Goblins Terra

LAUNCHING OF HARLEY DAVIDSON IN BRAZIL IMT PASSION 2009 Team Name: Goblins Symbiosis Institute of International Business, Pune Nancy Rawat: 9579191228 Arti Golas: 9766495469

10/12/2009

Table of Contents Product........................................................................................................................................ 3 Geographical Expansion................................................................................................................ 3 Requirements............................................................................................................................... 3 Reasons for choosing Brazil ........................................................................................................... 4 SLEPT Analysis .......................................................................................................................... 4 Customers................................................................................................................................ 5 Geert Hofstede Matrix ........................................................................................................... 5 Conclusion ................................................................................................................................... 6 References ................................................................................................................................... 6

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Product A bike (motorcycle) is a single-track vehicle whose propulsion is provided by an engine. These generic characteristics are combined with > 800 cc engine, hand-finished designs, seamless built and smoother ride than any other bike results in the advent of a unique experience – Harley experience. Harley-Davidson is an inspirational bike for every bike rider or designer, every bike is designed keeping in mind the vision of ‘providing extraordinary customer experience’. In doing so, it has differentiated itself on two aspects: 1. Tangible – These are the product characteristics.  Customized designs  Seats highly comfortable due to cross bones and sprung solo seat  Unique colours  Hand finishing  Seamless tank made by deep drawing that ensures corners are not cut  Saddle bags  No Unsightly welds  Exhaust pipes are designed to be in sync with the overall design  Rider controls on handlebars are clear  Water-cooled bike, stylised radiator These are some of the attributes of Harley-Davidson not found in competitor’s bikes. 2. Intangible Intangible characteristics are image, status, identity. Harley Davidson is a bike that gives the rider an image of an adventurous person who is seeking freedom. The status imparted is very high; this brings a sense of exclusivity. The person can identify himself with the group of riders who inspire to fulfil their dreams. These characteristics make Harley an ‘experience’ and not just a vehicle.

Geographical Expansion With the median age of people (40+ years) riding Harley in US is increasing it should be looking forward for a geographic expansion. Every MNC is looking for a market with a large consumer base and rising disposable income to establish their foot hold and increase revenues. The most sought after economies in this segment are BRIC (Brazil, Russia, India and China) economies.

Requirements   

For a bike – large number of male/female riders in the age bracket above the legal driving age. For a cruising bike – good roads alongside the enthralling landscapes, cult following culture and people with disposable income who can afford these bikes. For business into other country – rules and regulations should not hinder the business. The business should be profitable for the company.

The amalgamation of the conditions fulfilling these requirements can be found in Brazil. Amongst the BRIC economies Brazil is the best choice for launching Harley-Davidson. 3

Reasons for choosing Brazil  

SLEPT (Socio-culture, Legal, Economical, Political and Technological) Analysis: It helped in understanding Brazil as a market for Harley Davidson Geert Hofstede Matrix: To understand the people of Brazil as potential customers

SLEPT Analysis 1. Socio-culture: Brazil has a heterogeneous culture owing to its history of immigration of various ethnic groups across the world. The population between 15-64 years of age is 66.8% of total population of 198,739,269. This age group is majorly influenced by the attributes of Harley. The median age of Brazil is 28.6 years (male: 27.8 years and female: 29.3 years). The rate of urbanization is 1.8% pa and 86% of total population resides in urban areas. This indicates towards the large number of people who are influenced by urban culture (generalized as American culture). This gives a large potential customer base. The sex ratio in 15-64 years of age is 0.98 male(s)/female and there is not much gender disparity in Brazil. This is a good indicator for Harley-Davidson which is developing new models targeting women. 2. Legal: Brazil is one of the top ten automobile manufacturing countries in the world by volume. The import cost is CIF + (import duty+ misc. taxes of 1%) + Industrial Federal Tax (IPI). In addition to this Common External Tariff (CET by MERCOSUL) and Merchandise Circulation Tax (ICMS) of different states is applicable. However, for auto parts CET and ICMS is not applicable in Brazil. This offers an added advantage to Harley- Davidson as it reduces the price. Further, the labor cost is low in Brazil as compared to US and 100% FDI in automobile industry is allowed. These two reasons indicate that Harley can set up its manufacturing unit in Brazil which will help to reduce cost and capture market more effectively. 3. Economic scenario: There is large income disparity in Brazil. But with a GDP growth of 8.6% and ranking ninth in purchasing power parity it is an attractive market. Inequalities in Brazil take place across different racial groups and regional dimension. Regional inequalities in Brazil originate from a strong north-south divide. The per capita income is highest in southeast, south and central west. The Southeast region of Brazil is the economic hub with 40% of Brazilian population residing there. Regional Diversification (%):

Sample Mean Urban Rural North Northeast Southeast South Central West

Per Capita Per adult equivalent Percentage Income income 100 240.54 464.46 79.91 277.49 533.31 20.29 95.38 193.93 4.83 180.2 377.65 29.07 130.22 265.51 43.87 309.24 589.05 15.39 268.19 503.35 6.83 249.25 484.72

Source: http://www.sussex.ac.uk/Units/PRU/wps/wp24.pdf 4. Political: The form of government is democratic republic and is stable. The Government is working towards improving the infrastructure specifically the road network of the nation. However, it has not been very successful in reducing the income disparity. 4

5. Technological: Road network and landscapes - There is abundance of official funds for roads in Brazil. Few Brazilian companies dominate the technology to design and build roads; these companies (such as OAS, Odebrecht) are the largest contributors of the Brazilian election campaigns and are hence supported. Also, the building and maintenance of roads is a means for governments to inject cash in the economy and generate an increase in employment levels. Brazilian roads reach almost every city, and are well networked in the southeast and south region which has people with high disposable income and beautiful landscapes around Sao Paulo and Rio de Janeiro. This is a good indicator of the target market with the spending power to buy Harley.

Customers Geert Hofstede Matrix 1. Power Distance (PDI): Brazil power distance index is 69. This implies that people value and accept difference in social status. Harley is a product that gives sense of exclusivity and hence, high social status. Hence, it will be accepted by the people who can afford it as a symbol of their social status. 2. Uncertainty Avoidance (UAI): For Brazil it is 76. This is low as compare to that of US which is. This implies that Brazilians tend to be risk averse comparatively and less adventurous. This may pose a challenge for Harley to position its bike amongst the target market. 3. Individualism v/s Collectivism (IDV): In Brazil collectivism is preferred, their culture supports one's obligation to the group such as organizations and institutions, and they place importance on belonging. This implies successful prevalence of cult culture which is an integral part of Harley’s marketing strategy. 4. Masculinity v/s Femininity (MAS): Brazil prefers a masculine dimension which implies that people have more assertive characteristics and an inclination towards acquisition of wealth. This will help is projecting the image of Harley as a bike for people who are inspiring and freedom seekers. There is equality between genders. This will help Harley to target women as the potential customers. 5. Long term orientation (LTO): It is high as compared to world average. Although might not be of much relevance to Harley. Description of Geert-Hofstede Dimensions of Brazil as compared to World 80

76 69

70

65 56.5

60

45

50

62

49 51

48

38

40

Brazil World Average

30 20 10

0 PDI

IDV

MAS

UAI

LTO

Source: http://www.geert-hofstede.com/hofstede_brazil.shtml 5

Conclusion Thus, the SLEPT analysis of countries and Geert-Hofstede dimensions of Brazilians describe that for Harley Davidson, Brazil is the best country as a new market.

References http://www.harley-davidson.com/en_US/Content/Pages/home.html www.ciaworldfactbookfile.com http://www.geert-hofstede.com/ http://forum.bridgat.com/brazil-import-regs-tariffs-taxes-t721.html http://www.rncos.com/Report/IM582.htm

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