Monopoly and Indian Motorcycle Essay

Submitted By parnofiello
Words: 1219
Pages: 5
Open Document
Indian Motorcycle Dealership Business Proposal
Matthew Parnofiello
ECO 561
November 17, 2014
Richard McIntire
Business Proposal
After a 70 year gap in Indian Motorcycle’s production the brand has been revived by parent company Polaris Industries, Inc. and is ready to re-enter the market against longtime historical rival Harley-Davidson, Inc. Indian Motorcycle’s opportunity and challenge is to build out a vibrant dealership network across the U.S. quickly and effectively in order to capitalize on the brands re-launch. As an avid motorcycle enthusiast and business minded opportunist I am keenly interested in becoming an Indian Motorcycle dealer. There is a market opportunity to ride the wave of nostalgia and excitement for the return of the revered brand. The dealership network build-out will quickly accelerate from only a few dozen to hundreds over the next few years. Early adopters willing to put up the initial investment and the work required to stand up dealerships will be among the first to reap the rewards of this new market entrant.
The Market Structure
The motorcycle market in the U.S. is an oligopoly. The market share of the top three firms is 79.3% (Statista, 2014). The variety of brands available, motorcycle uses and consumer tastes keep the market from evolving into a monopoly. The relatively high costs of entering the market however prevent the market from evolving into monopolistic competition.
Historically the motorcycle market from its inception reflected monopolistic competition. There were upwards of 100 U.S. manufacturers competing to define and capitalize on the emerging market in the early 1900’s. As the market naturally matured many mergers, acquisitions and business failures drastically consolidated market players. Economies of scale allowed the victors to lower their production costs. These firms also got access to new, often costly technologies to stay ahead.
With the demise of Indian Motorcycle in 1953, Harley-Davidson (H-D) was the only American motorcycle manufacturer with the technology, skill, production facilities and scale to operate within and serve the U.S. market. During most of these years, 1953 – 2013, H-D operated in a virtually pure monopoly market save for the eventual low cost competition from eastern Asian manufacturers like Honda and Yamaha in the late 20th century.
Today, with Indian Motorcycle re-entering the market, Harley-Davidson will finally have an American competitor, once though defeated, rise from the ashes to form a duopoly of American motorcycle firms. The support of Indian Motorcycle’s parent company Polaris Industries is paramount to the revived brands success. Many attempts to revive Indian Motorcycles have failed to overcome the multiple barriers to entry into the American motorcycle market (Indian Motorcycle, 2014).
Elasticity
Motorcycles in general have a higher level of elasticity. If prices increase for a particular brand or model consumers have many other alternatives. It is worth nothing that motorcycles in the U.S. market are considered a luxury good. Consumers do not need them so they tend to purchase what they want not what they need. This being the case, luxury motorcycles are somewhat less elastic in that consumers tend to buy what they want despite price. Cost is just one of many factors affecting purchasing habits.
With elasticity of demand in mind I would price the Indian motorcycles just above their competition. In a market that values quality and prestige over price, history has shown that healthy margins are attainable with the right balance. To avoid losing some more price sensitive customers I would limit the price delta versus comparable alternatives to a negligible 8%.
As Indian Motorcycles ramps up production it should be their goal to constantly match marginal cost to marginal revenue to maximize production. Before each time these two variables meet new capacity should be built to start the process over again. In this manner the motorcycle
Show More

Related Documents: Monopoly and Indian Motorcycle Essay

53681867 Hero Honda Kinetic Case Study Essay

Hero-Honda Motors the world’s largest two-wheeler company. When the joint venture agreement between Hero group and Honda Motors Company – Japan came up for revalidation in the year 2004, Honda Motors and Scooters India Ltd announced to enter the motorcycle market. This brought the management of Hero group to re-think their strategy. In order to overcome the emerging challenges, the management thought it appropriate to forge strategic partnering with a firm that brings to the group a technology that…

Words 7830 - Pages 32

Constitutional Law Chapter 2

Chapter 2 Constitutional Law Introduction Many people assume that a government acts from a vague position of strength and can enact any reg­u­lation it deems necessary or desirable. This chapter emphasizes a different perspective from which to view the law: action taken by the government must come from authority and this authority can­not be ex­ceeded. Neither Congress nor any state may pass a law in conflict with the Constitution. The Constitution is the supreme law in this country…

Words 9538 - Pages 39

mgmt2101 final exam notes Essay

Week 1 Globalization & International Business 1. International VS domestic business (differences due to) i) Environmental dynamics (macro) Currency, inflation, interest rates, accounting practices, cultures, social customs, laws, political stability ii) Operational nature (micro) -> hierarchy of managers Communication, coordination, motivation, differences in organizational principles and management philosophies 2. Globalization World moving away from self-contained national economies toward an…

Words 8745 - Pages 35

Business Law Notes

Chapter one Business Law Law is a set of rules, enforceable by the courts, which regulate the government of the state and governs the relationship between the state and its citizens and between one citizen and another. There are various ways in which the law may be classified; the most important are: * Public and private law * A) Public law is concerned with the relationship between the state and its citizens. Specialised areas are: 1. Constitutional law is concerned with the workings…

Words 34659 - Pages 139