Why America’s Retailers Like Target Fail Abroad | CNBC Marathon

Summary

The script explores the challenges of global expansion for brands like Target and McDonald's, detailing Target's failed Canadian launch costing $4.1 billion due to supply chain issues and poor market understanding. It contrasts with Walmart's successful Canadian entry through strategic operations. McDonald's, once a symbol of Iceland's global integration, exited after the 2008 crisis due to high operational costs, while local and adaptive chains like KFC thrived. Harley-Davidson's struggle in India's vast motorcycle market is highlighted by high bike prices and strong local competition, despite the company's efforts to expand internationally.

Takeaways

• 🌐 Target's entry into Canada symbolized the country's integration into the global community and was an ambitious attempt to expand its brand internationally.
• 📉 Target's Canadian launch was fraught with issues, including empty shelves, poor atmosphere, and supply chain problems, leading to a $4.1 billion loss in one year.
• 🏭 Major supply chain issues, poor real estate decisions, and merchandising errors were key factors in Target's failure to resonate with Canadian consumers.
• 🚫 Despite initial excitement and curiosity from Canadians, Target's execution fell short of expectations, with many comparing it unfavorably to the American version.
• 🛑 Target's Canadian venture was abandoned in 2015, with 17,000 employees losing their jobs, marking a significant setback in the company's expansion strategy.
• 🍔 McDonald's struggled in Iceland due to the high operational costs and economic collapse in 2008, leading to the closure of all but one outlet.
• 📈 The economic downturn in Iceland made it unprofitable for McDonald's to maintain its outlets, as the cost of imported goods skyrocketed.
• 🍟 Other fast-food chains like Burger King and Pizza Hut also exited Iceland during the financial crisis, highlighting the broader challenges faced by imported food businesses.
• 🏍 Harley-Davidson faces challenges in the Indian motorcycle market due to high prices and strong competition from more affordable, locally preferred brands like Royal Enfield.
• 🌟 Despite a strong brand presence, Harley-Davidson's high-cost motorcycles are out of reach for the majority of Indian consumers, leading to low sales volumes.
• 🌏 Harley-Davidson is focusing on international expansion and product diversification to counteract declining sales in the US market.

Q & A

What was the initial reaction to Target's entry into the Canadian market?

Initially, there was excitement and anticipation for Target's entry into Canada, with consumers being curious and eager, as evidenced by long lines at pop-up shops.

What were some of the operational issues Target faced in Canada?

Target faced major supply chain issues, poor real estate decisions, and merchandizing errors, which left them unprepared and unable to handle the fallout effectively.

How much did Target's failed Canadian expansion cost them?

Target's failed Canadian expansion cost them $4.1 billion in after-tax losses for just one year.

What was the role of the 2008 recession in Target's Canadian expansion?

The 2008 recession influenced Target's decision to look northward for economic potential, as the US consumer economy was struggling to regain vitality.

Why did McDonald's fail in Iceland?

McDonald's failed in Iceland due to the high operational costs following the 2008 economic collapse, which made it unprofitable to maintain the business without drastically raising prices.

How did the economic crisis impact McDonald's and other fast-food chains in Iceland?

The economic crisis led to the closure of McDonald's and Burger King in Iceland, as their reliance on imported goods made it difficult to maintain profit margins without raising prices.

What is the current state of the motorcycle market in India, and what is Harley Davidson's position in it?

India is the largest motorcycle market in the world, but Harley Davidson has only a small slice of it, with sales declining in recent years due to high prices and competition from more affordable local brands.

What is the median price of a mass-market motorcycle in India, and how does it compare to the cheapest Harley Davidson?

The median price of a mass-market motorcycle in India is significantly lower than the cheapest Harley Davidson, which sells for about ₹578,700 or just over $8,000, roughly eight times higher.

What is the strategy behind Harley Davidson's international expansion?

Harley Davidson's international expansion is part of a strategy to revitalize its business and secure its future by targeting the growing motorcycle markets in Asia and increasing its international business to half of its total by 2027.

How has Target adjusted its strategy following the Canadian experience?

Following the Canadian experience, Target has focused on improving its US operations, investing in store remodeling, digital operations, and brand partnerships, while also enhancing customer experience with initiatives like drive-up returns and Starbucks integration.

What challenges does Harley Davidson face in expanding its presence in Asia?

Harley Davidson faces challenges in Asia such as entrenched local competitors, the need to offer more affordable bikes, and maintaining brand prestige while potentially sacrificing profit margins on smaller bikes.

Outlines

00:00

🏪 Target's Failed Canadian Expansion

Target's entry into the Canadian market was marked by high expectations but quickly turned into a costly failure. The company faced major supply chain issues, poor real estate decisions, and merchandizing errors, leading to empty shelves and an unfamiliar shopping experience. Despite attempts to appeal to local culture and a significant investment in advertising, Target's Canadian launch was rushed and unprepared. The retailer eventually pulled out of Canada in 2015, incurring after-tax losses of $4.1 billion for just one year. The failure was attributed to systemic shortcomings, underestimation of competition, and leadership issues, contrasting with the success of Walmart's strategic entry into the Canadian market.

05:03

🛠️ Target's Post-Canada Recovery and Focus on Domestic Growth

Following the Canadian debacle, Target underwent significant changes under the leadership of Brian Cornell. The company refocused on its domestic US market, investing in store remodeling, digital operations, and private label brands. It also adapted to changing consumer behaviors, emphasizing essential goods and clearing excess inventory through discounting. Target's strategy included brand partnerships with names like Ulta, Disney, Levi's, and Apple, and it leveraged its advertising platform, Roundel, to optimize ad placements. Despite the challenges of inflation and economic shifts, Target aimed to strengthen its position in the US market with plans to renovate stores and improve customer experience.

10:04

🍔 McDonald's Exit from Iceland: A Case of Economic Unsuitability

McDonald's failed to establish a lasting presence in Iceland, closing its last outlets in 2009. The company's struggle was tied to the 2008 global financial crisis, which hit Iceland particularly hard. The crisis led to a devaluation of the Icelandic krona and soaring import costs, making it unprofitable for McDonald's to maintain its operations due to its reliance on imported ingredients. Despite initial popularity, the economic turmoil forced McDonald's to close its doors, while other fast-food chains that sourced locally, like KFC, managed to survive. The case highlights the importance of economic conditions and strategic adaptation for international businesses.

15:06

🏍️ Harley-Davidson's Challenges in the Indian Motorcycle Market

Harley-Davidson faces significant challenges in the Indian motorcycle market, the world's largest, where it holds only a minuscule share. Despite the potential for growth, Harley has seen sales decline due to its high-priced, less fuel-efficient motorcycles that cater to a niche market. The majority of Indian buyers prefer more affordable, locally made bikes from brands like Royal Enfield, which also offer a strong community and cultural appeal. While Harley-Davidson is making efforts to expand its international presence and attract new riders with innovations like electric motorcycles, its high costs and the dominance of Japanese and local brands pose significant obstacles in a price-sensitive market like India.

20:07

🌏 Harley-Davidson's Global Strategy Amidst Domestic Decline

Harley-Davidson is pursuing an international expansion strategy to counteract declining sales in the United States. The company aims to increase its international business to half of its total revenue by 2027, focusing on Asia's massive motorcycle markets. This push is part of a broader effort to revitalize the brand, which includes investments in new products like electric motorcycles and efforts to attract younger riders. However, the strategy also brings risks, such as potential margin compression from selling cheaper bikes and the challenge of competing with entrenched local brands. The company's future success hinges on its ability to navigate these challenges and adapt to the diverse demands of global markets.

Keywords

💡Franchise

A franchise is a business operation that is granted the right to sell a company's goods or services in a particular territory, in exchange for a fee and a percentage of sales. In the context of the video, McDonald's and Target are examples of franchises that expanded internationally. The video discusses the challenges faced by McDonald's in Iceland and Target in Canada, highlighting the complexities of operating a franchise in different markets.

💡Globalization

Globalization refers to the increasing interconnectedness and interdependence of the world's markets and businesses. The video uses the opening of a McDonald's franchise in Iceland as a symbol of the country's move towards globalization and integration into the global community. This concept is central to understanding why companies like Target and McDonald's seek to expand their operations worldwide.

💡Supply Chain

A supply chain is the network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. The video mentions that Target faced major supply chain issues in Canada, which contributed to its failure there. Effective supply chain management is crucial for retailers to ensure that products are available when and where needed.

💡Merchandising

Merchandising refers to the process of promoting and selling goods, often focusing on how products are displayed and marketed to attract customers. The video points out that Target had merchandizing errors in Canada, such as empty shelves and poor product presentation, which detracted from the customer experience and contributed to the company's struggles.

💡Economic Crisis

An economic crisis is a period of negative economic growth or contraction, often characterized by high unemployment, reduced industrial activity, and increased business failures. The video discusses how the 2008 global economic collapse affected Iceland, leading to the closure of McDonald's franchises due to the country's financial instability and the high cost of imports.

💡Market Saturation

Market saturation occurs when a market has reached the maximum number of potential customers for a product or service. The video implies that the motorcycle market in India is saturated, with Harley Davidson struggling to gain a significant share due to competition from more affordable, locally preferred brands like Royal Enfield.

💡Brand Prestige

Brand prestige refers to the perceived status or esteem associated with a brand, often influencing consumer preferences and purchase decisions. The video notes that while Harley Davidson holds a prestigious brand image, its high-priced motorcycles are not affordable for the majority of Indian consumers, affecting its market penetration.

💡Trade Disputes

Trade disputes arise when countries disagree over trade policies or practices, often leading to tariffs or other trade barriers. The video suggests that expanding into international markets like Asia could help Harley Davidson hedge against risks from US trade disputes with the European Union, which have impacted its business.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video discusses how inflation has affected consumer behavior and led Target to discount excess inventory of discretionary goods, as consumers shift towards purchasing essentials.

💡Operational Efficiency

Operational efficiency refers to the optimal use of resources to produce the desired output, often measured by how well a company can manage its operations to reduce waste and increase productivity. The video highlights that Target's lack of operational efficiency in Canada, such as overstocks in warehouses while stores were empty, contributed to its failure.

💡Market Expansion

Market expansion is the process of increasing a company's customer base by entering new markets or regions. The video outlines Target's and Harley Davidson's attempts at market expansion into Canada and India, respectively, and the challenges they faced in adapting to local consumer preferences and market conditions.

Highlights

Iceland's entry into the global community symbolized by the opening of a franchise.

Target's Canada launch was rushed and costly, resulting in $4.1 billion in after-tax losses.

Major supply chain issues and merchandizing errors left Target unprepared in Canada.

Target's Canadian stores suffered from empty shelves and a dull atmosphere.

Target's first international expansion faced challenges due to poor real estate decisions.

Canadian consumer preferences differed from American assumptions, leading to Target's failure.

Technical issues and a flawed merchandizing system exacerbated Target's problems in Canada.

Target's overstocks in warehouses contrasted with empty stores.

Target's operational efficiency and enterprise management were not up to scratch.

Target's assurance to consumers and an apology video on YouTube failed to remedy the situation.

Target's decision to persevere through system challenges led to a game of whack-a-mole with problems.

Renovation needs and unsightly physical store experiences due to previous Zellers locations.

Underestimation of Canadian retail competition was a fatal mistake for Target.

Poor leadership in Canada and a focus on merchandizing rather than operations contributed to Target's issues.

Target's US CEO and Canadian operations President exited amidst mounting issues.

Target's 2013 data breach and the costs incurred from it added to the company's woes.

Target's decision to exit Canada and focus on the US market after the failure.

Target's investments in store remodeling, digital operations, and private label brands post-Canada exit.

McDonald's failure in Iceland due to the 2008 economic collapse and high operational costs.

High import prices and the strong krona made it difficult for McDonald's to maintain profit margins in Iceland.

McDonald's Icelandic franchise had to consider a 20% price hike on its Big Mac to remain profitable.

Harley-Davidson's struggle in the Indian motorcycle market due to high bike prices and strong competition.

Harley-Davidson's international push as part of a strategy to revitalize its business amidst declining US sales.

Harley-Davidson's challenge to gain market share in Asia's massive motorcycle markets.

Transcripts

The opening of the franchise kinda symbolized in Iceland

at that time entering into a global community.

I definitely give them credit for trying new things

and trying to attract new riders.

You know, the question will be, will it be successful?

I would say that Canada was really Target's to lose.

They'd fix one problem, but that would create another

problem. And it just became something that nobody could

really figure out.

People inside Target were saying, look, the writing is

on the wall. This is going to be a disaster.

These images are from the inside of a Target.

Not in America, but in one of 133 Canadian stores that

began opening in 2013.

Empty shelves, mediocre atmosphere, and all in all,

a surprisingly dull and unfamiliar experience.

It is not the target Americans know and love, and

it was not the one Canadians were eagerly

anticipating either.

Despite all of the excitement, Target's Canada

launch was a rushed mess—and an expensive one at

that. It ended up costing the retailer $4.1 billion in

after tax losses for just one year.

Major supply chain issues, poor real estate decisions

and fatal merchandizing errors left the retailer

unprepared and ill equipped to handle the fallout.

Target gave up on its Canadian dreams in 2015.

So what happened?

And why couldn't it translate to a country that

largely spoke the same language and whose consumer

preferences were presumably similar?

Target's launch in Canada was its first real foray in

international expansion.

The company had been eyeing the country for its close

geographical location and its mostly English-speaking

consumer base.

Even the colors of the Canadian flag matched the

company's official colors, influencing the red maple

leaf imagery in its ad campaign.

An opportunity to purchase leases from failed Canadian

discount retailer Zellers was also appealing, which

altogether was a 1.825 billion CAD transaction in

2011. In the context of the aftermath of the 2008

recession, Target saw a lot of economic potential up

north.

Even by 2011, the consumer economy in the US was

struggling to return to any semblance of vitality or

normality.

That's Doug Stephens, author, retail veteran and

founder of Toronto-based consultancy Retail Prophet.

At the time, Target was interested in pursuing

physical avenues for its international expansion

rather than online.

By 2013, the establishment and construction of its

Canadian stores, merchandizing systems and

supply chain were in full swing.

And it was a big deal.

It was to be Target's largest single year of store

openings, with the expectation to open 124

stores across all ten provinces.

But it would not turn out to be the massive success

Target was anticipating.

Consumers were pleased at the idea of Target Canada.

I recall going to a pop up shop in downtown Toronto

that Target was holding and there was a line up around

the block. People were extremely curious.

It really requires a lot of expertise of the target

market in all its facets, you know, not just

customers, but competitors, the local community

suppliers, laws and customs and so forth.

The company launched a multi-platform ad campaign

which used the verbiage "neighbour" with a "u" in

order to appeal to local culture.

The launch generated decent buzz.

People were talking about it.

Canadians who had experienced Target in

America were eager.

I think that there may be this assumption,

particularly on the part of American companies, that

Canadian consumers are essentially just carbon

copies of American consumers.

But as soon as you start making some of those

assumptions incorrectly, they can add up to a

problem. I would say, though, in this particular

case, I would say that Canada was really Target's

to lose. But there was also, I think, a level of

arrogance.

With such a tight time frame, 124 locations in ten

months, its supply chain was not properly structured

and riddled with data errors.

It grew to be one of the biggest hurdles as it

continued opening.

Those hurdles heightened alongside major technical

issues and a flawed merchandizing system.

They had overstocks in their warehouse of goods while

stores were empty.

I mean, that I think was really the biggest problem.

And had Target simply put a moratorium on it right away

and said, Look, we can't afford to fail here, they

were really well known for their product alliances and

their designer alliances and a great store

environment, they weren't necessarily up to scratch

when it came to operational efficiency and enterprise

management.

And despite clear systemic shortcomings, Target assured

consumers their experiences would be remedied.

The company even issued an apology video on YouTube.

We had some disappointments when we opened.

Certainly we think we've disappointed our guests.

But here at headquarters and at our store teams,

we're working really hard.

If you were to trace this back to the decision that

changed everything, it would be that decision to

persevere through these inordinate systems

challenges. And it became like a game of whack-a-mole.

You know, like they'd fix one problem, but that would

create another problem.

And it just became something that nobody could

really figure out until it was too late.

Alongside major renovation needs within buildings

previously occupied by a discount retailer, aka

Zellers, it led to an unsightly physical store

experience.

I mean, I was going into stores in the Toronto area

and I was looking around at, you know, running feet

of empty shelves, merchandizing where you

would have products one deep but 20 across because

they were trying to fill space. And this is just not

not normal, right?

There was something dreadfully wrong, but they

just kept denying it.

Oh, you have these available stores and you're fitting

your business into that instead of the other way

around, really controlling the location, the layout of

the store. That is really a big barrier.

The underestimation of Canadian retail competition

was also fatal.

Much of the budget market had already been captured by

Walmart, Costco, giant Tiger and Sears.

Target's poor leadership in the north also exacerbated

its issues.

A president of the Canadian business whose forte was not

systems, not operation, not inventory management, but

merchandizing, so the skill set really didn't match the

challenge.

With the launch going south, May 2014 saw the exit of two

Target executives, US CEO Gregg Steinhafel and the

President of its Canadian operations, Tony Fisher.

Steinhafel had resigned.

Fisher was fired.

Amidst already piling issues, Target was also

facing even more challenges at home.

An infamous 2013 data breach incurred $191 million

in gross expenses and was one of the biggest data

breaches to hit a US retailer.

Data from up to 40 million credit and debit cards were

stolen, a scale that ultimately evolved into a

damaging and lasting breach of customers' trust.

By 2014, Target had determined its Canadian

operations were so costly it would not be profitable

until 2021 and finally called it quits.

Its full year after tax losses in 2014 due to

discontinued operations amounted to a massive $4.1

billion. 17,000 employees lost their jobs.

While an obviously difficult outcome, Targets

narrative trying its hand at an international

expansion and failing is hardly anything new.

In 2006, Home Depot attempted an entrance into

the China market.

It misunderstood consumer culture and trends and

closed all stores by 2012.

In the case of Walmart's expansion in Canada, the

retailer enjoyed a much better reception, even when

it was initially seen as a threat to the country's

homegrown retailers.

I would argue that Walmart's entry into Canada was done

with surgical precision.

You know, I think Walmart is known for being an

incredible operator of its stores.

Its systems and its processes are second to none

in many cases.

And I would also argue that there was maybe at the time

there was even less love for Walmart in Canada.

I don't know that the Canadian market was

necessarily as receptive to the idea of Walmart coming

into the country, but Walmart did a tremendous job

and in the ensuing years they really managed to make

themselves a part of the retail fabric of Canada.

In the immediate aftermath of the Canada exit, the

entrance of Brian Cornell's leadership helped the

company recover and maintain its beloved

reputation back home.

So he brought a lot of, you know, fresh air to Target.

He had a focus on merchandizing, on building,

you know, the digital business. Urban stores and

as well as management style is very data driven but also

being out within the company, but also out in the

marketplace to really listen to his team but also

to customers.

And Target has invested a lot since then in its

stores, store remodeling and design.

Also the digital operations, not just the

website, but also integrating online with the

stores for pickup or for d rive up for delivery, same

day delivery.

It's private label brands have been a particularly

strong area, with a whopping 48 labels, ten of

them boasting billion dollar value.

Right now, in 2022, Target is no longer pursuing its

past international interests and is focusing

entirely on the US market for the foreseeable future.

It has plans to completely renovate 200 stores at home

and open 30 more this year.

They have even little initiatives thinking about

their customer experience.

They are now trying to expand that people that pick

up online orders at the store, they can even add

Starbucks orders and they also make it easier to

return with these drive up options.

Its expansion strategy is in its brand partnerships,

branching out into brands like Ulta, Disney, Levi's

and Apple. The company is also leaning into its

advertising offerings, using Roundel to optimize ad

placement on its digital platforms.

Inflation has wrought havoc upon the economy, and

Target's profits sunk a striking 90% in Q2 2022 from

last year due to an excess of unwanted inventory.

There has been a distinct change in consumer behavior.

You know, it has been an extremely inflationary time

and consumers have adapted.

So they are buying less in discretionary categories.

So Target is now shifting more on focusing more on the

essentials again.

And in the meantime is clearing this inventory of

discretionary goods.

So that has led to discounting.

For now, Target's stay at home plans are locked in

place as the aftershocks of the pandemic ripple into a

taxing inflationary wave.

When you think of global fast food titans, you

probably think of McDonald's. The chain has

restaurants in more than 100 countries and has been a

household name in America since the 1950s.

But there is one European state where McDonald's

failed to capture national attention: Iceland.

Mcdonald's tried for over 15 years to make it in

Iceland, but in 2009, the local franchise closed its

three remaining stores with no plan to return.

So what went so wrong for McDonald's in Iceland?

To answer that, let's go back to when McDonald's

first entered the market in 1993, at a time when the

isolated island nation was shifting toward a free

market economy and becoming more globalized.

Then Prime Minister Davíð Oddsson took the first bite

of an Icelandic McDonald's hamburger at its grand

opening. It was seen as a sign of the country finally

entering into the modern globalized world.

When McDonald's opened up in 1993, I have never, ever in

my life seen such an opening in one restaurant.

There were lines for days outside the restaurant, and

they were selling thousands and thousands of burgers

every day.

But then, you know, after honeymoon is over, people

started, it was just a usual thing.

Locals welcomed the American fast food chain because it

symbolized the country pulling away from isolation

and nationalism.

The opening of the franchise kind of symbolized in

Iceland at that time, entering into a global

community. And some scholars have pointed out

that in relation to marginal countries or

countries that feel themselves a little bit

marginal, getting international franchises can

be important as kind of affirming that you are part

of a global community or a community of nations.

But in 2008, the global economic collapse hit the

small country of roughly 300,000 people.

The stock market and its three biggest banks

collapsed, and almost every business in the country

nearly went bankrupt.

Thousands of people lost their savings and Iceland

erupted in protests.

The krona lost roughly half its value and higher tariffs

translated into much higher import prices.

That made it difficult for foreign brands that were

dependent on imports to maintain its profit margins

without drastically raising its prices.

According to the owner of the McDonald's Iceland

franchise, the chain imported its raw ingredients

from Germany. The franchise owner told the media that

prices spiraled so out of control that for a kilo of

onion imported from Germany, he was paying the

equivalent of a bottle of good whiskey.

In contrast with McDonald's and also Burger King, which

closed at a similar time as McDonald's closed, both were

sourcing materials from outside Iceland.

And the two restaurants in question closed in 2008 and

2009 following the economic crisis.

So it simply wasn't cost effective to have such a

large share of materials for the fast food.

Mcdonald's Icelandic franchise owner said that in

order to remain in business and make a profit,

McDonald's would have had to hike up its Big Mac price

by 20% to $6.36.

That would have made it the most expensive Big Mac in

the world at the time.

Switzerland currently holds that title with its $6.82

cent Big Mac.

In 2009, the franchise announced that it would be

closing its three outlets with only a week's notice,

blaming high operational cost.

Mcdonald's local franchise partner in Iceland was a

firm called List.

The managing director of the McDonald's franchise

told media that business had actually never been

better at the time it pulled out of the country.

He told media that the restaurants had never been

this busy before, but at the same time profits had

never been lower. Icelandic media reported that 10 to

15,000 people patronized McDonald's daily in its

final days of operation.

2008 marked a time when several businesses decided

to exit Iceland, including McDonald's' rival Burger

King, and Pizza Hut, which closed all but one outlet.

Just like McDonald's, Burger King sourced their

products from abroad.

The fast food giants that did exit Iceland had trouble

competing with restaurants that sourced their

ingredients locally.

But other analysts say high import costs affected

everyone, even the businesses that used

homegrown ingredients.

And the difference between the chains that succeeded in

Iceland after the crisis and the ones that failed all

boils down to management.

Companies that survived were companies that had usually

either financed themselves in a more conservative

manner and/or maybe simply got better assistance from

the bank than other companies. So in the case

of, for example, McDonald's, that company was

highly indebted with foreign currencies when they

went bankrupt.

Iceland has long been known for its overpriced food and

its high cost of living.

In 2018, Iceland was ranked the second most expensive

country in the world.

A typical sit down meal will cost you around $20 to

$40. Local fast food owners say keeping prices

consistent is the key to surviving in Iceland.

Keep your prices reasonable.

And if you keep your quality good, if you have

the consistency, which is the key, consistency,

consistency, consistency, then you can survive in

almost any business.

After closing, McDonald's' Iceland franchise lost the

McDonald's signage and renamed the stores Metro.

This new chain uses locally sourced food to keep costs

low and is still operating today.

And not all American fast food chains left Iceland

during the financial crisis.

We've seen places like KFC, they did not close.

They survived the economic crisis and the main

difference is that they have most of the raw

materials for their food is grown in Iceland.

So I guess they were better off because of that.

And things are getting better in Iceland.

Its economy is bouncing back and it's proving to be

an inviting place to do business.

According to the Economic Freedom Index, which looks

at a country's business and investment freedom, Iceland

ranks fifth among European countries and Icelanders are

opting to eat out.

Young Icelanders eat fast food on average every other

day, spending an average of 220 USD a month.

Iceland has also become a hot destination for tourism.

As of 2017, the number of foreign visitors to Iceland

has more than quadrupled since 2010.

With Iceland's economy looking bright, tourism

climbing and residents enjoying the multiple fast

food options, there might be hope for McDonald's to

make a comeback in the Nordic region.

India is the largest motorcycle market in the

world. About 13% of Indians own a two wheeler of some

sort. For a rough comparison, about 8% of US

households own a motorcycle or scooter.

There are almost 170 million motorcycles,

scooters and mopeds on Indian roads.

That is enough bikes for over half the US population.

And American motorcycle maker Harley Davidson wants

in on the action.

The struggling firm bets that spreading into other

markets will help it survive declining sales on

its home turf in America and pervasive fears over its

future. But Harley Davidson has only a small slice of

the Indian market, and sales there declined 21.6%

in the 2019 fiscal year and fell about 7% the year

before. Total sales in India of motorcycles

excluding scooters and mopeds, were 13.6 million

inches 2019.

Out of that, Harley Davidson sold only 2676.

That prompts the obvious question: what is going so

wrong for Harley in the world's biggest motorcycle

market? Two-wheeled transportation has long been

a common sight on Indian roads, but the motorcycle

market really started to take off in the 1980s when

Japanese manufacturer Honda entered the country through

a partnership with the Indian company Hero.

In terms of volume, the market is still dominated by

Japanese brands such as Honda and Yamaha.

Harley Davidson entered the country about ten years ago,

but it has struggled to ramp up production, build

out its dealer and service network and connect with

customers in a crowded environment.

India only became the world's largest motorcycle

market in 2017, finally surpassing China.

But Harley Davidson just doesn't make bikes Indians

can afford.

In fact, the machines are too expensive for 95% of

motorcycle buyers in India.

They cost too much up front, are too expensive to

maintain and get worse gas mileage than some of their

competitors. The cheapest Harley Davidson in India

sells for about ₹578,700, or just over $8,000.

That is about eight times higher than the median price

of a mass-market motorcycle.

But Harley Davidson is a widely known brand, and many

Indians consider its motorcycles something to

aspire to. And not every buyer is choosing a bike

solely based on cost or practical need.

There is definitely a subset of consumers who

would gladly trade up to a Harley Davidson if they

could afford it. But most of them settle for a cheaper

bike made by a competitor.

One of them, perhaps the best known, is the

India-based brand Royal Enfield, which is the

largest seller of heavyweight motorcycles in

the world, including in India itself.

Though its biggest bikes are still smaller than the

typical Harley, the brand has a large fan base with

about 3.5 million motorcycles on the road.

It has riding groups all over India, which are

inspired by Harley Davidson, and the company

conducts regular weekend riding programs.

Royal Enfield motorcycles might not quite have the

same prestige as a Harley, but they have their own

illustrious history and have been long used by the

Indian military.

They can also be had for much less money.

A Royal Enfield Classic 350 mid-size bike costs only

about $2,600, and the larger, recently launched

Interceptor 650 goes for less than $4,300.

Those lower prices have been a boon to the company's

volumes. Royal Enfield grew about 23% in the fiscal year

2018. It grew another half a percent in fiscal year

2019, selling about 805,300 units.

Other motorcycle manufacturers, such as

Germany's BMW, are taking note and making smaller,

more affordable bikes tailored to local tastes.

Harley Davidson has begun manufacturing some of its

motorcycles outside the US in recent years to take

advantage of cheaper labor, lowered shipping costs and

local trade relationships among countries.

Besides India, several of the world's largest

motorcycle markets are located in Asia.

That includes China, Indonesia, Vietnam and

Thailand, where Harley Davidson has a factory.

This international push is part of a larger strategy to

revitalize its business.

The general consensus is that the company needs to do

something to secure its future.

While the company's global net income grew a slight

1.86% in 2018, it declined almost 25% in 2017, nearly

8% in 2016 and almost 11% in 2015.

In the United States, Harley Davidson has an

extremely strong brand and a huge share of the market.

The problem is that market is shrinking.

At home, it is making a number of investments in new

products, such as electric motorcycles.

It's also stepping up efforts to attract new young

riders and dabbling in concepts such as electric

bicycles and venturing into international markets could

provide tremendous opportunity for the company.

I definitely give them credit for trying new things

and trying to attract new riders.

You know, the question will be will it be successful?

And I think to me, the jury is definitely still out and

I'm very skeptical that they'll be ultimately

successful on that.

Harley Davidson wants half of its business to come from

its international units by 2027, up from a bit more

than a third in 2018.

That would help it weather a declining market at home.

And beefing up its presence in Asia's massive motorcycle

markets could help hedge the risks from US trade

disputes with the European Union, which many say

threaten Harley Davidson's business.

But ramping up in Asia brings a new set of worries.

Selling cheaper bikes around the world could do

wonders for volume.

But it could also drive down the amount of money

Harley-Davidson makes on each of its bikes.

The brand currently has perhaps the most enviable

margins in the business.

So I think the question will be: what does this do to

margins? Because I would argue that you're going to

make less money on a smaller bike.

And you also have a lot of entrenched competitors in

some of these markets who've been operating here

for years, if not decades.

So it's not like Harley-Davidson is going to

walk in and say, hey, we're Harley, give us 10% market

share. It's going to be a lot harder than that,

clearly. And I think it's going to be a lot more

expensive than some people might think.

Harley-Davidson declined to comment to CNBC for this

story, but the company has said it plans to release two

new middleweight motorcycles in 2020.

Harley shipped 132,868 motorcycles to customers in

the United States in 2018.

It only shipped 2600 motorcycles out of the

21,000,002 wheelers sold in India in the same year.

So the opportunity to grow its business and stay alive

is tremendous.

And Harley-Davidson needs a win.