strategic case

8/4/2019 Strategic Case

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The case study: Harley Davidson, Inc. 2008: Thriving Through a Recession, Case 16

starting on page 16-1, will include a synopsis; identification of their resources,

capabilities, and core competencies; and three findings of fact. Each finding of fact will

require a justified solution, each a minimum of one page each. The student will support

their recommended solutions with rational thought learned from the course material,other courses, and real-life experiences. Using the information from the weeks readings,

The development and application of a complete SWOT analysis should be included. The

paper will be double-spaced and will not exceed 10 pages in length. The assignment will

be uploaded to the D2L DROPBOX.

SchoolofNaturalScience, MathematicsandBusiness

Department of Business Administration

16. HARLEY DAVIDSON INC. 2008: THRIVING THROUGH A RECESSION Priscilla Carroll*, Ackeil Facey, Bernard Holmes, Tarsha Johnson, Keinelia

Toussaint, Nicholas Umontuen

Department of Business Administration, Fisk University, Nashville, TN 37208

Harley Davidson has beat the odds once, will it be able to do it again? This case analysis

deals with past as well as the future of this successful American company. William

Harley and his friend Arthur R. Davidson began brainstorming business ideas in 1901.

Their ideas and concepts lead to the birth of The Harley-Davidson Company in 1903.

Harley Davidson is an Elite motorcycle company that in the past appealed to many but

with the changing times, they are coming close to appealing to none. The traditional

Harley-Davidson heavy structured motorcycles originally appealed to the baby boomers.

With the growing concerns that the baby boomers are aging management introduces a

newer version of their motorcycle called the V-Rod in an attempt to appeal to the muchyounger market. 104 years after the initial start of the Harley-Davidson Corporation, they

hit a financial decline and had to revamp the market strategy in order to successfully

compete in the 21st Century market. Harley Davidson is failing financially because of the

lack of diversity in their marketing strategies, slow response or no solutions to the

challenges facing the company due to the recession, and negligence from the local and

foreign companies’ true production levels.

The questions many may ask, is how will the current recession affect the operations of

Harley Davidson? Will the company be able to grow at the historical rates that made

Harley Davidson Market leaders? Will expansion help or hinder the company’sresources? To begin to answer these questions we studied the company’s marketing

strategies, the statistics from the sales, and the production levels. Recommendations forthe companies are to cut back on non-profitable foreign subsidiaries, focus on more

energy efficient motorcycles, expand to other products such as Choppas, and implement

effective compensation management strategies.

Faculty Advisor: Prof. Nicholas Umontuen



INTRODUCTION AND OVERVIEW OF HALEY DAVIDSON

Harley-Davidson, Inc. is primarily in the business of recreational vehicle. Harley-Davidson wasincorporated in 1981 and is based in Milwaukee, Wisconsin.

It is the parent company for the group of companies doing business as Harley-Davidson Motor Company(Motor Company), Buell Motorcycle Company (BMC) and Harley-Davidson Financial Services (HDFS).The Motor Company produces heavyweight motorcycles and offers a line of motorcycle parts,

accessories, apparel and general merchandise. The Motor Company manufactures five families of motorcycles: Touring, Dyna Glide, Softail, VRSC and Sportster. BMC produces sport motorcycles,including five v-twin XB models and the single-cylinder Buell Blast. BMC also offers a line of motorcycleparts, accessories, apparel and general merchandise. HDFS provides wholesale and retail financing andinsurance programs primarily to Harley-Davidson/Buell dealers and customers. The Company operatesin two principal business segments: Motorcycles and Related Products (Motorcycles) and FinancialServices. HDI is a manufacturer of motorcycles based in Milwaukee, Wisconsin, making it one of the tworemaining American mass-producer of motorcycles (along with Victory Motorcycles). The companyemphasizes heavy bikes designed for cruising, bikes known for their distinctive exhaust noise.

The Motorcycles segment designs, manufactures, and sells primarily heavyweight, touring, custom, andperformance motorcycles, as well as a line of motorcycle parts, accessories, clothing, and collectibles. Italso offers police, fire, and rescue motorcycles. The Financial Services segment engages in financingand servicing wholesale inventory receivables and consumer retail loans primarily for the purchase of

motorcycles in the United States, Canada, and Europe. It provides wholesale financial services to itsdealers and retail financing to consumers. Its wholesale financial services include floorplan and openaccount financing of motorcycles, and motorcycle parts and accessories; real estate loans; computerloans; and showroom remodeling loans. Retail financial services include installment lending for its newand used motorcycles. The Financial Services segment also provides the brokerage of variousmotorcycle insurance policies and service warranty agreements.

Harley-Davidson also provides other services to its dealers, including service and business managementtraining schools, customized dealer software packages, delivery of its motorcycles, a motorcycle rentalprogram, and a rider training program. In addition, the company licenses the name â€˜Harley-Davidsonâ€™ and other trademarks owned by it. Its licensed products include T-shirts, jewelry, smallleather goods, and toys.

History

The company considers 1903 to be its year of founding, though the Harley-Davidson enterprise could be

considered to have started in 1901 when William S. Harley, age 21, drew up plans for a small enginethat displaced 7.07 cubic inches (116cc) and had four-inch flywheels. The engine was designed for usein a regular pedal-bicycle frame.

Over the next two years Harley and his boyhood pal Arthur Davidson labored on their little motor-bicycle using the northside machine shop of their friend Henry Melk. It was finished in 1903 with thehelp of Arthur's brother, Walter Davidson. Upon completion the boys found their little "power-cycle"unable to conquer Milwaukee's modest hills without pedal assistance. Bill Harley and the Davidsonsquickly wrote off their first motor-bicycle as a valuable learning experiment.

Starting fresh, work was immediately begun on a new and much improved machine. This first "real"Harley-Davidson motorcycle would have a bigger engine of 24.74 cubic inches (405cc) with 9-3/4 inchflywheels weighing 28 pounds. The machine's advanced loop-frame was similar to the 1903 MilwaukeeMerkel motorcycle. They also got help with their new engine from outboard motor pioneer Ole Evinrude.Elder brother William A. Davidson also lent a hand in the enterprise. The prototype of the new improved

loop-frame model was assembled in a 10 by 15 foot (3 by 5 meter) shed in the Davidson familybackyard. The machine was functional by 8 September 1904 when it was entered in a Milwaukeemotorcycle race, the first known appearance of a Harley-Davidson motorcycle.

In January 1905, small advertisements were placed in the "Automobile and Cycle Trade Journal" thatoffered bare Harley-Davidson engines to the do-it-yourself trade. By April, complete motorcycles were inproduction on a very limited basis. In 1905 no more than a dozen machines were built in the backyard n1906 Harley and the Davidsons built their first factory on Chestnut Street (later Juneau Avenue). Thislocation remains the Motor Company's corporate headquarters today. The first Juneau Avenue plantwas a modest 40 by 60-foot single-story wooden structure. That year around 50 motorcycles wereproduced.

(Source: 1.Corporate website of Harley Davidson)

Our Mission

â€œWE FULFILL DREAMS THROUGH THE EXPERIENCES OF MOTORCYCLING, BY PROVIDING TOMOTORCYCLISTS AND TO THE GENERAL PUBLIC AN EXPANDING LINE OF MOTORCYCLES ANDBRANDED PRODUCTS AND SERVICES IN SELECTED MARKET SEGMENTS.â€



VISION

Harley-Davidson, Inc. is an action-oriented, international company, a leader in its commitment tocontinuously improve our mutually beneficial relationships with stakeholders (customers, suppliers,employees, shareholders, governments and society). Harley-Davidson believes the key to success is tobalance stakeholdersâ€™ interests through the empowerment of all employees to focus on value-addedactivities.

Our Values

 Tell the Truth.

 Be Fair.

 Keep Your Promises.

 Respect the Individual.

 Encourage Intellectual Curiosity.

The company fosters these values by actively communicating their importance and encouragingemployee involvement and development. We believe that our business will be most successful if we tapthe contributions of each of our people.

1. Analysis of Strategic Factors

INDUSTRY AN ALYSIS

It has better profit margin than the industryâ€™s average. This is depicted by the following data:

HARLEY-DAVIDSON INC. one-year net profit margin: 17.7%

* Difference from the company's 5-year average net profit margin: 2.6 pct. pts.

Difference from the average for the Recreational Vehicles group: 11.3 pct. pts.

Net profit margins (%)

Company 17.7%

Company 5-Yr Avg. 15.1%

Industry 6.4%

(See Reference No. 3. Source MSN.com)

This indicates it is less risky than the industry.

FOR other questions see attached excel sheet.

POSITIVE RECENT DEVELOPMENTS

1. Harley-Davidson, Inc. announced that its third quarter results keep it on track with its previouslydisclosed guidance for 2005. The Company has also broadened its long-term guidance on wholesaleunit growth to 5 to 9% annually. This will support annual earnings per share growth target in the rangeof 11 to 17%. According to Reuters Estimates, analysts expect the Company to earn $3.36 per share forfiscal 2005.

2. Harley-Davidson, Inc. raised its outlook, citing record-level sales of Harley-Davidson motorcyclesduring the second quarter and an increase in European demand. The Company now expects full year2005 earnings per share growth to be in the 10% to 13% range. According to Reuters Estimates,analysts on average were expecting the Company to report full year 2005 earnings per share of $3.19.The Company had previously set expectations that wholesale shipment volume would drive earnings per

share growth of 5% to 8% for the year. Harley-Davidson's longer-term guidance remains at 7% to 9%annual growth in motorcycle unit shipments, supporting earnings per share growth in the mid-teens.

Harley-Davidson, Inc. Introduces Three Motorcycles

Harley-Davidson, Inc. announced that it has expanded its model offerings with an all-new 2006 VRSCR Street Rod, a big bore 15th Anniversary Edition 2005 Fat Boy and dirt track-inspired 2005 Sportster883R.

(Source www.msn.com)

AMERICAN ICON â€“ (SFAS Summary) SWOT ANALYSIS OF HDI

As many enthusiasts may describe it, the pride of owning a Harley-Davidson is the pride of owning an'American Icon'. Harley-Davidson's (HDI) positioning strategy can best be defined by its missionstatement: "We fulfill dreams through the experience of motorcycling- by providing to motorcyclists andto the general public an expanding line of motorcycles, and branded products and services in selected

market segments." Now in its 100th year, however, the ideal of owning an 'American Icon' has slowlydwindled out of the public's mind, due mostly to the competition from Japanese manufacturers likeHonda and Yamaha. HD's most important promotional tool is the brand image of a truly American



product. Such a tool appeals to the domestic market, and owning a Harley-Davidson bike fits well intosupporting the national feelings of pride for America.

HD's strength's of its powerful brand image, maintaining good customer relationships, strong financialposition, and superiority of technology and design are hindered by its weaknesses related to productcapacity and unfulfilled demand for their products.

Internal factor analysis summary (IFAS)

STRENGTHS

Since the 1950â€™s, Harley-Davidson has been an integral part of American pop culture. The days of the lone rider crossing a long stretch of highway that extends as far as the eye can see sparks nostalgiain any red blooded American. It is has been this key relationship with the name Harley-Davidson thatpowers the thirst for people to purchase an American road bike. Name recognition is very important inthe business world and often people refer to any heavyweight motorcycle as a â€œHarleyâ€ .

The loyalty of the customer has been seen in the long run through repeat business. Repeat businesshas also lead to a steady flow of income for the company. The restructuring of Harley-Davidson in the1980â€™s has lead to two decades of growth. Stock prices continued to rise and both net income andsale have reached an all time high. There has been such a demand for Harley-Davidson motorcyclesthat a one to two year waiting line built up.

The fact Harley-Davidson motorcycles are all slightly unique have lead to their success. The owners of

the motorcycles feel as though they have a custom bike, which has lead to the acceptance of higherprices. This â€œmass customizingâ€• of motorcycles was unique to the industry, furthering the loyaltyof owners as well as makers. Due to the high demand for Harleyâ€™s, resale prices have been higherthan the competitions. This has made some ownerâ€™s feel as though their Harley-Davidson is aninvestment allowing them to justify higher sales prices.

By increasing productivity, Harley-Davidson has increased net sales ( For detailed financial analysis seeattached excel sheet)

Over 80% of the suppliers of Harley-Davidsonâ€™s materials have been located within 160 miles of themanufacturing facilities. By using a just-in-time system, named MAN (materials as needed), Harleyadopted a very efficient approach to manufacturing. Offering long-term contracts to suppliers who havemet the companiesâ€™ requirements and making their own pickups allowed Harley-Davidson to cutcosts. Using modern technology in research and development and computer-aided drawing also gavethem competitive advantage. A product development center in Milwaukee built in 1996 lead to

shortening the time of product to market.Employee pride was another strong point in the Harley-Davidson philosophy. Employee benefits, suchas stock options, have lead to high moral. Employee training and development gave more satisfaction tothe workers. From the standpoint of productivity happy workers are also more productive workers. Alsoworkers were encouraged to participate in demonstration rides for potential customers. This proved tobe very expensive yet worthwhile to the company and customers alike. Demonstration days opened uplines of communication and further increased customer loyalty.

WEAKNESSES

Harley-Davidson has been a very strong company since the 1980â€™s. Demanded soared for theirproducts. The demand grew so fast that manufacturing could not keep up. Customerâ€™s were forcedto wait a year or longer to get their motorcycle. During this period many customerâ€™s switched to thecompetition in order to get their product. The demographics that Harley-Davidson is target at is mid40â€™s educated male making around $68,000 a year. This target audience has stayed loyal to Harleyand been able to withstand the long wait. The younger people that had yet to gain loyalty to thecompany were not being satisfied and many have moved to cheaper foreign substitutes.

Women only made up 2% of the total Harley-Davidson sales . Many women complained that the size of the motorcycles were too large for them to feel comfortable. With a price exceeding $20,000 for a topof the line model, Harley-Davidson motorcycles were more expensive than their competition. Even thelower end models were not affordable for some potential customers.

In an industry with competitors that had many more resources and products, Harley-Davidson waslimited by their size. Many competitors have a more diversified product line that allowed for them tomake a lower profit on some products. Honda, for example, had more options for the budget-mindedentry-level customer. Once entered into Hondaâ€™s product line they felt that they would be able toget repeat business for their more profitable motorcycles due to customer loyalty. It was very hard forHarley-Davidson to get new customers due to their limited ability to provide a new product and the highprice of used Harleyâ€™s.

External factor Analysis summary (EFAS)

THREATS



The main threats for Harley-Davidson came from Japanese companies such as Honda, Kawasaki,Suzuki, and Yamaha. Some competition also came from domestic competitors in Polaris, Excelsior, andIndian. As the only major US manufacturer of motorcycles, Harley-Davidson could see future domesticmarket share shrink with the success of Polaris.

The post baby-boomers were the main customer for Harley-Davidson during the 80â€™s and 90â€™s. As these members of society grow older, their purchasing power will decrease. A tight demographic has

forced Harley-Davidson to rely on a portion of the population that has been declining. With fewer corecustomers, Harley needed to consider marketing to new customers.

Women made up more than half of the worldâ€™s population. Yet Harley-Davidson only drew 2% of itssales from women. Competitors have been able to entice women into buying their products by offeringsmaller, more women specific motorcycles. Since many women had husbands or boyfriends , they couldhave influenced their partners into purchasing competitors motorcycles. With a specific product line,Harley-Davidson may alienate future customers.

OPPORTUNITIES

Harley-Davidson has much strength that can lead to great opportunities for the companiesâ€™ future.The three major opportunities are, introducing more products for women, expanding the product line inorder to compete in the international arena, and increasing production to meet demand.

2. Strategic Alternatives and Recommended Strategy

There are fundamental questions that all businesses must ask themselves to play a pro-active role inthe competitive environment.

 What to change?

 When to change?

 How to change?

 How FAST to change?

 How to ensure the capability to change?

There is a need to constantly renew their processes, their knowledge, their technology, their people,and finally, the strategies.

It is useful to examine the competencies that Harley possesses in its current operations. It has beentheorized that companies deliver superior customer value by performing exceptionally well in one or

more of three areas, Operational Excellence, Customer Intimacy, and Product Leadership. Based on theabove discussion, it is relatively easy to theorize that Harley primary strengths lie in the area of Customer intimacy and product innovation.

A. Strategic Alternatives (From SFAS)

Strategic Alternatives are developed by matching of the Threats-Opportunities-Weaknesses-

Strengths (SWOT) Matrix, the Internal- External (IE) Matrix. Any organization, whether military,product-oriented, service-oriented, governmental, or evenathletic, must develop and execute goodstrategies to win.

Various Alternatives for Harley-Davidson are:

1. Continue current horizontal growth strategy by replicating its success in other international marketsfor Harley-Davidson

Pro: Uses core competency to build a desirable product.

Cons: Need to significantly increase marketing effort and expenses.

2. Follow vertical growth strategy of having plant of rawmaterial like auto components or companyowned showrooms

Pros: May enable better integration with value chain.

Con: Likely to significantly increase R&D costs and also capital costs.

3. Follow vertical growth strategy of acquiring manufacturing facilities.

Pros: May be able to reduce unit costs via process R&D; could improve product development function.Cons: Expensive and capital intensive; would restrict flexibility.

4. Investigate acquisition of another Auto Company.

Pros: economies of scale and scope possible so can compete in other product segments.

May increase sales and reduce costs in every area.

Con: May not be enough to compete in other segments.



5. Growth through Differentiation focus: The opportunities are, introducing more products for women,expanding the product line in order to compete in the international arena

Pro: Uses core competency to build a desirable product.

Cons: Need to significantly increase marketing effort and expenses.

Advantages of growth strategy will lead to increase in the market share and the economies of scale.

Disadvantages: There may be risk of losingits focus.

Pause Strategy:

Consolidates various acquisitions to find economies and to encourage innovation among the businessunits.

Advantages : may lead to increase in the short term profitability.

Disadvantages: There may be risk of losing

the market share and revenues.

RECOMMENDATION

B. Recommendation

1. What recommended Strategy would you use?

There is no doubt that strategies evolve because of the unexpected responses such as customersâ€™expectations, new technologies, popular commodities, the change in the environment and pop culture.Thus a companyâ€™s strategy must be combined with a proactive strategy and reactive strategy.Furthermore, a company strategy should not be bland and generic where many companies are doingthe exact thing. The best solution is to alter the tactics by creating new innovative ways to be uniqueand different from the competitors. IF we closely analyze this statement, the patterns of anorganization's actions will be clearly reflected not only in the financial performance of an organizationover the years but in the relative strengths, weaknesses and strategic positioning of the firm in thebusiness environment, industry or economy it operates in. The understanding of these elements is theprima facie requirement in the strategic planning and management process and is closely analyzed inthe environmental scanning process of an organization. These factors are very important in establishingthe corporate level strategies of an organization. But one has to remember that there are numerousother factors also such as general state of economy, industry growth rates, etc. which influence the

formulation of strategyHD should chose following:

Growth through Differentiation focus:

The opportunities are, introducing more products for women, expanding the product line in order tocompete in the international arena. HD should target a younger market that is technologically consciousin order to increase its share in the performance cruiser market space. With the introduction of the new V-Rod motorcycle, HD is in a position of attaining a sizeable share in the performance cruisermarketplace. To target the younger market with the new product line, the company should adopt thefollowing marketing objectives:

HD should continue current horizontal growth strategy by replicating its success in other internationalmarkets for Harley-Davidson

Implementation, Evaluation and Control

1. What kinds of programs (for example, restructuring the corporation or instituting TQM) should bedeveloped to implement the recommended strategy?

Effective implementation depends upon carefully communicating the strategy to all stakeholders - bothinside and outside the organization. When strategy drives the planning process, implementation iseased. When new strategies are implemented, changes must often be made - particularly in terms of structure and processes in the organization. Implementation can also be eased as complexity isreduced. And finally, having key processes in place (including decision-making, problem analysis,opportunity analysis, situation analysis, and project management) will assist in effective implementation.Thus the strategy and its programs must be communicated to the stakeholders of Harley.

Implementing strategy involves

* Creating fits between way things are done & what it takes for effective strategy execution

* Executing strategy proficiently & efficiently

* Producing excellent results in timely manner

* Most important FITS are between strategy AND



o Organizational capabilities

o Reward structure

o Internal support systems

o Organizational culture

PRINCIPAL TASKS OF STRATEGY IMPLEMENTATION

* Building a capable organization

* Allocating ample resources to strategy-critical activities

* Establishing strategy supportive policies & procedures

* Instituting best practices & mechanisms for continuous improvement

I will recommend Benchmarking for Harley. Benchmarking is a process, which evaluate various aspectsof their processes in relation to best practice, usually within their own sector. This then allowsdivisions/organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance.

Benchmarking is simply about making comparisons with other organisations and then learning thelessons that those comparisons throw up".

Source: The European Benchmarking Code of Conduct

"Benchmarking is the continuous process of measuring products, services and practices against thetoughest competitors or those companies recognized as industry leaders (best in class)".

Source: The Xerox Corporation

Benchmarking will be primarily with the companies in the industry it is operating like with Honda, Polarisand other rivals. We will also consider world class companies in other industries, which can suitably beapplied, to our situation. It will encompass the following:

â€¢ Regularly comparing aspects of performance (functions or processes) with best practitioners;

â€¢ Identifying gaps in performance;

â€¢ Seeking fresh approaches to bring about improvements in performance;

â€¢ Following through with implementing improvements; and

â€¢ Following up by monitoring progress and reviewing the benefits.

In benchmarking with comparable others, an organization:

* Determines how leading organizations perform specific process(es)

* Compares their methods with its own

* Uses the information to improve upon or completely change its processes.

It is important when benchmarking with stellar organizations that you gain a clear understanding of thescope of their project, the methodology they used, the critical success factors they identified, thechallenges and opportunities they faced in implementation, and the important lessons they learned.

The â€˜Gap Analysisâ€™

When examining the best practices of others and drawing comparisons, an organization will oftenperform what is called a "gap analysis." This is a way to identify the performance or operationaldifferences between your process and that of your benchmarking partners, and to understand why thedifferences exist. One way to identify these gaps is through a technique called "activity modeling," auseful method for understanding how a business process really works by first describing how things are("as-is" modeling), and then by how you want them to be ("to-be" modeling). Key Actions inBenchmarking for Best Practices

Number of steps that are integral to an effective best practice review:

* Research to plan the review. Before selecting comparison organizations, research the organizationsthemselves as well as current industry trends and developments.

* Select appropriate organizations. Your research should yield a list of best practice organizations. Usethis list to determine how many and which ones to visit. Experts suggest keeping the list to amanageable number, which can be as low as five.

* Collect data from selected organizations. Develop a standard list of questions to structure theinterview process and guide your discussions. Gear questions toward discovering common practices andcharacteristics among the selected organizations. You may need to revise this list after you obtain

feedback from the first interview.



* Identify barriers to change. Identify the barriers to implementation within your organization, whetherreal or perceived.

â€¢ Make recommendations for change constructive and convincing. Give your agency a "basket of ideas" from which to choose. Build flexibility into the recommendations, as your agency will need toadapt them to its unique needs and functions. It also helps to outline the benefits as well as the keysteps that should be taken in order for implementation to be successful

Measures to be taken by Harley on the basis of benchmarking:

â€¢ A product mix that is responsive to rapidly changing market needs

â€¢ Introduction of new products based on latest R&D,

â€¢ Use of process innovation and quality improvement process to reduce cost of operations andconsequently price of product

These are some of the measures that need to be taken up by the manufacturing companies to retaintheir competitiveness in a low margin environment. Efforts to reduce manufacturing costs need to betargeted on reduction in material related costs as well as overheads. Investment in material costs wouldget reduced by looking at long term contracts with vendors, reducing rejects & reworks dramatically,developing alternative materials etc. By reducing investments in inventory across the supply chain(through implementation of pull-based material procurement), even the overhead costs can be reducedfurther.

Benefits of benchmarking

Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. Ithelps crack through resistance to change by demonstrating other methods of solving problems than theone currently employed, and demonstrating that they work, because they are being used by others.

TOTAL QUALITY MANAGEMENT CAN ALSO BE IMPLEMENTED

â€œQualityâ€• is continually evolving, an emerging consensus includes: Continuous Improvement andLearning: Continuous improvement and learning refers to both incremental and â€œbreakthroughâ€improvement, and applies to both the individual and organizational levels. Improvement and learningcan be directed toward better products and services, to better processes, and to being more responsive,adaptive, and efficient.

The companies use all the above statistical and managerial concepts. They all are very useful tools andused time and again by the organizations. According to my opinion control charts is essential to study

closely the quality of the products coming from each production operation. The primary purpose of control charts is to indicate when production processes may have changed sufficiently to affect productqualtiy. This tool is very mush useful for the organisations. There are two type of control charts: 1. Forvariables 2. For atributes.

These charts can be used just in any application, from automated manufacturing to services. In anyindustrial product, say cotton yarn, the print outs of control charts for certain qualtiy measures can beprovided to the consumers which will give consumers more confidence

Perceptive from Joseph M. Juran

He focused on following points:

* Quality control must be an integral part of management

* Quality is no accident

* Quality must be planned

* There are no shortcuts to quality

* Use problems as sources of improvements

Hence Harley must focus on quality as an integrated concept. They must improve the quality of everyaspect of management whether it is labour, material or machine.

Perceptive from Deming

THE CONTRIBUTION BY DEMING IS VERY USEFUL. He has give the 14 points apply anywhere, to smallorganizations as well as to large ones, to the service industry as well as to manufacturing. They apply toa company:

1. Create constancy of purpose toward improvement of product and service, with the aim to becomecompetitive and to stay in business, and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to

the challenge, must learn their responsibilities, and take on leadership for change.



3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basisby building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Movetoward a single supplier for any one item, on a long-term relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve quality andproductivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership: The aim of supervision should be to help people and machines and gadgets todo a better job. Supervision of management is in need of overhaul, as well as supervision of productionworkers.

8. Drive out fear, so that everyone may work effectively for the company

9. Break down barriers between departments. People in research, design, sales, and production mustwork as a team, to foresee problems of production and in use that may be encountered with theproduct or service.

10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and newlevels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causesof low quality and low productivity belong to the system and thus lie beyond the power of the work force.

* Eliminate work standards (quotas) on the factory floor. Substitute leadership.

* Eliminate management by objective. Eliminate management by numbers, numerical goals. Substituteleadership.

11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibilityof supervisors must be changed from sheer numbers to quality.

12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management byobjective.

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The transformation iseverybody's job.

Who should develop Evaluation programs?Every manager has an active role. It is a job for whole management team

* Implementation involves every organization unit

* Top management has to orchestrate major implementation initiatives. But they must rely on middle & lower-level managers to get things done

c. Who should be in charge of the programs?

Incharge of program:

o Chief Executive Officer

o Heads of major organizational units

2. Are the programs financially feasible? Can pro forma budgets be developed and agreed upon? Arepriorities and timetables appropriate to individual programs?

Yes programs are financially feasible. These are also known as strategic funds are expense itemsrequired for the implementation of strategic action programs whose benefits are expected to be accruedin the long term, beyond the current budget period. There are 3 major components of strategic funds:

1. Investment in tangible assets, such as new production capacity etc.

2. Increases (or decreases) in working capital generated from strategic commitments, such as

the impact of increases in inventories and receivables resulting from an increase in sales and so on.

3. Development expenses that are over and above the needs of existing business, such as advertising tointroduce a new product or to reposition an existing one; R&D expenses of new products and so on.

PROFORMA Budgets have to be formulated by team of comprising organizational heads and otherfunctional specialist on the above assumptions. Here the R&D, advertisement costs will be high of Harley in the light of new strategy.

3. Will new standard operating procedures need to be developed for Control ?



Yes it needs to be developed due to the introduction of Benchmarking and Total Quality management.Well-written Standard Operating Procedures are written documents that describe, in great detail, theroutine procedures to be followed for a specific operation, analysis, or action. Consistent use of anapproved Standard Operating Procedure ensures conformance with organizational practices, reducedwork effort, reduction in error occurrences, and improved data comparability, credibility, anddefensibility. The development and use of SOPs is an integral part of a successful quality system. Itprovides individuals with the information to perform a job properly and facilitates consistency in thequality and integrity of a product or end-result through consistent implementation of a process orprocedure within the organization. In addition, SOPs are frequently used as checklists by inspectorswhen auditing procedures. Ultimately, the benefits of a valid SOP are reduced work effort, along withimproved data comparability, credibility, and legal defensibility.

Standard Operating Procedures also serve as resources for training and for ready reference anddocumentation of proper procedures. Standard operating procedures (SOPs) provide direction, improvecommunication, reduce training time, and improve work consistency. The SOP development process isan excellent way for managers, workers, and technical advisers to cooperate for everyoneâ€™s benefit. A very positive sense of teamwork arises when these parties work together toward common goals.

SOPs should complement and serve as a basis for introductory training. Excessive detail also is likely tocause resentment from experienced workers. They might feel that management is using the SOP tomicromanage every aspect of their work performance.

In addition, well-written SOPs act as effective communication tools that contribute to workerunderstanding and job satisfaction.

SOPs should be written by individuals knowledgeable with the activity and the organization's internalstructure. These individuals are essentially subject-matter experts who actually perform the work or usethe process. A team approach can also be followed, especially for multi-tasked processes where theexperiences of a number of individuals are critical.

REFERENCES

 Wieringa, Douglas, C. Moore, and V. Barnes. Procedure

 Writing: Principles and Practices. Columbus, Ohio. Battelle

 Press: 1998.

 Price, Brenda. Set monitoring protocols for SOPs. Dairy Herd

 Management, Vol. 38, No. 3, March 2001. Cornell Pro-Dairy Staff. â€œIf Iâ€™ve told you onceâ€¦â€ • Northeast

 Dairy Business, Vol. 2, No. 2, April 2000.

 BOOK: OPERATIONS MANAGEMENT BY GAITHER

 WWW.INDIAINFOLINE.COM, BUSINESSWORLDINDIA.COM

 Corporate website of www.harley-davidson.com/

 Book Corporate Strategy by Gary Hamel



Harley Davidson Case Study

Company Summary:

Harley-Davidson is one of two American producers of motorcycles, and the nation's #1 seller of thecruiser style of motorcycles. The organization offers 35 different models of custom and touring bikesthrough a worldwide network of more than 1,500 dealers. Harley models include the Sportster, the FatBoy, and the Electra-Glider. The company also produces sport bike style motorcycles under the brand

name of Buell. Other than its motorcycles, Harley-Davidson sells a certain type of life style and attitude.Including, but not limited to, goods licensed with the company name, such as a line of clothing andaccessories. Retrieved June 12, 2007 from (http://www.hoovers.com/harley-davidson/--ID__10706-- /free-co-factsheet.xhtml.) According to Buss (2004), Harley's roots stem from a blue-collar appeal forsocial mavericks, beginning with its founding in 1903, and continued to grow through the early '80s.During this time, a print ad showing a buff guy's arm with a Harley tattoo asked: "When was the lasttime you felt this strongly about anythingÐ²Ð‚Ñœ

Marketplace Competition:

J.D. Power and Associates (2006) reveals that, in its ninth model year, Victory Motorcycles is growing atclose to ten times the industry rate. Victory is the motorcycle division of Polaris Industries that is morecommonly known for its ATVÐ²Ð‚â„¢s and snowmobiles. "People who choose to ride our bikes lovethem - it's something we've known for a long time - and we're happy this information is finally public."said Mark Blackwell, Vice President of Victory Motorcycles and International Operations for Polaris

Industries. Black well goes on to state that more consumers desire an American heavyweight cruiserthat has a more modern design and function. He adds that the test ride program is really helping toopen people's eyes.

SWOT Analysis:

Strengths:

Ð’Â· Mission Statement- We fulfill dreams through the experience of motorcycling,

by providing to motorcyclists and to the general public

an expanding line of motorcycles and branded products and services

in selected market segments. Retrieved on 6-12-07 from, http://www.harley-davidson.com/wcm/Content/Pages/Student_Center/student_center.jsp?locale=en_US&bmLocale=en_US#demographics.

Ð’Â· 2006 Sales (mil.)- $6,185.6Ð’Â· 1-Year Sales Growth- 9.0%

Ð’Â· 2006 Net Income (mil.)- $1,043.2

Ð’Â· 1-Year Net Income Growth- 8.7%

Ð’Â· 2006 Employees- 9,000

Ð’Â· 1-Year Employee Growth- (7.2%)

http://www.hoovers.com/harley-davidson/--ID__10706--/free-co-factsheet.xhtml.)

Weaknesses:

Company Product Quality Cost of Ownership Sales Service

BMW

BuellDucati

Harley-Davidson

Honda

Kawasaki

Suzuki

Triumph

Victory

Yamaha

Scoring Legend

Among the best Better than most About average

The rest



http://www.jdpower.com/autos/ratings/motorcycles

Opportunities:

Ð’Â· Harley- Davidson is revving up efforts to broaden its appeal to younger riders and women.

Ð’Â· . Harley is now pursuing younger male buyers and female customers in several ways. It reachesout to the dreamers group through a direct mail program. Advertising is also playing a major role inrefining the Harley brand.

Ð’Â· New products, however, are skewing younger. The Harley portfolio now includes traditionalcruisers, many priced above $20,000; high-tech, performance oriented V-Rod bikes, introduced twoyears ago at $16,500-17,700; and the Sportster line, which retails at $6,500-9,500. Buss, (2004)

Threats:

Ð’Â· The Victory Vision bikes have four inches of cushion in their seats, a relaxed, feet-forward ridingposition, the best aerodynamic wind protection and airflow management for all weather riding, andplenty of storage space with modern American styling.

Ð’Â· Victory reported that it has established goals for sales to grow to $2.2 billion by the end of the2009 calendar year.

Ð’Â· The Vision 800 concept motorcycle features an 800cc four-stroke liquid-cooled parallel twin linkedto an automatic Constant Variable Transmission (CVT) without foot controls or clutch; a cast aluminum

alloy frame and cast aluminum single sided swingarm; a 43mm inverted telescopic front forks and fullyadjustable single rear gas shock; braking via dual 300mm rotors in the front and a 250 mm rotor inback. Also, a 120/60-R17 front tire and 250/40-R18 rear tire, both wrapped around 3.75-inch-wide sixspoke cast aluminum rims. Retrieved on 6-12-07 from, (http://www.allbusiness.com/retail-trade/motor-vehicle-parts-dealers-motor-motorcycle/855796-1.html)

Recommendations:

Ð’Â· Although the numbers of younger riders are on the rise, Harley must take notice of the marketingstyles that MTV utilizes.

Ð’Â· The youth of this country are constantly changing, and constant market research must be done tokeep up with what the next ideas of what is cool.

Ð’Â· Generally older males are the demographic that Harley- Davidson aims for, but the research Ifound indicates that women and young men are beginning to purchase more cruiser style motorcycles.

Ð’Â· Victory makes a great product, (I should know because I sell them) and they are on the rise to bethe top competition to Harley.

Ð’Â· Harley must get into the minds of the younger and more feminine crowds by surveys or incentivesthat appeal to this new demographic.

References

Buss, D., (2004), Can Harley Ride the New Wave? Brandweek . 45. Retrieved June 12, 2007.

(Dec 21 2006), The Riders Have Spoken: Victory Motorcycles Receives High Ratings From J.D. Powerand Associates. Business Wire. Retrieved from

http://www.harley-davidson.com/wcm/Content/Pages/Student_Center/student_center.jsp?locale=en_US&bmLocale=en_US#demographics

(http://www.allbusiness.com/retail-trade/motor-vehicle-parts-dealers-motor-motorcycle/855796-1.html)

http://www.jdpower.com/autos/ratings/motorcycles

http://www.hoovers.com/harley-davidson/--ID__10706--/free-co-factsheet.xhtml.



Harley-Davidson Inc., an employer of 4,694 workers,

consists of Harley Davidson Motor Company based in

Milwaukee and Eagelmark Financial Services Inc.

Based in Chicago, Illinois. In addition, there are nearly

600 dealerships throughout the United States and

1,065 dealers worldwide.

Harley-Davidson is the #1 seller of heavyweight

motorcycles in the United States, holding a 47%

market share.

Harley-Davidson's revenues come from five major

areas: H-D Motorcycles,Genuine Parts, Financial

Services, H-D Merchandise, and Beull Motorcycle

Company.H-D Motorcycles is the staple of company

and brings in the bulk of the company's revenues at

73%.Industry Overview

In 2003, 950.000 bikes in US and 23M worldwide.2007, %5 growth expected

China, India and SE Asia are expected to drive the industry growth

Larger bikes are predominant but smaller bikes will exceed the former one as a result of age and traveldifficulties.

Oligopolistic structure

Mature Industry

Moderate legislative and regulation obstacles in many countries (air pollution laws, driving licenceproblems etc.)Objectives

Creating a new and younger customer base

Growing companies' market share in world market

Gaining and sustaining competitive advantage

Strategies

Full commitment to build-to-order and focused-differentiation strategies.

Value over price through the development of mini-niches and the heavy construction of the parts.

Not exceeding demand in production. (By not being able to meet demands, an attitude of must-havehas developed)

Developing the relationship between customers, dealers and employees (HOG, HD University)

Providing awareness of H-D brand among non-riding public (Licensing)

Continuous improvement of quality and efficiency through ;

- Just-in-time inventory (being renamed MAN (materials as needed-to differentiate from ineffective JIT'sprocesses implemented by other companies.)

- Employee involvement (EI)

- Statistical operator control (SOC) simple statistical techniques and control charts to monitor andanswer 2 main questions Is the process in control (operating in a stable, predictable range of variation)and Is the process capable ( to remain within the specifications consistently )

Not dependent on advertising or other traditional marketing techniques "selling dreams and lifestyle nottransportation "

Customers are the sales force Ð’â€˜It's one thing for people to buy your product or service, but it'sanother for them to tattoo your logo on their biceps.'

Promoting sales by the financial services offered by Eagelmark, a wholly owned subsidiary. H-DFinancial

Services makes it easier to own and finance the bike of your dreams.

Promotions at motorcycle rallies.

Opportunities



Recovering economies in US and Asia / Pacific

Increase in motorcycle usage every year

Increase in transportation and traffic problems

Sponsorship for racing activities and special promotional events and major motorcycle consumer showsand rallies.

Marketing through rider training programsNon-traditional retail outlets

Continuous quality improvements

Plans for capacity expansion

Strengths

Customer Loyalty

H-D quality products stand the test of time; this is evident by their high resale value. H-D motorcycleshave the highest resale value of any other motorcycle company

High resale value also correlates with high sales, since consumers know that they get out what they putinto their investment.

H-D products are in compliance with all applicable environmental regulations and standards

Using almost all new technology in production (V-Rod)

HOG (largest motorcycle club in the world) and BRAG (Buell Riders Adventure Group)

Strong company culture

Brand loyalty and perception

American Culture

Brand stretching success

Strong dealer network

Growing financal resources

TechnologyThreats

Weaker global economy

TQM practices

High cost of manufacturing because of steel usage

Bush's steel tariffs

Highly competitive market

Negative image about motorcycles

The attack of Japanese competitors through improved quality and low price strategy

Aging customer base and dramatic increase in older bikers' deaths

Rapid changes in consumer preferences

Whether it be golf memberships or extensive travel packages, substitute products are everywhere.Competition is high because of the income level of the target market.

Weaknesses

H-D is an American brand with an American attitude. Penetrating

into international markets has been difficult with American hostility running

Agreement with domestic dealers according to overseas sales

High product, spareparts and service price

Suppliers

Harley-Davidson owns its own assembly and engine manufacturing company.

H-D relies on 695 parts suppliers to construct its motorcycles.

Most suppliers are metal and steel companies that are fully in touch with H-D's manufacturing plantsand are able to log on

to a H-D supplier portal and track demands for their product.

"HD has been working with longtime suppliers to hit annual goals of lower costs, consistent quality,improved delivery



performance, and continued investments in new technology, in exchange, the motorcycle companywon't shop the

business to other suppliers"

Consumers

Harley-Davidson has a very loyal customer base and a differentiated product. Consumers do not havemuch if any

bargaining power due to this strong following. If Harley-Davidson were to abuse this, consumers couldseek alternatives

such as competitor products or the used motorcycle market.

Competition

H-D is not alone in the heavyweight motorcycle market, but it does boast a 47% market share in 2002and a very unique

product. H-D's nearest competitor is very far behind.

Honda, Suzuki, Yamaha, Kawasaki, BMW, Ducati, Triumph, Moto Guzzi

New Entries

Barriers to entry such as high startup costs and product development costs are so high that H-D has

little worry of newcompetitors.

Substitutes

Cars, bikes

Outdoor sports

Competition is high because of the income level of the target market. H-D has shown strong revenuegrowth in the mid to high teens over the last 5

years. The company also has the luxury of benefiting from its strong brand image and high income

target market. However this large growth is not sustainable without penetrating into international

markets or expanding into different product lines. H-D has seen strong growth in its' stock price over

the last years and has large market share. But growth would need to come from international sales to

keep

up the strong growth rate or the stock price could be overvalued.

Harley-Davidson's life cycle is at the mature stage. H-D is no longer developing new, differentiated

products but instead is working to gain market penetration, changing incidental clients to regular

clients, and regular clients into heavy clients. H-D is also going mainstream in its efforts to

obtain new markets.

H-D's broad appeal will carry its earnings but growth will slightly decline as the company

further matures.

Recommendation

Expanding its current market (market expansion), diversifying its product line (product diversification),

and modifying its marketing mix to target a younger (technologically conscious) demographic



Harley-Davidson Case Study

Introduction of the Company

In 1903 William Harley and Arthur Davidson produced the first Harley-Davidson motorcycle for sale tothe public. The first yearâ€™s production was only three motorcycles with one dealer. In 1909, Harley-Davidson introduced the first? V-twin engine, which is still the company standard today. Harley-Davidson rapidly grew to the largest motorcycle manufacturer in the world by early 1920s, with 2,000

dealers in 67 different countries.

By the 1930s all of the American competition was gone. Harley-Davidson suspended production of civilian motorcycles during World War II, and only built motorcycles for the military, exclusively. Whenthe war was over, Harley-Davidson converted back to civilian production. Harley-Davidson's growth wasfueled by acquisitions as well as capitalizing on new technologies. In 1969 Harley-Davidson merged with American Machine and Foundry (AMF). By the 1970s other competitors were entering the globalmarket, and many of them were from overseas.

In an attempt to transform the company, in 1981,a senior executive of Harley-Davidson bought thecompany from AMF and turned the company around dramatically. Harley-Davidson emerged with newproducts and innovations along with a new commitment to quality, creating the dynasty Harley-Davidson has become today.

Harley-Davidson's success continued to grow as they received tariff relief from the International TradeCommission on 700cc motorcycles. Another event contributing to Davidson's renewed success was theformation of the Harley Owners Group (H.O.G.). This company sponsored club consisted of riders whotransformed motorcycling into a family-oriented social sport. It continues to be very successful with600,000 owners and 1,200 chapters worldwide.

Economic Indicators

Internationally, Harley-Davidson revenue has exceeded $816 million, which accounts for 18% of the netrevenue for motorcycles. The Harley-Davidson emblem is an international icon and the sound of V-twinengine is unmistakable. Harley-Davidson is the number one motorcycle manufacturer and is also thenumber one seller of heavyweight bikes in the U.S. They also sell a line of clothing and accessories aswell as make bikes under the Buell nameplate. Harley-Davidsonâ€™s attire has attitude and rightfullyso, there is no other motorcycle as classy as the â€œHarleyâ€ • . One Harley-Davidson tee-shirt sloganseems to capture the spirit by simply stating, â€œPut your ass on some classâ€• (Williams,2004,1).

Mission and Vision Statement

Analysis of Mission Statement

Harley Davidsonâ€™s Mission Statement states:

â€œWe fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to thegeneral public an expanding line of motorcycles, branded products, and services in selected marketsegments (David, 2003 p12).â€

The components of a mission statement should address; attention to customers, products and servicesthe company provides, technology, concerns for survival, growth and profitability, philosophy, self-concepts, public image, and concerns for employees . The customer component is addressed in Harley-Davidsonâ€™s mission statement and is identified as motorcyclists and the general public. The productsand services component is identified in their motorcycles and the Harley-Davidson brand products. Themission statement mentions the target market as riders, and those who may want to become a rider.The Philosophy component of Harley-Davidson's mission statement is fulfilling dreams though the

experience of riding a Harley. Harley Davidsonâ€™s mission statement does not mention the followingcomponents; concern for survival, growth and profitability, technology, public image or the concern foremployees.

Analysis of Vision Statement

According to the Davidson text, Harley Davidsonâ€™s Vision Statement states:

â€œHarley-Davidson is an action-oriented, international company, a leader in its commitment tocontinuously improve (its) mutually beneficial relationships with stakeholders (customers, suppliers,employees, shareholders, government, and society). Harley-Davidson believes the key to success is tobalance stakeholdersâ€™ interests through the empowerment of all employees to focus on value-addedactivities (David, 2003 p12).â€

Customers are addressed in the vision statement as stakeholders. Stakeholders include the customers,suppliers, employees, shareholders, government, and society. The concern for survival component isoutlined in the vision statement as the commitment by Harley-Davidson to continuously improve its

mutually beneficial relationship with stakeholders. The self-concept of the vision statement is expressedin the empowerment of all employees.



The following components are not mentioned specifically in Harley-Davidsonâ€™s vision statement;products and services, market, and technology, and philosophy. Most of these components areindirectly included the mission and vision statement as Harley-Davidson expresses their desire to bringquality products to the market it serves. The mission and vision statements articulate this overarchingphilosophy to remain number one.

Internal and External Audits

Internal and external auditing in a company is necessary in determining its strengths, weaknesses,opportunities and threats or its SWOT analysis. Included in the analysis is the internal factor evaluation(IFE), which specifically weighs the strengths and weaknesses, and the external factor evaluation (EFE),weighing the opportunities and threats. Each of these is an assessment of each SWOT element thataffects Harley-Davidsonâ€™s efforts to achieve its mission (See Appendix A). Harley-Davidsonâ€™scase study determined the following SWOT analysis:

Internal Factors

Strengths

Harley-Davidsonâ€™s internal strengths are their domestic and international market share, financialstatus, and product quality.

Harley Davidsonâ€™s market share, both domestic and international, consists mainly of men betweenthe ages of 40-50, who fall in upper income levels. Harley-Davidson is a national icon, and is also

known for their quality products and brand recognition. Another very important internal strength is thefact that Harley-Davidsonâ€™s financial status has had a steady increase in profit for over 18 years.

Weaknesses

One major weakness found within Harley-Davidson is the untapped target markets of both the femaleand African American riders, however, there are recent Harley-Davidson commercials airing that arebeginning to target these markets.

External Factors

Opportunities

The five opportunities evaluated in the EFE are an increased product line, loyal customer base,untapped markets, and brand recognition.

Harley-Davidson has several products available to their customers; however, they are undergoing newways to increase their product line to keep up with the demands of new products. According to the

2003 Annual Report, Harley-Davidson opened a new plant in York, PA called Softail, which was built tosupport production flexibility in order to maximize output.

Harley-Davidsonâ€™s customers are considered to be part of the Harley Owners Group or H.O.G. familyof riders. They have maintained their constant customer growth through word-of-mouth by advertisingthrough their current customer base. H.O.G. members are invited to attend Harley-Davidson annualevents specifically for their loyal customers, or H.O.G. members and serve two purposes: make thecurrent members feel important and to entice new customers of which are friends/family of currentmembers.

Men are the main focus group when selling motorcycles, because Harleyâ€™s are thought of as fast,heavy and dangerous machines. Women have placed themselves in a more equal role with men insports, and the need for adventure in the last few decades. Harley-Davidson has recently began takingthe opportunity in attracting the female market.

Harley-Davidson has brand recognition of being the most familiar name in the motorcycle retail industrytoday. They are continuing this effort by building the Harley-Davidson Museum in Detroit, MI in 2006.The income will benefit both the company and the town, with an estimated $12 million in state andlocal revenue (Harley-Davidson, 2004).

Threats

Harley-Davidson has four potential threats, which are; a sudden drop in demand, unexpected regulatorychanges, terrorism and its proven impact on retail sales, and H.O.Gâ€™s association with crime.

Many businesses come to a plateau in sales and Harley-Davidson will not be an exception. With Harley-Davidsonâ€™s history and stable financial projections, business should remain at a 7 percent to 9percent growth rate.

Harley Davidson is taking preventative measures to â€œavoid unexpected changes in the regulatoryenvironment for its productsâ€• (Harley-Davidson, 2004, p. 56) They are also taking into account theloss of operation time and capital expenditures due to any unforeseen circumstances such as terrorism.

History has proved however, that the 9/11 event did not impact sales or production.

Competitive Assessment/Strategies



Harley-Davidsonâ€™s top five competitors in the market of motorcycles are Honda, Yamaha, Polaris,Kawasaki, and Suzuki. Among the five competitors, Honda seems to be Harley-Davidsonâ€™s majorcompetitor. According to two interviews done at Harley-Davidson dealerships in Fairfax and Manassas,Harley-Davidson is not in all the markets that Honda is in, some of which include engine marine, ActiveTerrain Vehicles (ATV), and automobiles.

The strategy of Harley-Davidson is to continue to fuel the demand for their high quality products.

Harley-Davidson motorcycles fetch heavy premiums in both foreign and domestic markets. The moneyfor research and development to improve the Harley-Davidson design is being directed, once again,towards making Harley-Davidson among the best motorcycles in the world. According to, Senior Vice-Presidents Bleustein and Davidson, â€œHarley has managed to survive because of the passion peoplefeel for its product (Harley-Davidson, 2004) .â€

Marketing Review

Historical Data

As mentioned in the 2003 Form 10K, â€œHarley-Davidson believes that its higher growth rate wasdriven by increasing market share, the stock market and its associated wealth effect of the mid and late1990s and most recently, the excitement leading up to Harley-Davidsonâ€™s 100th Anniversaryâ€(Davidson, 2003, p12).

During 2003, Harley-Davidson shipped 291,147 motorcycle units, 27,494 more units than in 2002(Dicarlo, 2004). The increase in the number of motorcycle units shipped was due to the high demandfor Harley-Davidson 100th Anniversary edition motorcycles, and the new 2004 model motorcycles.

Harley-Davidsonâ€™s wholesale motorcycles are distributed through an independent worldwide dealernetwork. During 2003 growth in retail sales of Harley-Davidson, motorcycles outpaced otherheavyweight motorcycles (Davidson, 2003).

Customers continue to pay a premium over list price. Harley-Davidson motorcycles range from $5,500to $23,000 suggested list price. Not only are customers paying these prices, they are waiting up to sixmonths to take delivery of the motorcycle (Dicarlo, 2004). This demand and willingness to pay topdollar for their products indicates Harley-Davidsonâ€™s marketing strategies have been successful inthe years past.

Long-Term Strategy

Harley-Davidson, Inc., expects to grow its business by delivering a continuous stream of exciting newmotorcycles, related products, and services. Harley-Davidson has set new goals for the company to be

able to satisfy a yearly demand of 400,000 Harley-Davidson motorcycles in 2007 (Bolfert, 2002). According to Dicarlo, â€œHarley-Davidson believes that by offering innovative products and services,and by driving product gains in all facets of its business, the company is confident that they can deliveran earning growth rate in the mid-teens (Dicarlo, 2004 p45)â€ .

Harley-Davidson Merchandise and Lifestyle

Harley-Davidson's merchandising line has expanded beyond just motorcycles. Their merchandise lineincludes; clothing, tattoo patches, coffee mugs, belt buckles and infant wear to memorabilia. TodayHarley-Davidson promotes the Harley lifestyle experience through "designer store" dealerships. Thesestores feature customer lounges and rider meeting rooms with Harley-Davidson pinball machines,antique bikes, and rally videos. Stores are designed to enhance the owner's experience and highlightthe premium quality of Harley-Davidson products (Bolfert, 2002).

Advertising Method

Harley-Davidsonâ€™s catalogs, brochures, and annual reports compliment the designer stores. Includedin every annual report, is a Harley-Davidson motorcycle poster that is often displayed in stores. Harley-Davidsonâ€™s catalogs are designed by Carmichael Lynch Advertising in Minneapolis and areconsidered to be collector's items. According to Bolfert â€œcustomers rarely throw away these catalogs,instead they are likely to be found on coffee tables all over the world (Bolfert, 2002 p 23).â€ • As partof Harley-Davidson advertising strategy, Harley-Davidson never shows people on motorcycles; the ideais that â€œwith a Harley you can be anyone you want to beâ€ • (Bolfert, 2002 p 52).

The company has also licensed its logo to more than 100 manufacturers, which gives the companyever-present exposure. Harley-Davidson has also found a marketing niche in its H.O.G. clubs; the bikersin these clubs are considered to be rolling convoys of free advertising for the company.

Product/Brand Differentiation

The Harley-Davidson name alone takes you back a half-century when it comes to the other brands of motorcycles that are on the market today. Thatâ€™s because no other motorcycle on earth can do forthe rider what a Harley can do. What makes the Harley-Davidson product/brand different are some of



the following things; reliability, the V-twin engine, their line of motor clothes, custom parts/accessories,resale value, and brand image.

V-twin Engine. The classic Harley-Davidson engines are two-cylinder, V-twin engines with pistons placedat 45-degree angles. What this angling does, is provide more horsepower to the engine for the rider.The engine design, which is covered under several United States patents, produces the unique,signature throbbing sound of the Harley-Davidson(Harley-Davidson, 2004).

Motor Clothes. Harley-Davidson manufactures all Harley-Davidson brand motor clothes for men,women, and children. The customer can purchase anything from leather jackets, helmets,undergarments, boots, to hair accessories. Most Harley riders can be seen wearing at least once pieceof the long line of motor clothes that contribute to the Harley-Davidson brand image.

Parts/Accessories. Harley-Davidson parts and accessories are designed to work together for that end-to-end custom look. The owner can add as much or as little as they like, whenever they like. All thecustom accessories have that unique brilliant shine of chrome and the Harley-Davidson trademark stamped on each part. The design is a perfect fit.

Resale Value. Harley-Davidson has the highest resale value of any motorcycle. According to Motor CyclePrice Guide, when a person purchases a Harley-Davidson, after owning it for a few years, the resellvalue is very close to what was actually paid.(Harley-Davidson, 2004).

Brand Recognition. Many Harley-Davidson owners purchased their bikes for the brand name and theproven quality of the product(Harley-Davidson, 2004).

Yamaha, Honda, Kawasaki, Polaris, and Suzuki have tried to duplicate what Harley-Davidson has done,and some of them have succeeded in the areas of; style, motor clothes, and parts/accessories, but theyhave not had the same success Harley-Davidson has accomplished.

Management Assessment

Harley-Davidson is the parent company for many independent dealers under the Harley-Davidson MotorCompany. Also Buell Motorcycle company and Harley-Davidson Financial Services are separate entitiesunder the Harley-Davidson name. All three divisions under the parent company, together, make upHarley-Davidson. Harley Davidsonâ€™s management strategy has been contributory to their success aswell as their vision beyond U.S. boarders.

Financial Analysis

Harley-Davidson is in sound financial shape. Shareholders equity has been steadily increasing since

1999 as Harley-Davidson continues to hold the market share on U.S. heavyweight motorcycles andgood percentage of the international market(Ziemer, 2003).

Revenues

Harley-Davidsonâ€™s 2003 revenues increased over previous years and have held the largest marketshare in the U.S. for heavyweight motorcycles since 1986. International revenue was $816 million,which accounts for 18% of the net revenue of the Motorcycles segment. Changes in the product withinthe Company's motorcycle families generally resulted in higher revenue during 2003. Foreign currencyexchange rates also had a favorable effect on revenue. Approximately $60M in 2003 was a result of stronger foreign currencies, primarily in Europe and Japan. (Ziemer, 2003)

Profitability

The company experienced higher gross profit in 2003 than in previous years. This is not simply relatedto higher net revenue. While royalty revenues from licensing activities are relatively small, theprofitability of this business is relatively high. Licensing has proven to be an effective means for

enhancing the Company's image with consumers. In addition to the royalty revenues, the customtouring motorcycles are generally the most expensive vehicles in the market and the most profitable forthe company, also contributing to the higher gross profit in 2003. (Ziemer, 2003)

Finally, the Company's growth required several factory expansions which provided the opportunity tothoroughly modernize and improve productivity, quality and manufacturing margins(Ziemer, 2003).

Cash Flow and Liquidity

The companyâ€™s cash flow and liquidity continue to be solid as well. There was an increase of $531,521 in cash and cash equivalents from 2002 to 2003. Company continues to maintain positivecash flow. The company's main source of liquidity is cash from operating activities. They generated$935.6 M of cash from operating activities compared to $7775.6M (Add real number) in 2002(Ziemer,2003).

Harley-Davidsonâ€™s current ratio of 2.86 and their quick ratio of 2.64 show that the company is in a

good position to meet their short term obligations and do not have to rely on the sale of their inventoryto meet these obligations.



The company is also in a good position to cover their retirement plans. During 2003 and 2002 thecompany contributed $192M and $153.6M respectively to its defined benefit pension plans. Thesecontributions were made from cash on hand for the direct purpose of improving the funded status of the Company's pension plans and were in excess of the minimum required amounts for the plans. Cashbalances are maintained at levels adequate to meet near term plan expenses and benefit payments(Ziemer, 2003).

Success FactorsHarley-Davidson attributed their success to the ability to deliver new products to the market, attractnew customers, retain existing ones and expand capacity in a responsible way (Ziemer, 2003).

Recommendations

Harley-Davidson has a proven track record of success and holding on to the leading market share in theU.S. along with their sound financial position and strong brand recognition, it may appear as if theycanâ€™t improve much more than they already have. As with any business, the one thing Harley-Davidson can do wrong is be too confident in their success. They have to search for new markets andcontinuously improve their current products. They need to remain flexible and knowledge of theirinternal and external strengths and weaknesses. As with any company in the lead, competitors will seek to copy what they have or improve upon their technologies.

Harley-Davidsonâ€™s loyal market is aging and they have not been successful in tapping into thefemale riders or the African American riders. Recently Harley-Davidson commercials have begunappearing on certain networks targeted for these markets. The new commercials also feature thefemale rider. If Harley-Davidson is successful is attracting these new markets, they will also have toexpand their products to meet the demands of the new demographic.

Harley-Davidson appears to be poised to go after this market and if history repeats itself, Harley-Davidson will continue to stay in front on their strategies and continue to remain a force to be reckonedwith in this industry.

strategic case

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