STRATEGIC MANAGEMENT

CASE ANALYSIS

CASE: HARLEY DAVIDSON, Inc. -2004

By
RICHARD.A.COX
FRANCIS MARION UNIVERSITY

Submitted by,
HARI PRAKASH.N.V
 Harley Davidson, Inc

Mission Statement says:

“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”

Vision Statement says:

“Harley-Davidson is an action-oriented, international company, a leader

in its commitment to continuously improve [its] mutually beneficial
relationships with stakeholders (customers, suppliers, employees,
shareholders, Government, and society). Harley-Davidson believes the
key to success is to balance stakeholders’ interests through the
empowerment of all employees to focus on value-added activities.
MISSION analysis

COMPONENTS YES / NO
CUSTOMERS YES
PRODUCTS & SERVICES YES
MARKETS YES
CONCERN FOR SURVIVAL YES
TECHNOLOGY NO
PHILOSOPHY YES
SELF CONCEPT YES
CONCERN FOR PUBLIC IMAGE YES
CONCERN FOR EMPLOYEES NO
MISSION STATEMENT EVALUATION MATRIX

PROPOSED MISSION
To be branded as the best motorcycle available in the world.

PROPOSED VISION
The best quality motorcycle, motorcycle products and financial
services will be provided world wide is the commitment of Harley-Davidson.
Customer satisfaction is our motto and the Harley-Davidson customers can experience
the taste of reality of motorcycle dreams by relaying their satisfaction on us. Harley-
Davidson is dedicated to use the advanced technology to produce the most superior
motorcycle in domestic and international markets. Stay competitive and continue
growth worldwide remain profitable and survive is our philosophy. Employees of
Harley-Davidson are the foundation of the company and they are the driving force
behind the Harley-Davidson name. The total team effort of Harley-Davidson
employees is devoted to fulfilling dreams of customers and we believe that there is not
a motorcycle riding experience like a Harley-Davidson’s. Excellence is our push
though our Harley-Davidson bar and shield logo that says superior quality. Honesty
and customer loyalty and these morals are the heartbeat of Harley-Davidson
organization. Harley-Davidson do our part in supporting all environmental laws in
 every country we do business. Determination and commitment is the place where
Harley-Davidson intends to stay.
.
EXTERNAL ANALYSIS
PESTLE

• Harley-Davidson is one of the most admired and recognized

companies in the world today.
• Academy of Motorcycling for those interested in learning to ride a
motorcycle.
• “Riders-Edge” the motorcycling academy of Harley-Davidson
introduced more than 1000 aspiring motorcyclists to the sport in
2000.
• Average purchaser of a U.S Harley-Davidson motorcycle is a
married male in his mid-forties
• Average purchasers of a U.S Harley-Davidson have a household
income of $78,600.
• Over two thirds of the sales of Harley-Davidson motorcycles are
to buyers with at least one year of education beyond high school.
• 30% of the Harley-Davidson buyers have college degrees.
• Only about 9% of Harley-Davidson U.S retail motorcycles are to
women.
• Confidence in economy is directly proportional to the purchasing
of consumer items.
• Repeat business is strong as about 42% of motorcycle purchasers
have owned a Harley-Davidson previously.
• U.S Government and People are considering Harley-Davidson as
an American icon.
• Opportunities in emerging economies [India, China] but uncertain
operating situations.
• A new assembly facility opens in Manaus, Brazil, the first
operations outside of the U.S, reduces taxes, make them more
affordable to a larger group of Brazilian customers.
• Harley-Davidson is one of the main manufacturer and user of V-
ENGINE configuration.
• Harley-Davidson’s have a wide variety of products according to
Standard, Performance, Touring & custom.
• Harley-Davidson is facing some legal problems in Asian countries,
in India there is 60% tariff and various other taxes will cause the
price of the bike to double.
• Noise pollution and some emission standards of Harley-Davidson
bike is not up to the level of some countries across the globe.
Five Forces

 Internal Rivalry.
• Four major competitors are mainly concentrated on these
heavyweight motorcycle segments: in addition to Harley-
Davidson the other three are Yamaha, Suzuki, Honda all are
Japanese companies.
• Some of the major competitors of Harley-Davidson have larger
financial and marketing resources and are more diversified
(Example: Yamaha, half of its revenue is only from motorcycles).
• Polaris (American snowmobile/ATV manufacturer) producer of
“Victory” motorcycles priced its motorcycles below the Harley-
Davidson motorcycles.
• Strategic alliance between Suzuki and Kawazaki in the areas of
product development, design, engineering, and manufacturing of
motorcycles, this alliance strengthened both companies’ global
motorcycle businesses.
• Honda, the main competitor of Harley-Davidson in U.S eat up
some market share of Harley-Davidson.
 Potential entrants
• Entry barrier is very high is this segment, because this segment
needs a lot of capital investment and the industry is on a
maturity stage, so that there is only four main competitors.
• The economies of scale are low in this segment, which is the
reason why there are only four major players.
• There is some small scale producers, who are making these
custom made motor cycles but the amount of their production is
not at all a threat for Harley-Davidson, and they are increasing
the interest of motorcycles among the general public.
 Substitute products
 • Harley-Davidson motorcycles are a luxury vehicle, so that there is
only a few close substitutes for heavy weight motorcycles that
could seriously affect the market.
• Passenger cars, sports bikes, scooter bikes are the main
substitutes of Harley-Davidson motorcycles.
• The people who are thinking of buying a heavy weight motorcycle
are not seriously considering one of these options, scooter, sports
bike.
• In India Enfield can pose as a small substitute.
 Power of suppliers
• Steel, basic electrical equipments and shipping of final
motorcycles are the main things Harley-Davidson seeks from
suppliers.
• Harley-Davidson has a wide span of suppliers, so that if one
supplier attempted to increase the price, they can easily switch
to the alternate suppliers without any problem in production..

 Power of Customers
• Consumers of Harley-Davidson motorcycles are individual
customers, so that they can’t seriously affect Harley’s financial
position.
• The numbers of dealers around the globe are also less and they
are also dependent to the individual customers, that can’t affect
Harley-Davidson’s financial position.

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
THREAT
 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.
 EFE MATRIX
Weighted
Key external factors Weight Rating score
OPPORTUNITIES
The European demand for Harley Davidson is the highest
in the international market and represents the single
largest motorcycle market in the world 0.15 4 0.6

The international heavy weight market is growing and is

now larger than the U. S. heavyweight market 0.15 4 0.6
Women and younger riders are increasing becoming
interested in bikes 0.1 3 0.3
Market share increasing in Europe and Asia for the last two
years 0.1 3 0.3
Increasing demand in US markets for bikes 0.1 2 0.2
Customers value quality parts 0.025 1 0.025
THREAT
Harleys ongoing capacity restraints caused a shortage
supply and a loss in domestic market share in recent
years 0.15 4 0.6

Harleys average buying age is 42 years old and increasing 0.1 3 0.3

The European Union’s motorcycles noise standards are

more stringent than those of Environmental Protection
Agencies in the U.S and increased environmental stand 0.025 3 0.075

Some competitors of Harley Davidson have larger financial

and marketing resources and they are more diversified 0.025 2 0.05
Environmental protection laws 0.025 4 0.1
Buell division needs to continue to produce a quality
motorcycle under Harley’s brand name 0.05 1 0.05
TOTAL 1 3.2
 CPM
HARLEY HONDA YAMAHA
CRITICAL
SUCCESS Weighted Weighted Weighted
FACTORS Weight Rating Score Weight Rating Score Weight Rating Score
Advertising 0.15 4 0.6 0.2 3 0.6 0.15 4 0.6
Product Quality 0.15 4 0.6 0.05 3 0.15 0.025 3 0.075
Price
Competitivenes
s 0.1 1 0.1 0.15 3 0.45 0.25 3 0.75
Management 0.025 3 0.075 0.03 4 0.12 0.05 2 0.1
Financial
Position 0.1 2 0.2 0.14 4 0.56 0.335 3 1.005
Customer
Loyalty 0.15 4 0.6 0.06 2 0.12 0.15 2 0.3
Global
Expansion 0.025 3 0.075 0.05 4 0.2 0.02 3 0.06

Market Share 0.3 2 0.6 0.32 3 0.96 0.02 2 0.04

TOTAL 1 2.85 1 3.16 1 2.93
INTERNAL ANALYSIS
FINANCIAL RATIOS

LIQUIDITY RATIOS

Current Ratio = Current Assets / Current Liabilities

= 2729/956
= 2.85

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

=(2729-208)/956
= 2521/956 = 2.63

LEVERAGE RATIOS

Debt to Total Assets Ratio = Total Debt / Total Assets

=994/4923
=0.20

Debt to Equity Ratio = Total debt / Total stock holders equity

=994/2958 =0.34

Long Term Debt Equity Ratio = Long term Debt / Total stock holders
equity
=670/2958
= 0.23

Times Interest Earned Ratio = Profits before interests and taxes /

Total Interest charges
=1149/0
ACTIVITY RATIOS
Inventory Turnover = Sales / Inventory of finished goods
=4624/208
=22.23

Fixed Assets Turnover = Sales / Fixed Assets

=4624/2194
=2.10

Total Assets Turnover = Sales / Total Assets

=4624/4923 =0.93

Accounts Receivables Turnover = Annual Credit Sales / Accounts

receivable
=4624/1114
=4.15
Average Collection Period = Accounts Receivables / (Total credit
sales/365)
=1114/(4624/365)
=1114/12.66
=87.99
PROFITABILITY RATIOS

Gross Profit Margin = (Sales – COGS) / Sales

=(4624-3070)/4624
=1554/4624=0.34
Operating Profit Margin = EBIT / Sales
=1149/4624
=0.25

Net Profit Margin = Net Income / Sales

 =761/4624
= 0.16

Return on Total Assets ( ROA ) = Net Income / Total Assets

= 761 / 4923
= 0.15
Return on Equity ( ROE ) = Net income / Total Stock holders
equity = 761 / 2958
= 0.26
Earnings Per share (EPS) = Net income / Total stock holders
equity = 761 / 302
= 2.519
Price Earning ratio =Market price per share/Earning
per share
=39.11/2.519
=15.526
Growth ratio
Sales =Annual % growth in total sales
=(4624-4091)*100/4091=13.029
Net income =Annual % growth in profits
=(760-580)*100/580=31.034
STRENGTHS

 Net income of 2003 was $760mn, its more than 30% as

compared to the previous year 2002.
 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.
WEAKNESS
 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
IFE MATRIX
 WEIGHTED
KEY EXTERNAL FACTORS WEIGHT RATING SCORE
STRENGTHS
Net income of 2003 was $760mn, its more
than 30% as compared to the previous
year 2002 0.15 3 0.45
The standard and performance segments
of Harley Davidson make up 70% of the
European heavy weight motorcycle market 0.09 3 0.27
Harley-Davidson operates in two segments:
Harley-Davidson motorcycles & related
products and HDFS (Harley-Davidson
Financial Services) 0.025 4 0.1
Harley-Davidson is the only major
American heavyweight motorcycle
manufacturer 0.1 4 0.4
Strong brand name 0.15 4 0.6
The HOG (Harley Owners Group), which
have a 7,50,000 members world wide is
the industry’s largest company sponsored
motorcycle enthusiast organization 0.05 2 0.1

Buell Riders Adventure Group (BRAG) was

also formed recent 0.025 2 0.05
Customization of the bikes, this is Harley-
Davidson’s major revenue maker 0.025 3 0.075
Harley-Davidson have a good marketing
division and its divided as dealer
promotions, customer events, magazine
and direct-mail advertising, and public
relations 0.025 2 0.05
WEAKNESS
High price 0.15 2 0.3
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). 0.06 3 0.18
They didn’t yet start its sales in India, one
of the biggest markets 0.1 3 0.3
Required production is not met, analyzing
the future of Heavyweight motorcycle
market 0.05 4 0.2
TOTAL 1 3.075
 SWOT matrix

Opportunity Threat
SO Strategy: ST Strategy

 EXPAND PRODUCTION TO  INCREASE STRONG BRAND

EUROPE NAME
 EXPAND PRODUCTION TO  INCREASE MARKET TO
Strength ASIA YOUNGER CUSTOMER

WO Strategy WT Strategy

 IMPROVE EMPLOYEE
RELATIONSHIP
Weakness
 GRAND STRATEGY MATRIX

RAPID MARKET GROWTH

STRATEGY: MARKET DEVELOPMENT, MARKET PENETRATION,

PRODUCT DEVELOPMENT, HORIZONTAL INTEGRATION,
DIVESTITURE, LIQUIDATION.

SPACE Matrix

Environmental
Financial Strength (FS) Stability (ES)
Return on Investment 2 Technological changes -2
Leverage 3 Rate of Inflation -3
Liquidity 4 Demand variability -6
2 Price range of
Working Capital competing products -2
5 Barriers to entry into
Cash Flow market -6
Inventory Turnover 3 Competitive pressure -4
3 Ease of exit from
Earnings per Share market -3
Price Earnings Ratio 2 Price elasticity of -2
 demand
Risk involved in
business -2
Total 24 Total -30
Industry Strength
Competitive Advantage (CA) (IS)
Market share -1 Growth potential 3
Product quality -1 Financial stability 3
-3 Technological know
Product life cycle how 5
Customer Loyality -1 Resource utilization 4
-4 Ease of entry into
Competition's capacity utilization market 6
-1 Productivity, capacity
Technological know-how utilization 4
Control over suppliers & -2
distributors
Total -13 Total 25
Average value for FS = 3
Average value for CA = -1.85
Average value for IS = 4.17
Average value for ES = -3.33

Point on X axis = (-1.85+4.17)/2 = 1.16

Point on Y axis = (3-3.33)/2 = -0.165

Strategies:

STRATEGY: BACKWARD INTEGRATION, FORWARD

INTEGRATION, HORIZONTAL INTEGRATION, MARKET
PENETRATION, MARKET DEVELOPMENT, PRODUCT
DEVELOPMENT.
I.E MATRIX
EFE: 3.2
IFE: 3.075

STRATEGY: BACKWARD INTEGRATION, FORWARD

INTEGRATION, HORIZONTAL INTEGRATION, MARKET
PENETRATION, MARKET DEVELOPMENT, PRODUCT
DEVELOPMENT
BCG MATRIX
RELATIVE MARKET SHARE: 48%
GROWTH RATE: 13.029

STRATEGY: MARKET PENETRATION, MARKET DEVELOPMENT,

PRODUCT DEVELOPMENT, DIVESTITURE.
 QSPM
J.V EUROPE J.V ASIA
STRENGTH WEIGHT AS TAS AS TAS
Net income of 2003 was $760mn, its more
than 30% as compared to the previous year
2002 0.075 3 0.225 3 0.225
The standard and performance segments of
Harley Davidson make up 70% of the
European heavy weight motorcycle market 0.045 3 0.135 2 0.09
Harley-Davidson operates in two segments:
Harley-Davidson motorcycles & related
products and HDFS (Harley-Davidson
Financial Services) 0.0125 4 0.05 3 0.0375
Harley-Davidson is the only major American
heavyweight motorcycle manufacturer 0.05 4 0.2 4 0.2

Strong brand name 0.075 4 0.3 2 0.15

The HOG (Harley Owners Group), which have
a 7,50,000 members world wide is the
industry’s largest company sponsored
motorcycle enthusiast organization 0.025 2 0.05 3 0.075
Buell Riders Adventure Group (BRAG) was
also formed recent 0.0125 2 0.025 4 0.05
Customization of the bikes, this is Harley-
Davidson’s major revenue maker 0.0125 3 0.0375 3 0.0375
Harley-Davidson have a good marketing
division and its divided as dealer promotions,
customer events, magazine and direct-mail
advertising, and public relations 0.0125 2 0.025 2 0.025
WEAKNESS 0
High price 0.075 2 0.15 2 0.15
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). 0.03 3 0.09 3 0.09
They didn’t yet start its sales in India, one of
the biggest markets 0.05 3 0.15 3 0.15
Required production is not met, analyzing
the future of Heavyweight motorcycle market 0.025 4 0.1 4 0.1
OPPORTUNITIES 0
The European demand for Harley Davidson is
the highest in the international market and
represents the single largest motorcycle
market in the world 0.075 4 0.3 2 0.15
The international heavy weight market is
growing and is now larger than the U. S.
heavyweight market 0.075 4 0.3 3 0.225
Women and younger riders are increasing
becoming interested in bikes 0.05 3 0.15 4 0.2
Market share increasing in Europe and Asia
for the last two years 0.025 3 0.075 4 0.1
Increasing demand in US markets for bikes 0.1 2 0.2 3 0.3
Customers value quality parts 0.0125 1 0.0125 2 0.025
THREAT
Harleys ongoing capacity restraints caused a
shortage supply and a loss in domestic
market share in recent years 0.075 4 0.3 3 0.225
Harleys average buying age is 42 years old
and increasing 0.025 3 0.075 2 0.05
The European Union’s motorcycles noise
standards are more stringent than those of
Environmental Protection Agencies in the U.S
and increased environmental stand 0.0125 3 0.0375 2 0.025
Some competitors of Harley Davidson have
larger financial and marketing resources and
they are more diversified 0.0125 2 0.025 3 0.0375
Environmental protection laws 0.0125 4 0.05 2 0.025
Buell division needs to continue to produce a
quality motorcycle under Harley’s brand
name 0.025 1 0.025 2 0.05
1 3.0875 2.7925
STRATEGY RECOMMENDATION & IMPLEMENTATION:
 MARKET PENETRATION
 Get some more market share from the existing market, like U.S,
U.K, and Japan etc through more marketing techniques like
advertising. Harley-Davidson has a good brand name so it’s easy
for them to eat up the competitor market share if they can
provide some more customer benefit.
 Competition is high in this segment mostly in U.S so market
penetration can be a good choice for the company.
 Expand the HOG (Harley Owners Group) to Asian countries, if the
company can provide the customer satisfaction that they are
providing to the U.S customers to the Asian customers they can
increase the sales.
 PRODUCT DEVELOPMENT
 Younger generation and female are now coming to this segment
so expand the motor cycle segments to younger generation and
females.
 In Europe they can increase or expand the Buell’s market share
by introducing new motorcycles.
 MARKET DEVELOPMENT
 Harley-Davidson can bring in their vehicle to Asian countries like
India and China, because these countries have a high population
and the market potential is also high.
 The cost to bring in the old vehicles (old product) to India is so
much difficult because there are so much environmental laws are
there which won’t allow that type of vehicles to come to India,
and its difficult that taxes and levis are high in India so starting
new plant in India can solve this problem. Negotiations with the
Government can solve these problems.
  DIVERSIFICATION
 Bring in new vehicles to new markets like India and China is a
good choice, but it’s too costly.
 Bringing new types of recreational vehicles is a best choice.

RECOMMENDATION
 Expand European and Asian market.
 Increase the sales of Buell sport bike and Harley-Davidson to
younger customers and females.
 Horizontal diversification: acquires or develops new products that
could appeal to its current customer groups even though those
new products may be technologically unrelated to the existing
product lines.
 Concentric diversification: Bring in new recreational vehicles.
EVALUATION
 REVIEW UNDERLYING BASES OF STRATEGY
 Once again prepare all the internal and external analysis (eg: EFE
& IFE)
 Compare the already prepared analysis with the one which will be
prepared after the new strategy implementation.
 MEASURING ORGANIZATION PREFERENCES
 Analyze all financial ratios (current and the future).
 If any advantage, then implement the new strategy, otherwise
continue with the present one.

 Reference:
 Strategic Management Concepts and Cases; Fred R. David, 10th & 12th Edition.

 www.harley-davidson.com
 www.google.com