CALIFORNIA STATE UNIVERSITY, HAYWARD

COLLEGE OF BUSINESS AND ECONOMICS

MANAGERIAL ECONOMICS

GUIDELINES FOR CASE ANALYSIS

Harley Davidson - A and B

I. MAIN ISSUES

1. Have imports been the dominant cause of "serious injury" to Harley Davidson?

2. Is the level of protection sought by Harley Davidson justified as a means of reversing the cause of serious injury?

II. MAJOR SUB-ISSUES

1. What is the standard for determining "serious injury" to Harley Davidson? Possible candidates:

(i) Lost sales

(ii) Declining market share

(iii) Lost profits

(iv) Price reductions

(v) Reduced employment

Is the "negative profits" criterion defensible?

2. Was foreign competition the dominant cause of Harley Davidson's problem? This, in turn, implies two sub-issues:

(i) What is the correct definition of Harley Davidson's market for motorcycles? This issue hinges on the degree of product differentiation and the cross-price elasticity of demand. Is the latter high or low given the established brand-name of Harley Davidson and the large premiums that customers are willing to pay for their motorcycles in spite of low quality

(ii) What is the dominant cause of Harley's troubles:

(a) economy-wide recession or other economic factors?

(b) poor management decisions?

How can one distinguish between the two different kinds of factors?

(iii) What are the partial equilibrium effects of a tariff on motorcycles and what are the quantitative and qualitative effects for US motorcycle consumers, US motorcycle producers like Harley Davidson, Japanese producers and the US economy at large? (Look at the standard discussion of the effects of a tariff in a standard text on International Trade/Economics such as Krugman and Obstfeld, Salvatore or Yarborough and Yarborough)

Please use the data in the case to support your arguments on these issues and look at the questions at the end of the case.