Harley Davidson Company is one of the best known motorcycle producing companies in the world. Its products’ quality including durability and high performance are some of the characteristics which have heightened this company’s reputation. Despite these attributes, the company is facing various challenges in its production line which influences negatively on the company’s production. These include stiff competition from its associate companies, the adoption of double branding strategies by its competitors where more than two motorcycle brands are produced by two companies, harsh global economic times associated with increased taxations, and introduction of external competitors into the motorcycle industry has greatly affected the company’s production.
The company’s management has decided to adopt the Pest and the Porter’s methods of the external environment analysis in order to respond to these challenges. The Pest analysis involves the analysis of the external environment which the organization exists in. This involves taking into consideration the external macro environment conditions including the political, economic, social, cultural and technological factors, which have a greater influence on this company’s production. Additionally, it involves the evaluation of the organization’s strength including its position in the competitive market applying the Porter’s forces of business evaluation (Herzog, 2010).
On the other hand, Porter’s analysis of the external environment involves the analysis of the company’s competitive nature and its strengths in relation to goods and services provision to their customers. The model involves evaluating the suppliers bargaining power in the company taking into consideration the number of suppliers in the market, substitutes available, and the cost differences between the suppliers of this product. Customers’ bargaining power is taken into consideration in order for the company to evaluate the strength, which their customers have, on the company’s volumes and gross margins. This involves determining the conditions which increase customers bargaining power including buyers’ concentration, less operators for a large producing industry, and the company operating with high costs of operation (Burkardt, 2010).
The entry of new companies producing the same products as the company influences the major market determinants which include the prices, share and customers loyalty. This will enable this company come with strategies necessary to respond to the introduction of new competitors into the market. Rivalry between the company’s competitors influences the company’s choices in terms of prices and profitability affecting its competitiveness. The existence of substitutes to the products produced by this company affects the company’s prices, customer attraction and customer relationships (Herzog, 2010).
Therefore, this company can use Porter’s five forces of business analysis in acquiring valuable information, which is required for cooperate planning. These forces enable the company determine its attractiveness in the market industry through the provision of the company with insight on its profitability. This information is important since it helps in decision making of this company on either its exit or enter into the new markets. Additionally, the five forces will enable this company to compare the net effect of their market competition to the impact on their competitors. Therefore, it will be possible to understand the ways which its competitors employ in order to respond to changes hence shaping the structure of this company (Shelly & Rosenblatt, 2010).
The combination of these two methods of organization analysis will enable the company identify the necessary drivers which are required to initiate the required change. This occurs through the revelation of the company’s insight concerning its attractiveness, potential future, the expected changes in the economic, political, socio-cultural and technological spheres, which has a great impact on an organization functioning. Additionally, these models provide the organization with case scenarios, which helps in identifying the potential changes required in the company (Herzog, 2010).
The use of this model of analyzing the effects of the external environment to this company will enable it identify the available options to invest in. This is guided by the knowledge gained on the power and intensity of the competitors in the market. Therefore, the company will come up with ways which will be adopted enabling it improve its own competitive standards in the market. This may include choosing to adopt new direction in their marketing strategies and strategic partnerships with some of their competitors to improve the competitiveness of their products (Burkardt, 2010).
This model will enable the company analyze their current and future state of each of the five competitive external forces and the effect of these on the influencing power of the organization. Therefore, the company’s managers will be able to come up with various options, which can be adapted to influence these forces in favor of the company’s interests hence helping in the reduction of the overall power of the competitive forces to the company itself. Porter’s model will enable the company determine its internal environment, objectives and competencies and assist it in coming up with various strategies of sustaining their competitiveness in the market (Shelly & Rosenblatt, 2010).
On the other hand, Pest analysis can be used by this company to understand its market position, direction for its operations and its possibility for growth or decline. This model will enable the company come up with effective marketing planning, strategic planning product and business development alongside the development of research reports on the company’s status in the market. Additionally, it will enable the company perform in an aligned positive direction with the change caused by the external environment. The company will effectively adapt to the challenges brought by the external environment enabling it function in new realities of the change agent (Shelly & Rosenblatt, 2010).    Â
Furthermore, this method of the external environment analysis will enable the company identify the economic conditions that influence the demand and supply of their products. Understanding these conditions will enable it come up with an effective timing and strategies to exploit the prevailing market conditions which the organization should venture in. The company will be aware of the impending government and political policies, which will influence the nature of their productions. These include creating awareness to the entry of new competitors to the market such as the external companies supplying the same product (Herzog, 2010).
The company will identify the tastes and demands to their products, which are influenced by the socio-cultural environment. Analyzing the socio-cultural environment will enable the company introduce new products that will meet their consumers’ demands. Through analyzing the technological changes which contribute to changes in demands of their product, the company will be able to adopt new technological skills to improve the quality and the effectiveness of their products. Technological breakthroughs will allow the company to determine its financial requirements for the adoption of the new technology (Burkardt, 2010).
In conclusion, the application of the Porter’s and Pest methods of external market analysis will enable it achieve competitive standards in the market as compared to its competitors. This is because these models will enable the company come with strategies, which will be employed to improve the company’s productivity and the quality of the motorcycles produced. The company will also explore additional options, which might be adopted in order to increase the demand and the supply of their products. This may include adopting mechanisms such as collaborating with a company which produces the same goods, come together and improve the quality and synergistic distribution of their products. Additionally, the company’s managers will be able to evaluate the prevailing market conditions which the company may invest in hence increasing volumes of their sales.
