2008Aug Harley Problems Continue
2008Aug Harley Problems Continue
“Harley finds the going is far from easy”Financial Times, July 18, 2008
“Harley-Davidson yesterday said that its quarterly earnings fell 23 per cent as increasing international sales had failed to offset difficult economic conditions in the US. Domestic shipments at the motorcycle maker shrank by almost a quarter…” In a period of high fuel prices and tight family budgets, it’s not surprising that high-end chopper sales are down sharply. But there is a more significant trend at work too. For years, we have used Harley-Davidson as the perfect example of a demographically-driven business. The chrome-laden Harley has a special mystique in the American mind, a symbol of freedom and the open American road. It’s also a symbol of another great American tradition: the male mid-life crisis! The typical Harley rider is a white male in his early to mid 40s. As the Boomers age into their late 40s and early 50s, Harley’s prime demographic market will shrink for decades. For Harley to prosper in the coming years, the company will have to make its bikes appealing to other demographic groups, such as younger men. Unfortunately, this will probably mean having to offer a lower-priced machine that better fits in a younger rider’s budget. International sales are also a potential source for growth, but the same problems remain. Rich Europe’s aging demographics do not favor premium motorcycles, and the younger emerging markets of Asia and Latin America do not yet have high enough incomes to pay Harley’s price. This is another confirmation that demographic changes can wreak havoc on the business strategies of even well-managed, top-notch companies. This past month also saw the bankruptcy and closing of another American icon, Bennigan’s. The Irish-themed bar and grill has been a fixture in the American suburbs for decades. Bennigan’s will probably not be the last American casual dining chain to close its doors.
Casual dining chains, starting with Norman Brinker’s Chili’s, were a phenomenally successful concept that met the needs of young Baby Boomer families. But as the last of the Boomers’ children leave the nest; these chains will have to appeal to a new generation of parents with their own distinct tastes. Some will be successful; others will fail. The end result will be a suburban restaurant landscape that looks very different from ours today. The old, familiar names that survive and prosper will be those that are able to effectively reinvent themselves to appeal to the next generation.
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