Harley Case Study

5/26/2018 Harley Case Study

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HarleyDavidson Inc.

2008

Ahsan Khan

Roll No. 02

MBA - 3rd

Semester

Case Study: Thriving Through Recession


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HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

Summary of Case Study: Harley Davidson (Thriving Through Recession)

The key consideration points which I observe in the introduction and history of Harley

Davidson which include hierarchal changing and diversification in their plant are

extracted as:

Harley Davidson Inc. Founded in 1903, Harley Davidson is a modern successstory of a company that turns it self around by emphasizing quality manufacturing

and image marketing. After gaining its control of the company from AMF in a

leveraged buy out in 1981, the management of Harley Davidson introduced Just in

Time manufacturing strategy.

Encourage by the high market demand for the Harley Davidson bikes between thetwo decades of 80s and 90s, competitors increasingly challenged Harleys strong

position in market in wonderful heavy bike.

Harley adopts strategies to expand its demand of products, for this they acquiredone of the sports motorcycle company in 1993 which is name Buell Motorcycle

Company.

For attempting diversification of product other than motorcycle into recreationalvehicles with the purchase of holiday Rambler was reversed in 1996 with the

divestment of this business unit. Worrying that the baby-boomer target market for

their heavy weight motor cycles was aging, management decided to introduce V-

Rod in 2001. This was a low slung, high powered motor cycle meant to appeal to a

youth market that was interested in riding Crotch Rockets.

After consistently growing through 90s era sales shows sign of slowing down asbaby boomers continued to age. Safety was also an issue, given that riders over

age 40 accounted for 40 percent of all fatalities.

For the first time in history the profit was declined in 2007 2008. After President James Ziemer reviewed 2007 financial results, he realized that

2008 would be challenging year for them given the pending recession.

Analyst and strategist also wondering that how the company would be affected inthis deep recession. How Harley Davidson does continues to grow at its past rate.


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Harley Davidsons Mission

The Mission statement of the Harley Davidson is,

We fulfill the dreams through the experience of Motorcycling by providing to

motorcyclists and to the general public as expanding line of motorcycles, branded

products and services in the selected market segment.

Harley Davidsons Objectives

The objectives of the Company are:-

To increase sales and earn profit. To provide great motorcycles. To enhance the Harleys life style experience. To continue providing an excellent financial performance. To increase production capacity. To expand and strengthen companys distribution network. To expand globally.

Policies of Harley Davidson

The policies of Harley Davidson are:

Improving strategic alliance with suppliers, reducing cost and implementingtechnology.

Promotion from within. Encouraging employees to focus on value added activities, Continuous educating their employees. Enhancing Harley Davidson experience through H.O.G. Giving back to community through charities.


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Current strategies of Harley Davidson

The current strategies adopted by the Harley Davidson are:

Focus on cost and material. Growth through increase international presence. Manufacturing strategy are increasing capacity, quality, flexibility and decrease

cost of production.

To increase Harley Davidson financial services segments participation withEuropean dealers.

Growth of new millennium bikes through V-rod and acquisition of Buell. Growthof new sports bikes attracts young customers.

Ground breaking of Harley Davidson museum in June, 2006.

Current Performance of Harley Davidson

The performance of Harley Davidson is:

Motorcycles shipments were decline in 20016 their shipments are 3, 49,196 unitswhile in 2007 there are 3, 30,619 units.

European market share grow up by 9.6 percent. Dominate heavy weight bikes they have market share of about 49.4 percent. In 2007 their net sales down by 1.2 percent while profit also decline by 10.4

percent from last year.


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EXTERNAL ENVIRONMENT

The external environment plays a vital role on any companys business development. The

external environment related to Harley Davidson is discussed below:

Economy

Low interest rates Domestic recession threatened in 2007 Fuel efficiency of motorcycles with rising fuel prices

Technology

Technological advances pose more efficiency for industry. World wide protection by patents High cost technology

Socio-cultural

Women riders are an undeveloped market Baby boomers generation is Harleys industry target markets Younger buyers

Political & Legal

Tighter government regulations Steel imports tariffs from European Union


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Task Environment

In task environment we distribute it into opportunities and threats. First we discuss the

opportunities then on threats.

Opportunities Increase expansion will introduce Harley Davidson to new markets and

increase their international market share.

Custom / Touring motorcycles are expensive but have high sales and highprofit margin.

Advertising through licensing agreements and cafes Threats

Threat of substitute include motor vehicles and mopeds, scooters andbicycles

Unionization and Wage control Bargaining power of buyers higher due to exhaustion of backlog and high

inventory and dealers

Highly competitive global and domestic markets


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INTERNAL ENVIRONMENT

Internal environment also affect the companies strength and growth. Now we discuss

internal environment of Harley Davidson.

Corporate Structure

To business segments which are motorcycle and its related products Financial services - Harley Davidson financial services Decentralized decision making Companies owns Buell motor cycle companies, Buell motorcycles are high

performance motorcycles

Stage Three CorporationCorporate Culture

Commitment to quality Commitment to employees Commitment to customers Commitment to H.O.Gs Commitment to partnership with venders

Marketing

Resale of product higher than competitors Introduction of sleeker, 110 HP V-Rod aimed to young buyers in 2001 Some older models selling at a lower expected price

One hundred

th

anniversary celebration ride was a success Licensing and Cafes are most visible brand building tools Harley Davidson trademark was highly recognizable H.O.Gs promotes Harley through rallies and events, dealer promotions and direct

advertising


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Website also easy to use and gives complete information of company Strong brand loyalty about 92% repurchase rate Alliance with Ford Motor Company

E-Commerce growing since 2000 Buells appeal younger buyer to their bikes and after acquiring it by Harley, the

overall market share goes high

Finance

Supply demand balance which improves over 2002 to 2004 era Return on equity has remained relatively constant at not less than 20% since 1994 Harley Davidson financial services generated income from continuing operation of

$960 million during 2005

International sales and advanced 2%. The largest international markets in Europe,Japan and Canada

Earnings grew up from $417 million in 2001 to $960 million in 2005, growth wasfairly steady and strong

47.8% and 8.9% European markets shares during 2005Research and Development

Research and development expenditure of $178.5 million, 170.7 million and 50.3million in 2005, 2004 and 2003 respectively

Product R&D focused on quality and reliability Develop the V-Rod the fastest of any bike Harley Davidson has ever built

Logistics & Operations

Just in Time (JIT) manufacturing strategy Statistical process control Strong relations with vendors Value added services also offered by Harley Davidson to their deals


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Joint venture with Porsche producing power train components, strategic alliancewith Ford motors.

Human Resource Management

Over 9000 employees in their product lines Motor cycle related segmented employees In financial services segment having 550 employees with no union Heavy community involvement Around 50 percent of Harley Davidson employees ride Harley bikes

RREECCOOMMMMEENNDDAATTIIOONNSS

Some recommendations according to my observation to Harley Davidson are:

Expansion to other geographical locations to gain more market share Beneficial licensing agreements which favors their policies Consolidate international operations in an attempt to gain more efficiency than

prior to further global expansion

Maintains current size and sales in order to decrease inventory at dealerships Review all cost so that profit can be made Consider special sales incentives. Do a cost/ benefit analysis to ascertain the

profits will not badly effected

Looks like it will be a world recession so expect sales which generates profits todecrease again, just focus on the rendering cost.

Documents

Harley Case Study