Andre de Mezerville

Craig Domagala

Sonya Frederick

Eddie Stanislawski

Darrick Wesson

James Wood

GROUP TWO

Corporate History

Strategic Overview

Internal Analysis

External Analysis

Strategic Recommendations

Sustainable Competitive Advantage

William Davidson Walter Davidson Arthur Davidson William Harley

American Motorcycle Company Founded in 1903Milwaukee, Wisconsin

Designed Small Engine for Use with a Regular Pedal Bike

Evolution of H-D Factory

1906—Produced 50 Motorcycles

Today—Produce Over 260,000

Motorcycles

1914—

Produced

16,284

Motorcycles

1907

The Harley-Davidson Motor Company Incorporated

1909

Developed First V-Twin Powered Motorcycle

1910

Introduced Bar & Shield Logo

Dealer Network of 200+ in United States

1920’s

Officially Largest Motorcycle Manufacturer in World

2,000 Dealers in 67 Countries

1953

H-D Sole American Manufacturer of Heavyweight Motorcycles When Indian Motorcycle Company Went out of Business

Late 1950’s

Japanese Motorcycle Manufacturers Entered US Market

Late 1960’s

Japanese Motorcycles Grew to 85% of Market Share

1970’s

Purchased by American Machine & Foundry (AMF)

Labor Strike=Lower Quality bikes

Changed Marketing Strategy to Focus on Non-traditional Market Alienating Traditional Customers

Market share plummeted from 77.5% to 23.3%

1981

Purchased by Group of Senior H-D Executives

1980’s

Remarkable Turnaround of the Company

Adopted Japanese Production Methods

Productivity Triad—Employee Involvement

JIT Inventory Practices

Statistical Operator Control (SOC)

Marketing Strategy on Idea of Not Just Selling Bikes, but a Lifestyle

1983 Harley Owners Group (HOG) Established 1986

Launched Line of Motor Clothes

Licensed Popular Brand Logo

IPO

1993

Adopted Circle-based Organizational Structure

1988-1995

Annual Shipments More Than Doubled

1993

Purchased 40% Interest in Buell Motorcycle Co.

1998 Purchased Remaining Interest in Buell 2003 100 Year Anniversary 2008 Purchased MV Agusta Group

Italian Motorcycle Company to Expand Presence in Europe

2008 Harley Davidson Museum Opened

History

Culture

Vehicles

2009 {Financial Crisis}

Current CEO Keith Wandell Hired

Introduced “Delivering Results Through Focus” Long-term Business Strategy

▪ Improve Manufacturing, Product Development, Business Operations

Discontinued Buell

2010

Divested MV Agusta

Entered India Market

2013

110th Anniversary Celebration

Biggest Launch of New Motorcycle Models in H-D History

260,839 Motorcycles Sold

Revenue $5.9 Billion ($5.6 Billion 2012)

2014

Stock Price (NYSE: HOG) $69.21 ($10.10 in 2009)

Market Share 54.9%

2013 2012 2011 2010 2009 2008 2007 2006

USA 696 695 706 729 758 787 788 679

Canada 69 73 74 74 74 74 76 75

Europe Region 371 371 370 364 369 381 370 354

Asia Pacific Region 271 281 274 272 254 200 194 178

Latin America Region 51 47 44 40 40 45 49 31

TOTALS 1458 1467 1468 1479 1495 1487 1477 1317

Defining Harley Davidson

Corporate MissionTodayFuture

Corporate Culture

Key Result Objectives

Strategic Issues

Abell’s

Framework

(AE #1)

Starting

Point of

Strategic

Planning

Who is Being Satisfied? (Customer Group)

What is Being Satisfied?(Customer Needs)

How are they Doing It?(Distinctive Competencies)

Caucasian Male 25-35 Low Maintenance, Affordable & Modern Styling

Blackline Softail Line, Largest Release of New Models in 2014

Caucasian Male 35+ Freedom & Raw Power, Individualization

Heavyweight Bikes that are Highly Customizable

Women Need lighter weight bikes, Instruction about riding

New models that are easier to handle by women-special educational seminars

Hispanic Very Social Culture New rider group formed called “Harlistas”

Asian Practical, Reliable, Low Cost, Low Pollution, Low Maintenance , Retail Financing

Harley Financial Arm, Watching costs more closely (Tariffs increase prices), Electric Bikes

Fulfilling dreams of personal freedom is more than a phrase. It’s our purpose and our

passion. We bring a commitment of exceptional customer experiences to

everything we do—from the innovation of our products to the precision of our

manufacturing—culminating with our strong supplier and dealer networks.

We are Harley Davidson.

At Harley Davidson, we strive to create the most comprehensive line of motorcycles that appeal to all motorcycle enthusiasts, positioning our products as the first choice of every motorcycle buyer regardless of gender, nationality or age to help us become the best motorcycle company in the world and allow us to maintain the largest global market share.

Org

an

izati

on

al V

alu

es/N

orm

s

Technical (Difference) Social (Integration)

Organization’s Orientation

Achievement

(Open System)

Performance

(Controlled

System)

Quality Culture Creative Culture

Supportive Culture

Productive Culture

The Harley-Davidson culture reflects the bold, rebellious attitude of our products while providing opportunities for professional growth and leadership development. We demonstrate behaviors throughout our organization that exemplify integrity, accountability, diversity, teamwork and creativity. We also recognize that great companies require great leaders to ensure a sustainable future and strive to build leadership at every level of the company.

Our culture includes a strong customer influence, reminding us that our work is informed by our loyal customers throughout the world – fulfilling their dreams of personal freedom every minute of every day.

Glassdoor.com Employee Reviews

187 Reviews

3.1/5 Stars

54% of Employees Would Recommend

60% Approve of CEO

“Harley is a great brand, but the current corporate culture is dominated by fear with very low employee morale.” ~August 2011

Independent Party Evaluation in 2012

H-D Placed in 6th Percentile

Needed to Change Leadership Behaviors

▪ Tied it to Compensation

KEY AREA OBJECTIVE MEASURE OF PERFORMANCE

Marketing Multi-generationalMulti-cultural

Sales Data

Innovation Product Development Release of New ProductsQuality Reviews

Profit EPS of $1.25 in 2015 Profit & Share Data

Human Organization Improve Employee Morale Employee SurveysReviews on Glassdoor.com

Financial Resources Increase Cash Reserves Liquidity Ratios

Productivity Improve Worker Productivity Meet Customer Demand

Social Responsibility Use CSR to connect with all stakeholders

CSR Report

Physical Resources Continue Streamlining Plants

Project Completion Reports

How to continue to get social premium $$$? How to satisfy the needs of the aging core

customer segment—Baby Boomers? How to attract new market segments?

Younger Riders

Women

How to expand globally? How to use innovation to stave off the

competition?

Company Capability Profile:

Managerial Factors

Competitive Factors

Financial Factors

Technical Factors

Strengths

Weaknesses

Risks

MANAGERIAL FACTORS

Corporate Image

Strategic Plans & Analysis

Speed of response to Changes

Mgmt Communication & Control

Aggressiveness in Meeting Competition

COMPETITIVE FACTORS

Product Quality & Uniqueness

Market Share

Invest. in Product Development

High Barriers for Competitors

Advantage Taken of Market Growth Potential

FINANCIAL FACTORS

Profitability, ROI

Capacity to Meet Demand

Price Elasticity of Demand

Stability of Costs

Degree of Leverage, Financial Stability

TECHNICAL FACTORS

Technical & Manufacturing Skills

Economies of Scale

Newness of Plant and Equipment

Level of Technology Used in Prod.

Production Effectiveness and Delivery Schedules

Corporate Image Cult status▪ Adventure, tradition and power

American Icon▪ Symbol of free-spiritedness and a verve for living life

intensely.

High Quality▪ Responsibility of upholding the qualities that customers

identify as the essence of Harley

Social responsibility▪ Focused on reducing energy use and associated

greenhouse gas emissions in its plants

Use of Strategic Plans and Strategic Analysis Business strategy was focus on:▪ New product development

▪ Global expansion

▪ Demographic outreach

▪ Commitment to core customers

Basic pillars: ▪ growth, continuous improvement, leadership development

and sustainability

Objetive:▪ Increase sales and expand the company's strength as one of

the most customer-centered brands in the world.

65%13%

22%

Total Market Share in the US (Nov-2010)

Harley DavidsonHonda MotorsOthers

Market Share

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Market Share for 651+CC Motorcycle

US EuropeSource: Harley Davidson Case study

Market Share Aging customer base ▪ Baby boomers generation (60%)

Young riders have different preferences ▪ Heavy Models → Sports bikes and others

▪ Strong Japanese competitors produces sports bikes

Investment in New-Product Development

Focus on the needs of riders

Think global, act local

Improve speed to market

Grow its customer base

Strengthen its leadership in the

heavyweight motorcycle segments

Develop modern bikes to attract

customers in new

demographic segments

Advantage Taken of Market Growth Potential

Expand its presence in the international markets

▪ Europe, Latin America, Japan, China and India

▪ Markets which with rapid growth in disposable incomes and increase in demand for luxury and foreign brands

Strengthen its worldwide dealer network

▪ Improve communication with retail customers

▪ Provide a premium retail experience

▪ Strengthen dealer profitability

Profitability(in thousands)

Source: Annual report on form 10K (http://investor.harley-davidson.com)

Price Elasticity of Demand

Motorcycles are luxury items

High impact during economic recessions

Technical and Manufacturing Skills

Implemented common standards through “Best Practice Circles”

Cost savings

Flexibility (customer led)

Fluent communication between R&D and Production

ETOP Chart

Industry Trends

Environment

Government

External Threats

External Opportunities

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Factors Impact of Factors X Importance of Factor = Environmental Results

Economic -6 8 -48

Political -1 1 -1

Social 10 10 100

Technological 3 3 9

Competitive -1 1 -1

Geographic 5 5 25

Note: Impact-on the relevant industry, from +10 (opportunity) to -10 (threat)

Importance-to the specific analyzation of HD, from 0 (unimportant) to 10 (very important)

Growing International Markets

Electric motorcycle

Global Marketing

Waste Reduction and Recycling

Water Reduction

Energy Consumption Reduction

Competition

External Changes (government, taxes)

International tariffs and duties

Lower cost competitors or imports

Product substitution

Porter Analysis & Business

Strategy

Miles and Snow

International Strategies

Growth Vector Analysis

Differentiation of product/service

High quality

High customization

▪ Unique product

Brand loyalty

▪ Harley lifestyle

High demand

Focus of market/product

Narrow, well-defined market

Market expansion

Expansion through acquisition

Expansion of product line

Defender

Domain: Narrow and pretty stable

Growth: Slow and incremental, market extension

CSF Metric: Sales and market share

Success

▪ Stable pocket

▪ No R&D

▪ Advertising, create “Harley Lifestyle”

Grow globally by:

expanding into more international markets

Apply customer-led ideas as well as local market perspective into the development of their products

Regional operation centers

Added 118 new dealer points internationally since 2009 – goal of 150 by this year

2013: 36% of new motorcycles were shipped internationally – goal of 40% by this year

Regional HQ:

U.S (Wisconsin)

Latin America (Florida)

Europe, Middle East and Africa (England)

Asia-Pacific (Singapore).

International countries:

experiencing growth in disposable income.

Maintain dominant U.S market share (50%+); look to capture market share in international markets.

Continue aiming for “non-core customers”

Existing

Market

Market penetration

Sportster

Custom

Touring

Product variants; imitations

Customization

Value-added Parts

Product line extension

Project Livewire

Bike Accessories

Clothing Line

(Market

Choices)

Expanded

Market

Aggressive

promotion

Project Rushmore

Mrkt seg, prod

differentiation

Strong, loyal

customers, cult-like

brand

Vertical diversification

Castalloy (Wheel supplier)

Assembly

Paint

New

Market

Market development

Female-fit Motorcycles

Market extension

Trike

Conglomerate

diversification

Harley Davidson

Financial Services

Present products Improved products New products

(Product Choices)

Continue to increase their presence in international markets and adapt to consumer tastes

Focus on the brand; improve manufacturing and speed to market

Continue to invest in more innovative products –Project Livewire

Target more towards “non core” customers

Resource/Capabilities-Based Model Perspective

VRIO Framework

▪ Value

▪ Rarity

▪ Imitation

▪ Organization

Resources

Market Share

Brand

Dealer network

Capabilities

Technological advancements

New Market penetration

Multiple Models to reach specific buyers Customization

High level of Interaction between buyer and seller

Leader in Technology Large national and international bike events

dominated by Harley Davidson

Strength

“Cult status”

Weakness

Outsourcing parts to reduce cost

Reemergence of Indian Motorcycles

Strength

Buyer experience

Brand recognition

Weakness

Manufacturing capabilities and parts are readily available

Similar styling

Strength

Managements interactions with customers

Employee dedication

QUESTIONS?