Posted: June 5th, 2021
Lehman Trikes was engaging in a forward integration. They were able to obtain the front end parts needed for their trikes through their deal with Harley Davidson. Where other manufacturers were unwilling to provide these parts, Harley Davidson provided the parts and allowed Lehman to manufacture a completed product. Harley Davidson was engaging in a related diversification strategy.
They were already selling motorized bikes but by including Lehman Trikes in the process they were able to sell a different type of bike, a three wheeled motorcycle, allowing them to reach new customers. Lehman had an opportunity to increase production in their manufacturing facilities. A major benefit to Lehman was the potential to gain a larger customer base by teaming with Harley Davidson brand and reputation. They would also benefit from the increase income provided by the manufacturing contract.
With this business venture, Lehman also runs the risk of competing against themselves. Since they also produce three wheeled motorcycles, the products they are producing for Harley Davidson could take away some potential customer do to the popularity of the Harley Davidson brand. Harley Davidson has the opportunity to sell an end product that is expertly built. By outsourcing the job to a company that is an expert in the field, Harley Davidson is able to market their bikes as a well built machine.
A major benefit to Harley Davidson was labor provided by Lehman Trikes. They did not have to pay union workers, employed by Harley Davidson, for completion of the bikes but were able to outsource the work for a better rate. Harley Davidson also faces the competition of Lehman Trikes and other companies that Lehman has partnered with. Not only could the Harley Davidson trikes face competition with Lehman build trikes, but also with other trikes but by Lehman for other companies.
Considering the state of the economy and its impact on the trike market, it was reasonable for Harley Davidson to bring production back into their own facilities. By working out a labor agreement with their workers, Harley Davidson was able to reduce cost for the production of its trikes. Lehman should begin pursuing another relationship similar to the Harley Davidson contract. Although they could potentially create more competition for themselves, they could also increased production and be able to increase business by taking on work for other companies.
Place an order in 3 easy steps. Takes less than 5 mins.