Harley Davidson Group 2

Report
I. Current Situation
Dillon Shepley
A. Current Performance
Arose from near demise as a company in 1985 back to the top of the
motorcycle industry but are now being threatened by the current recession
and have seen a slowdown in sales and stock price growth in 2007.
• Opening a museum in 2008
• Facing a challenge of growing 7%-9%
I. Current Situation
Dillon Shepley
B. Strategic Posture
1. Mission
• We fulfill dreams inspired by the many roads of the world by
providing extraordinary motorcycles and customer experiences. We
fuel the passion for freedom in our customers to express their own
individuality.
• Design, manufacture, and sell premium motorcycles for the
heavyweight market
I. Current Situation
Dillon Shepley
B. Strategic Posture
2. Objectives
• Respond to market changes
• Recruit riders of the younger generations.
• Recruit women riders.
• Have more say in the design and planning process.
• Grow both their HOG and Buell Riders Adventure Group (BRAG)
organizations
• Utilize E-Commerce to increase sales
• Survive the recession
• Stay on top of the heavyweight motorcycle market.
• Increase safety awareness
I. Current Situation
Dillon Shepley
B. Strategic Posture
3. Strategies
• Acquired Buell Motorcycle Company in 1993.
• Acquired Eaglemark Financial services to produce revenues from customer
credit.
• Internal makeover of the company
• Use technology to cut back on communication times and administrative
trivia.
• Introduce bikes that appeal to younger generations and international
markets.
• Introduced a new beginner rider’s course aimed at the first time Harley
owner and rider.
• Introduced 17 year old Jennifer Snyder as the newest member of the Harley
Davidson racing team.
• Partnered with Jane magazine in 2005
• Held Harley Owners Group rallies (HOG)
I. Current Situation
B. Strategic Posture
4. Policies
•
•
•
•
•
•
Maintain the quality Harley-Davidson image.
Traditional styling
Design simplicity
Durability
Ease of service
Evolutionary change
Dillon Shepley
II. Strategic Managers
Jayson Brayall
A. Board of Directors
1. A substantial majority of the Directors on the Board (9 of 11) are
independent.
a)
•
•
•
•
•
•
Stock rose 23,000% since going public (1986-2006)
Core business - resonates w/ ‘motor heads & suits’
Graying of its prime sector (med age = 47)
Shifting & tuning focus – younger/sports world riders
World expansion = XX digit growth, weakening N. American Ops
Grow brand in Latin America, Asia (India/China) & EU.
II. Strategic Managers
Jayson Brayall
A. Board of Directors
1. A substantial majority of the Directors on the Board (9 of 11) are
independent.
b)
• Stock symbol = HOG
• Director(Non mgt) AN retainer of $100K, at least ½ to be paid in
common stock
• Encourages SR Mgmt to interact w/ the Directors
• Audit , HR, $Comp & Nominating & Corp Governance Cmtes =
Independents
• Furthering steps for compliance to enviro- emissions, noise & safety
stnds- which positions it better for EU and Japanese mkts
II. Strategic Managers
Jayson Brayall
A. Board of Directors
1. A substantial majority of the Directors on the Board (9 of 11) are
independent.
c)
•
•
•
•
•
•
•
•
•
Specialization & Experience (Core & Expansion)
Technical Engineering
Transportation & Logistics (SCM)
Dealer relationships
Recapitalization / Private to Public
M&A / Leveraged Buy-Outs / Corp Law
Financial
e-Busn, IT, TeleCom, Media
International Mkting & Merchandizing
II. Strategic Managers
Jayson Brayall
B. Top Management
• 50% of all Harley employees ride the brand
• CEO & Board’s direction to Mgmt intimately know customers
 design / offer great products
 operational excellence mfr’ing & Supply Chain Mgmt (SCM)
• Direction to strengthen credit division (including franchising (wholesale &
retail) income stream
• ‘Top 100 Global Brands’ and in Fortune’s ‘Most Admired Companies’ and
Forbes ‘Company of the Year’
• Mkt confidence buying back stock during a multi-year repurchase effort
valued over $200M.
II. Strategic Managers
Jayson Brayall
B. Top Management
• Mgmt Accused of stock manipulation forcing dealers to accept stock(book corp sales)
 US dealers, 80% sold Harley’s exclusively - burdened to shoulder
costs until sold more bikes
• 2004- retiring CEO made $40M w/ pay & stock options
• Several class action lawsuits filed (‘06) claiming Board & Mgmt fraud
• Main Production – York, PA- (‘07) full contract strike
Management Makeup
• Next to no info published regarding experience / backgrounds or
$compensation for the Mgmt team
• Harley’s By-Laws- Director & Mgmt Pay = cash & stocks; restricted,
deferred & nonqualified options
Exhibit #5A
Harley-Davidson_Exhibit 5A
(In thousands, except per-share amnts)
Income statement data:
Net revenue
Cost of goods sold
Gross profit
Financial services income
Financial services expense
Operating income from financial services
Selling, administrative and engineering expense
Income from operations
Investment income
Interest expense
Income before provision for income taxes
Provision for income taxes
Net income
Weighted-average common shares:
Basic
Diluted
Earnings per common share:(in dollars)
Basic
Diluted
Dividends paid per common share
Jayson Brayall
2008
2007
5,594,307
3,663,488
1,930,819
376,970
294,205
82,765
984,560
1,029,024
9,495
4,542
1,033,977
379,259
654,718
5,726,848
3,612,748
2,114,100
416,196
204,027
212,169
900,708
1,425,561
22,258
0
1,447,819
513,976
933,843
234,225
234,477
2.80
2.79
1.29
1.29
249,205
249,882
3.75
3.74
1.06
1.06
Exhibit #5B
Harley-Davidson_Exhibit 5B
(In thousands, except per-share amnts)
Balance sheet data:
Jayson Brayall
2008
2007
2006
Working capital
2,774,124
1,562,235
1,954,956
Finance receivables held for sale
2,443,965
781,280
547,106
Finance receivables held for investment, net
2,195,563
2,420,327
2,280,217
Total assets
7,828,625
5,656,606
5,532,150
Current debt
1,738,649
1,119,955
832,491
Long-term debt
2,176,238
980,000
870,000
Total debt
3,914,887
2,099,955
1,702,491
Shareholder equity
Number of shareholders of record
2,115,603
89,298
2,375,491
90,748
2,756,737
88,995
Exhibit #5C
Jayson Brayall
Harley-Davidson_Exhibit 5C
Assets, Depreciation & Capital Expenditures
Yr Ending Dec 31 (Ammount In thousands)
Motorcycles
& Related
Products
Finacial
Services
2007 Identifiable Assets
Depreciation and Amortization
Net Capital Expenditures
1,804,202 3,447,075
197,655
6,517
232,139
9,974
2006 Identifiable Assets
Depreciation and Amortization
Net Capital Expenditures
1,683,724 2,951,896
205,954
7,815
209,055
10,547
2005 Identifiable Assets
Depreciation and Amortization
Net Capital Expenditures
2,845,802 2,363,235
198,833
6,872
188,078
10,311
III. External Environment
Jeff Austin
A. Natural Physical Environment: Sustainability Issues
•
•
Harley has been very wary of raw material usage and purchase recently.
The biggest concern for Harley when considering environmental issues will
be seasonal changes.
B. Societal Environment
1. Economic
•
•
•
•
•
The current recession will be a continual threat (T)
Expansion into China (O)
Growth in target rider market (O)
Restructuring cost could exceed $110 million (T)
Many wholesaler and retailer compete to carry the Harley name (O)
III. External Environment
Jeff Austin
B. Societal Environment
2. Technological
• Research and development of new motorcycles to appeal to different rider
groups (O)
• Development of faster, sleeker motorcycles to appeal to younger market (O)
• Redesigned manufacturing process geared toward cost reduction and
flexibility to market changes (O)
• R&D bring professional and employees together to consider redesign and
product creation (O)
• R&D spent over $163 million (T)
• Internet sales available to public market (O)
III. External Environment
Jeff Austin
B. Societal Environment
3. Political/Legal
• Regulations concerned with air, water, and noise pollution (T)
• Product recall to ensure consumer safety (T)
• Must rely on independent dealers for sales (T)
4. Socio Cultural
•
•
•
•
•
Restructuring will close numerous plants down (T)(O)
Reaching out to younger generation and female riders (O)
Offer for new riders to participate in Rider’s Edge program (O)
New product offerings for non-riding public (O)
Sponsorship of local events and races (O)
III. External Environment
Jeff Austin
C. Task Environment
• Threat of new entrants – Low - Harley has the history to repel any new
production or competitor
• Bargaining powers of buyers – Medium – They are not the only motorcycle
dealer, one bad experience from a consumer may send them looking toward
Honda or Kawasaki.
• Threat of substitute products or service – Low – No imitators known at this
time
• Bargaining power of suppliers – Medium
• Rivalry among competing firms – High – Previously mentioned competitors
jockey for market groups targeted by Harley
• Power of unions, government, special interest groups – Low
III. External Environment
Jeff Austin
D. Summary of External Factors
External
Factors
Weight
Ratin
g
Weighted Comments
Score
Threats
Opportunities
Current recession
0.15
4.3
0.645
Huge opportunity in
expanding
westernized market
Expansion into China
Marketing to
different rider
market
Redesign of
manufactoring
process
New product
offerings
Product
development
0.2
4.2
Regulations
0.84
Chance to sell to
younger generation
and females
0.1
3
Restructuring of
operations
0.05
0.05
2.8
2.7
0.14
0.135
0.05
0.15
2.2
3.3
3
Air,emissions, and
noise pollution a
factor
may lose local
vendors/stakeholde
rs
0.3
Eliminates
unnecassary plants
0.05
sales could be
affected due to lack
of finances
R&D expenses
0.11
0.165
0.45
0.05
clothing lines are big
sellers
Product recall
sportier bikes attract
different markets
Independent
dealers
0.1
Totals
1
0.05
3.3
3.7
2.6
0.165
0.185
0.26
3.395
will extreme R&D
expenses
jeopardize revenue
could
blemish
public image
may affect pricing
and sales income
IV. Internal Environment
Jeff Taylor
A. Corporate Structure
• Harley-Davidson has an 11 member Board of Directors consisting of 9 nonemployee and 2 employee members. They serve in three-year staggered terms.
• The president and CEO, James C. Ziemer has set three constants for success that
he expects his employees to follow closely.
• There is no information provided describing the decision making process or the
timeline for major decisions to be made.
B. Corporate Culture
• Management pushes the employees to see what the customers see so they make
the employees go through a dealer to purchase their bikes if they buy them. 50%
of the employees ride Harleys, so this accounts for a great deal of training.
• The employees are offered opportunities to obtain union representation to make
sure they are taken care of for their hard work.
• The CEO implements 3 main objectives for success: Passion for the business,
sense of purpose, and operational excellence.
IV. Internal Environment
Jeff Taylor
C. Corporate Resources
1. Marketing
• Most marketing efforts are divided between dealer promotions, customer
events, magazine and mail advertising, public relations, cooperative programs
with dealers, and national television ads.
• Harley-Davidson stays involved with all major motorcycle consumer shows
and rallies, and also sponsors racing activities and different promotional events.
2. Finance
• Since Harley went public, its shares have risen over 23,000%. As of February
2008, there are over 90,000 shareholders of Harley-Davidson common stock.
• Due to the down economy in 2007, the company experienced their first
declines in over 20 years. Motorcycle revenue dropped 1.27% and total revenue
fell 0.69%. The biggest decline during this time was a 10.74% drop in operating
income.
• Between 2003 and 2006, net income rose grew by over 30%.
IV. Internal Environment
Jeff Taylor
C. Corporate Resources
3. Research and Development
• Harley strongly believes that research and development is a factor in keeping
them in the front of the market for custom and touring motorcycles, and ready to
develop products for the performance segment.
• They have a Product Development Center (PDC) that brings employees from
styling, purchasing, and manufacturing together with regulatory professionals,
and supplier representatives to create a well rounded process development team.
• Over the span of 2005 to 2007, research and development expenses averaged
over $180.5 million a year.
IV. Internal Environment
Jeff Taylor
C. Corporate Resources
4. Operations and Logistics
• Research and development leading to the company entering the market for
both female and younger riders helped them stay at the head of the motorcycling
industry.
• Harley sells its products at wholesale to a group of around 684 independentlyowned full-service Harley-Davidson dealerships.
5. Human Resources Management
• The relationships with unions and employees are typically very good.
• As of the end of 2007, there are 9,000 employees working for the company.
The majority of these employees are unionized and have representation from
either the Paper Allied-Industrial Chemical and Energy Workers International
Union, or the International Association of Machinist and Aerospace Workers.
IV. Internal Environment
Jeff Taylor
C. Corporate Resources
6. Information Technology
• IT systems are not mentioned in this case.
• Garry Berryman, an intense procurement expert, brought Harley’s top
suppliers into the design and planning process because he felt that new
technology and the Internet would make it very easy to form bonds this way.
Exhibit #2
Jeff Taylor
Table 5-2
Internal Factor Analysis Summary
Internal Factors
Weight
Rating
Weighted Score
Comments
Strengths:
Employee unions
Male and female customers of
all ages
Rider training and safety
programs
Foreign operations
Harley Owners Group
(H.O.G.)
0.05
3
0.15
Employee representation
0.2
4.5
0.9
Broad customer base
0.1
0.15
4
4.2
0.4
0.63
0.15
3.9
0.59
Offered by Harley
Quickly growing
Largest motorcycle club
on Earth
Weaknesses:
Image of who rides Harleys
Performance market
0.15
0.05
4.2
1.2
0.63
0.06
Expensive
0.1
3.1
0.31
Advertising
0.05
1.9
0.1
Total scores
1
3.77
Negative stigma
assosiated with brand
Not involved enough
No options for lowermiddle class
Don't reach put to
potential riders
V. Analysis of Strategic Factors
A. Situational Analysis (SWOT)
Benjamin Howard
1. Strengths
• Net income of 2003 was $760mn, its more than 30% as compared to the
previous year.
• The standard and performance segments of Harley Davidson make up 70%
of the European heavy weight motorcycle market
• Harley-Davidson operates in two segments: Harley-Davidson motorcycles &
related products and HDFS (Harley-Davidson Financial Services).
• Harley-Davidson is the only major American heavyweight motorcycle
manufacturer.
• Strong brand name.
• The HOG (Harley Owners Group), which have a 7,50,000 members world
wide is the industry’s largest company sponsored motorcycle enthusiast
organization.
• Buell Riders Adventure Group (BRAG) was also formed recent
• Customization of the bikes, this is Harley-Davidson’s major revenue maker.
• Harley-Davidson have a good marketing division and its divided as dealer
promotions, customer events, magazine and direct-mail advertising, and public
relations.
V. Analysis of Strategic Factors
Benjamin Howard
A. Situational Analysis (SWOT)
2. Weaknesses
• High price
• Harley-Davidson has problems in gaining more market share in some
European countries (That’s one of the main markets for Heavyweight
motorcycles outside U.S).
• They didn’t yet start its sales in India, one of the biggest markets.
• Required production is not met, analyzing the future of Heavyweight
motorcycle market
V. Analysis of Strategic Factors
Benjamin Howard
A. Situational Analysis (SWOT)
3. Opportunities
• The European demand for Harley Davidson is the highest in the international
market and represents the single largest motorcycle market in the world.
• Women and younger riders are increasing becoming interested in bikes
• The international heavy weight market is growing and is now larger than the
U. S. heavyweight market
• Market share increasing in Europe and Asia for the last two years
• Increasing demand in US markets for bikes
• Customers value quality parts
V. Analysis of Strategic Factors
Benjamin Howard
A. Situational Analysis (SWOT)
3. Threats
• Harleys ongoing capacity restraints caused a shortage supply and a loss in
domestic market share in recent years
• Harleys average buying age is 42 years old and increasing
• The European Union’s motorcycles noise standards are more stringent
than those of Environmental Protection Agencies in the U.S and increased
environmental stand
• Some competitors of Harley Davidson have larger financial and marketing
resources and they are more diversified
• Environmental protection laws
• Buell division needs to continue to produce a quality motorcycle under
Harley’s brand name.
V. Analysis of Strategic Factors
Benjamin Howard
B. Review of Current Mission and Objectives
Mission Statement
“We fulfill dreams through the experiences of motorcycling, by providing to
motorcyclists and to the general public an expanding line of motorcycles,
branded products and services in selected market segments”
Objective
To be branded as the best motorcycle in the world.
Exhibit #4
Liquidity Ratio
Current
(Current Assets/Current
Liabilities)
Quick
(current Assets-inventory/current
liabilities)
Leverage Ratio
Debt to Total Assets
(Total Debt/Total Assets)
Debt To Equity
(Total Debt/Total Assets)
Activity Ratios
Inventory Turnover-sales
(Net Sales/Inventory)
Average collection (days)
(Inventory/COGS divided by 365)
Benjamin Howard
2008
1.3
Fixed Asset Turnover
(Sales/Fixed Asset)
Total Asset Turnover
(sales/total asset)
3.77%
1.87%
0.401
Profitability Ratios
Gross Profit Margin
(Sales-COGS/Net Sales)
42.30%
73%
8.74%
55
51.7%
Net Operating Margin
(Net Profit After taxes/Net Sales)
10.70%
Profit Margin on Sales
1-(COGS/Sales)
35.08%
Return on Total Assets
(Net Profit After Taxes/Total
Assets)
14.27%
Return on Equity
(Net Profit After
taxes/Shareholder’s equity)
24.92%
VI. Strategic Alternatives
Jeff Austin
A. Strategic Alternatives
•
•
•
Market development
Marketing strategy
Product development
Alternatives and Pros and Cons
•
•
•
Operations strategy (This is a win lose situation for all involved)
Purchasing strategy needs to be considered when selling and using raw
materials.
Logistics strategy can also be seen when discussing the consolidation of plants
and distributors.
VI. Recommended Strategy
B. Recommended Strategy
Benjamin Howard
• Design to continuously improve product quality, increase productivity,
reduce costs and increase flexibility to respond to changes in the marketplace
• This market naturally wants something different from what the older
generation rode. They are looking for more cool and sleek sport bikes
• The Company continues to establish and reinforce long-term, mutually
beneficial relationships with its suppliers. Through these collaborative
relationships, the Company gains access to technical and commercial resources
for application directly to product design, development and manufacturing
initiatives
• The Company must continue to be successful in promoting motorcycling to
customers new to the sport of motorcycling including women, younger riders
and more ethnically diverse riders
• Harley has adopted several new marketing objectives to target the younger
market with its new product line: expand its current market, diversify its
product line, and modify its marketing mix to target a younger demographic
VII. Implementation
Jayson Brayall
• Old facilities –v- efficient Asian competitor
• Optimize production facilities & SCM
• Strikes & reinventing labor interactions
• Graying of its prime UW sector (med age = 47)
• Retuning focus – young/sports riders- +up
• World expansion = XX dig growth, weak N. American Ops- Grow brand in
Latin America, Asia (India/China) & EU
VIII. Evaluation and Control
Jeff Taylor
• Sales information is tracked to the specific dealer where the product was sold.
Harley is able to record the age, gender, and even the household income of their
buyers after most purchases.
• The company identifies its strengths, weaknesses, opportunities and threats
by carefully evaluating their customer feedback, monitoring the competition,
and using an extensive research and development group.
• Devising a system to suggest the most prominent locations for dealerships
based on previously gathered information would be an effective way for Harley
Davidson to position their company most efficiently.

similar documents