Harley Invades Africa

Management at Work Harley Invades Africa With engines thundering, a pack of some 30 chrome-girded Harleys descends like a

squad of nomadic storm troopers on the sleepy town of San Pedro. The riders are

garbed in bandanas, ripped jeans, studded boots, and black leather bedecked with

emblems of an anarchic motorcycle culture. You can tell, however, that it’s not your

ordinary gang of Hells Angels by the group’s logo—an elephant in cowboy boots.

They call themselves the Elephant’s Bikers, and they ride the poorly maintained

highways and dusty byways of the West African nation of Côte d’Ivoire (aka Ivory

Coast).

The Elephant’s Bikers club was founded in 2003 to celebrate the 100th birthday of

the iconic American motorcycle maker Harley-Davidson. The members, of course,

ride Harleys, even though they tend to be rather pricey: Taking import costs into

account, the club’s preferred models run from US$8,200 (the cheapest) to

US$52,000. Obviously, club members are fairly affluent, and they include the son of a

former president and a current cabinet official. “You’ll often see a big boss show up

with ripped jeans and skulls even though he’s in charge of a highly rated company,”

reports one member. “That’s the paradox among Harley Davidson lovers” in Côte

d’Ivoire. In San Pedro, a port town of about 150,000 in which a few residents get

around on rickety mopeds, a contingent of men, women, and children turns out to

greet the riders and snap pictures from aging cellphones.

In May 2014, a similar scene played out in Margate, South Africa—multiplied by a

hundred times. The coastal town of Margate is home to Africa Bike Week, an annual

Harley-sponsored event catering to riders and enthusiasts. The 2014 version—held a

year after Harley had hosted a worldwide 110th anniversary celebration—attracted

some 3,000 bikers and a throng of 110,000 enthusiasts. Located on the southern tip

of the continent some 3,000 miles from Côte d’Ivoire, South Africa boasts Africa’s

second-largest economy (behind Nigeria) and is one of only four African countries

ranked as upper-middle income by the World Bank.

Harley launched in South Africa in 1996—two years after the country abandoned the

notorious policies of racial segregation known as apartheid. It was a well-timed

move: With the end of apartheid, the South African economy was finally liberated

from 12 years of international sanctions. Since 1996, South Africa’s gross domestic

product (the value of all goods and services produced annually) has tripled, and a

sizable middle class has emerged.

It’s this growing middle class that interests Harley, particularly because it includes so

many black consumers. According to Michael Carney, who is in charge of the

company’s African marketing efforts, Harley’s African strategy calls for bypassing its

traditional core market—41-year-old-plus white males—in favor of “an emerging

middle-class black market hungry for the lifestyle of Harley Davidson…. We foresee

this market becoming our main market in the not too distant future in Africa.” Harley

opened a subsidiary office in Cape Town in 2008, and of 11 authorized dealerships in

sub-Saharan Africa, 9 are located in South Africa.

South Africa was a logical point of entry into the African market. Along with Nigeria,

South Africa accounts for more than half of all spending in sub-Saharan Africa.

Perhaps more importantly, the black middle class has grown from 1.7 billion in 2004

to 4.2 million in 2013, and its spending power has also increased significantly: In

2013, black middle-class South Africans spent US$3.7 billion compared to US$3.0

billion by their white counterparts. The label “middle class,” however, can be

misleading in South Africa, where the distribution of wealth along racial lines is

extremely unequal. A so-called actual middle class, for instance, falls in the “actual

middle” of the spread of household incomes. According to one recent study, this

segment consists of households with monthly income between US$142 and US$426.

It is overwhelmingly black. Some economists also identify an “affluent middle class”

consisting of households with monthly income ranging from US$523 to US$3,733.

Blacks make up 52 percent of this group and whites 29 percent. (Only 4 percent of

South Africans enjoy higher incomes than this “affluent middle class,” and this group

is 60 percent white and 20 percent black.)

Now consider these numbers in light of the fact that nearly 80 percent of the total

South African population is black and less than 9 percent white. Blacks, therefore,

are significantly underrepresented in both categories of “middle class.” In reality,

concludes one South African economist, “the ‘middle class’ is not in the middle of the

income distribution, and those who are in the middle are not ‘middle class’ in the

sense of being above some minimum level of affluence…. It follows,” he adds, “that

the differences between the two groups go beyond income and can be expected to

reflect aspects of poverty and deprivation.” In fact, South Africa has an extremely

high rate of unemployment—about 25 percent. Among blacks, the unemployment

rate is 41 percent; among whites, it’s 6.3 percent.

So why is Harley so bullish on South Africa? Indeed, why does it have such high

expectations for sub-Saharan Africa as a whole, especially among middle-class

consumers? After all, the sub-Saharan middle class is typically defined as households

with US$2 to US$20 to spend per day. Given the fact that the cheapest model

currently sells in South Africa for US$9,166, Harleys are clearly out of reach even for

“middle-class” sub-Saharan consumers. Why, then, do so many people flock around

the Elephant’s Bikers club whenever it makes a pit stop in a town where a rundown

moped is a luxury? “We’re sharing a pleasure, a dream,” explains one club member.

“People identify with that. They see that it’s accessible, that it’s not just on

television.”

Michael Carney sees a similar dynamic at work in the attraction of Africa Bike Week.

The success of the event, he believes, is due in large part to Harley’s brand image:

“Owning and riding a Harley-Davidson motorcycle,” he says, “is a unique experience

and lifestyle that unites people from all walks of life. As a brand, we’ve been fulfilling

dreams of personal freedom for 110 years.” According to Carney, the Harley image

thus appeals to a key psychographic dimension of the company’s target market—

namely, aspirations of upward social mobility.

Nick Blazquez, head of African operations for the European beverage company

Diageo, agrees that well-known brands benefit from the personal and social

aspirations of middle-class African consumers: “The African middle class,” he says,

“aspires to improve their lot…. In that regard, they aspire to brands in the same way

as consumers around the world aspire to brands. I’m just not sure,” Blazquez admits,

“what the middle class is in the context of Africa.”

The influential American investor George Soros, however, is sure about one thing:

The African middle class is the fastest-growing middle class in the world. That US$2–

US$20 in per diem spending power, for example, represents an increase of more

than 100 percent in less than 20 years. It also represents 123 million people, or 13

percent of the population, and will include 1.1 billion by 2060 (42 percent). African

consumers spent US$860 billion in 2008 (the most recent year for which official

numbers are available) and will spend US$1.4 trillion in 2020. This trajectory,

according to the World Bank, is “unstoppable,” and Soros calls Africa “one of the few

bright spots on the gloomy global economic horizon.”

Case Questions 1. According to Harley-Davidson’s Africa country manager, Celine Gruizinga, “No

one who comes here is going to make a quick buck. It’s no small feat. It’s a

type of commitment that takes decades.” Let’s say that you’re the CEO of a

publicly owned U.S. company that manufactures fashion footwear. You’re

interested in getting involved in the sub-Saharan Africa market, which will

eventually total 1.1 billion middle-class consumers—50 years from now. You

need to decide which sort of globalization strategy would work best for you:

exporting, licensing, joint venture (or some other form of strategic alliance), or

direct investment. Generally speaking—and given Gruizinga’s warning—what

are the pros and cons of each option?

2. As it happens, Celine Gruizinga is also Harley’s first-ever female country

manager. She’s also an avid Harley rider. The company is targeting women

buyers in sub-Saharan Africa, who already account for 26 percent of Harley

riders in a region where the company reports “a significant increase in the

number of both white and black women riders.” Interestingly, Harley is also

targeting women in the United States. What kinds of marketing appeals might

Harley make to female consumers in both markets? What kinds of appeals will

probably have to be distinctive for each market? Why do you think more

women are interested in buying Harleys?

3. Nigeria has the largest economy in Africa. It’s oil rich, and the economy is

growing rapidly, driven by agriculture, telecommunications, and services. The

banking sector is strong. Unfortunately, Nigeria is also a serious security risk.

How should Harley-Davidson proceed with any plans to do business in

Nigeria? (“Cautiously” is a good answer, but try to be more thorough in

analyzing the situation.)

Case References • Joris Fioriti, “Meet the Elephant’s Bikers, Côte d’Ivoire’s Version of Hells

Angels,” Voices of Africa (South Africa), November 27, 2013,

www.voicesofafrica.co.za, accessed on January 1, 2017; Anthony Volastro,

“Harleys, Hogs and Hells Angels Ride on Africa,” CNBC, December 5, 2013,

www.cnbc.com, accessed on January 2, 2017; Elaine King, “Motorcycling:

Harley-Davidson Rides into Africa,” Financial Mail (South Africa), May 22, 2017,

www.financialmail.co.za, accessed on January 2, 2017; Zwelakhe Shangase,

“Mike Rides in for Harley,” The New Age (South Africa), March 21, 2013,

www.thenewage.co.za, accessed on January 1, 2017; Sulaiman Philip, “South

Africa’s Black Middle Class on the Rise,” Media Club South Africa, November 22,

2013, www.mediaclubsouthafrica.com, accessed on January 1, 2017; and “The

World’s Fastest-Growing Middle Class,” UHY International, July 12, 2012,

www.uhy.com, accessed on January 2, 2017.