Harley Davidson Motorcycles example essay topic

EXECUTIVE SUMMARY This report examines the Harley-Davidson phenomenon. From near bankruptcy to double-digit growth every year, Harley-Davidson has something working for them. That something is called "strategic planning and development". With the growing global economy, companies are looking for ways to improve their market share.

Many excellent firms have learned how to beat their competitors through the implementation of new management, marketing, and / or manufacturing techniques. Harley-Davidson is one of those excellent companies whom has challenged traditional ideas. This report will identify those strategies that have worked and brought the company and its shareholders success each year. Today, Harley-Davidson Inc., an employer of 8,100 workers, consists of Harley-Davidson Motor Company based in Milwaukee and Eagelmark Financial Services Inc. based in Chicago, Illinois. These are strategic business units are they are managed separately based on the fundamental differences in their operations, products and services.

In addition, there are nearly 1,500 dealerships worldwide. Harley's commitment toward continuous improvement is exemplified in the supplemental financial statements, Appendix section. Harley's strategic objective is to continue to provide, safe, high technology heavyweight bikes and keep customer satisfaction at high levels. This quality vision more than doubled Harley-Davidson's market share and increased its brand loyalty. Harley-Davidson's products include: motorcycles, parts & accessories along with financing services. Three main geographic markets comprise the bulk of motorcycle sales: North America, Asia and Europe.

Harley-Davidson's customers are comprised of both male and female with the female segment the fastest growing market at 5% yearly. Expansion into the European and especially Asian markets will be forthcoming. These new market opportunities will require new designs that are lighter, easier to use, comfortable and stylish. Motorcycles are no longer thought of just a mode of transportation. The Harley-Davidson motorcycle welcomes you into a family, a culture of the free and willing sprit. Future threats to prepare for include the increase in European trade tariffs on well-known brands such as named, Harley-Davidson.

Production plant expansion should shorten the wait time for manufacturing new bikes. This has been a weakness of Harley-Davidson for years. It adds to the mystique, but the risk of losing customers is also present. The latest financial reports found in the Appendix section confirm Harley-Davidson's successful strategies. Year 2001 sales at $3,363.4 (mil), a growth of 15.7% from previous period. Year 2001 net income at $437.7 (mil), a growth of 25.9%.

Harley-Davidson has successfully captured 60% of the motorcycle market. The future at Harley-Davidson is expected to do very well and increase market share even more where penetration into the Asian and European market is expected. The 100-year anniversary is scheduled for August 2003 in Milwaukee, WI where approximately half a million people are anticipated to participate in the celebration. The American icon is very much alive and desired among people around the world.

The Harley-Davidson tradition knows no boundaries but is a culture of its own. With that kind of brand recognition and strategic management, this company is expected to enjoy success another 100 years. HARLEY DAVIDSON INC. Case study of an American icon and the successful strategies INTRODUCTION Harley-Davidson Inc. at a Glance Founded: 1903 Headquarters: Milwaukee 2001 Net Sales: $3,363.4 million 2001 Net Income: $437.7 million Business Units: Harley-Davidson Motor Co., Eagle mark Financial Services Inc. Number of Employees: 8,100 Number of Dealers: 1,200 worldwide Number of Motorcycles Produced per Year: 263,000 in 2002; targeting 289,000 by 2003 Perhaps more than any other 20th century product, the Harley-Davidson motorcycle is revered as an American icon - a symbol of free-spirited ness. While this gives Harley marketing advantages, it carries the responsibility of upholding the qualities that customers identify as the essence of Harley.

Harley-Davidson is the only major US maker of motorcycles and the nation's #1 seller of heavyweight motorcycles who has held the largest share of the U.S. heavyweight motorcycle market since 1986. Besides its bikes, Harley-Davidson sells a licensed line of clothing and accessories with the company name and now offers financing. Also, gaining attention are the Harley-Davidson Cafes, located in various cities including New York City and Las Vegas. In addition, many of Harley-Davidson owners / riders are members of the Harley Owners Group better known as H.O.G., with more than 500,000 members nationwide.

The demand for Harley-Davidson motorcycles continues to rise. Other motorcycle manufacturers have tried to compete with Harley-Davidson, but none have been able to match Harley-Davidson in terms of customer loyalty and sales. The dedication to its existing customers has created a loyalty that is enviable by many other companies. The case study will allow an in-depth look into what strategies have made the company so successful and what to expect in the future. INDUSTRY ANAYLSISThe industry is this case study is the motorcycle industry consisting of five major manufacturers: American (Harley Davidson, Indian Motorcycle), and Japanese (Honda, Yamaha, Kawasaki, Suzuki) and some European companies (mainly BMW of Germany and some other Italian companies). Industry sales of motorcycles were shrinking in the early l 990's because of the recession and the competition from computers and electronic products decreasing consumers' discretionary income.

The sales of accessories and parts make up 36% of total retail sales and are a viable area for producers to explore because people want something to personalize their bikes. Previously, motorcycles were viewed as a cheap means of transportation. By 1992, they came to be viewed as a recreational, or a luxury item. This new perception of motorcycles led to the introduction of more expensive models with higher prices. This in turn created a new market for Harley-Davidson of consumer financing, one of the fastest growing service areas in the motorcycle industry. The table 1 comparison shows Harley Davidson continues to show strong growth in sales that increased by 15.7% over previous year whereas BMW gained massive sales in 2001, yet growth was only at 2.3% indicating their marketing may be reaching a peak.

Company 2001 Sales (mil) 1-Yr. Sales Growth 2001 Net Inc. (mil) 1-Yr. Net Inc. Growth 2001 Employees 1-Yr. To provide a clean and a safe work environment.

To manage our business efficiently and profitably. To understand that we exist in a changing marketplace with increased competition. To be supportive and well thought of in our community. And to remember that our business is more than the bottom line. We gotta have fun, enjoy working with each other and with our customers.

INTERNAL AUDIT (STRENGTHS, WEAKNESSES) BRAND LOYALTY The Harley-Davidson corporation's ability to evangelize the Harley lifestyle without alienating a customer-base, which prides itself on being free-spirited and counter-cultural, has been a testament to its marketing shrewdness. 'We " re proud of our motorcycles, and we are committed to a lifelong relationship with our customers. That's why Harley-Davidson is much more than a machine. It's a way of life. ' Harley-Davidson's business design is based on long-lasting relationships not only with their customers but also with all their stakeholders. Harley-Davidson's mission to fulfill dreams extends beyond their customer; it is their goal to create mutually beneficial relationships with all their stakeholders - customers, employees, dealers, suppliers, investors, government and society.

While the company holds 60% of the market, managers are by no means asleep at the wheel. Harley-Davidson upholds it's reputation for quality and good service retaining the customer base and securing new customers to the brand as indicated in figure 3. PRODUCTS Harley Davidson produces only heavyweight motorcycles (with engine displacements of 750 cc or greater) that are categorized into touring and cruiser motorcycles. Touring motorcycles are designed for long distance riding and feature many car like features (i. e., trunks), and provide Harley with the greatest profit margin. Cruisers are styled after early motorcycles and are the kind most often associated with Harley. They provide a very low profit margin because of their low prices but are used as a means to attract young customers.

Strategic managers study demographics such as illustrated in figure 3 very carefully. Trends are identified and strategies for the next new product launch and market penetrations are readied. Implementation is crucial along with timing. For example, for year 2003 the company will produce special models in limited quantities for the 100-year anniversary. Not to be forgotten is the part and accessories (P&A) business, which has grown remarkably during the past years, and it is expected to grow slightly faster than motorcycles. The company's strategy is ready and offers digital inventory now.

General merchandise includes motor clothes apparel and collectibles HARLEY-DAVIDSON, INC. Blast) 6,436 5,043 7,767 6,334 4,415 Buell Blast 3,489 5,416 - - - 9,925 10,189 7,767 6,334 4,415 Figure 2 MARKETS Harley is the established leader of heavyweight motorcycles in the North American market, accounting for about 60% of the market share. The size of its market share provides an opportunity for Harley to gain dominance. Its customers are the most loyal of any other brand and its products have a great reputation. Foreign markets are growing very fast because customers there are obsessed with Harley's quality and culture providing a great opportunity for Harley to exploit.

The main problem is Harley's limited production capability, putting customers on a waiting list for months. To avoid customers purchasing from the competition, careful strategic management took place. Strategies now at work include creating good customer ties, provide after sales service, build up customer loyalty, expand distribution network, and modify products to meet local customer needs. Strategies as mentioned have been weighted in the Competitive Profile Matrix (CPM) illustrated in Appendix A. The purpose of the CPM is for identification of a company's major competition and their particular strengths and weaknesses in relation to a sample firm's strategic position. It is very useful in addressing the question "where do we focus?" Strategies involve the company's structure as well. This has meant going to a high-performance work organization, with remarkable leadership from its labor union.

In manufacturing operations, self-directed work teams are the order of the day. Enterprise-wide, Harley is now organized into three basic circles: a produce products group, a create demand group, and a provide support group. Everyone in the company belongs to one of these three. The 70's saw a decline in the overall market. A flood of imports from Japan and quality problems created major problems for the company.

In the 80's, 13 members of Harley-Davidson management purchased the company from AMF and brought a return to quality and implemented new management and manufacturing techniques. Harley-Davidson was one of the first US companies to use just-in-time inventory policies, statistical processes and employee involvement programs. Even using governmental laws as part of your strategy is acceptable. For instance, in 1982, the company convinced the International Trade Commission (ITC) that the glut of imported Japanese bikes were a threat of injury.

Additional tariffs were imposed on the imports for five years, giving the company a chance to revitalize its place in the market. It did this in just three years by re-tooling and streamlining its operations. It is most apparent the strategic management team had extensively researched the competition and implemented strategy to slow down growth. Immediately thereafter, the company practiced the policies formulated from evaluating its internal audit and external audit. No doubt many matrix es were developed and ready to put to work once the Japanese growth had been slowed. Internal factors best account for the motorcycle maker's movement from near death to double-digit growth for the last several years.

You see a simplified, high-performance, organizational structure and a set of clear matrix es derived from one key goal: to be ready for launch at the right time. Double-digit growth and being sold out of product are great (Harley's situation for the last several years), but they contain big risks. Foremost: despite the romance of the product, an "I-want-it-now" American customer base might get tired of waiting. To reduce this threat adding production capacity was needed, which they " ve done (they opened their first new plant since the 1920's in Kansas City two years ago) but carries with it the possibility of having overcapacity if and when the market heads south. EXTERNAL AUDIT (OPPORTUNITIES, THREATS) CUSTOMERS Demographics are a useful tool in finding out what people are up to. In this case study, we would want to know who is buying Harley-Davidson motorcycles.

Answers to these questions provide a clear focus on what group to intensify customer service efforts, what group offers potential penetration with products, how did past strategy fare and trends that will develop over periods of time which are most useful in forecasting. The information gleaned from figure 3 points to the fastest growing segment as women, thereby representing an opportunity. Harley-Davidson's success in this market will require designing smaller, easier to handle, comfortable and good quality bikes to build up brand loyalty within this segment of the market. Demographic Profile (1997-2001) 1997 1998 1999 2000 2001 GENDER Male 93% 93% 91% 91% 91%Female 7% 7% 9% 9% 9%MEDIAN AGE Years 44.6 44.4 44.6 45.6 45.6 MEDIAN INCOME ($000's) Household 74.1 73.6 73.8 77.7 78.32001 PURCHASERS 41%Owned Harley-Davidson (R) motorcycle previously 31% Coming off of competitive motorcycle 28% New to motorcycling or haven't owned a motorcycle for at least the past 5 years Figure 3 It is of interest to know Harley-Davidson has never focused on lower pricing that would cut the profit margin for the shareholders. Instead, the focus has been on quality product and superior customer service coupled with owning an American icon. The pricing strategy has been successful as figure 3 indicates by the increase in household income each year for the customer.

Higher income persons are most interested in purchasing this American legend. Cost is not influencing purchase. MARKETS In addition to all those motorcycles, Harley-Davidson sells $500 million worth of parts and accessories to its fanatic followers, its customers. Ken Ostermann, Harley's manager of electronic commerce and communications, figured that the company could sell even more if it opened an online store.

However, the company first had to strike a balance between dealers and brand managers. The company agreed so as not to take away revenue from it's dealerships, to forward the order to the selected by customer dealer. This way the dealer remains the focal point of the customer's buying experience and the company makes sure the Harley message is maintained in a consistent way. The e-shopping phenomenon was an opportunity to expand the Harley brand even further yet conscious of the important role dealer's play in the whole scheme of Harley-Davidson business.

This opportunity is included in EFE Matrix, Appendix B. Another opportunity appeared for the legendary motorcycle brand Harley-Davidson in 2000 to reclaim its heroic stature through the mass exposure as an official Olympic game provider. As a provider to both the Olympics and the Para-Olympics, the company secured a strong presence in the nationwide torch relay, giving the brand 16,000 km of high profile exposure. The company supplied four specially designed Harley-Davidson police Road King motorcycles to transport police escorts with the relay, and some 60 motorcycles to be used during the Games to transport journalists' film for processing. Harley-Davidson Motor Company market development manager Adrian O'Donoughue said the company's aim was 'primarily, in bringing back Harley-Davidson to the forefront of people's minds through the torch relay'.

He said the attention grabbing ability of the product itself was far more effective than a billboard in a cluttered environment. These types of opportunities are taken advantage of and capitalize on by intelligent strategic managers. They look for opportunities such as this and waste no time in securing. Continual research is necessary to dig out such opportunities thus requiring a satisfactory R & D budget as this case study. COMPETITION The marketing push comes as the Harley-Davidson brand faces serious challenges from the resurgence of performance bikes in the market especially from Asia. Even though this is represented as a threat on the EFE Matrix, Appendix B, it can be viewed as a potential market.

These bikes being introduced are new and un-tested in the market for quality, safety and design. Harley-Davidson may design a smaller bike, high performance, easy of use and saturate the American icon brand that is so desirable to foreign segments while maintaining good customer service and a chance to be a part of the Harley-Davidson family. One of the most recent threats comes from the European Community that will introduce the increased customs duties on several kinds of American goods. The European Community leadership sent the list of American goods, on which products are most likely to suffer additional tariffs, to all European Community members, which included very familiar trademarks such as Harley-Davidson bikes. Harley-Davidson will need to monitor the current events and appropriately apply strategic measures to reduce the cost of this threat. STRATEGIC ALTERNATIVES AND RECOMMENDATIONS Managers always want to choose the alternative that capitalizes on Harley's strengths to reduce the effects of threats.

Recommendations are as follows: The company should produce only heavyweight motorcycles, thereby focusing its R&D on producing safe, good quality products. The company is to guarantee a high resale value and provide good after sales service. Customers under 30 years of age are to be provided with safe, stylish, high quality products at reasonable prices, thereby increasing brand loyalty. Customers from 30 to 50 years of age are to be provided with high performance, safe products, building up Harley's brand loyalty that is considered the strongest, especially in the domestic market. Customers over 50 years of age are to be provided with comfortable, easy to handle bikes to increase their convenience. Foreign bikes are not designed this way and are expected to be outperformed by Harley.

The plan to focus on the domestic market with 60% emphasis and on the foreign market with 40% emphasis is both good and bad. It is a strength in the sense that international demand for Harley products are increasing and that would increase the company's revenues since it will expand its distribution network, provide after sales service, and appear there with an already established brand loyalty. It is a risk though to expand with 40% emphasis in the foreign markets because Harley is not strong in meeting consumer demand that is expected to grow even more and dissatisfy both domestic and foreign customers. Surely, Harley can solve this problem by getting loans, thereby expanding its plant capacity and meeting this increased demand. The future cash flows that will arise due to increased sales will be used to repay these loans and maintain the company's good credit rating. SUMMARY The case study has given an intuitive look into strategies at work.

The basic tools illustrated in the following Appendixes will work for any company. The tools provide the areas of focus and capitalization. Harley-Davidson implemented changes in the '90's to prepare for the future challenges and stay ahead of competition. They have targeted towards improving manufacturing and creating new products and services. Thus far, the strategies have been very successful and have built strong relationships with all their shareholders. They have used a very systemic approach during the developmental journey.

Through the decades, Harley-Davidson motorcycles have had the ability to generate emotion. The excitement of racing, the peacefulness of a ride down a country lane, the pleasant symphony of a handful of bikes rumbling down Main Street, the exhilaration of switchbacks on a mountain road, but most of all, the camaraderie of the people who share the same love for Harley-Davidson motorcycles. The Brotherhood. The Sisterhood. The Family. It's time to come home.

EPILOGUE For the quarter ended September 29, 2002, consolidated net revenue totaled $1.14 billion; a $273.9 million or 31.8% increase over the same period last year. Net income and diluted earnings per share for the third quarter of 2002 were $165.0 million and $. 54, respectively, on 304.8 million weighted average shares outstanding. This compares to net income and diluted earnings per share for the third quarter of 2001 of $111.7 million and $. 36, respectively, on 306.8 million weighted average shares outstanding. This represents increases in 2002 third quarter net income and diluted earnings per share of 47.7% and 50.0%, respectively.

Sales growth in the high teens or low-20% range is very predictable for the company; the long-term trend on gross margins has been great for shareholders. Harley has funded its growth over the last 10 years almost entirely through cash generated from operations, rather than through constantly issuing new equity. There is a greater degree of Harley stock owned by its employees signifying strong faith in the company. With a 30% growth rate, combined with high demand for the motorbikes, and the stability of Harley's earnings make the company very attractive for long term investment The 2002 third quarter increase in net revenue of $273.9 million, or 31.8%, was driven primarily by the 19.2% increase in Harley-Davidson motorcycle unit shipments. During the third quarter of 2002, the Company increased its Harley-Davidson motorcycle unit shipments to 67,474 units, 10,863 units higher than the same period last year. This increase in units is primarily the result of continued demand for Harley-Davidson motorcycles combined with the Company's ongoing success with its manufacturing strategy, which is designed to increase capacity, improve product quality, reduce costs and increase flexibility to respond to changes in the marketplace.

The most recent U.S. market information (provided by the Motorcycle Industry Council) indicates that the Company had a U.S. heavyweight (651+cc) market share of 44.5% through August 2002 (Harley-Davidson models only) compared to 41.6% for the same period in 2001. Through August 2002, retail registrations in this market have grown 12.1%, while retail registrations for the Company's motorcycles (Harley-Davidson models only) increased 19.8%. Although, industry information is not yet available for September, Company data shows a 19.1% increase in U.S. retail registrations of its Harley-Davidson motorcycles through the first nine months of 2002. European market data (provided by Girl S.A.) includes retail registrations in Austria, Belgium, France, Germany, Italy, The Netherlands, Spain, Switzerland and United Kingdom. The most recent market information available shows the Company with a 6.0% share (Harley-Davidson models only) of the heavyweight (651+cc) market through August 2002, slightly higher than August 2001. Through August 2002, retail registrations for the Company's motorcycles (Harley-Davidson models only) were up 2.5%, while the European heavyweight market in total increased 1.9%.

The Company believes that the continued soft economy in Europe continues to impact the heavyweight motorcycle market Although industry information is not yet available for September, Company data, which includes retail registrations in all European countries, shows that Harley-Davidson motorcycles are up 8.5% through the first nine months of 2002. The Company's performance in the European heavyweight market has been positively impacted by sales of its new V-Rod motorcycle. Available data relating to the Japanese market (derived from industry sources) shows the Company with a 22.2% share (Harley-Davidson models only) of the heavyweight (651+cc) market through August 2002, up from 20.5% for the same period in 2001. The Japanese market has increased. 5% through August 2002, while retail registrations for the Company's motorcycles (Harley-Davidson models only) increased 7.7%. Although, industry information is not yet available for September, Company data indicates Japanese retail registrations of its Harley-Davidson motorcycles have increased 13.9% through the end of September 2002.

P&A net revenue of $499.3 million for the first nine months of 2002 was up $101.1 million, or 25.4%, compared to the same period of 2001. General Merchandise net revenue of $176.7 million was up $60.3 million, or 51.8%, compared to the first three-quarters of 2001. The larger than normal increases in P&A and General Merchandise were driven by the Company's 100th Anniversary products, as well as continued demand for Harley-Davidson motorcycles For the nine months ended September 29, 2002, Financial Services income was $157.5 million, an increase of $25.0 million over the same period in 2001. Operating income from Financial Services was $78.9 million, an increase of $34.6 million over the same period in 2001.

The increase in operating income was driven by strong overall performance in HDFS' retail, wholesale, and insurance lines combined with lower provision for credit losses, lower borrowing costs, and larger gains. The increase in the retail business was led by the strong customer acceptance of HDFS' consumer financing program introduced in 2001. This program is based on tiered pricing offering lower rates to borrowers with stronger credit ratings. During 2002, the Company continued work on its capacity expansion efforts that are taking place at several of the Company's existing facilities.

These plans include a 350,000 square foot expansion at the Company's York, Pennsylvania assembly facility; a 60,000 square foot expansion at the Company's Tomahawk, Wisconsin facility; and a 165,000 square foot addition to the Company's Product Development Center in Wauwatosa, Wisconsin. The Company completed the Tomahawk expansion in the third quarter of 2002, but will continue to invest capital related to the remaining projects during the fourth quarter of 2002 and into 2003. BIBIOGRAPHYHenshaw P., Kerr I. (2001) The Encyclopedia of the Harley-Davidson. USATeerlink, R (2000) More Than a Motorcycle - The Leadership Journey at Harley-Davidson.

Harvard Business Review. Harley-Davidson Inc. Annual Reports Business Week articles: November 17, 2000 Harley is Riding High on the Hog November 16, 2002 Corporate Scoreboard-Third Quarter 2002 Business 2.0 articles: Dec 2002/Jan 2003 How Harley Revived Online SalesPDBPR articles: March 1999 Harley Davidson Weds Metrics to High-Performance Work Organization to Promote Launch Readiness B.C. Intell & Tech articles: October 11, 1998 The Trademark Registrability of the Harley-Davidson Roar; a Multimedia Analysis IIA Enterprise Risk Management Conference 2002 November 2002, Volume 29, number 11 Hoovers Online Dunn & Bradstreet Online.