Management Case
Internationalization at Harley-Davidson
1. What is the nature of the international business environments Harley faces? What types of risks does the firm face?
The nature of the international business environments Harley faces are complex and varies due to cultural and regional needs of the diverse markets it competes in. This is shown by the differences of the sales mix in U.S. and Europe as revealed in exhibit 1 of the case. For example, in 2006, custom models accounted for 47.4% in U.S., whereas it accounted for 13.4% in Europe. In the U.S., other sales of models based on different criteria such as performance, touring, and standard accounted for 15.1%, 35.5%, and 2.1% respectively. Europeans have different preferences however. Performance, touring, and standard accounted for 41.4%, 26.1%, and 19.2% respectively. The reason Harley faces such diversification is clearly due to customer preferences and market demands. I believe that all four types of risks in international business are present: (1) Cross-cultural Risk: Harley operates in different facilities in the U.S., Brazil and Australia. Potential growth markets include Canada, Japan, Australia, Latin America (Brazil), India, and China. There are many cultural differences in languages, lifestyles, customs, and religion of the various countries. These differences may lead to inappropriate business strategies and ineffective relations with customers. However, understanding the different markets would be beneficial to Harley. (2) Country Risk: Differences in the country’s political, legal, and economic systems may adversely impact firm profitability. Government intervention restricts market access and imposes many challenges on the company. As the case mentions, Brazil’s government initially “imposed high import tariffs that doubled the cost of bikes to Brazilian buyers”. To overcome the high costs of import taxes, Harley built a plant in Brazil. (3) Currency or Financial Risk: Risk of exchange rate
1. What is the nature of the international business environments Harley faces? What types of risks does the firm face?
The nature of the international business environments Harley faces are complex and varies due to cultural and regional needs of the diverse markets it competes in. This is shown by the differences of the sales mix in U.S. and Europe as revealed in exhibit 1 of the case. For example, in 2006, custom models accounted for 47.4% in U.S., whereas it accounted for 13.4% in Europe. In the U.S., other sales of models based on different criteria such as performance, touring, and standard accounted for 15.1%, 35.5%, and 2.1% respectively. Europeans have different preferences however. Performance, touring, and standard accounted for 41.4%, 26.1%, and 19.2% respectively. The reason Harley faces such diversification is clearly due to customer preferences and market demands. I believe that all four types of risks in international business are present: (1) Cross-cultural Risk: Harley operates in different facilities in the U.S., Brazil and Australia. Potential growth markets include Canada, Japan, Australia, Latin America (Brazil), India, and China. There are many cultural differences in languages, lifestyles, customs, and religion of the various countries. These differences may lead to inappropriate business strategies and ineffective relations with customers. However, understanding the different markets would be beneficial to Harley. (2) Country Risk: Differences in the country’s political, legal, and economic systems may adversely impact firm profitability. Government intervention restricts market access and imposes many challenges on the company. As the case mentions, Brazil’s government initially “imposed high import tariffs that doubled the cost of bikes to Brazilian buyers”. To overcome the high costs of import taxes, Harley built a plant in Brazil. (3) Currency or Financial Risk: Risk of exchange rate