Harley-Davidson – 2009 Forest David: David: Francis Marion Marion University University
A.
Case Abstract Harl Harley ey-Da -Davi vids dson on is a compr compreh ehen ensi sive ve bus busin ines esss polic policy y and and stra strate tegi gicc marketing case that includes the company’s year-end 200 !inancial statements" compet competito itorr in!orm in!ormati ation" on" and more# $he case time time setti setting ng is the year 200%# &u!!icient internal and e'ternal data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan !or the company# Head(uartered in Mil)aukee" *isconsin" Harley-Davidson’s common stock is publicly traded on the +e) ,ork ,ork &tock 'change under the ticker symbol HD.# $here is something about the po)er o! a Harley motorcycle that intrigues both men and )omen# $he )ay this company connects )ith its customers is e'trao e'traordi rdinary nary## $he Harley Harley name name and logo logo epitom epitomi/e i/e symbol symbolss o! m meri erican can individualism and a bit o! merican rebelliousness# Many customers have the !amous Harley bar 1 shield logo tattooed on his or her arm# $he company spon sponso sors rs ride ridess and and rall rallie iess ever every y)her )heree !rom !rom Dayt Dayton onaa to Hous Housto ton n and and in international cities like &aint-$rope/" &ung)oo" and illehammer# From Me'ico to Mount Fu3i and ustria to ustralia" Harley riders get together at events in more than 400 countries# For some riders" ho)ever" the thrill may 3ust be the back roads and riding alone on a la/y &aturday a!ternoon# $he distinctive sound o! a Harley-Davidson roars# ven the Harley *eb site roars# +o other motorcycle has this this soun sound# d# $hee soun $h sound" d" ho)e ho)eve verr" is anno annoyi ying ng and and obno obno'i 'iou ouss to many many noncustomers#
B.
Vision Statement 5proposed6 $o be recogni/ed as the best motorcycle company in the )orld#
C.
Mission Statement 5proposed6 Harley-Davidson is committed to providing the highest (uality products and !inancial services to men men and )omen )orld)ide 54" 76# $he Harley name stands !or customer satis!action 586 and )e )ould like all Harley customers to relay their satis!action to all motorcycle dreamers# dreamers# Harley-Davidson uses advanced technology to produce the superior motorcycles motorcycles 56# 9ur philosophy is to conduct business )ith utmost integrity integrity )hile serving our customers" employees" and shareholders 56# *e appreciate the hard )ork o! our employees employees 5;6# *e push e'cellence though our Harley-Davidson bar and shield logo and the Harley
4
9)ners
=ustomer >roduct or services Markets $echnology =oncern !or survival" gro)th" pro!itability >hilosophy &el!-concept =oncern !or public image =oncern !or employees
Mission Statement 5actual6
*e !ul!ill dreams through the e'perience o! motorcycling" by providing to motorcyclists and to the general public an e'panding line o! motorcycles and branded products and services in selected market segments#
D.
Eternal A!dit "##ort!nities
4# $he international heavy)eight motorcycle market is gro)ing and is no) larger than the U& heavy)eight market 2# uropean demand !or Harleys is the highest in the international market and represents the single largest motorcycle market in the )orld# 7#
4# Harley’s ongoing capacity restraints has cut supply and resulted in a loss in domestic market share in recent years# 2# Harley’s average buying age is 2 years old and increasing# 7# $he uropean Union’s motorcycles noise standards are more stringent than those o! nvironmental >rotection gencies 5>6#
4?
# &ome competitors o! Harley-Davidson have larger !inancial and marketing resources and are more diversi!ied# ?# nvironmental protection la)s# # &hi!ts in buyers’ needs and tastes# 8# =ustomer loyalty in uropean and sian countries lo) !or merican products# %# =osts could become e'pensive !rom importing# ;# >erception o! Harleys among noncyclers is o!ten not good# Com#etitive &ro'ile Matri Harley Critical S!ccess )actors
dvertising >roduct Auality >rice =ompetitiveness Management Financial >osition =ustomer oyalty
Honda
(ama%a
*ei+%t
,atin+
*ei+%ted Score
,atin+
*ei+%ted Score
,atin+
*ei+%ted Score
0#20 0#4? 0#40 0#40 0#4? 0#40 0#4? 0#0? .00
2 7 7 2 7
0#%0 0#0 0#20 0#70 0#0 0#70 0#70 0#4? .2/
2 7 2 2 7 2 2 2
0#0 0#? 0#20 0#20 0#? 0#20 0#70 0#40 2.0
2 7 2 2 2 2 2 2
0#0 0#? 0#20 0#20 0#70 0#20 0#70 0#40 2./
E)E Matri ey Eternal )actors "##ort!nities 4# $he international heavy)eight market is gro)ing and is no) larger than the U& heavy)eight market 2# $he uropean demand !or Harley-Davidson is the highest in the international market and represents the single l argest motorcycle market in the )orld 7# rotection gencies in the U#& and increased environmental stand# # &ome competitors o! Harley-Davidson have larger !inancial and
4
*ei+%t
,atin+
*ei+%ted Score
0#4?0
2
0#700
0#4?0
2
0#700
0#400 0#400
2
0#200 0#00
0#02?
4
0#02?
0#0?0
7
0#4?0
0#02? 0#02? 0#02?
7 7
0#08? 0#400 0#08?
0#400
2
0#200
0#0?0 0#0?0
2 2
0#400 0#400
0#02?
4
0#02?
marketing resources and they are more diversi!ied# ?# nvironmental protection la)s# # &hi!ts in buyers needs and tastes# 8# =ustomer loyalty in uropean and sian countries# %# =osts could become e'pensive !rom international importing# ;# >erception o! Harleys among noncyclers is o!ten not good $otal
E.
0#02? 0#02? 0#02? 0#02? 0#02? .00
7 7 2 2 7
0#08? 0#08? 0#0?0 0#0?0 0#08? 2.1
nternal A!dit Stren+t%s
4# +et income in 200 )as B%%; million" )hich )as ?7 percent higher than in 2002# 2# &trong relationships built on trust and respect )ith suppliers and dealers# 7# $he standard and per!ormance segments o! Harley-Davidson make up 80C o! the uropean heavy)eight motorcycle market# # Harley-Davidson operates in t)o principal business segments: Motorcycles and elated >roducts" and Financial &ervices# ?# Harley-Davidson is the only ma3or merican motorcycle manu!acturer# # &trong brand name# 8# $he company has continued to !ocus its capital e'penditures on capacity e'pansion at its ne) and previously e'isting !acilities# %# $he Harley 9)ner’s
4# Harley-Davidson does not emphasi/e price in its product# 2# Harley-Davidson has had di!!iculty gaining market shore in some uropean countries# 7# egistrations !or the siaE>aci!ic market are decreasing# # Facing ongoing capacity constraints# ?# 9nly a small portion o! the companys annual capital e'penditures relate to e(uipment" )hich has the sole purpose o! meeting environmental compliance obligations# # $he top Goard o! Directors !or Harley-Davidson are all men# 8# $he leadership strategy council is comprised completely o! vice presidents# %# Di!!icult to attract and retain talented employees# ;# ack o! opportunity !or advancement# 40# oss o! bene!its#
48
44# )inancial ,atio Analysis 5anuary 200%6 4ro5t% ,ates 6 &ales 5Atr vs year ago (tr6 +et .ncome 5,$D vs ,$D6 +et .ncome 5Atr vs year ago (tr6 &ales 5?-,ear nnual vg#6 +et .ncome 5?-,ear nnual vg#6 Dividends 5?-,ear nnual vg#6 &rice ,atios =urrent >E atio >E atio ?-,ear High >E atio ?-,ear o) >riceE&ales atio >riceEGook Ialue >riceE=ash Flo) atio &ro'it Mar+ins re-$a' Margin +et >ro!it Margin ?,r re$a' Margin 5?-,ear vg#6 ?,r +et >ro!it Margin 5?-,ear vg#6 )inancial Condition DebtE(uity atio =urrent atio Auick atio .nterest =overage everage atio Gook IalueE&hare nvestment ,et!rns 6 eturn 9n (uity eturn 9n ssets eturn 9n =apital eturn 9n (uity 5?-,ear vg#6 eturn 9n ssets 5?-,ear vg#6 eturn 9n =apital 5?-,ear vg#6 Mana+ement E''iciency .ncomeEmployee evenueEmployee eceivable $urnover .nventory $urnover sset $urnover dapted !rom )))#cnbc#com
Harley 40#00 8#20 4?#80 42#;? 2#8 7#;%
nd!stry 2#0 547#406 %#%0 %#0 4#% 42#0
S&-/00 4#20 4?#;0 4?#40 #8% 44#0 #4
4#4 #% 4#0 2#8% ?#08 42#0
20#8 ?8#? 4#0 4#77 #2 4#0
4;#0 #% 48# 4#?7 2#;7 42#?0
2#4 28#; 4%#0 0#4 27#7 4?#4
2#; 42#0 #8 2?#? ;#? ?#;
8#7 42#4 %#7 8#7 ;# ?#;
0#28 7#4 2#8 ?#0 4# 40#2
0#2? 2#4 4#7 7?#; 4#; %#
4#08 4# 0#; 7#? ?#% 47#24
72#% 20#0 2?#% 2#4 4?#2 24#7
24#2 44#7 48#0 4%#7 ;# 4?#8
4?#; 2#% 8#8 42#0 2#0 ?#8
40?"000 ?%8"000 #7 42#; 4#4
20"000 2;?"000 %#0 8#4 4#8
70"000 7"000 8#8 8#% 0#
4%
Date Av+. &7E 42E0 4%#20 42E07 48#?0 42E02 2#70 42E04 70#%0 42E00 7?#?0 dapted !rom )))#cnbc#com
&rice7Sales 7#?8 7#40 7#2 #%; #47
Date Boo3 Val!e7 S%are 42E0 B40#; 42E07 B;#%4 42E02 B8#7% 42E04 B?#%0 42E00 B#? dapted !rom )))#cnbc#com
Debt7E;!ity 0#2? 0#27 0#48 0#22 0#2?
&rice7Boo3 ?#?? #%? #2 ;#7 %#??
,"E 6: 28# 2?#8 2#0 2#; 2#8
8et &ro'it Mar+in 6: 48#8 4#? 4#2 47#0 42#0
,"A 6: 4#2 4?#? 4?#0 4#0 4#7
nterest Covera+e 4#% 8#7 ?;#8 + +
8et *ort% Analysis 5year-end 200 in millions6 4# &tockholders’ (uity B7"24% 2# +et income ' ? J B%%; ' ? 7# &hare price J B?2 E>& J B7#2% ' +et .ncome B%%; # +umber o! &hares 9utstanding K &hare >rice J 28 ' B?2 Met%od Avera+e
B B B B <
7"24% "? 4"0;7 4"2% 9=00
)E Matri ey nternal )actors Stren+t%s 4# +et income in 200 )as B%%; million" )hich )as ?7 percent higher than in 2002# 2# &trong relationships built on trust and respect )ith suppliers and dealers# 7# $he standard and per!ormance segments o! HarleyDavidson make up 80C o! the uropean heavy)eight motorcycle market# # Harley-Davidson operates in t)o principal business segments: Motorcycles and elated >roducts" and Financial &ervices# ?# Harley-Davidson is the only ma3or merican motorcycle manu!acturer# # &trong brand name# 8# $he company has continued to !ocus its capital e'penditures on capacity e'pansion at its ne) and previously e'isting !acilities# %# $he Harley 9)ner’s
4;
*ei+%t
,atin+
*ei+%ted Score
0#08?
0#700
0#08?
0#700
0#0?
0#20
0#0?0
7
0#4?0
0#0?0
7
0#4?0
0#0?0 0#00
7
0#200 0#420
0#00
7
0#420
0#070
7
0#0;0
40# Harley-Davidson has a strong marketing department" )hich sponsors and participates in all ma3or motorcycle consumer sho)s and rallies# *ea3nesses 4# Harley-Davidson does not emphasi/e price in its product# 2# Harley-Davidson has had di!!iculty gaining market shore in some uropean countries# 7# egistrations !or the siaE>aci!ic market are decreasing# # Facing ongoing capacity constraints# ?# 9nly a small portion o! the companys annual capital e'penditures relate to e(uipment" )hich has the sole purpose o! meeting environmental compliance obligations# # $he top Goard o! Directors !or Harley-Davidson are all men# 8# $he leadership strategy council is comprised completely o! vice presidents# %# Di!!icult to attract and retain talented employee# ;# ack o! opportunity !or advancement# 40# oss o! bene!its $"$A>
).
0#070
7
0#0;0
0#08? 0#08?
4 4
0#08? 0#08?
0#00 0#0?? 0#0?0
4 4 2
0#00 0#0?? 0#0?0
0#0?
2
0#0;0
0#00
2
0#0%0
0#07? 0#070 0#070 .00
2 2 2
0#080 0#00 0#00 2./
S*"$ Matri Stren+t%s
*ea3nesses
4# +et income in 200 )as B%%; million )hich )as ?7 percent higher than in 2004# 2# &trong relationships built on trust and respect )ith suppliers and dealers# 7# Harley-Davidson operates in t)o principal business segments: Motorcycles and elated >roducts" and Financial &ervices# # Harley-Davidson is the only ma3or merican motorcycle manu!acturer# ?# &trong brand name# # $he company has continued to !ocus its capital e'penditures on capacity e'pansion at its ne) and previously e'isting !acilities# 8# $he Harley 9)ners
4#
4?0
Harley-Davidson does not emphasi/e price in its product# 2# Harley-Davidson has had di!!iculty gaining market share in some uropean countries# 7# egistrations !or the siaE>aci!ic market are decreasing# # Facing ongoing capacity constraints# ?# 9nly a small portion o! the companys annual capital e'penditures relate to e(uipment" )hich has the sole purpose o! meeting environmental compliance obligations# # $he top Goard o! Directors !or Harley-Davidson are all men# 8# $he leadership strategy council is comprised completely o! vice presidents# %# Di!!icult to attract and retain talented employees# ;# ack o! opportunity !or advancement# 40# oss o! bene!its#
highest number o! HarleyDavidsons sold# ;# Harley-Davidson has a strong marketing department" )hich sponsors and participates in all ma3or motorcycle consumer sho)s and rallies# "##ort!nities 4# $he international heavy)eight market is gro)ing and is no) larger than the U& heavy)eight market 2# $he uropean demand !or Harley-Davidson is the highest in the international market and represents the single largest motorcycle market in the )orld# 7# rotection gencies in the U#& and increased environmental stand# # &ome competitors o! HarleyDavidson have larger !inancial and marketing resources and they are more diversi!ied# ?# nvironmental protection la)s# # &hi!ts in buyers’ needs and tastes# 8# =ustomer loyalty in uropean and sian =ountries#
S-" Strate+ies 4# 'pand production into urope 5&4" &2" 92" 976 2# >artner )ith an apparel maker to produce Harley apparel@ 3oint venture in urope 5&?" 96
*-" Strate+ies 4# Hire t)o )omen to Goard o! Directors 5*" 96
S-$ Strate+ies 4# .ncrease strong brand name 5&" $;6# 2# >romote smaller Harleys in sian countries 5&;" $8" $%6
*-$ Strate+ies 4# .mprove employee relationships 5*8" $6 2# Guild a ne) manu!acturing plant in the U& 5*" $46 7# Guild a ne) manu!acturing plant in urope 5*2" $46
4?4
%# =osts could become e'pensive !rom international importing# ;# >erception o! Harleys among noncyclers is o!ten not good#
4.
S&ACE Matri
y-a'is J F& L & J ?#% L 5-7#26 J 2# '-a'is J = L .& J -4#% L 5L?#06 J 7#2
H.
4rand Strate+y Matri
4?2
>.D M$ <9*$H Auadrant ..
Auadrant . Harley
* =9M>$.$.I >9&.$.9+
&$9+< =9M>$.$.I >9&.$.9+
Auadrant ...
Auadrant .I &9* M$ <9*$H
4# For)ard .ntegration 2# Gack)ard .ntegration 7# Hori/ontal .ntegration # Market >enetration ?# Market Development # >roduct Development 8# elated Diversi!ication
.
$%e nternal-Eternal E: Matri $%e )E $otal *ei+%ted Score
High 7#0 to 7#;;
$%e E)E $otal *ei+%ted Score
Medium 2#0 to 2#;;
&trong 7#0 to #0 .
verage 2#0 to 2#;; ..
*eak 4#0 to 4#;; ...
.I
I
I.
Harley
o) 4#0 to 4#;;
I..
I...
Hold and Maintain
4?7
.K
,e+ion U& urope apan =anada 9ther $otal
@.
,even!e B"0;8M B8%M B4;7M BB47%M B440M
S&M
Strate+ic Alternatives ey nternal )actors Stren+t%s 4# +et income in 200 )as B%%; million" )hich )as ?7 percent higher than in 2002# 2# &trong relationships built on trust and respect )ith suppliers and dealers# 7# $he standard and per!ormance segments o! HarleyDavidson make up 80C o! the uropean heavy)eight motorcycle market# # Harley-Davidson operates in t)o principal business segments: Motorcycles and elated >roducts" and Financial &ervices# ?# Harley-Davidson is the only ma3or merican motorcycle manu!acturer# # &trong brand name# 8# $he company has continued to !ocus its capital e'penditures on capacity e'pansion at its ne) and previously e'isting !acilities# %# $he Harley 9)ner’s
*ei+%t
40# Harley-Davidson has a strong marketing department" )hich sponsors and participates in all ma3or motorcycle consumer sho)s and rallies# *ea3nesses . Harley-Davidson does not emphasi/e price in its product# 2. Harley-Davidson has had di!!iculty gaining market share in some uropean countries# . egistrations !or the siaE>aci!ic market are decreasing# . Facing ongoing capacity constraints# /. 9nly a small portion o! the companys annual capital e'penditures relate to e(uipment" )hich has the sole purpose o! meeting environmental compliance
4?
0#08?
@oint Vent!re in E!ro#e AS $AS 0#700
ncrease Brand 8ame &romotion AS $AS 7 0#22?
0#08?
2
0#4?0
0#070
0#0?
0#20
2
0#470
0#0?0
---
---
---
---
0#0?0
---
---
---
---
0#0?0 0#00
2 ---
0#400 ---
---
0#200 ---
0#00
2
0#0%0
7
0#420
0#070
---
---
---
---
0#070
---
---
---
---
0#08?
---
---
---
---
0#00
0#20
2
0#420
0#0??
---
---
---
---
0#0?0 0#0?
-----
-----
-----
-----
obligations# ?. $he top Goard o! Directors !or Harley-Davidson are all men# . $he leadership strategy council is comprised completely o! vice presidents# 1. Di!!icult to attract and retain talented employees# 9. ack o! opportunity !or advancement# 40# oss o! bene!its $otal
ey Eternal )actors "##ort!nities 4# $he international heavy)eight market is gro)ing and is no) larger than the U& heavy)eight market 2# $he uropean demand !or Harley-Davidson is the highest in the international market and represents the single largest motorcycle market in the )orld 7# rotection gencies in the U#& and increased environmental stand# # &ome competitors o! Harley-Davidson have l arger !inancial and marketing resources and they are more diversi!ied# ?# nvironmental protection la)s# # &hi!ts in buyers’ needs and tastes# 8# =ustomer loyalty in uropean and sian =ountries# %# =osts could become e'pensive !rom international importing# ;# +oncustomer perception is lo)# SB$"$A> SM $"$A> A$$,AC$VE8ESS SC",E
4??
0#00
---
---
---
---
0#07?
---
---
---
---
0#070 0#070 0#08?
-------
------.0
-------
------0.12/
*ei+%t
0#4?0
@oint Vent!re in E!ro#e AS $AS 0#00
ncrease Brand 8ame AS $AS 2 0#700
0#4?0
0#00
2
0#700
0#400 0#400
7 ---
0#700 ---
---
0#00 ---
0#02?
---
---
---
---
0#0?0
---
---
---
---
0#02?
7
0#0?0
4
0#02?
0#02? 0#02?
-----
-----
-----
-----
0#400
---
---
---
---
0#0?0
---
---
---
---
0#0?0
0#200
7
0#4?0
0#02?
---
---
---
---
0#02? 0#02? 0#02? 0#02?
----7 7
----0#08? 0#08?
----2 2
----0#0?0 0#0?0
0#02?
4
0#02?
0#400 ./ 2.200
1.925
.0//
.
,ecommendations •
•
>.
Form a 3oint venture )ith a uropean motorcycle company# $his )ould enable Harley to in!iltrate the uropean market in a more cost e!!ective )ay" and allo) Harley to stay more in!ormed on uropean Union a)s dealing )ith noise and emissions# lso 3oint venture )ith a uropean apparel maker to produce and market Harley apparel# $otal =ost e'pected o! B2#?G# 'pand the brand name o! Harley through increased advertising" trade sho)s" and bike rallies# $otal cost B?00M#
EB$7E&S Analysis Bmount +eeded: B7"000M &tock >rice B?2 $a' ate 7?C .nterest ate 8C &hares 9utstanding 28M
M.
E#ilo+!e 9n anuary 4;" 200%" Harley-Davidson .nc# reported that !ourth-(uarter pro!it rose 40 percent as the company bene!ited !rom higher sales overseas" pushing its results above *all &treet e'pectations# $he year 2008 )as Harley’s t)entieth straight year o! record revenue" earnings" and retail motorcycle sales# .ts shares closed up B2#?" or almost ? percent" to B?#0? on the +e) ,ork &tock 'change# Auarterly earnings gre) to B270 million" or % cents per share" !or the 9ctober-December period !rom B20; million" or 84 cents per share" a year earlier# 4?
evenue gre) 40 percent to B4#7 billion !rom B4#22 billion" )ith motorcycle revenue up 40 percent to B4#0; billion# $he company said U#&# retail motorcycle sales increased 0#8 percent" )hile international sales rose 47 percent# For the !ull year 2008" Harley’s net income rose % percent to B;?;# million" or B7#4 per share" !rom B%%;#% million" or B7 per share" in 200# evenue gre) 8 percent to B?#7 billion !rom B?#02 billion in the prior year# $he company maintained its !orecast !or )holesale unit gro)th in the range o! ? to ; percent annually and an annual earnings per share gro)th rate o! 44 to 48 percent# .t kept its motorcycle shipment target !or 200% o! bet)een 7%"000 to 7?2"000 units" )ith planned )holesale shipments o! 8;"000 motorcycles during the !irst (uarter# Ho)ever" utting inventory in the right place at the right time has been challenging"N he said# N*e have not !ound a short-term silver bullet solution#N Harley’s )orld)ide retail sales gre) 7#0 percent in the !ourth (uarter and #2 percent !or the !ull year to 748"4; units@ the company said# For the year" U#&# sales gre) #2 percent to 2?7"4 units" uropean sales gre) 4;#; percent to 2;"%2@ apan )as up 44#4 percent to 44"20@ =anada rose #4 percent to 44"0@ and all other markets gre) 4;# percent to 44"4;7#
4?8
