Strategic Management: External Analysis
Harley Davidson (HD) is one of the best motorcycle producers in the world. The company deals in exploiting diversity in production and distribution of products and services in the motorcycle industry. In the society that we live in today, various business entities use PEST and Porter’s Five Forces Analysis tools for developing strategies towards the achievement of competitive advantage in the market and industry of operation.
This assignment is mainly aimed at examining the information to be included in the PEST and Porter’s Five Forces Analysis in Harley Davidson (HD). PEST and Porter’s Five Forces Analysis tools are used in the creation of strategic choices by the executive management of Harley Davidson.
In undertaking the environment analysis of Harley Davidson through the PEST analysis, executive management should be focused on integrating substantive information with regards to political, social, economic and technological factors. These factors should be driving forces of success within the sector and market. In terms of economy, the analysis should emphasize on the inclusion of modern concerns with regards to the global economy as well as huge price tag in collaboration with the HD motorcycle. From this view, the economic analysis should be focused on the business cycle stage, monetary policies, trade flows and patterns, rate of inflation, interest rates, cost of labor and exchange rates. Besides, the executive should also consider the analysis of environmental laws, educational legislations, discrimination law, employment law, data protection law and competition regulations. These components will be critical in the realization of extensive analysis of the political circles in which HD operates.
Another component of PEST analysis tool is socio-cultural factors like driving forces in the achievement of competitive advantage in the market and industry of business. In this category, the company should emphasize on the integration of valuable information related to attitudes towards product quality as well as customer service religious beliefs, level of education, lifestyles, gender distribution, average disposable income levels and age distribution. Besides, the executive management should also comprise of social classes, family size and structure and perception of consumers on ‘green’ or ecological products. Since most of the products of the company are based on social factors, this analysis will be important in developing and implementing accurate decisions with reference to addressing the consumers’ tastes (Harley-Davidson Inc, 2013).
Executive management should also be focused on the integration of technological factors that apply to the logistics and production management. Other technological factors in the PEST analysis tool include access to the latest technology, level of technology within the industry, technology incentives and spending on research and development.
Porter’s Five Forces of Competition should include various components in every category. Under the threat of substitutes, the executive management should be focused on the integration of the presence of close substitutes in the sector. Besides, the management should also involve the number of suppliers, changing costs from one supplier to another, and quantity of the supplies in order to establish the power of suppliers in the industry. In the determination of the power of buyers, Harley Davidson entity should involve switching costs from one seller to another, number of buyers and quantity of products purchased.
This will provide adequate information about the extent of force of competition while addressing the consumers’ needs and preferences. In the evaluation of the threats of new entrants into the market, the organization should look into the number of new entries into the industry, number of re-introduced organizations within the sector and the possibility of international players within the market of operations. Internal rivalry should finally, focus on the market share of every company, strategies and business models, number of operators, trends, number of consumers and cost of research and development (Porter, 2008). This is important in the generation of information on the extent of competition and techniques for attaining competitive advantage.
PEST and Porter’s Five Forces analysis tools can enable the executive management at HD to make substantive strategic decisions with the objective of obtaining competitive advantage in the industry. The PEST analysis tool will enable Harley Davidson to identify business and personal opportunities. Besides, it also enables the company to predict advance warning about significant threats. PEST analysis tool can reveal the direction of change based on the business environment. This role is important in the facilitation of the ability of the organization to shape its operations for the achievement of competitive advantage. The organization will also find the need for making the required change instead of omitting the achievement of the desired position.
The company will use this information in avoiding the start or offset of a project that might not be successful because of a reason that is beyond the organization’s control. PEST analysis information is also essential in enabling the company to break away from any irrelevant assumptions in the process of developing strategic decisions for entry into new international or regional markets and industries. This is attributed to the fact that HD will have the opportunity of developing an objective based on the new environment of operation in internal and global markets. The PEST analysis tool is generally critical in opening doors to new opportunities and threats that might prevent the process of the achievement of goals, while also addressing preferences of the consumers in the different markets across the world (Berzins, 2012).
The Porter’s Five Forces analysis tool is effective in the development or formulation of the strategies of Harley Davidson following insights on various factors regarding the structure of the motorcycle industry. The information will assist the executive management in understanding the position of the company with the objective of adopting and implementing new strategies for achieving competitive advantage (Porter, 2008). The tool operates effectively with the PEST analysis tool in promoting the attempts of the organization in initiating and managing change. The company might also use this information for making valuable improvements in the industry in order to address the different needs of customers.
Harley Davidson has adopted and integrated PEST and Porter’s Five Forces analysis tools with the aim of developing new strategies for change initiation and management within the sector. These tools are substantive in identifying opportunities and threats with regards to the area of operation. This information will be useful in addressing strategic problems affecting the company, resulting into the reduction in market share and revenues at the end of the fiscal year. PEST and Porter’s Five Forces analysis tools are used in the development of wise strategic choices by the executive management of HD. For this role to be achieved, the organization should have an understanding of the accurate information to comprise of the tools.
Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 86(1), 78-93.
Bērziŋš, G. (2012). Strategic Management in Creative Industry Organizations: Specifics in Strategic Decision Making. Management Of Organizations: Systematic Research, (62), 7-23.
Harley-Davidson, Inc. SWOT Analysis. (2013). Harley-Davidson, Inc. SWOT Analysis, 1-8.