Introduction

The purpose of this assignment is to decipher and understand the inner and outer working of Harley Davidson Motorcycles Company by using different tools and techniques used in class. By studying this company from all possible angles we could determine the future of the company and how it could cope in a so ever changing world. External and internal analysis will be used with a wide range of tools to determine threats and opportunities that can affect this company.

The Harley Davidson Company is well known for their V-twin engine cruising motorbikes. All the needed information about this company is in the case study papers. Harley Davidson is a major market leader in the USA for cruising bikes and also it offers a lifestyle that other companies can’t replicate. With the advancement of mechanical and manufacturing technology and increasing competition, Harley faces a rough time to sail through. Mainly manufacturers from the Far East have targeted Harley for competition by bringing up their own version of cruisers in which they succeeded. They also came along with more advanced engine technology at a cheaper price tag and also by sheer volume compared to that Harley can output.

By using the tools to analyse the market situation, threats, opportunities and other variables a draw-up of Harley’s future can be achieved.

Vision:

Harley Davidson vision statement:

‘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’

www.harley-davidson.com

Harley Davidson’s vision expresses to be unique in every way with by standing by its roots and delivering superior motorcycles to the market with prosperity quality and character built in.

Mission:

Harley Davidson’s mission statement:

‘We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders’

www.harley-davidson.com

Harley Davidson has a objective and aim which is to provide its customer the ultimate riding joy and a global Harley Davidson community not only for the enthusiast and to attract more customers for more people to enjoy and share the pleasure of owning a Harley Davidson motorcycle

Internal Audit

Ashridge Model:

www.emeraldinsight.com

Purpose:

Harley Davidson to remain an iconic legendary heritage to American culture. To maintain prosperity and uniqueness of the Harley Davidson brand and the image it is

selling. To dominate the heavy motorcycle segment globally and make a statement of being one of the

oldest all American motorcycle producers and its authenticity to American culture. To produce quality motorcycles for customers to experience the ultimate riding experience. To build a global community of Harley Davidson riders not only for enthusiasts.

Values:

Being one of the oldest all American motorcycle producers in the world and its developed expertise and experience developed over a century.

Its loyalty to America as it served its part during the war eras for providing them motorcycles throughout and being the only sole American motorcycle to survive.

Its loyalty to customers. The Harley Davidson brand not only represents motorcycles but also a lifestyle and culture. The unique styling and character with Harley Davidson motor bikes setting trends for heavy

weight motorcycles. Developed a very good reputation very early stage compared to its competitors. During the

early 1900’s through racing to being the suppliers of motorcycles to the American army and police the brand is very strong and well known globally.

Strategy:

Globalization, dealerships worldwide. Harley Davidson’s involvement with its customers, The Harley Owners Group (HOG)

worldwide events held including rallies organised by Harley Davidson. Using and the well known brand as a tool to convince that it’s not only a bike it’s a lifestyle,

this can create an emotional attachment with the product as it is also used as a way of expressing yourself and your style.

The brand represents a tradition and authenticity to American cultures showing loyalty to its American roots works in their favour.

Harley Davidson also owns beull and mv agusta in order to capture the lighter weight sports bikes category.

Standards and Behaviours:

Since the buyout the company has seen many changes especially in the hr department they have developed a more non hierchial management approach which has led to better employee involvement and commitment.

Harley has been improving their products and technology and moved on from their old fashioned ways and technology in order to compete with its competitors.

Harley Davidson has also changed its initial thoughts about entering the lightweight motorcycle segment and has introduced new bikes to compete in this segment.

Harley Davidson has broadened its target audience with its new products.

The standards and behaviours of Harley Davidson is influenced by its values and purpose as it reflects upon Harleys own values from their website which includes encouraging intellectual curiosity, respect for individuals and fairness

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Value chain Evaluation

Harley Davidson have always been a market leader in the USA heavyweight cruising motorcycles but as they increased production capacity by introducing JIT systems in their plants, the competition was getting heavier with other Japanese manufacturers introducing rival models resembling to Harleys’. The competition was set to produce as much as 30 times heavyweight bikes including ones that looked alike in style, and also that came with more powerful and economic engines. H.D. has many of its parts bought from other suppliers and small manufacturers which account for a major part of manufacturing costs as they do not have strong bargaining power, this is also due to their philosophy of letting other companies thrive rather than making it in-house. How ever in the last decade Harley made some patent applications and has improved their engines by adding electronic injection and liquid cooling.

A major concern is their manufacturing and assembling plants including headquarters, are all far apart from each other and located though out the USA.

Most of its plants are located within the Wisconsin state but the others are in distant places. The two part fabrication plants are located hundreds of miles apart not to mention their wheel manufacturer which is located in Australia. The main problems this poses is transportation costs and time. However there is good infrastructure within the USA, and the parts would be transported on cargo lorries but this would take hours or even days before parts can arrive.

They have a Research and development centre in the same town as one of their power train production plants which is good as communication can be done in a fast way. What is not known is that if they are in the same industrial estate. Also their R&D didn’t have the advantage to pass on knowledge from other entities such as car manufacturing like some other competitors were doing. Although they did have this facility, they tend to stick to traditional design and technology which might have put off some potential customers. This slow laid back attitude towards R&D and adapting new technologies just led to two new types of engines decades apart while the likes of Honda could churn out new engine models nearly every year. Engines wasn’t the only technical department Harley was behind with, but also mechanisms such as gears, braking and suspension were primitive compared to those of BMW and others. In order to keep up and prolong the life of Harleys, they offered constant upgrades. In order to adapt to other markets such as the European, where roads are curvy, they had improve suspension and brakes in order to satisfy this spec.

Harley is a company that seems to be selling a lifestyle which only comes complete if the bike is bought and then you can finally belong to a family rather than just having a technically sound bike and then there is nothing after, just a bike without a soul. They offered the HOG, a group founded for Harley owners to arrange outings and events.

Also the company seems to be offering a range of merchandise that brings in some revenue, but probably isn’t that necessary as it is not like a souvenir shop. While their main market may be middle-aged men from the middle class, others are attracted by those motorcycles. However this target market is getting older and the company is not attracting younger audience. This led to the acquisition of Buell motorcycles which had sportier performance and therefore would seem more appealing to a younger market. Buell also had a group called BRAGG which was to offer the same experience as the HOG. So maybe by introducing the same styles they could keep the younger market till they buy a real Harley and this is how they can survive. The figures of sales show that Buell is increasing

shipments year on year. Also the MV Augusta, Italian super bike manufacturer, also purchased by H.D. was also more appealing to the younger generation. This was a good source of income as it was sold throughout Europe and it is the bike which appeals the most to this market.

Amongst other entities, Harley offers financial services so that people can buy bikes on finance but this proves to be difficult as not everyone can keep with payments. This posed problems with their cash flow and balance sheets.

Harley is more of a differentiator company that could also offer customised motorcycles. They included services such as Chrome Consulting, custom seats and custom paint jobs in order for the customer to have their dream motorbike come true. While they produced much lower volumes than the competition, and all parts were made manually. This meant that the price bas was widening and parts were costing more, which ended up being paid by customers when buying the end product.

During the management changes in mid 80’s, the dealerships were reformed in order to drastically improve customer service and availability in order to attract their desired target audience which wasn’t flowing in through their network’s doors.

Their approach to non-hierarchical management style and a better, less formal communication between managers and shop floor staff and suppliers was sparking up more enthusiasm thus increasing productivity.

Internal Factors Matrix

Internal Factors   Importance RatingWeighted Score Comments

Strengths:          

Strong/well known brand 0.15 4 0.6Strong can use to push Buell & MV

Global   0.15 4 0.6Needs to be stronger in some parts of the world

Good Experience in building motorcycles 0.05 3 0.15 Needs to advanceStrong loyal community of H.D. owners 0.05 2 0.1 Can stray its focusGood Corporate structure   0.1 2 0.2 Its a key issue to successGood Distribution   0.1 3 0.3 Mainly outsourcedWeakness:          Struggle to capture attention of their lightweight bikes 0.05 2 0.1

Hard to compete with its rivals products

Majority of their customers being 40+ 0.05 2 0.1 Narrow segmentMarketing   0.15 2 0.3 Wrong marketing approach

Engineering   0.15 3 0.45Hard to compete with its rivals engineering

Total     1   2.6  

5 4.5 4 3.5 3 2.5 2 1.5 1                 

The table illustrates where HD are positioned which is a differentiation company which is high priced and aimed at a broad scope of market however their customers are mainly higher earning 40+ years. HD does have a long tradition in the industry creative designs and strong marketing capabilities along with engineering capabilities which makes HD liable to compete as a differentiator. Being a differentiator carries certain risks such as competitors imitating therefore HD is always under threat with the market being saturated with HD lookalike imitations therefore HD always needs to look for ways of implementing distinctiveness into their products.

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2 powertrain production sites in America. 2 Motorcycle parts fabrication sites in America. 1 Fiberglass and plastic fabrication site in America. 1 Buell Assembly site in America. 1 Corporate Office in America. 1 Product development centre in America 1 Assembly plant for Brazilian market in Brazil 1 MV Agusta & Cagiva assembly site in Italy 1 MV Agusta & Cagiva warehouse in Italy 1 Motorcycle wheel production in Australia Over a 100 licensees for non motorcycle such as toys and souvenirs, Over a 1000 dealerships globally. Harley Davidson stores & cafe’s around America Various training & learning centres for staff.

Tangible Intangible Human

Cash: $594 million

Receivables for investment: $1.4 billion.

Property, plant, machinery: £1.1 billion

Buell and MV Agusta plants.

90 new patents 2001-2009

JIT and lean implementation into production & inventory.

Open communication non hierchal culture.

Real D scientific visualization for designs.

Advanced technology implemented into manufacturing processes such as vibration analysis and thermograph programs

HOG activities promoting brand.

9000 employees

Good employee involvement and encouragement culture.

Good healthcare benefits.

Employee training programs.

Using M.Porters Generic strategy table we can determine HD’s strategy.

The table illustrates where HD are positioned which is a differentiation company which is high priced and aimed at a broad scope of market however their customers are mainly higher earning 40+ years. HD does have a long tradition in the industry creative designs and strong marketing capabilities along with engineering capabilities which makes HD liable to compete as a differentiator. Being a differentiator carries certain risks such as competitors imitating therefore HD is always under threat with the market being saturated with HD lookalike imitations therefore HD always needs to look for ways of implementing distinctiveness into their products.

HD

Financial Analysis

The analysis below gives some understanding on the financial situation within the Harley Davidson Motor Company for period from 2006 to 2008. Both profit-loss summary and balance sheet will provide the figures.

This section will add more comments related to the profit loss table. The following points were identified within the table. This table represents the company’s sources of income and spending on a yearly basis. Also this gives a stable ground to analyse and even predict their future from their financial past by comparing every year.

1- There is a dramatic drop in sales, this could be due to the competition also the year 2008 was when the recession started and people had less disposable income to buy a product for leisure

2- From point 1, less and less motorcycle sales due to change in economic climate.

3- The parts and accessories sales suffered just a slight decrease but barely noticeable, people still need to repair their motorcycles (maintenance and replacements of failed components), and accessories in order for the customers to customise their bikes further and make the most out of it. All the sales from both of these categories are fused into one figure so no one is really sure which group is most popular.

4- General merchandise sales were up a staggering 10% in 2007 followed by a slight increase of nearly 3%in 2008. looks like people bought less bikes and preferred to get HD merchandise

5- The financial services just suffered a decrease of 1.3% over the period of those two years. Big increase in 2007 and a bigger decrease in 2008, when the economy began collapsing.

6- A total of 3.57% decrease in revenue between 2006 and 2008 due to factors stated above.

7- The costs of good soared by nearly 6% during this period. Harley was loosing sales meanwhile, and the prices of raw materials were getting up. Also the parts were fabricated and HD didn’t have a strong bargaining power with their suppliers. Increased manufacturing costs and also to consider transportation costs, within the US and from Australia.

8- With manufacturing costs up, dramatically decreased sales volume with a lowered revenue, their profit seems to spiral downwards

9- Year on year their profit margin seems to decrease alarmingly as well, a total of nearly 10% over the past 2 years. They are making less and less profit.

10- Engineering, admin and selling expenses are all summarised up into one figure but nothing is known what has been spent on each. But over all this overhead has increased considerably

(nearly 16%). Admin fees could have gone up as there was more paper work to do, probably they have restructured their distribution network and engineering costs could have soared.

11- Research and development is an important part of any company, as this can take their products further by implementing new technologies. This department could help to boost the sales up but there was a huge decrease in 2008 from 2007 where there was a small increase. This could suggest that they are not really interested in developing their products further, especially engines. Also probably they had decreased budget due to the lower sales volume.

12- As their sales volumes dropped drastically, they had to spend more on advertising their products, in order to reach more people so that they could pick up sales again.

13- The total costs of overheads has risen by 13%, an unnecessary increase while the revenue was lower than previous years

14- The operating profit decreased dramatically over the past 2 years, this is worrying, as shares in HD would have lowered in value. Not good for the shareholders.

15- Investments don’t return anything, they just lose money, a massive 82% from 2007, where stocks were at their highest and then crashed from there onwards

16- Revenues are falling drastically and year on year their net income decreases. A worrying prospect for stockholders. This is due to lower sales volume, higher manufacturing and over heads costs.

NB. The green highlights represent figures that contribute positively to the company and the red highlights represent figures that have a negative impact on the company.

Financial info and stock information too from

http://investor.harley-davidson.com/StatementsBalanceSheets.cfm

Balance Sheet (figures in millions of $)

 for 2008    

  Net Total  

Assets      

       

Current Assets      

Cash 594    

Accounts receivable 296    

Finance receivables for sale 2,444    

Finance receivables for investment 1,378    

Inventory 401    

Other Current Assets 265    

    5,378   1

       

Property, plant and equipment   1,094   2

Others   1,357   3

       

TOTAL     7,829

       

       

Liabilities and Stockholders' Equity      

       

Current Liabilities      

Accounts payable 865    

Short-term debt 1,739    

    2,604   4

       

Finance debt 2,176     5

Pension and postretirement benefits 758     6

Other long-term liabilities 175    

    3,109  

       

Total shareholders' equity   2,116   7

       

TOTAL     7,829

1- They have some money owed to them, and double the amount in cash, which is nearly a tenth of the total revenue.

2- HD has a total of nearly 3.34 million square feet of production and assembly shop floor surface area around the central north of the USA. They also have 3.7millions square feet of production and assembly lines in other parts of the world (outside the USA). Their corporate office is in Milwaukee, where the company was started. Also they have quite a big product development centre of around 400 000 sq ft.

3- Other unknown assets

4- They have loads of creditors that they owe money to, this could be due to the suppliers’ prices going up, transport costs, etc…

5- Too much debt from the financing service

6- Nearly $84,300 of benefits per employee, they have around 9,000 people working for HD and that number has not changed for some time. This also gives them higher morale and thus increasing productivity and quality of work.

7- The total pot for the shareholders.

Financial Review

The figures on the profit loss statement show that there is clearly a big drop in net income. The total revenue only dropped nearly 300 million but their net income dropped by a staggering 40% over those 2 years. The year 2007 was an all time high for HD as shown in the graph below. The stock prices were at their highest which meant they had a good financial year, before then their stock price was fluctuating and then in 2009, at the end of 2008, just like the figures show on the tables, the stock crashed and hit a rock bottom.

The lower sales volume year on year meant that their manufacturing costs went up; also they had less bargaining power with their suppliers. The recession hit in late 2008, meaning that less people had disposable income to be able to buy those kinds of bikes which were considered more as a leisure product. Also prices of steel went up considerably thus suppliers had to increase their prices. With increasing costs in overheads their profits were tumbling which then resulted in lower net income, thus the stock prices went crashing down. Which falling sales they started spending more money on advertising but far less on R&D, this was a panic time for them to try and get their bikes remarketed and to attract more people.

Also on the P/L table, the green highlights represent figures that contribute positively to the company and the red highlights represent figures that have a negative impact on the company.

There are 5 green points out of 15 highlighted issues between 2006 and 2007 while the period 2007-2008 shows only 2 green points and the rest are red. This visually shows how much decline there is in the company.

The worrying factor is that they have $2.6 Billion debt for 2008which accounts for nearly half of their revenue.

Recommendations

Improving Manufacturing Operations:

The first thing to do in order to cut costs, it would be better to have a central manufacturing site with assembly lines within the same area. This would mean that people could lose their jobs in the current manufacturing sites. But HD could help them with their move and even give them bonuses. Having a wheel manufacturer in the USA especially in the state of Wisconsin, would mean cutting shipping costs and saving a lot of time and close the plant in Australia. By having all those processes just meters away, would cut overall cost of the motorbikes, as there would be far less logistical problems involved (far less costs).

They should keep all the good pay packages for their employees as this boosts up their morale thus improving productivity and quality in their work.

Investment income:

As the figures show, they should definitely stop their investment activities as this poses a problem of loss.

In order to understand increase in costs and decrease in sales, the following points should be considered:

- breakdown of manufacturing operation, costs- investigate as of why suppliers increased costs (volume, bargaining power, steel price)- investigate why there is a high level of inventory- investigate where there are bottle necks in the processes that slows their production rates

down- why isn’t there more money spent in R&D

External Analysis:

Five Forces:

1. Internal Rivalry Harley Davidson is one of the most admired and recognized companies in the world but there

are four major competitors mainly concentrated on these heavyweight motorcycle segments: in addition to Harley Davidson the other three are Yamaha ,Suzuki Honda are Japanese companies.

Honda is the main competitor of Harley Davidson in lap up some market share of Harley Davidson.

Some of the major competitors of Harley Davidson have larger financial and marketing resources and are more diversified.

Strategic alliance between Suzuki and Kawasaki in the areas of product development, design, and manufacturing of motorcycle, engineering, and this alliance strengthen the global motorcycle business of both companies.

Rivals implicate the existing product of Harley Davidson and they are trying to lack behind existing product in automobile technologies (Honda and Yamaha)

Harley Davidson does not have many shares in European market.

2. Potential entrants: In this segment entry barrier is very high because it needs a lot of capital investment and the

industry is on maturity stage so that there are only four major competitors.

There is some small scale producers who are making these customers made motor cycle but the amount of their production is not a threat for Harley Davidson, and they are increasing the interest of motorcycles among the customers.

The economies of scale are low in this segment ,which is the reasons why there are only four major competitors.

3. Substitute Products: Harley Davidson are luxury vehicles so that there is only few close substitutes for heavy

weight motorcycles that could seriously affect the market. The customers who are thinking of buying a heavy weight motorcycle are not seriously

considering one of these options scooters, sports bike. In India Enfield can position as a small substitute. Passengers cars , sports bike scooter bikes are main the substitute of Harley Davidson. Honda, Suzuki ,Yamaha and Kawasaki are offering V twin Cruisers closely related to

Harleys, at lower prices with more advanced technologies.

4. Power of supplier:

Harley Davidson has a wide range of suppliers, In case one of the supplier attempted to increase the price, they can easily switch to the other suppliers without any problem in production.

Harley Davidson seeks main things from its supplier which are steel, basic electrical equipment and shipping of final motorcycles

In completion with Harley Japanese’s manufactures key advantage was the scale advantage deriving from vastly greater volume.

5. Power of Customers :

Consumers of Harley Davidson are individual customers so the financial position of Harley Davidson cannot be seriously affected.

The number of dealer worldwide are also less and there are also dependant to the individual customers , that cant affect Harley Davidson financial position.

Harley Davidson and its customer’s relations are very strong.

Pest Analysis

Political:

As Harley produces heavy weight motorcycles the market/industry it’s in is slightly narrowed by legislation in the U.S and Europe which requires users to have a full motorcycle license and relevant experience this automatically eliminates young riders between 16-18 and as far as insurance policies concern is that some models insurance companies simply won’t insure or will be relatively expensive for younger riders. Other legislations that Harley motorcycles may face with noise limit regulations in some areas of the world as Harleys are very noisy motorcycles not many people or the law tolerates it.

No political barriers are enforced with trade with US companies however countries in the middleast such as Afghanistan and Iraq may not be able to trade as as US product may not appeal to them due to their war history with the US.

Future legislations which may affect Harley motorcycles may be if new emission limit legislations are enforced and Harley being a heavyweight motorcycle may affect on some models.

Transport costs are also at a soar which may have an affect on sales.

Economical:

In many places in the world fuel prices are very high compared to US fuel rates and as fuel rates are always on the rise it may have an effect when buyers considering heavyweight motorcycles.

The global rescession has had an impact on sales of motorcycles as Harleys main customer audience is focused on 40+ with a fairly high income with peoples savings and jobs being in jeopardy it had an effect on sales. Also as inflation soared currency drop and cost of materials goes therefore increase in H.D overheads also increasing depreciation levels to rise in assets.

Social:

Motorcycles that Harley offers may be regarded as “old man” motorcycles due to their lack in performance and speed generally being built for cruising this segment of the market does not attract many younger riders, as the market is targeted at 40+ with a wealthier income it has narrowed its industry potential however Europe being a portentous market as it is the second largest heavy weight motorcycle market in the world it is seen that 70% of this comes from performance bikes which Harley is missing out.

In Europe due to conditions and layout of road cruising motorcycles are not as adaptable to these conditions where as performance bikes are for the tight turns and windy narrow roads where as in America it has an Harley has an apparel associated with American culture big wide roads long straight roads in the middle of deserts suitable for cruising.

People buying into Harley want not just the Harley experience but also look for the uniqueness and as far as Harley riders they wouldn’t want to be associated with aftershaves with Harleys name made by loreal, Harley doesn’t appeal to customers as a designer brand but does as individuality and the wrong approaches has been taken trying to achieve it.

Technological:

Harleys competitors have pushed Harley to compete in technological advances in their products however for Harley to become as competitive with the far east in terms of technology will take a long time so therefore Harley is left lacking in technology in their products. New technologies are always coming mainly from the far east and as their companies are from there it is hard for them to compete but also Harleys competitors have business in other areas so they can cross and share resources and technological developments. But as Harley doesn’t also own a car business it is already giving the japaneese a head start. Technological advances have pushed out the iconic air cooled engines from Harleys production into liquid cooled.

PEST Factors Commentary Impact Effect Effect of Time

Rating

Political :In the case study there are no political barriers for Harley Davidson to trade with US companies

This factor

Has great influence on the firm

High

Positive effect on the firm

Possibly no change in the firm at the moment

Important

Economical:

There are some economical barriers for the Harley Davidson due to recession and fuel rates which are always on rise .

This factor also has a great impact on the firm as it is a heavyweight motorcycle company so inflation can have some effect on the sales of motorcycles.

High

It depends on the recession and inflation period but in near future it can have some serious effect on the sale of company.

At the moment there is increase in price range of motorcycles.

Critical

Social :

Harley Davidson motorcycles may be offered as ‘old man’ motorcycles due to lack in

This factor also has a impact on the firm as the rider now look for uniqueness and best performance bikes which

It can have negative effect on the firm

There are not much changes at the moment in the firm .

Intermediate

performance. its market is not attracting younger riders.

Harley are missing out.

Medium

Technological

Harley Davidson is lacking far behind in technology .

Due to lack of technology Harley is lagging far behind its competitors.

High

It is resulting in negative effect on the production and sales of the company

Harley Davidson trying in various ways to overcome this problem

Important

Strategic Alignment:

SWOT Analysis:

SWOT is used, to analyses the Strengths, Weaknesses, Opportunities and Threats of a company.

Strengths:

Harley Davidson has approximately 70% share regarding the heavy weight motor cycle

market.

It has its operation in manufacturing motorcycles, and it also operate in providing financial

services.

Harley Davidson is a strong brand company and is well established in the mind of customers

with the image of strength and freedom.

It is the only American brand for heavy weight motorcycle manufactures.

Buell formed to endorse the brand and involve customers to beat their loyalty level.

Strong market and distribution channel in U.S

Harley Davidson has strong and long lasting relations with the employees.

Motorcycles customization makes up a major amount of revenue for Harley Davidson.

The foremost strength of Harley Davidson is customer loyalty.

Weakness:

The main weakness of Harley Davidson is due to losing its market share continuously,

especially in the European market.

Harley Davidson has poor market techniques which is not attracting new customers in the

international market.

The prices charged on the motorcycles are quite high.

By analysing the future need of production heavyweight bikes is weak, due to which the

required production amount is not targeted.

Opportunities:

The demand for Harley Davidson is the highest in European regarding the international

market and represent the single largest motorcycle market in the world.

Market share is increasing in Europe and Asia for the last two years.

Younger riders and women are becoming interested in bikes.

The international heavy weight market is growing and is now larger than U.S heavy weight

market.

There is increasing demand in US market for bikes

Threats :

The average buying age of Harley’s bikes is 42 years old and increasing.

In the recent years Loss in domestic market share and shortage of supply due to on-going

capacity restraints.

Some competitors of Harley Davidson have larger financial and marketing resources and

these competitors are more diversified.

The European Union’s motorcycles standards are more strict than those of environmental

protection agencies in the US and increased environmental stand.

Buell division needs to continue to produce a quality motorcycle under Harley’s brand name.

Conclusion:

From applying the SWOT techniques, it can be seen that Harley Davidson has many strengths this

compares to a few threats identified. The weakness outnumber the opportunities though which would

imply that Harley Davidson have to focus on realizing these opportunities to reduce and combat the

threats. Harley Davidson should expand European and Asian market.

7 S’s

The McKinsey 7 S Model

Strategy :

Harley Davidson strategy is to control the market by increasing the sales of heavy weight motorcycle.

Harley Davidson main competitive advantage lay with super heavy weight bikes. R&D department to develop new products. No real push to break into European market.

Harley Davidson brand has developed a community based phenomenon. Harley’s long term profit growth depends on its ability to expand the sales of high- priced

heavyweight motorcycles.

Heavy investment in new plants for manufacturing and development.

Structure :

Harley Davidson is a family run business founder by William Harley and Brothers William Davidson.

Harley Davidson is a well-known manufacturer of heavy weight motorcycles in US. Employers are extremely loyal.

No defined hierarchy stated in the case study however these positions are stated: the founders

are William Harley and Brothers William Davidson, Arthur Davidson and Walter Davidson, Keith Wandell CEO of Harley Davidson, Harold Scott vice president of HR of the company.

Harley Davidson has a large frame work conducted with 19 organizations in a variety of industries across the America, Europe and Asia/Pacific.

System:

Hierarchy in place with Directors overseeing activities and decision making going through Paul Stroud.

Financial results logged and monitored to keep on track.

Harley-Davidson, Inc. has seen revenues remain relatively flat ($4.3B to $4.2B), though the company was able to grow net income from $55.1M to $146.5M. A reduction in the percentage of sales devoted to cost of goods sold from 78.23% to 77.82% was a key component in the bottom line growth in the face of flat revenues.

Style :

Harley-Davidson is one of the most admired and recognized Companies in the world today.

Harley Davidson has considered the American icon by people and US government .

Harley Davidson has a strong relationship with its loyal employees and customers.

Harley Davidson is Non-aggressive non-ambitious company, structured around a family

business model.

Harley Davidson is strongly reliant on super heavyweight motorcycles.

Staff:

Harley Davidson has an energized work force.

The entire plant is organized into two teams. Production is by 8 to 15 member natural work

group. Overall plant management is by a 14 member plant leadership comprising the plant

manager, union representatives elected representatives from the process groups and six staff

members.

Good shift pattern with flexible staff to cover emergencies.

Managers in place at each major function.

Skills: Dealer relationship continued to be a strategic priority for Harley Davidson.

Harley Davidson has achieved greater success in penetrating international market.

HOG has played a critical role in building in building brand image and customer loyalty.

Investment is done in the various plants for advanced technologies and capacity expansion. Emphasis are placed on developing g manufacturing capabilities.

Good customer services and liaison, including support for rush order.

Shared value:

Market leading quality product.

Maintain employment at all sites.

Maintain of their brand market.

Conclusion of 7 S Analysis:

The 7s model shows the company in its current state. The 7 S strategy tool has identified key

attributes within each area, to align this tool correctly the Strategy, Structure and Systems group must

engage with the ‘people’ issues within the Staff, Skills and Style areas. This configuration must be

aligned to have a successful company.

Strategic Decisions

Space analysis

The SPACE analysis wills breakdown four major areas which will be given a mark and then plotted onto a graph in order to determine what a company’s strategic position is. Those main points to be analysed are: Financial Strengths, Competitive Advantage, Environmental Strengths, and Industry Attractiveness. All those categories will have a total mark and then plotted onto the two axis from which the company’s position will be determined each quarter will represent Conservative, Aggressive, Defensive, or Competitive strategies. Marks from 1 (low) to 6 (high)

Financial Strengths:

- Their cash amount is increasing year on year which suggest more money to spend around if needed

- Have assets worth $7.8 billion- Investment capabilities

[RATING: 4] over all

Competitive Advantage:

- Harley Davidson is a major leader in the American heavyweight motorcycle market, and is the pioneer of the whole cruise bike and chromed parts culture but there is big competition from other huge Japanese corporations [RATING: 3]

- They can offer a wide range of parts in order to customise motorbikes for each client in order to make it bespoke, more special for the customer. Harley is more of a differentiator than the other companies but could end up cost more.[RATING: 4]

- Strong brand and strong relationship with customers[RATING: 4]

- Overall rating 3+4+4=11 : 11/3=3.7

Environmental Strengths:

- Research and Development department is present and has its own lab but investments within this asset have fallen since 2007 when it received a big boost. Not many innovations have been issued by HD during 8 years and not much new advancement have been made which means the competition had plenty of time to develop better products.[RATING: 2]

- Products are sold around the world through more than 1000 HD dealerships, most being in America and secondly most being in Europe so they can reach their two main markets. They also have the factory in Brazil for the South American markets which is a strength. The competitors have their own dealerships but they mix with their other products such as cars or are sold through dealers that sell many brands. So HD is only focussed on bikes.[RATING: 5]

- Most of their manufacturing and assembly facilities are all situated in the state of Wisconsin where their headquarters is. But some other two plants are situated in near by states. They have instituted a new programme where they are joining more factories together. Their major concern is their wheel manufacturers located in Australia, resulting in transportation cost and increase in lead time.[RATING: 3]

- Overall rating: 2+5+3=10 ; 10/3= 3.3

Industry attractiveness:

- Harley Davidson is a pioneer in the motorcycle industry offering virtually limitless customisation for their products while bigger competitors offer less and just imitations of HD. They are the original, the real deal.[RATING: 4]

- HD offers the possibility for younger buyers to get a Buell motorbike (sportier) as a substitute while not affecting HD’s finances because they own the brand. Also this could be good as Buell buyers can be lead on to later in life to buy a Harley[RATING: 4]

- There are many events organised by Harley for their owners such as, gatherings and cruises, also same kind of club for Buell owners. This is supposed to enhance the over all experience and make it all feel like doing something as a “family”. Other competitors cannot offer this kind of experience.[RATING: 3]

- There is growth in the international heavy weight motorcycle market.[RATING: 5]

- Increase of women riders[RATING: 3]

Overall rating: 4+4+3+5+3=19 ; 19/5=3.8

SPACE Model:

Competitive Advantage

Environmental

Strengths

Industry

Attractiveness

Financial Strength

CONSERVATIVE AGGRESSIVE

DEFFENSIVE COMPETITIVE

The space model shows that the company are fairly centralized however in order to differentiate they need to become more of an aggressive strategy.

Priorities:

Using from the overall analysis findings H.D shows strengths in many areas and the opportunities identified in the market.

HD should look further into aiming certain products at females as identified the female riders are increasing in the market.

The European market shows an opportunity however the product line must be adjusted to meet European customer demand and expectation as their current models may not be highly appealing.

The lightweight segment also shows opportunity in order to compete H.D. needs to step up their technology and performance integrated into the lightweight products.

H.D has a very strong brand this can be used to back their other lines Buell and MV Agusta, also concentrate on protecting the prosperity of the brand and not alliancing with companies like loreal as these type of marketing is not right for its aimed consumers.

H.D. should keep their engine and power train production in America as this is what customers pay for is all American made product.

H.D. should offer exclusive lines of updated classic models as this will keep uniqueness for the loyal enthusiast customers.

Conclusion:

By using different tools to analyse the Harley Davidson situation the following was concluded:

Harley Davidson is a differentiator company which sells in lower volumes to a broader market. They have proven to adapt to economic and time changes by using new production methods in order to improve quality and quantity. However the competition always advanced and remained ahead of them in technological developments, slowly Harley adapted just a few bits of new technology and implemented them onto their products.

All that said, there is vast room for improvement. They could reduce costs greatly by having a more unified manufacturing and assembly site. They also improved their dealership network by training their partners to enhance their customer services and have higher stock levels. By doing this they could finally reach a standard accepted by their target market.

Overall Harley Davidson could improve certain aspects in order to increase capacity, create more demand and improve its financial situation.

Bibliography & Reference Sources

http://www.blackwellpublishing.com/grant/files/CSAC05.pdf

http://www.harley-davidson.com/

http://www.networkofstrength.org/partners/harley_davidson.php

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=HOG:US

http://www.articlesbase.com/motorcycles-articles/harley-davidson-symbolizes-the-spirit-of-freedom-and-strength-867579.html

Book: Strategic Management and Business Policy by Thomas L. Wheelen and J. David Hunger Eighth Edition