By implementing the quality approaches, the company was able to develop a firm foundation.

Unresolved Issues

Despite implementing a major quality improvement program, one of the key issues that remained unresolved was convincing the customers about the improved quality of Harley-Davidson’s motorcycles. Customers remained skeptical of the company’s products despite the improvements. It was clear that the company had a tainted image among consumers. In order to convince the customers, the company developed advertisement programs aimed at convincing customers to purchase the new and improved motorcycles. A breakthrough came when the company invited over 40,000 potential customers to test their new motorcycles (Gross, n.d). This generated interest from those who attended the event and thus made purchases. Through the advertising campaigns and word of mouth, H-D was able to improve its image among consumers. Currently, Harley-Davidson is still facing competition from other manufacturers and especially from Honda and Polaris.

Lessons Learnt

This research provides useful lessons on total quality management in organizations. The total quality management programs can provide important learning lessons to businesses in all parts of the world. The total quality management programs enable business organizations to do things in the right way, thus improving value and profitability in the long-run. Companies can adopt the total quality management programs such as just-in-time approach to reduce costs and improve quality of products. Another useful lesson is the need for poorly performing companies to benchmark from their successful peers. Through benchmarking, a poorly performing company may identify its major weaknesses.

References

Gross, D. (n.d). The turnaround at Harley-Davidson. Forbes Greatest Business Stories of All        Time. Retrieved from http://www.uic.edu.hk/~kentsang/powerst/forbes-   The%20Turnaround%20at%20Harley-Davidson.pdf

Motorcycle USA Staff. (2008). Harley-Davidson motorcycle history. Retrieved from             http://www.motorcycle-usa.com/2008/02/article/harley-davidson-motorcycle-history/

Nimwegen, J., & Kleiner, B. H. (2000). Harley-Davidson Motor Company. Management Research News, Vol. 23 Issue: 7/8, pp.121-       127,https://doi.org/10.1108/01409170010782325

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