"In a democracy, oftentimes, the other people win."
Man, Thailand is just falling apart. I feel bad for the people who actually bought into the idea of a democratic system, who actually believed in the elections, they have got to be just throwing up their hands and saying forget it, it doesn't work.
The country has such a long history of Military coups (sp?) and such reverence for the king plus an accepted cast structure that democracy is a pretty alien concept. I think a lot of the problem is that the TH people are trying to merge the concept of political equality into a society with an established and accepted stratefied social structure, where inequality is accepted and entrenched.
Guess I will just have to keep my fingers crossed and hope it doesn't go the way of Bangladesh, that it can somehow hang on ala the Philippines or Indonesia.
After finally getting some sleep earlier today, I was browsing through Newsr and I came across something that at first I found hard to believe. Apparently, the folks at Harley Davidson/"HD" have agreed to buy the MV Agusta/Cagiva motorcycle company.
Honestly, to say that this is a bad idea is a complete understatement - I think this is going to rank as one of the worst ideas/mergers in motor sports, as bad as Daimler/Chrysler and GM/Fiat and possibly one of the worst business decisions of any company in 2008.
Wanna know why? Read on!
Note: The basis for my opinion is both macro and micro but I don't think anyone except finance geeks would be interested in my micro/ratio analysis. So instead, here is a Macro review of why this is such a bad idea using SWOT categories to organize.
- - - - - - - -
Strength - Harley Davidson has significant experience in the development, production and sale of "cruiser" motorcycles. HD has approximately 45% of the lucrative heavy cruiser segment of the motorcycle market. Despite significant efforts from competitors HD should maintain its overall market share for the near future.
Harley Davidson is a well established and well regarded global brand. HD consistently ranks among the ten best-known American brands, a ranking near to companies such as Coca-Cola and Disney.
Harley Davidson customers are intensely loyal to the brand and consider ownership of a HD motorcycle to be a declaration of "lifestyle". Many customers are willing to assume significant debt to income % to obtain and maintain this lifestyle.
Weakness – Harley Davidson has little recent experience in the development, production and sale of "performance" motorcycles. The most recent HD in-house efforts to develop a performance motorcycle failed due to a myriad of reasons including a dispute in direction from within HD. The performance effort was eventually redirected back to the main “cruiser” product line. Also, business partners using HD products as the basis for performance motorcycles (Buell) have recently decided to discontinue using HD products.
Harley Davidson has been aggressively trying to expand the brand overseas/in emerging markets with limited success. Ancillary products such as apparel have been strong sellers but the actual motorcycles sell only in limited numbers due to their high cost.
The Harley Davidson traditional customer base is now aging and demand in the major market (US) has leveled over the past 5 years. HD management has admitted that demand is expected to fall over the near term.
Harley Davidson motorcycles are priced at the upper end of the market and require a large investment of discretionary capital by customers. The traditional customer for a Harley Davidson motorcycle has been a US-based male, 35-55 years old, making 78000 USD per annum and spending 16000 USD on their bikes. Less than 6% of customers own more than one Harley Davidson motorcycle.
Opportunity - MV Agusta is an established motorcycle company operating out of Italy. It has a long history of producing high performance motorcycles. Its "halo" product, the MV Agusta 1000 is well regarded by buyers of European motorcycles and was displayed at the Guggenheim museum as part of the art of the motorcycle showing in 1998.
The purchase of MV Agusta/Cagiva offers Harley Davidson an opportunity to expand income streams and, perhaps more importantly, gain access to an established dealer network that will allow expansion of the HD brand.
Threat - A very high level of competition exists in the performance motorcycle industry. Major multinational manufacturers, including Honda and Yamaha are competitors within the industry. Furthermore, other Italian based competitors such as Ducati and Aprilia are well regarded and well funded, including receiving government support (MV Agusta does not receive Italian government support due to its previous foreign ownership). Other Italian manufacturers such as Bimota and Benelli are struggling to remain operational and others such as Laverda have ceased production. The market for Italian performance motorcycles is considered to be at near saturation with limited growth prospects.
Development of new MV Agusta models has stagnated recently due to a lack of funding, with only one significant upgrade to the "Halo" product line, an increase in displacement. Also, while other Italian manufacturers such as Ducati and Aprilia are heavily involved in "race based" development via MotoGP and World Superbike, MV Agusta has almost no race effort ongoing (Note: Race based development refers to product improvements that are originally developed for racing).
--- - - --- ----
The analysis clearly indicates that that the purchase of MV Agusta is a really risky decision by Harley Davidson. Currently the MV Agusta product is aging and will require significant development investment in the near future which will drain Harley Davidson development resources. Also HD has little previous success to draw on regarding the development, production and marketing of performance motorcycles.
Since the chances of the purchase of MV Agusta being a failure are high and a failure could significantly hurt HD both financially and as a global brand, the question is why would Harley Davidson management make this decision? Are they just boneheads?
I think there are two reasons-
One – Management may be thinking that they can repeat at MV Agusta what they did at Harley Davidson. For anyone who doesn’t know, HD was almost bankrupt back in the 70’s when it was owned by the AMF conglomerate. It was then bought by a group of employees and has since been a huge success. HD management may be thinking that this success can be repeated. This seems very unlikely, Harley had several unique strengths, including intense brand loyalty that MV Agusta does not have.
Two - Perhaps Harley Davidson management is making the same error that so many motor industry companies seem to be making recently - the flawed assumption of repeatability across market segments. This is the same mistake that Daimler made with Chrysler, that GM made with Fiat, that Nissan made with the Titan pickup; a company assumes its success in a segment of motor vehicle manufacturing can be replicated within a different segment that the company has little or no direct experience in. Market segments have intensely different groups of requirements by customers and success in one segment cannot be replicated in another segment just by repeating processes (apologies to Jack Welch, it just doesn’t work).
WRAP IT UP: Overall, I think the greatest challenge to HD having a success with MV Agusta is getting them to understand that European motorcycles, especially Italian “performance” motorcycles, are not a lifestyle defining purchase. The typical Italian performance motorcycle owner tends to think of themselves as more discriminating/having “good taste”. It is unlikely they will want to wear “branded” clothing, dedicate significant portions of their discretionary income to the purchase of other branded items or consider attending branded events to be a major component of ownership.
Disagree? Fine – as long as you put some actual thought into your response, it will be welcomed.
Marty, 7:53 pm CST 31-Aug-2008Post Script
Facts regarding the writer –
· I currently own several Italian motorcycles, including several 1999-2000 laverdas.
· I do not current work for any motorcycle company nor have I worked for one in the past
· I do currently own a Harley Davidson but it is not a "cruiser" . I own a HD VR1000 which is a race/sport bikes produced by HD for just a few years back in the 90's. Only 70 copies of the bike were produced (AMA racing requires you make at least 50). Harley used much of the engine developed for the race bike in their newest engine (the revolution which debuted I believe in the VRod) but discontinued the race/sport bike effort because they were unwilling/unable to dedicate the necessary resources to make it competitive.
Okay, this jet lag is starting to get serious. Going into hour 60 awake now, starting to feeling seriously loopy. Not druggy or drunk loopy, more of the 2nd day after a mini triathlon loopy. A little trembly, lightheaded if I get up from the couch too quickly.
What is so strange to me is that if I fly from Dallas to San Francisco and then catch a flight to singapore or manila or Bangkok, I have no jet lag issues. But if I fly back to San Fran and then on to Dallas I have jet lag that makes it so I can't sleep for 2.5 days? It makes no sense - Singapore is 12 hours different but it shouldn't make a difference which way I go?
Since I have nothing much else to do I am backing up the music drives while watching everything I have stored on the Tivo. Its a mini marathon of House, Burn Notice and the Closer. I have to admit I enjoy skipping past all the commercials. One thing I find interesting - in the US about every 3rd commercial is for some type of food product, pizza or fast food of some type. Overseas there are very few commercials for food. Perhaps that is part of the reason the US is the country that has the 2nd highest percentage of its population "overweight", although the BMI basis is a totally worthless statistic, its like when they say the average american has $4000 credit card balance. The correct stat for both should be the median; average gets skewed by a couple of outliers.
I need a faster USB connection, its taking forever to back up the music drives. Okay its a ton of stuff, up to 2 terabytes now, over 100,000 albums. But it shouldn't be taking a full day to do a drive. I think its slower where you deal with Apple format (I have to admit, I miss the wild old days of napster where you could get a ton of stuff for free). Itunes, bah. Sharepod together with winamp are much better.
Cripes man, being gone for 7 weeks sure causes the mail to back up. But it is kind of like the holidays, you get to open up everything at once including all the stuff you buy online. A whole bunch of stuff for my laverda, I am so going to win the Concours de Elegance this year. And for anyone reading this, the nice thing about getting your mail at the post office is you can have them exclude all the coupons and circular crap so you only get actual snail mail.
Maybe going for a long run would help me fall asleep? But as Hey its Rachel would say, its hot as balls here in TX. I think I'll give it a few more hours and if nothing happens I would pop a couple of Unisom. The problem with them is they don't knock down the higher brain functions so you don't get much REM sleep and you have really crunked up dreams.
And can someone tell me how to post a song to this blog? I keep trying to through some music up here but I get delivery errors?
Marty, 11:55 am CST 30-Aug-2008
It's tradition here in Bangkok to wear yellow on Monday's to show support for the King of TH. So what I am I wearing today? Yellow of course! Long live the king.
Sitting in the office in Bangkok after a rain storm rolled through. I used to think Houston got nasty after a rain storm but this is bad. Not Jakarta bad, which is just humidity and you need to change your shirt after being outside after 10 mins. This is more of a polluted nasty bad, where all the pollution that went up into the sky in the morning has now come back down and it covers all the plants and surfaces. Everything has a vauge smoking smell to it, even the puddles. Like an old ashtray made out of something porous that even though it has been wiped clean still has a faint smoking "tang" to it.
Frappuchino
Bangkok isn't bad. Manila is easier, better english language skills among locals. For example, today when I left the Sheraton I had to get the bellman to tell the cab driver where I wanted to go. In Manila, I never had this problem, I just told them and could then pop in the headphones.
I can't complain. The Sheraton on Sukhumvit is great as always, work is good, I am making more right now than I ever had. But somehow I feel like I am not productive.
Frappuchino -
How is it that I keep getting invites to stock picking newsletters? Its weird - the more I have at fidelity the more newsletter offers I get. It makes no sense to me since if you are smart enough as an investor to make some money in the market then you probably don't need newsletters to tell you how to make money in market.
RANT: Newser, CNN, Drudge are all so focused on the US. MSNBC - what a f joke. USA Today - only if I was still in 5th grade. IHT is just the NY times. So what does this leave me? FT.com is good but a little too UK oriented. Dallasnews.com for my local weather....If you are reading this, feel free to post some suggestions for a news website.
Saw a web posting about Collin Powell being McCains running mate. That would be an awesome pick but the religious right would go apeshit..Too bad, President Powell in a few years would be awesome.
Enough random musings - I am going to figure out how to post some music on this site. Maybe some Arctic Monkeys or the Kills or Snow Patrol...
25-Aug-08 3:25 pm
