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Business Report BUSN-1010

by: Greg Galba

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Company Overview

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Company Overview____________ - Description of the Company

- Markets Served

- Product Line

- Competitive Advantages

- Core Competencies

- Areas of Market Leadership

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Harley-Davidson

Description of the Company:

Harley-Davidson is an American motorcycle manufacture founded in Milwaukee,

Wisconsin in 1901, by William Harley and Arthur Davidson.1 From the tiny shed, they designed

their first motorcycle in, to the now worldwide recognizable image of the Harley-Davidson logo;

Harley- Davidson has made a name for itself as the American motorcycle of choice. Spanning a

company career of over a hundred years and being the only American motorcycle company left

to survive the Great Depression, and both World Wars, Harley-Davidson has let it be known that

they are here to stay. Offering product lines from motorcycles, to clothing apparel, all the way to

signature flavors of coffee their market continues to grow giving the American made company

the ability to expand. With a current product line for 2010 of over 34 signature styles of

motorcycles, all of which fully customizable to your needs, Harley-Davidson has made it able for

everyone to get the bike of their dreams. Known for its standard of high quality that it represents

in its motorcycles, all of Harley-Davidson products come from true American workmanship.

Now with dealerships in over 60 countries, Harley-Davidson is branching out it’s marketing like

never before in an effort to make Harley-Davidson the world motorcycle of choice. Harley-

Davidson is a promising and prospering company that represents the true spirit of American

motorcycles.

1 http://www.harley-davidson.com/wcm/Content/Pages/H-D_History/history_1900s.jsp?locale=en_US

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Harley-Davidson

Markets Served:

Owning a Harley-Davidson has never been easier, with over 60 countries having

authorized dealers, it’s possible for you to have a Harley-Davidson anywhere in the world.

Harley-Davidson has a concentrated target segment that it uses to market and sell its

motorcycles. According to the demographic profile report of 2007 for Harley-Davidson, males in

which the median age was 45 years of age made 88% of motorcycle purchases.2 Harley-

Davidson is well aware that this is their concentrated target segment that they aim to market at.

For the past ten years, the research shows that this is the largest portion of consumers for their

products, with 85% of motorcycles purchased by males above the age of 40. With middle-aged

males being a large portion of their market served, the other major market portion would consist

of the devoted Harley-Davidson consumers. Of the motorcycles purchased in 2007, 52% were

returning customers showing that Harley-Davidson also serves a large returning consumer

market area. Many consumers will only turn to Harley-Davidson for their motorcycle needs and

motorcycle apparel, leaving the competition behind.

2 http://investor.harley-davidson.com/demographics.cfm?locale=en_US&bmLocale=en_US

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Harley-Davidson

Products Offered:

Motorcycles: Harley-Davidson offers 7 different families of motorcycles, each

with their own sub-models under the family. Each sub-model is completely

customizable giving you the ability to come up with any bike that you desire.

Family models include:

- Sportster Family- Starting at $6,999 - The Sportser Family is an American

legend that offers classic style, agility, and smooth power.3

- Dyna Family – Starting at $11,999 – The Dyna Family offers

customization, raw power, personalization, with big twin valve performance.

3 http://www.harley-davidson.com/en_US/Content/Pages/2010_Motorcycles/2010_motorcycles.html

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- Softail Family – Starting at $16,999 – The Softail Family offers authentic

hard tail style, clean lines and low-slung, while still offering that clean

modern ride.4

- VRSC Family – Staring at $14,999- The VSRC Family are modern cruisers

with drag street performance, precise technology, in a sleek look.

4 http://www.harley-davidson.com/en_US/Content/Pages/2010_Motorcycles/2010_motorcycles.html

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- Touring Family – Starting at $16,999 – The Touring Family offers luxury,

performance, and comfort for your long haul in American touring.5

- Trike Family - Starting at $29,999 - The Trike Family offers comfort and

cargo space for you long haul adventures

5 http://www.harley-davidson.com/en_US/Content/Pages/2010_Motorcycles/2010_motorcycles.html

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- CVO Family – Starting at $25,299 - The CVO Family offers cutting-edge

style and customization, with screaming eagle power.6

Parts and Accessories: Harley-Davidson offers all the parts and accessories that

you could ever need for your motorcycle, to just tweaking it to improve

performance, to having to order replacement parts. From being able to upgrade

your seats or exhaust, to having to replace belts, tires, or windshields, Harley-

Davidson has all of your motorcycle parts and accessory needs.7

6 http://www.harley-davidson.com/en_US/Content/Pages/2010_Motorcycles/2010_motorcycles.html

7 http://www.harley-davidson.com/wcm/Content/Pages/Accessories_and_Apparel/Accessories_and_Apparel

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Apparel: What brand of apparel would Harley-Davidson riders trust other than

Harley-Davidson. Harley-Davidson has all of your riding gear from boots, to

jackets, to pants, to riding gloves. Anything that you could possibly need to wear to

ride they offer.

Collectibles: Every Harley-Davidson enthusiast loves to decorate their home with

Harley-Davidson collectibles. Harley-Davidson has many products that they offer

for the home such as holiday decorations, collectibles, to signature flavors of

coffee.8

8 http://www.harley-davidson.com/wcm/Content/Pages/Accessories_and_Apparel/Accessories_and_Apparel

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Harley-Davidson

Competitive Advantages:

Harley-Davidson has many competitive advantages that other motorcycle

companies cannot copy. Harley-Davidson is the leading manufacture of American

motorcycles; no other American motorcycle manufacturing company comes close

to the quality and craftsmanship that Harley-Davidson has. Harley-Davidson is a

very distinct bike, so distinguishable that you know one is coming before you even

see it, just by that classic “Harley” sound. Foreign bike makers like Yamaha and

Honda cannot produce the classic sound in their bikes. This is a distinct advantage

that Harley-Davidson has because every bike rider wants that sound for their

motorcycle. Harley-Davidson is a well-sought after brand that is seen to none in

competition. Everywhere you go in the world people know what a Harley-

Davidson is, this form of word-of mouth following in the motorcycle world makes

every rider want to have one. This is a distinct advantage because Harley-Davidson

is the company being followed not Yamaha, or Honda.

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Harley-Davidson

Core Competencies:

Harley Davidson’s success can be linked to its incredible marketing

strategies skills that have helped the business succeed through the Great

Depression, two World Wars, the rise of Japanese competition, and the near

bankruptcy it almost faced in 1985. Today their Core Competencies can be viewed

as their ability to separate themselves from their competitors (product

differentiation), and their strategy of the pull vs. push method for distribution.

Harley-Davidson uses the product differentiation to separate themselves from all

foreign competitors. They have always been seen as high value and raw American

power and they focus on that aspect so it always remains that way. By doing this

they capture the true American motorcycle market which helps sales when dealing

with foreign competitors. Another Core Competency for Harley-Davidson is their

pull vs. push method for distributing their bikes. Rather than mass producing many

bikes for throughout the year, Harley-Davidson produces bikes on a smaller scale

for when their product is needed. This helps to cut cost by not over producing

bikes and endangering profits. By doing this they can always keep bikes in stock

but are still able to maximize profits.9

9 http://www.cox.smu.edu/article/research/research.do/89

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Harley-Davidson

Areas of Market Leadership:

Harley-Davidson is the largest American motorcycle company in the United

States, they are perceived as high value throughout the motorcycle market. They

have used this high value image to separate themselves from other motorcycle

companies which has given Harley-Davidson an upper hand in the market. With

the ability to customize all of their motorcycles Harley-Davidson has given the

consumer complete control to design the motorcycle of their dreams. In today’s

world the more power you give to the consumer to design their product, the better

chance a consumer will buy a product from you. Harley-Davidson knows this and

uses it to their advantage by designing bikes, but leaving the customization to the

consumer so they can find exactly what they are looking for. Both the perceived

high value and fully customization capabilities have given Harley-Davidson the

ability to separate themselves from other motorcycle companies and stand out in

leadership of the market.

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Business Strategy

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Business Strategy______________ - Company Statements

- SWOT Analysis Chart

- Conversion of SWOT Analysis Chart

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Harley-Davidson

Company Name: Harley-Davidson Inc.

Mission Statement:

We fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to

general public an expanding line of motorcycles and branded products and services in selected

market segments.

We inspire and fulfill dreams around the world through Harley-Davidson motorcycling

experiences.

Vision Statement:

Harley-Davidson Inc. is a global leader in fulfilling dreams and providing extraordinary

customer experiences through mutually beneficial relationships with our stakeholders.

Is Your Company Living Up To their Mission Statement?

Harley-Davidsons are more than just building great motorcycles. They provide

unforgettable experience for their customers. They strive to be innovative and responsive to their

market needs. The Harley-Davidson team works with their creative employees to ensure they are

adaptive to the current trends. They even provide helpful financing to ensure everyone can take

part of the Harley-Davidson dream! The Harley-Davidsons line includes a variety of bikes as

well as accessories and apparel. When riding a Harley, you’re doing so in style.

Is Your Company Living Up To Their Vision Statement?

The Harley-Davidson team encourages everyone to take part in the passion and

experience of riding a bike. They realize their customers come first and they strive to be

customer driven and team orientated. Harley Davidson is also continually delivering customer

satisfaction. Harley-Davidson continues to keep a positive Relationship with both its customers

and stakeholders.

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Harley-Davidson SWOT Analysis

Objective: Identify the strengths, weaknesses, opportunities, and threats.

Company: Harley-Davidson Inc.

Strengths Weaknesses

Customizable

High Quality

Flexible

American Made

Stakeholder Orientated

Employee involvement

Socially Responsible

Plant tours and H.D. Museum

Global Competitor

Moral and Ethical Values are key part of the

frame work

Used Bikes

Web-Based Company

Brand Recognition

Community Involvement

Excellent relationship with suppliers helps to

reduce costs and improve quality

Long-Lasting relationship with employee

guarantees continued success

Products are luxury items

No sport Bike Category

Little done to appeal to new, younger

customers

Typical Image: Leather/Denim, Lots of

black: May turn away potential customers

High costs due to lower production

Changing/Growing technology

Increase price of Commodities increases

overall costs

Poor foreign Marketing Strategy Render low

penetration into foreign markets in Europe

and Asia/Pacific.

Opportunities Threats Growth in warm climate countries

Diversification of product lines

Marketing targeted at younger prospects

Strong brand Name

Lower cost bike with high Quality

outsourcing

Target Women

Create and develop automatic transmission

to increase potential range of buyers

Big foreign market

Honda, Suzuki, Yamaha, Kawasaki,

Triumph, Ducati

Foreign competitors produces less expensive

alternatives

Economic recession may lead customers

buying from less expensive companies

Competitors adapt better to changing times

No comparison with competitors in speed

Mass production by other companies allows

for cheaper production

Consumer switching cost not being high

makes a buyer’s market

Market entry barrier is low

Every country has different environmental

control standards relating to pollution, noise,

etc.

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Harley-Davidson

Conversion of SWOT analysis:

Harley-Davidson is a well-known company that has been around since 1903. They have

been making high class, high quality bikes. They are a successful company that knows how to do

what they do. Despite their success any company can always make improvements to become

more successful. Some of the ways that Harley-Davidsons can become more successful is by

turning their weaknesses into strengths.

Some of their weaknesses include: their products are mainly all luxury items; they lack a

sports bike category; little has been done to change their image for the younger customers, they

have a very typical image of leather or denim with lots of black; they have high costs due to their

low production; they need to adapt to all the changes in the technology. Increasing the price of

commodities would increase the overall costs; and their lack investments in foreign markets.

Some ways to improve on these factors and convert them into strengths would be to add a

more affordable sport bike category. Change up the general image a bit to make it more

appealing to younger generations. Most young people do not want to have the same style as their

great grandparents. Increase production to lower the costs of their products. Adapt better to the

changes taking place in the technology. And they can look into investing in foreign markets to

increase their potential customers.10

Another way to improve their business would be converting their strengths into

opportunities. Honda, Suzuki, Yamaha, Kawasaki, Triumph, Ducati are all competitors of

Harley-Davidson Inc. and they all have sports bikes which are cheaper in costs as well. The

current economic recession may lead to customers looking to buy less expensive products

making the competitors seem more appealing to the customers. So if they make faster, cheaper

bikes many of their threats will be eliminated.

10 http://www.harley-davidson.com/wcm/Content/Pages/Student_Center/student_center.jsp?locale=en_US

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Financial Analysis

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Financial Analysis______________ - Test Ratio

- Current Ratio

- Debt to Owner’s Equity

- Earnings per Share

- Return On Sales

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Harley-Davidson

Test Ratio:

Harley: $593,558 +$ 419,585 + $141,404 / $2,603,757 = .44

Honda: $7,110,801 + $22,911,341 + $4,763,194 / $43,644,890 = .80

With this particular financial ratio, it states that Honda Motor Corporation has roughly

double the availability to turn their assets into cash in order to pay current liabilities if necessary.

However, both Harley Davison and Honda are under a 1.0 ratio which means if they did need to

come up with cash quickly they would most likely have to resort to seeking the assistance of

high-cost lenders to pay of their short term debts. While this might seem like a terrible business

quality for both companies to be at, it is more common in the industry to be under a 1.0 than to

be under; in fact most businesses worldwide often finds them in the same predicament.

Current Raito:

Harley: $5,377,881 / $2,603,757 = 2.06

Honda: $47,598,133 / $43,644,890 = 1.09

This is the simplest ratio for anyone to understand. This simple ratio spells out whether or

not the company has more net assets or debts. Most business shoot to stay above 1.0 in order to

keep their ratio at the break even point, however a company that constantly rides the line

between the break even point and profit or loss seldom creates a stir in the market. Falling into

the negative numbers in this ratio almost guarantees bankruptcy or extreme financial issues. In

this particular ratio, Harley Davison wins the percent of assets they have versus Honda, while

Honda has a strong lead in the general assets.

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Harley-Davidson

Debt to Owner’s Equity:

Harley: $2,603,757 / $2,115,603 = 1.23 = 123%

Honda: $80,459,779 / $41,275,066 = 1.94 = 194%

Any percentage over 100% shows that the company has more debt that equity.

Unfortunately, both companies above are over this quota, but that is not necessarily showing that

both companies are at risk for financial troubles. In the case of Harley Davison, they are always

going to be in some sort of debt because most of their models are custom built and highly costly

to the company. While on the other side, Honda mass-produces its models to keep costs down,

however Honda is always innovating to make new and better products, which is the cause of

their debt. If either of these companies ever fell below 100% that would probably mean the end

of an era for both powers in the motorcycle industry.

Earnings per Share:

Harley: $654,718 / 2,340,000 shares = .29

Honda: $1,411,152 / 3,630,000,000 shares = 3.88

This ratio mainly shows exactly what a shareholder is getting in return from profits. Since

Honda has, a clear advantage in overall sales world wide, shareholders reaps the benefits of high

sales, gaining almost four dollars for each share of stock. Since Harley Davison does not do

nearly the volume as Honda, it seems less than impressive profits for shareholders, but since they

are a significantly small company with a lot fewer shares outstanding in the market, the numbers

are less of a shock to the veteran investor.

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Harley-Davidson

Return on Sales:

Harley: $654,718 / $5,971,277 = 10.9%

Honda: $1,411,152 / $103,115,782 = 1.3%

This is the most helpful ratio for financial officers. By comparing their net sales to their

net income, the company can get a basic understanding if what they are producing and what they

are selling are at the right ratios. From examining the two percentages above it is visibly obvious

that Harley Davison makes a far better return on sales, almost 11X higher. Honda may have the

upper hand in overall sales, but Harley Davison makes more profit for every custom motorcycle

they sell. Because of their superior quality compared to Honda, they have a better company name

and reputation, coaxing customers to pay the extra money to purchase their products.

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Future Direction

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Future Direction_______________ - Business Strategy One, Contingency Plan One

- Business Strategy Two, Contingency Plan Two

- Business Strategy Three, Contingency Plan Three

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Harley-Davidson

Business Strategy One:

Develop a sport bike to diversify the customer base. Currently, there is a

limited sport bikes selection in our product line. There is a large demand with the

younger adults (18-25) for quick, sharp, and sleek motorbikes. Harley-Davidson

deals almost exclusively with “Muscle” bikes and has no offering of a bike that

aims for style and grace as opposed to pure unadulterated power.

By creating a line of bikes that can capture this targeted market, and possibly

even some female prospects, Harley-Davidson can increase its total revenue

ranging from sales to merchandising, while still catering to the loyal customers of

the past 100 years. We plan to research and develop a line of sport bikes, while

simultaneously launching a strategic advertising campaign to build awareness and

demand of the new motorcycles when it becomes available to the market. We

believe the Harley-Davidson brand name will also help with advertising.

Contingency Plan One:

After the first two years of production, if demand is not significant to

warrant continued production of the new sport bike like, we can terminate

productions and possible even label the like as limited or special edition, the

limited amount produces should result in increase value, and if later polls or

consumers, a new design could be made and production will be restarted. An

example of this today is the re-introduction of the Chevrolet Camaro, which

redesigned the demand, was very high.

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Business Strategy Two:

Consumers are becoming more insistent every-day that the companies they

do business with do what they can to become eco-friendly. The government is also

pressuring companies to become “greener”, while rewarding those who do. While

for some companies this can mean expensive changes to products, manufacturing,

and waste disposal, other companies are finding ways to make this beneficial.

Some bottling companies have taken to reducing the amount of plastic used in each

bottle, reducing the amounts of non-biodegradable plastics in the environment by

the ton, on the same token, it also reduced their raw material usage, lowering

expenses and saving money.

Harley-Davidson would reap many benefits from investing in the research of

mo eco-friendly technology. With the “Cash for Clunkers” program implemented

by the Obama administration, We plan to invest in more fuel efficient and emission

reducing technology, with the intent to implement set technology into current

designs, with the possibilities of a new type of bike altogether (possibly along side

a new sport bike model). If discovered that producing a hybrid motorcycle at a cost

that allows for adequate profit upon sale, the next step taken will be to begin

production as soon as possible.

Contingency Plan Two:

If new environmental technology does not gain government aid, capture new

buyers, or entice previous customers to upgrade, the project will be sidelined.

Production of any new products or upgrades to old bikes will be slowed, any

technological advances or discoveries can be patented and sold to non competing

companies if available, and Harley-Davidson will still be able to project a

“greener” image. Harley-Davidson is known for its loyalty to the US, next step is

to be known for its loyalty to the environment.

Older cars with low gas mileage may be traded in for new cars with better

gas mileage, while the owner receives up to $4,500 in government sponsored

discounts. If the same concept can be applies to eco-friendly motorcycles, Harley-

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Davidson would benefit greatly along with the environment. If Harley-Davidson

advertises the fact that their bikes are now more “green: then they could also

capture a portion of the environmentalist market.

Business Strategy Three:

Harley-Davidson will build a bike at a more cost effective price without

losing the quality associated with Harley-Davidson name and be able to market it

globally. If we designed mopeds, scooters, or a light weight bike we can better

compete than the China, France, Italy, or other foreign countries that have

congressed downtown market tourist areas and use these types of vehicles already.

We could also target college students because it would be a lower cost but also

their first experience with Harley-Davidson, potentially gaining then as repeat

buyers.

Contingency Plan Three:

Consider doing a joint venture with an existing company in this field such as

Piaggio the markets of the Vespa to get the Harley-Davidson name established

with this kind of product. Depending on profits and sales we could look at breaking

off on out own again in the future.

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