HARLEY-DAVIDSON: INTERNATIONALIZATION IN THE TRUMP ERA

HARLEY-DAVIDSON: INTERNATIONALIZATION IN THE TRUMP ERA

Authors and Rights

  • Authors: Bertrand Guillotin and Seok-Woo Kwon

    • Written solely for class discussion.

    • Authors do not intend to illustrate effective or ineffective managerial handling.

    • Possible disguise of certain names and identifying information for confidentiality.

  • Copyright Information:

    • © 2018, Ivey Business School Foundation

    • Permission required for reproduction in any form.

    • Contact Ivey Publishing for copies or permissions.

Presidential Endorsement

  • Date: February 2, 2017

  • Context: Meeting at the White House

    • President Donald J. Trump praised Harley-Davidson executives and union leaders.

    • CEO Matthew S. Levatich left impressed with the Trump administration.

  • Policy Background:

    • Meeting occurred shortly after the announcement of the "America First" foreign policy.

    • This policy had potential implications for the company facing struggles and iconic status in U.S. manufacturing.

Potential in Asia

  • Statement by Levatich:

    • Emphasized Asia as a significant opportunity for growth.

    • Mentioned the Trans-Pacific Partnership (TPP) as a means to address barriers to growth in Asia (April 2016).

  • Shifting Context:

    • By May 2017, Levatich had to reassess pursuing Asian opportunities due to changing policies.

America First Policy

  • Overview:

    • Emphasized prioritizing American interests in foreign policy and trade.

    • Intended to grow the U.S. economy and return jobs through fair trade agreements.

  • Trade Agreements:

    • Withdrawal from the TPP was a key action to put the America First agenda in place.

    • Commitment to renegotiate NAFTA.

  • Impact on Businesses:

    • CEOs faced backlash from Tweets, impacting stock prices and leading to adjustments in business strategies.

    • Notable examples include:

      • Ford canceled building plans in Mexico and redirected investment to Michigan (January 3, 2017).

      • CEO Mark Fields’ departure linked to Trump's influence.

      • Boeing and Lockheed Martin faced stock drops following Trump's Tweets.

Use of Social Media as Influence

  • Social Media Phenomenon:

    • Questions arose if the White House was strategically using Twitter to influence business decisions while bypassing traditional media.

    • This approach led to unprecedented tension between the White House and the business community.

  • Impact on CEOs:

    • CEOs aware of their stock price performance were significantly affected by adverse Tweets.

Harley-Davidson's Legacy and Leadership Context

  • Company Background:

    • Founded in Milwaukee, Wisconsin in 1903.

    • Long-standing history as a U.S. icon.

  • CEO Profile (Matthew S. Levatich):

    • Became CEO on May 1, 2015.

    • Extensive experience within Harley-Davidson since 1994.

    • Educational background in engineering and business management.

    • Has served on boards of various related organizations.

  • Market Context:

    • By Inauguration Day, the U.S. policy environment shifted against globalization, impacting multinational expansions such as Harley-Davidson.

International Trade Issues

  • TPP Withdrawal:

    • Severely impacted Harley-Davidson as TPP aimed to lower tariffs in key markets like Malaysia, Thailand, and India (where tariffs were as high as 100%).

  • BRIC Market Entry:

    • Harley's efforts to enter BRIC markets (Brazil, Russia, India, China) aimed to counterbalance declining U.S. sales post-2008 financial crisis.

  • Historical Context:

    • The early interactions with global markets contrasted sharply with past struggles with competition (specifically from Japanese and European rivals).

Strategic Options and Market Challenges

  • Internationalization Strategies:

    • Options included direct exports and foreign direct investment, which has been tightly linked to market tariffs and global competition.

  • Market Position and Product Offering:

    • Defined wins and expansions contrasted against ongoing challenges of price competitiveness and product appeal due to shifting customer demographics.

  • Demographic Shifts:

    • Aging customer base (overwhelmingly white males) posing risks to long-term brand resonance.

Financial Metrics and Stock Price Performance

  • Stock Performance from 2014 to 2017:

    • Stock price dropped from $60.35 (Dec 2014) to $54.75 (May 2017).

    • S&P 500 increased by 16% during the same time frame, indicating underperformance relative to market benchmarks.

  • Financial Declines Noted:

    • Harley's downward trend in sales and market share amidst increasing competition and changing customer dynamics with relevance to millennials.

Operational and Strategic Challenges Ahead

  • Need for Urgent Strategy Development:

    • Levatich required to develop strategies addressing international expansion against domestic political concerns.

    • Various market responses essential in evaluating moves concerning tariffs and international production presence.

Conclusion

  • Dilemma Faced by Harley-Davidson:

    • Urgent decision of whether to pursue international expansion despite risks posed by domestic policy and market perception.