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Presentation on case study Harley Davidson

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Prepared By

ID Name12102235 MD:- Saddam Hosson13102073 Ety Akter13102518 Nusrat Jahan12302114 Afrina Jahan Prity

Section: ASubject: Strategic management and Business Policy (MGT-403)

TOMd. Lutfar Rahman

InstructorCollage of Business Administration (CBA)

2-6-2015

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Introduction

Harley-Davidson Inc, often abbreviated H-D or Harley, is an American motorcycle manufacturer.

Founded in Milwaokee,Wisconsin, during the first decade of the 20th century, it was one of two major American motorcycle manufacturers to survive the Great Depression.

Harley-Davidson also survived a period of poor quality control and competition from Japanese manufacturers.

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From 1977, the only motorcycles sold to the public under the Harley-Davidson brand have been heavyweight motorcycles, with engine displacements greater than 700 cc, designed for cruising on highways

Harley-Davidson sustains a large brand community which keeps active through clubs, events, and a museum.

Licensing of the Harley-Davidson brand and logo accounted for $40 million (0.8%) of the company's net revenue in 2010.

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Current Situation

A. Current Performance 2008

Revenue 2008 $5.59 billion down from $5.73 billion in

2007

Net Income $654.7 million down from $933.8 million in

2007

Earnings per stock share $2.70 down from $3.74 in

2007

Motorcycles sold 303,470 down from 330,619 in 2007

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B. Strategic Posture Mission

We ride with our customers and apply this deep connection in every

market we serve to create superior value for all of our stakeholders.

Objectives We fulfill dreams inspired by the many roads of the world by

providing extraordinary motorcycles and customer experiences. We

fuel the passion for freedom in our customers to express their own

individuality.

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Strategies

Get Cost structure correct

Obtain funding for Harley-Davidson Financial

Services

Invest in the Harley-Davidson Brand

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Policies

Harley-Davidson values the deep emotional connection that is created with our customers through our products, services and experiences. We are fueled by brand loyalty and trust that our customers place in us to deliver premium quality and the promise of a fulfilling lifetime ownership experience. We exemplify this commitment by embracing a culture of personal responsibility and stewardship for quality in everything we do.

9Corporate Governance

Board of DirectorsThe Board of Directors consisted of 11 members, of which only two were

internal members—James L. Ziemer, President and Chief Executive Officer (CEO), and Thomas E. Bergman, theChief Financial Officer. High lights board members in 2008.The Board of Directors serve three-year staggered terms. Each of the nine non-employee directors are compensated $100,000 per year. At least half of this amount is to be paid in common stock. Since 2005, the board has authorized a stock repurchase. In 2007, 2006, and 2005, the Company repurchased 20.4 million, 19.3 million, and 21.4 million shares of its common stock at weighted-average prices of $56, $55, and $49, respectively. As of February 2008, all of the 20 million shares authorized in 2007 remained to be repurchased. Each of the prior two years authorizations were fully repurchased by the end of the next year.

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1. Jochen Zeitz, Chief Executive Officer and Chairman of the Board, Puma AG

2. James L. Zeimer, President and CEO, Harley Davidson, Inc

3. James A. Norling, Executive Vice President, Motorola, Inc

4. George L. Miles, Jr., President and CEO

5. Sara L. Levinson, ChairMom and Chief Executive Officer, ClubMom, Inc

6. Donald A. James, Vice Chairman and Chief Executive Officer, Fred Deeley Imports, Inc

7. Judson C. Green, President and CEO

8. George H. Conrades, Executive Chairman of Akamai Technologies, Inc

9. Jeffrey L. Bleustein, Chairman of the Board, Harley-Davidson, Inc

10. Richard I. Beattie, Chairman of the Executive Committee

11. Barry K. Allen, President, Allen Enterprises

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C .Top Management

James C. Ziemer started with Harley-Davidson 38 years ago as a freight elevator operator and served as the CFO from 1991 to 2005. In 2005, upon the retirement of Harley veteran Jeffrey Bluestein, Ziemer assumed the top role of President and CEO.

Corporate Officers, Harley-Davidson, Inc.James L. ZiemerPresident and Chief Executive OfficerThomas E. BergmannExecutive Vice President, and Chief Financial OfficerGail A. LioneVice President, General Counsel and SecretaryJames M. BrostowitzVice President, Treasure, and Chief Accounting Officer2. Motor Company LeadershipJoanne M. BischmannVice President, MarketingDavid P. BozemanGeneral Manager, Powertrain OperationsJames M. BrostowitzVice President and TreasurerLeroy ColemanVice President, Advanced OperationsRodney J. CopesVice President and General Manager, PowertrainOperationsWilliam B. DannehlVice President, North American Sales and Dealers ServicesWilliam G. DavidsonVice President and Chief Styling Officer

Karl M. EberleVice President and General Manager, Kansas CityOperationsRobert S. FarchioneGeneral Manager, Parts and AccessoriesFred C. GatesGeneral Manager, York OperationsJames E. HaneyVice President and Chief Information OfficerMichael P. HeerholdGeneral Manager, TomahawkTimothy K. HoelterVice President, Government AffairsRonald M. HutchinsonVice President, New Business

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Kathleen A. LawlerVice President, CommunicationsLara L. LeeVice President, Enthusiast ServicesMatthew S. LevatichVice President, Materials ManagementGail A. LioneVice President and General CounselJames A. McCaslinPresident and Chief Operating OfficerJeffrey A. MertenManaging Director, Asia Pacific and Latin AmericaLouis N. NetzVice President and Director, StylingJohn A. OlinVice President, ControllerSteven R. PhillipsVice President, Quality, Reliability and Technical ServicesHarold A. ScottVice President, Human ResourcesPatrick SmithGeneral Manager, General MerchandiseW. Kenneth Sutton, Jr.

Vice President, EngineeringMichael van der SandeManaging Director, HD EuropeJerry G. WilkeVice President, Customer Relationships and ProductPlanning3. Harley-Davidson Financial Services LeadershipLawrence G. HundVice President, Operations and Chief Financial OfficerKathryn H. MarczakVice President, Chief Credit and Administrative OfficerSaiyid T. NaqviPresident4. Buell Motorcycle Company LeadershipErik F. BuellChairman and Chief Technical OfficerJon R. FlickingerPresident and Chief Operating Office

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2.External Environment

General EnvironmentEconomic- Confidence in economy is directly proportional to the purchasing of

consumer items.The economic crisis will hit this segment very much.Currency fluctuation is also a big problem in this industryRevenue from sales outside the using increased 7% from 2006 to 2007  TechnologicalAs technology changes, customers’ expectations increase.Harley-Davidson is one of the main manufacturer and user of V-ENGINE

configuration.Harley-Davidson’s have a wide variety of products according to Standard,

Performance, Touring & custom Politica U.S Government and People are considering Harley-Davidson as an American

icon. Federal, state, local authorities have control requirements relating to air, water, noise, and pollution.

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LegalHarley-Davidson is facing some legal problems in Asian countries, in

India there is 60%tariff and various other taxes will cause the price of the bike to double Noise pollution and some emission standards of Harley-Davidson bike is not up to the level of some countries across the globe.

EnvironmentalThis industry is the first attacked by environmental activists, the

environmental laws varies from country to country. In Europe its Euro, in India its BS.

Harley-Davidson’s one of the main problem is this environmental problems

Socio-culturalTraditionally targeted to upper middle class males.Increased demand by women for motorcycles.

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B .Industrial Environment

Rivalry High Competition Motorcycle manufacturers continue to improve designs and provide a competitive market for Harley Davidson to compete for new consumers. Thus Harley Davidson traditionally has become the dominant market player in the market with the strong market share. Honda has been the major competitor in the same market and Harley Davidson is heavily relying upon its brand and they are trying to maintain the strong base of the customers. Honda has really become the major internal rivalry for the company with its improved strategies in the products

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Buyers Power High With over 30 different models of Harley's ranging from $6,695-20,645, and 8 Models of Buell bikes avalible from $4,695-11,995, consumers hve many options of finding the bike that meets their needs while staying within their price range.

Distributors Power High Harley has 684 Independent owned full service dealerships as well as 323 foreign locations.

Threat of Substitutes Medium Honda is a big competitor for Harley with many similar lines of bikes from the small "crotch rockets" to the bigger cruising and touring bike

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C . Summary of External Forces

External Factors WEIGHT RATING

WEIGHTED

SCORE COMMENTS

Opportunities

Double digit growth in international market 0.1 4 0.4 Growth doubled in international dealer network for 2007

New dealership in S. Africa 0.1 3 0.3 New dealership being built in South Africa in 2008

Addition of Buell motorcycle line 0.2 5 1 Soaring Profits from adding the Buell line to H.D. dealers

E-commerce, online catalog 0.03 1 0.03 Harley-Davidson developed in 2001

Threats

Rising Fuel Prices 0.3 1 0.03 Steady sharp rise in fuel prices since 9/11

Pending recession 0.2 2 0.4

Consumers may keep aging motorcycles or wait to

purchase

U.S and Foreign environment controls (EPA) 0.03 2 0.06

Stricter Government environmental controls add to cost of

production.

National Traffic and Motor Vehicle Safety Admin 0.03 2 0.06

Stricter Government environmental controls add to cost of

production.

Total Scores 1 2.28

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Finance

In 1985 Harley-Davidson was 4 hours from shutting there doors. Citicorp, Harleys main lender denied lending money in 1985 but with only 4 hours remaining to find a lending company, Harley made a deal with Heller Financial and managed to save the company. At this current time it is now funded by HDFS (Harley-Davidson Financial Services). Which is a lending company for Harley-Davidson motorcycles among several other helping factors. This means the company basically now funds itself.

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FINANCIAL HIGHLIGHTS

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Ratio Analysis 21

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R&D Harley feels that research and development of there custom and touring motorcycles is a large part of the way they compete against the competition. They spent $178.5 million in 2005, $177.7 million in 2006, and $185.5 million in 2007 in areas such as style, purchasing, and manufacturing.

Human ResourcesApproximately 50% of the manufacturing employees of Harley-Davidson's own Harley's themselves and buy from dealerships so that they have first hand experience with what they are contributing too as a work force. There are roughly 9,000 employees of Harley-Davidson.

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Teamwork also played a role in the structure of the IS function at Harley Davidson Instead of chief information officer, they had “office of the CIO” where it is having

three directors. Senior management looks to the CIO to be their internal consultant, to give them

guidance and direction regarding technology’s ability to create business value. Each circle of leadership had an information technology circle (ITC) attached to it. It is made up of senior IS people & end users representing each site and function. The role of the ITC was to understand group processes and interactions and to decide

from a business perspective where the group should focus its technology efforts.

Harley Davidson implemented “Accentual Human Capital Development Framework” allowed Human Resource issues with senior level management in the language they both can understand. By allowing access from multiple locations instead of a single source, this improved Human Resources Information System became a major benefit for the Company because it increased employee engagement and work force adaptability.

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Capabilities of the Firm

Integrated technological resources – Usage of Information system to insure smooth flow of production .

Unique skills of employees – Provide high level training programs for its employees to add value to the company.

Manufacturing – HD manufacturing plants are capable of producing many different models

26Harley Davidson Best Strategic

Just-in-time inventory (JIT): Just-in-time inventory "was the driving force of Harley's quality-improvement program. Suppliers of Harley had to implement JIT into their production process in order to compliment Harley's system. Previously, Harley utilized a complex, computerized inventory system, Material Requirements Planning, which was based on maintaining high levels of stock, to offset any manufacturing problems, so the assembly line would not be halted. Harley recorded impressive improvements:

1. Inventory turns up from 5 to 20. 2. Inventory levels down 75 %. 3. Percentage of motorcycles coming off the line completed up from 76 % to 99 %. 4. Scrap and rework reduced by 68 %. 5. Productivity up by 50 %. 6. Space requirements down by 25 %.

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Employee involvement (EI): Successful implementation of any company program occurs when there are a commitment at all levels of the organization. Top management must not only direct but take direction from the lower level employees. Harley has set the following nine guidelines to follow for successful employee involvement.

Management must take a actions about continuous improvement of quality and efficiency of the employee.

Management must be should be encouraged the employee to develop and grow.

There must be a mutual trust between employees and management.

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Employees must be thoroughly trained in specific problem-solving and quality-control techniques.

Managers must encourage participation from everyone. Employees must be given responsibility and authority

for production, quality, preventive maintenance, and other aspects of their jobs.

Individual employees must help each other develop and grow.

Employees must attack problems, not each other-that is, there must be no finger-pointing when things go wrong.

Creativity must continuously be encouraged through a free, non-threatening atmosphere.

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Statistical operator control (SOC): In the beginning Harley-Davidson believed that their present machinery was unable to produce quality products. But, with the implementation of the Statistical Operator Control (SOC) process they soon realized that it was not their equipment but their methods. "SOC involves using simple statistical techniques and control charts to monitor the variation in a work process". Harley realized that this process would only work if the responsibility of quality was placed upon the persons who had direct contact with the materials (operators).

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Summary of Internal Factors

Internal Factor weight Rating Weighted score Comments

Strength:-

Marker Share leadership

Large and Customized score

.20

.15

4.10

4.20

.80

1.00

Provide quality product

Provide competitive Advantage

Weakness:-

Low sales Volume

High price

.10

.15

4.05

3.90

0.64

0.59

Reduce Revenue

Loss customer

SWOT analysisInternal

Strengths Weaknesses

Availability of financing through HDFS (Harley Davidson Financial Services.)Strong brand name and brand loyalty (clubs, events and museum)Quality control Harley’s custom segment gives owners the opportunity to customize their bikesHarley have a effective marketing division

Operating income for Financial Services segment decreased 61 percentDecreasing market share in America (major market for Harley) and has problem in gaining market share outside America

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SWOT analysis External

Opportunities Threats

The European heavyweight motorcycle market roughly 80 % of the size of the U.S. market

Women and younger riders are increasingly becoming interested in bikes

Market share increasing in Europe and Asia for the last two years

Market share expansion in new markets such as India and Latin America

Fierce competition from Japanese manufacturers (Honda, Yamaha, Suzuki, and Kawasaki)

Competitors of Harley Davidson have larger financial and marketing resources and they are more diversified

Environmental protection laws

Discretionary spending on high-end consumer goods has declined drastically

Harley’s Financial Services operations face competition from various banks, insurance companies and other financial institutions that have additional sources of capital at more competitive rates and terms.

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Strategic Factors Analysis Summary (SFAS)

The internal strengths and weaknesses of Harley-Davidson, listed in Table , are about average. On a scale of one to five, werates the company at a 3.7. Harley has very strong strengths that are essential to the future success of the company.

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The external opportunities and threats of Harley-Davidson, listed in Table 3, are average. On a scale of one to five, the author rates the company at 3.85. Important opportunities for Harley are the expanding overseas markets and the market of b women and young riders. In 2008, Harley has already expanded production overseas into India. where there is a large demand for Harley motorcycles

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Identification of strategic issues:-

1st strategy is customer focus: Harley-Devidson offers a wide range of products and services,from children’s tricycles, clothing accessories and affordable motorcycles to more higher- ended luxury motorcycles targeting customers in all age groups.

2nd is brand loyalty: By allowing their customers to personalize and customize their motorcycles, this strategy helps build their second strategy.

3rd Their value is: “Tell the truth. Be fair, keep your promises. Respect the individual. Encourage intellectual curiosity.’’

4th Policies: Harley- Davidson minimized the traditional approach in management and encouraged the “Open Door” policy throughout the company in order to maximize and encourage overall the employee involvement. Hence, they allow their employees to participate in the company’s key business decisions.

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Strategic Alternatives and Recommended Strategy

Alternative 1: Reinforce strategic alliance engagement with Asian distribution channels. (Lack of marketing experience leads to few opportunities).

Pros: 1. Increase sales, 2. Extend international market presence enhancing brand image.

Cons: 1.Significantly huge effort and investment capital, 2. Long payback which might impact the financial position.

Alternative2: Create more attractive capitalizing on low interest rate. (Weak performance in US)

Pros : 1. Increase sales, 2. Sustain positive cash flow (current/ liquidity ratio), 3. Targeting lower income market segment.

Cons: 1. Complication of reaching short/ mid-term agreement with financial institutes, 2. Considerable marketing and media expenses.

Alternative 3: Direct the R and D optimizing the oil consuming engines. (High rise of oil and environmental compliance).

Pros: 1. Lower environmental emissions, 2. going green initiative. Cons: 1. Huge resources for R and D, 2. Higher cost of manufacturing.

Implementation:

Strategy 1: Reinforce strategic alliance engagement with Asian distribution channels.

Invest time and persistence in order to successfully operate in Asia market. Create country based teams that are determined to make wise cultural

decision. More involvement with foreign government through office of trade of the US. More participation in the world trade organization activities.Strategy 2: Create more attractive capitalizing on low interest rate. Establish frame agreements with financial institutes for founding and support

HD media. Extend their marketing campaign through different type of media (social

media) and loyalty programs.Strategy 3: Direct the R and D efforts optimizing the oil consuming engines. Joint R and D initiatives with Ford Motors R and D team for. Oil consumption reduction for Harley- Davidson’s motorcycles. New hybrid motor using alternative energy sources. (bio fuel and green

energy)

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Recommendation: I would strategy recommend no.2 because no.1 is difficult; here need huge effort and investment capital. Alternative no.3 is difficult too because it need huge resource and very costly

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Conclusion:Harley Davidson, the famous manufacturer of heavyweight

motorcycles, has dominated the U.S. market by successfully targeting and selling its customers not only a motorcycle but the lifestyle that accompanies it. However, due to its overemphasis of the American heavyweight segment, the retirement of its core demographic, lack of research and development, and the economic strain on its financial services, the American icon must remodel its business strategy to achieve profitability and sustainability.

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