1. Summarize the case; what is happening and why is this important? 2. How does
ID: 390111 • Letter: 1
Question
1. Summarize the case; what is happening and why is this important?
2. How does this case relate to at least three strategies (Cost Leadership, Differentiation and Focus) (connect the dots, there are overlaps, in most of the topics (e.g. stakeholders, external, internal, five forces, rationale for biz level strategy)?
3. Make recommendations (how the company may better implement the strategy or strategies, (i.e. what makes these strategies successful? (look at notes and book)? Remember connect the dots between the topic in class (e.g. matching internal and external environment).
Use complete clear sentences and do not use previous chegg answers.
CASE 13
Polaris and Victory: Entering and Growing the Motorcycle Business
This case was written by Dr. Charles B. Shrader, Michelle L. Stotts, and Dr. Samuel M. DeMarie, all of the Department of Management, College of Business, Iowa State University, February 2015. It is intended to be used as a basis for classroom discussion rather than as a demonstration of either effective or ineffective management of a situation. Some of the opening and closing managerial situations included in the case are fictional and are for We will continue to win…, of course, but to take our businesses to a higher level we intend to change how the game is played. Polaris has grown and changed significantly from the little company that Edgar and Allan Hetteen and David Johnson founded 60 years ago in Roseau, Minnesota. But just as they relied on innovation and hard work to satisfy customers, we will strive to do the same in the decades ahead. Scott Wine, Polaris Chairman and Chief Executive Officer1 Steve Menneto, vice president in charge of the Motorcycle Division at Polaris Industries, gazed up at company headquarters in Medina, Minnesota as he pulled his gleaming cruiser into the parking lot. Menneto had been with the company since 1997 and was promoted to head of motorcycles in 2011. He knew his company’s Victory
bikes had come pretty far since they were first introduced to the riding public in 1998. With the development
of new luxury touring bikes and the steady release of aggressively-styled cruisers, along with the acquisition
of historic Indian Motorcycles, the motorcycle group had continually innovated throughout its first fifteen
years in business. Yet Menneto pondered the recurring questions facing Victory Motorcycles and Polaris. He wondered if the initial decision to diversify into heavyweight motorcycles was the right road to take. He realized Polaris took a big risk by moving into motorcycle
and going up against the recognized powerhouses in the industry. Would the Indian brand live up to its tremendous potential and capture market share at the high end of the heavyweight segment? Would Victory continue successfully competing against the Japanese giants, new energetic and innovative motorcycle companies, and their closest rival Harley-Davidson? Could the company continue to produce state-of-the-art motorcycles while maintaining the heritage of some of its iconic brands? Victory began making motorcycles in 1998. From 1998 to 2006 Polaris had invested over $100 million in motorcycle development and by 2006 the division was profitable for the first time. Victory sales were $113 million, 7 percent of company sales for that year.2 In 2009 Victory Motorcycles celebrated its first decade in the
motorcycle business, but a global recession led to poor sales, corporate restructuring, and company-wide layoffs. In that year Polaris, Victory’s parent company, announced a new ‘on-road’ vehicle division of which Victory would be part. Mike Jonikas was appointed as vice president of the new division and Mark Blackwell as vice president of the motorcycle business.3 Blackwell, the first Victory Vice President was an accomplished rider himself, winning the national 500cc motocross championship and being
inducted into the American Motorcycle Association’s Hall of Fame. Both Jonikas and Blackwell reported directly to Polaris Chief Operating officer, Bennett Morgan. Jonikas and Blackwell organized Victory with the intent of maintaining a high level of quality engineering throughout the production processes. Menneto knew that if Victory was to be a successful brand it needed to be able to meet customer expectations and not fall behind in terms of innovation like its main heavyweight competitor, Harley-Davidson. Victory could still consider itself a new motorcycle brand. Recent sales were strong but competition was also getting stronger. The challenge now was how to continue to innovate and grow in an increasingly crowded
and difficult market segment. The need to examine the motorcycle division’s strategy seemed imperative.
Polaris Industries, Inc. Polaris Industries, Inc., designed, engineered and manufactured snowmobiles, all terrain recreational and utility vehicles (ATVs), motorcycles and personal watercraft (PWC), on and off-road vehicles, and low emission vehicles; and marketed them, together with related replacement
parts, garments and accessories (PG&A) through dealers and distributors principally located in the United States, Canada and Europe under the brand names of Victory, Indian, Ranger, Sportsman, RZR, Switchback, and others. The garment and accessory items included helmets, boots,
T-shirts, sweat pants, touring luggage and trailers. The company was widely known as the world’s largest
manufacturer of snowmobiles and one of the biggest makers of all-terrain vehicles and personal watercrafts in the United States.6 In 2013, Polaris Industries employed seven thousand people at eleven manufacturing locations and five research and development centers worldwide. The company had over three thousand dealerships and operated in more than one hundred countries. Polaris produced its first snowmobile in 1954 under co-founder and former CEO Alan Hetteen.7 Textron, Inc. bought Polaris from its original Roseau, Minnesota ownership group in 1968.7 Then in 1981, Textron, Inc. sold the Polaris division to a group of private investors led by W. Hall Wendel Jr., a Textron division head.8
The snowmobile business kept the Roseau, Minnesota plant busy six months out of the year but company
managers wanted to figure out how to fill the other six months, so they extensively surveyed their snowmobiler customer base and decided in 1985 to diversify and produce all terrain vehicles (ATVs).7 The company once again diversified by manufacturing personal watercrafts
(PWC) in 1992, and eventually became a world leader in both ATV and PWC production and sales. In 1987
Polaris became a publicly traded company. As a result of its diversification strategy, Polaris was
able to manufacture products all year. Snowmobile manufacturing took place in the spring through late autumn or early winter and personal watercraft were manufactured during the fall, winter and spring months. Polaris has had the ability to manufacture ATVs year round since May 1993. ATV production starts in late autumn and continues through early autumn of the following year.5 Because of the seasonality of the Polaris products and associated production cycles, total employment levels varied throughout the year. Approximately 3,000 individuals
were employed by the company. Polaris’ employees
have not been represented by a union since July
1982. The company announced layoffs in their Osceola,
Wisconsin plant in early 2011 due to the recession.9
Expansion Into Motorcycles7,10
Matt Parks joined Polaris in 1987 as a district sales manager
for California, Nevada, and Arizona to develop the
dealer network. He was named ATV product manager
in 1992 and earned a spot at the company’s headquarters.
W. Hall Wendel Jr. asked him to do research on prospective
acquisitions or expansions. Parks, with the additional
title of general manager of new products, considered
such things as go-karts, golf carts, lawn-and-garden
products, chain saws, and Hula-Hoops by investigating
the various industries in terms of competition, size, level
of service, and new trends. Parks and others studied the
off-road motorcycle market when two dirt bike companies
were put up for sale. Then a European motorcycle
company asked to distribute their bikes through Polaris.
“That sparked a study of the motorcycle business that
uncovered signs of a promising market. Along with the
dirt bike research, we did a quick study of the street bike
business at that time, and we were kind of interested.
We thought, ‘You know, this makes some sense,” recalls
Parks.11
In 1993, Polaris distributed over 300,000 surveys
through the company’s Spirit magazine for Polaris vehicle
owners to measure the readers’ interest in buying a
wide variety of products from Polaris. “Motorcycling did
really, really well [in the survey],” said Matt Parks.12 The
survey results were personally interesting to Parks since
he was a lifetime motorcycle rider and owned several
motorcycles, including a ’74 Norton, ’66 and ’91 BMWs,
a ’77 Harley XLCR and an ’81 Ducati. Motorcycles also
caught the interest of Wendel who at the time owned a
Harley-Davidson.
In pursuing the possibility of motorcycle production,
Victory became the project’s confidential codename.
Parks came up with the name because it was a nonsensical
name with positive connotations. “It’s ‘V’ for victory.
It’s nostalgic; it has World War II connotations.”13
Parks along with Bob Nygaard, Snowmobile Division
General Manager, proceeded with investigating the
motorcycle production possibility by hiring two outside
firms to assist them in conducting further confidential
research on motorcycles. They chose McKinsey and
Company, one of the largest and most prestigious consulting
firms in the world, and Jerry Stahl, an advertising
executive who was very familiar with recreational motorsports
and the motorcycle business. Stahl also had experience
with Harley-Davidson’s advertising campaigns.
From May through August of 1993, Parks & Nygaard
assessed the Polaris infrastructure, including the company’s
sales force, dealer network, service and warranty
operation, and parts and accessories division. They also
looked at Polaris’ current customers to see what types of
things they were interested in and whether they would
buy a motorcycle from Polaris. Polaris analysts and consultants
also analyzed statistics from the Motorcycle
Industry Council (MIC) in terms of the location, displacement,
and types of bikes sold in the industry.
The research showed there was industry capacity
for another manufacturer in the cruiser business. The
research also revealed that Polaris dealers would like to
have on-road motorcycles to sell. Consultants believed
that a functionally superior cruiser built in America
could find competitive space between Harley-Davidson
and the Japanese producers. “We focused in on Harley
and the Japanese manufacturers and said to ourselves,
‘Is Harley vulnerable from any standpoint?’ We thought
that their costs were high,” Nygaard said. “We thought
that, based on re-engineering the Harley bike, we could
build it for less money. We felt that customers were
waiting too long to take delivery of their Harleys, and
they (Harley-Davidson) were vulnerable from that
standpoint. We could get to market with a bike that
we could make money, and the heavy cruiser end of
it was certainly what we wanted to target because that’s
where the (sales) numbers were, and that’s where the
(profit) margin was. It was the best fit for us, in that the
Japanese were vulnerable there. They really hadn’t been
able to tackle Harley, because it might look like a Harley,
but the real rider knew that it wasn’t an American-made
bike from an American manufacturer. We were close (at
the time) to being in the domestic engine business, and
we could build our own U.S. engine, and that gave us
a major leg up on the Japanese. We were an American
company.”14
“The result of the study was, believe it or not, yes,
there was a tremendous opportunity in the motorcycle
market,” Parks said. “It’s not the off-road motorcycle
market; it’s the on-road motorcycle market, and the
entry point, the best entry point, would be in the cruiser
market.”14 Cruisers were defined as stripped-down versions
of heavyweight touring bikes that were intended
for leisurely travel. Research showed that many cruiser
owners immediately replaced many components, such
as brakes, seats, wheels, vibration-adsorption devices,
frame stiffeners, and intake systems on their brand-new
motorcycles. This was interpreted as an opportunity to
fulfill demand created by undershot customers in the
market.
Polaris had experience producing recreational
vehicles for over 44 years. It had the engineering talent
and production capabilities to design and produce
distinctly different vehicle lines – snowmobiles, ATVs,
and personal watercraft – and produce its own engines
for many of those vehicles. Parks said the study showed
“the manufacturing capabilities and technological knowhow
Explanation / Answer
Answer: (1) In this case Polaris Industries which is a U.S company that manufactures recreational vehicles is planning for the diversification of its business in the field of motorcycles in the Cruiser segment. This case study highlights that how in the past because of its strong innovation, manufacturing and distribution; Polaris has emerged as a successful company at the marketplace. The company is now planning to venture into off road motorcycle business. Polaris for its new Victory motorcycle projects aims at capitalizing on its American image, innovation, manufacturing capabilities and strong distribution system in order to become successful in the heavy weight motorcycle market.
(2) This case relates to focus strategy as Polaris in its new venture is focusing on the heavy weight motorcycle market. Similarly the company plans to create a differentiation based on its American image and manufacturing capabilities that can help it to differentiate itself from both Japanese manufactures and also from Harley Davidson based on shorter delivery time. This case is also related with cost leadership as manufacturing the bikes in a cost effective way can also prove to be a point of differentiation.
(3) The company can make these strategies successful by focusing on its marketing mix for making it more responsive towards the demands of the customers. The company need to research about the features that are most desired by the customers in the segment, effectively use its existing dealer network to distribute its products , offer lower price by its superior manufacturing facility and strongly positioning itself as an American bike with better features.
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