Harley Davidson is a venerable motorcycle maker headquartered in Milwaukee, Wisconsin. Harley lived on its name and not its quality for a lot of years as foreign (Asian) competitors made better bikes and a greater variety of bikes.
When Harley Davidson upgraded its product with better technology its sales improved but when it started marketing more successfully to American baby boomers it came back from the dead. Now, however, Harley Davidson has to confront the near term effects of the recession and less money in the pockets of its niche market. Longer term Harley needs to look for another demographic base to sell to if it wants to market its image as well as its bikes.
This article is not meant to promote Harley Davidson or to dissuade you from buying their stock. The point is to understand the market for a company’s product and to know when to invest and when to get out based on when that market swells or shrinks. The forty to fifty year old successful American male who decides to reward himself with the toy that he has yearned for much of his life is turning into the fifty to sixty year old and soon will be the sixty to seventy year old. Will the next generation of American males have the same attachment to the Harley Davidson mystique? Can Harley Davidson market this mystique in other countries?
As with almost every product there are a lot of manufacturers and a lot of marketers. Watching stock prices will tell you, after the fact, who was successful but the point is to invest before all of the stock run-up happens. The point in niche markets such as Harley Davidson is to be able to identify an aging investment and to divest yourself of the stock before the aging investment’s decline divests you of your niche market investment.
When a company does exceptionally well and knows its market, it can be very profitable. However, if you invest in this niche market company, know what to expect of the company and of the market. With Asian economies expanding and the amount of oil in the world, limited oil companies will do well for a long time. With an aging market, companies such as Harley Davidson need to re-target or will need to phase out in the next generation, or sooner. This gets back to our usual admonition. Do you homework when you buy and keep current on your investments so that a change in product or market does not catch you by surprise.