Harley

Davidson Inc.
2008
Ahsan Khan
Roll No. 02
MBA - 3
rd
Semester
Case Study: Thriving Through Recession
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 success
story 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 J ust in
Time manufacturing strategy.

Encourage by the high market demand for the Harley Davidson bikes between the
two 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 acquired
one of the sports motorcycle company in 1993 which is name Buell Motorcycle
Company.

For attempting diversification of product other than motorcycle into recreational
vehicles 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 as
baby 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 J ames 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 in
this deep recession. How Harley Davidson does continues to grow at its past rate.
HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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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 implementing
technology.

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.


HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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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 with
European dealers.

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

Ground breaking of Harley Davidson museum in J une, 2006.

Current Performance of Harley Davidson
The performance of Harley Davidson is:
Motorcycles shipments were decline in 20016 their shipments are 3, 49,196 units
while 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.








HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

4

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




HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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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 high
profit margin.
Advertising through licensing agreements and cafes
Threats
Threat of substitute include motor vehicles and mopeds, scooters and
bicycles
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

HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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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 Corporation
Corporate 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
HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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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,
J apan and Canada
Earnings grew up from $417 million in 2001 to $960 million in 2005, growth was
fairly steady and strong
47.8% and 8.9% European markets shares during 2005
Research and Development
Research and development expenditure of $178.5 million, 170.7 million and 50.3
million 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
J ust in Time (J IT) manufacturing strategy
Statistical process control
Strong relations with vendors
Value added services also offered by Harley Davidson to their deals
HARLEY DAVIDSON [THRIVING THROUGH RECESSION]

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J oint venture with Porsche producing power train components, strategic alliance
with 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

R RE EC CO OM MM ME EN ND DA AT TI IO ON NS S

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 to
decrease again, just focus on the rendering cost.