“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.”
HARLEYDAVIDSON INC. ESPINO, Danna Laucil J. MABULAC, Billie Joyce L. OBANG, Elysa Marie E. SAMERA, Karen Joy S. ZACARIAS,Elisha Marie C.
I. Executive Summary For over 100 years Harley Davidson has been a leader in the motorcycle market worldwide. In 1903 the company was founded when Bill Harley and Arthur Davidson built their first motorcycle. Within five years they had built 150 units. In 2008, retail sales in the United States were at 218,939 motorcycles. There are more than 1,300 Harley-Davidson dealerships worldwide. Harley-Davidson Motorcycles are the number one U.S. based motorcycle, holding 28% of the U.S. motorcycle market. The motorcycle industry is a consolidated industry. The U.S. and international heavyweight motorcycle markets are highly competitive. The major players, such as Yamaha, Suzuki, and Honda, generally have financial and marketing resources that are substantially greater than the non-major players. Competitions in the heavyweight motorcycle market are based on several factors; price, quality, reliability, styling, product features, customer preference, and warranties. Harley’s first segment is the motorcycle and related products business. It included designing, manufacturing, and selling primarily heavyweight touring and custom motorcycles and offering a broad range of related products that included motorcycle parts and accessories and riding apparel. The custom products charge a higher price because of its features, styling, and high resale value. Their target market is mainly in US. By the end of 1997, they have an approximate 48.3% share in the US market, 6.1% share in European, and 16.5% share in Asia/Pacific. New competitors have entered the marketplace because demand for the motorcycles has exceeded production. The demand is prospected to grow in the future, and the switching cost is low. Harley Davidson has always been known for its differentiated products that have continuously stood out from the norm. More advertisement for Harley’s product can truly help them to attract their customers and to increase their market share. Harley-Davidson can also expand their product lines to increase their sales. Related diversification and market penetration are the strategies that Harley should use to promote its products and services.
II. Vision and Mission Mission We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments. Vision Harley-Davidson, Incorporated, is an action-oriented, international company a leader in its commitment to continuously improve the quality of profitable relationships with stakeholders (customers, dealers, employees, suppliers, 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.
III. Internal Assessment a. Corporate Profile In 1903 what was to become a legendary motorcycle company was formed in the Davidson family’s backyard. The “factory” in which the worked was a 10-by15- foot wooden shed with words “Harley-Davidson Motor Company” scrawled in the door. The Davidson brothers, William D., Walter, Arthur and William S. Harley, made their first motorcycle there. Achievements Finance Harley Davidson’s 2006 net revenue and net income were down 2.3% and 29.9% respectively, composed to 2007. International retail sales were up 10.3% as composed to 2007. Marketing Harley Davidson has approximately 686 independently owned full- service dealership in the United States. The marketing efforts are divided between dealer promotions, customer, events; and advertising through national television, print, radio and direct mailings, as well as electronics advertising. Harley Davidson promotes its products and lifestyle through The Harley Owners (HOG) which was founded in 1983 and currently has approximately 1.1 million members worldwide. Research and Development Motorcycle manufactures must utilize technology in developing their product as well as in the process of manufacturing them. More powerful motors and lighter, stronger structural components led to an increase in performance, while new brake and suspension systems help to make riding safer. Technology also plays an important part in
the manufacture and distribution of motorcycles. Computer programs allow designs to be tested in a virtual environment without having to pay for expensive prototypes. Computers are also used in manufacturing, distribution and delivery systems. Motorcycle manufactures must use all available technology resources to be successful. Technology Technology has been put to use throughout Harley-Davidson in order to design and produce the finest motorcycle possible. In 1997, the Willie G. Davidson Product Development Center (PDC) was opened to provide research and development facilities for product development. Employees from various functional units within the organization meet regularly with material suppliers to come up with new designs and processes. The PDC has been responsible for the successful launch of many new product innovations. The research and development teams are constantly working to find ways to make new motors with more power and durability. Harley-Davidson has several upgrade performance packages that were designed, tested, and perfected at PDC. Harley-Davidson technology is also being incorporated into Buell motorcycles. These motorcycles combine cutting-edge performance with the sport motorcycle design that has become so popular with the young riders throughout the world.
Management/Human Resource Motorcycle Segment In order to survive in the competitive motorcycle industry and to continue to strive toward their commitment to quality improvement and production efficiencies, Harley-Davidson s management realized they needed to foster a perpetual learning and improving organization. The management believes that open communication between all levels of employees is essential to the success of the organization. In order to foster an organizational environment made up of employees who share the same vision and values as the company, Harley saw that it was necessary to communicate the company s high moral values, and educate the employees about the whole business environment. This quest for incorporating the company s vision and high moral values into the organizational structure and expecting the employees to believe in and carryout this same vision and moral values, could have been extremely difficult since Harley s workers are unionized. However, Harley s relationship with the unions is excellent. Both the company and the unions have stuck by each other during good and bad times. Because of this, the unions trust Harley s management and
realize that their efforts toward continuous improvement and quality consciousness are in the best interest of the employees (Vroom, Vroom). Collective bargaining agreements between the company and the unions are expected to expire during the first quarter of 1997, but company and union relations are strong and there are no concerns about future agreements. Transportation Vehicles Segment Discussion of human resources and employee relations, within the transportation vehicle segment is limited. The segment employs approximately 2,400 people. The employees have no union representation and there is no discussion of any future efforts to unionize. The Holiday Rambler segment is committed to the continuous training and skills improvement of its current workforce, as is evident by the company s requirement that manufacturing employees maintain the flexibility to work on the production of any of its line of vehicles. Part of each employee s compensation package consists of production group incentives. These incentives allow an employee to increase their total compensation by meeting production goals and quality standards. Management Information System Harley-Davidson s commitment to manufacturing efficiencies, quality improvement, and technological advancements, provide evidence of the company s investments in information systems. By utilizing just-in-time inventory techniques through close, continuous, contact with key suppliers the company was required to expend a substantial amount of effort and resources towards the allocation of advanced communication systems. Management s earlier investments in Computer-Aided Design (CAD) systems in the early 1980s drastically increased production efficiencies and reduced the break-even point from 53,000 motorcycles in 1982 to 35,000 in 1986. Harley-Davidson seems to be making the necessary commitments in capital and other resources to stay competitive in this area. b. Vision and Mission Mission We fulfill dreams through the experience of motorcycling, (self-concept) by providing to motorcyclists and to the general public (customer) an expanding line of motorcycles and branded products (products) and services in selected market segments.(segments)
Vision Harley-Davidson, Incorporated, is an action-oriented, (self-concept) international company (market) a leader in its commitment to continuously improve the quality of profitable relationships with stakeholders (customers, dealers, employees, suppliers, shareholders, government, and society).(concern for employees) Harley-Davidson believes the key to success is to balance stakeholders' interests through the empowerment of all employees to focus on value-added activities. (Philosophy, concern for employees and concern for survival, growth and profitability) c. Corporate Officers President and Chief Operating Officer: Matthew S. Levatich Senior Vice President of Manufacturing: Karl M. Eberle Executive Vice President for Corporate Product Planning: James A. McCaslin Vice President and General Manager of Materials Management: Michelle Kumbier General Manager of Springettsbury Township Plant: Ed Magee d. Product Lines The motorcycle and related products segment of Harley-Davidson include parts and accessories (P&A), general merchandise; licensing; and motorcycles. The major P&A products are replacement parts and mechanical and cosmetic accessories.
e. Internal Factor Evaluation (IFE) Matrix Key Internal Factors
Weight Rating
Weighted Scores
Strengths Strong brand name Strong motivation for customers
0.14 0.06
4 3
0.56 0.18
Remain profitable throughout the crisis
0.05
3
0.09
Product customs and customizations
0.05
4
0.20
Provides insurance and related products to dealers and customers
0.07
4
0.28
Double digit growth for revenues and earnings
0.06
3
0.18
High productions and sales Employee Ethics
0.08 0.07
4 4
0.32 0.28
Focus on growth and corporate governance
0.07
4
0.28
0.14
1
0.14
0.06
2
0.12
0.07
2
0.14
0.08
1
0.08
Weaknesses High price Senior Leadership Group is not a decision-making body Employees have no union Competitors are more diversified Total
1.00
2.85
Note that the two most important factors to be successful in the motorcycling business are “Strong brand name” and “High price” as indicated by the 0.14 weight. Also note that the Harley-Davidson Inc. is doing best on “Strong brand name”, “Provides insurance and related products to dealers and customers”, “High productions and sales”, and “Employee Ethics”. Overall, this store receives a 2.85 total weighted score, indicating there is definitely room for improvement in store operations, strategies, policies and procedures.
STRENGTHS Marketing In the first half of 2010, Harley-Davidson opened its first five dealerships in India. Harley’s heritage is symbolic of the American dream. Harley’s workers and customers related to find motivation in this American dream that become reality. However, Harley has continued to remain profitable throughout the economic crisis. Harley-Davidson announced that it will shed additional 300-400 hourly jobs in the 2009-2010 timeframe. Management The values guide their action and serve as the framework for the decision and contribution its employees make at even level of the company. Mr. Richard Teerlink age 59 joined Harley-Davidson in 1981 and was elected to the board of directors in 1982. In 1988 he was appointed President, and he was named Chief Executive Officer in 1989 (Wheelen). Teeklink is also focused on growth and corporate governance, which is reflected in the company’s vision Finance Harley-Davidson provides insurance and insurance related programs primarily to dealers and their customers. Harley has provided consistent financial performance for the last 10 years, with revenue and earnings both showing double-digit growth. This growth can be expected to continue as long as the responsible strategies are continued. Production/Operation Harley’s custom segment gives owner the opportunity to customize their bikes, limited edition. WEAKNESSES Marketing Its stock declined from 48.05 per share to 9.78 per share in the time period March 8, 2008 to March 7, 2009 By the early 1970’s, the Japanese were importing huge numbers of cover-priced motorcycles into the United States. Harley is closing several facilities and has indicated its motorcycle sales decreased 13% during the first two months of 2009.
Management Senior Leadership Group of Harley-Davidson Inc is not a decisionmaking body. Discussion of human resources and employee relations, within the transportation vehicle segment is limited. The segment employs approximately 2,400 people. The employees have no union representation and there is no discussion of any future efforts to unionize. Finance Operating income for the motorcycles segment was down 21.5% and operating income for the financial services segment decreased 61.0% Worldwide retail sales of Harley-Davidson motorcycles were down 71.2% in 2008 as composed to 2007 which would create a decrease in profit. Production/Operation The heavyweight motorcycle (Harley-Davidson major competitor) have a large worldwide revenue and are more diversified than HarleyDavidson During 2008, the company shipped 303,479 Harley-Davidson motorcycles, a decrease of 27,140 motorcycles or 8.2% from last year.
IV. External Assessment a. Porter’s Framework
POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCT – LOW
Very few substitute as luxury bike No substitute when looking for luxury bike Cars, bicycle, and sports car are the best substitute products for Harley-Davidson Inc. products
RIVALRY AMONG COMPETING FIRMS – HIGH
BARGAINING POWER OF SUPPLIERS – MODERATE
Consolidated supplier Ease of switching suppliers Outsource steel and basic electronics Assembly within the company
Honda, Yamaha, Suzuki with high existing assets High exit barriers Strategic Alliance between Suzuki and Kawasaki through product diversification
BARGAINING POWER OF CONSUMERS – LOW High level of differentiation Less number of dealers Low power of customer as they are individual
POTENTIAL ENTRY OF NEW COMPETITORS – LOW
Switching cost is moderate to high Economies of scale, capital, distribution channel High tech involvement Small scale producers
standards,
b. External Factor Evaluation (EFE) Matrix Key External Factors Opportunities Company shipment in international customers increased Strategic focus on global markets
Weight Rating
Weighted Score
0.07
3
0.28
0.09
4
0.36
Comes first for retail unit registration in U.S Company website used to market its products and services Website features online catalog, use a dealer locator and place locator
0.05
2
0.10
0.08
4
0.32
0.09
4
0.36
Competes heavily in touring and customs segments
0.08
3
0.24
0.07
3
0.21
0.07
3
0.21
Threats Honda sales are favorable particularly in Asia Shares fall 10.4 %
0.08 0.05
3 2
0.24 0.10
Competitors has headquarters in U.S
0.06
3
0.18
Competitors offers traditional styling Honda and Yamaha are more diversified than Harley in terms of product offering Involvement to Lorillard that has potential related legal liability Total
0.07
3
0.21
0.08
1
0.08
0.06
2
0.12
Competitors have lower production and sales volumes Known for associating with charity
1.00
3.01
Note that the most important factor to being successful in this business is “Strategic focus on global markets” and “Website features online catalog, use a dealer locator and place locator” as indicated by the 0.09 weight. Also note that the HarleyDavidson Inc. is doing excellent in regard to handling three factors, “Strategic focus on global markets”, Company website used to market its products and services”, and “Website features online catalog, use a dealer locator and place locator”. Finally, note that the total weighted score of 3.01 is above the average (midpoint) of 2.5, so this motorcycling business is doing pretty well, taking advantage of external opportunities and avoiding the threats facing the firm. There is definitely room for improvement, though, because the highest total weighted score would be 4.0. As indicated by rating of 1, this business needs to capitalize more on the “Honda and Yamaha are more diversified than Harley in terms of product offering” threat.
OPPORTUNITIES Economic Forces Harley-Davidson announced in April 2009 that it will shed additional 300-400 hourly jobs in the 2009-2010 timeframe, on the top of the 1100 jobs it previously planned to eliminate during that period. The company shipment in international customers increased, consistent with the company’s strategic focus on global markets. Social, cultural, demographic and natural environment forces The passion runs so deep that many customers and admirers sport a Harley tattoo to express that passion. For the last 21 years, Harley-Davidson motorcycles have led the industry in the United States for retail unit registrations of new heavyweight motorcycles. Technological Forces The company website, www.harley-davidson.com, is also used to market its product and services. The website features an online catalog that allows retail customers to create and share product wish lists, use a dealer locator, and place catalog order. Competitive Forces In the United States, Harley-Davidson competes heavily in the touring and custom segment of the heavyweight motorcycle market, which accounted for approximately 84%, 80% and 79% of total heavyweight retail unit registrations in the US during 2008, 2007 and 2006 respectively. These competitors currently have production and sales volumes that are lower than Harley-Davidson’s and have considerably lower US market share than Harley-Davidson. Political, Governmental and Legal Forces Harley might be best known for its association with the Muscular Dystrophy Association, rising upward of $50 million for the charity. The amount of public land available for use can be an important determinant in consumer decision making concerning recreational vehicles (especially off-road and water-sports vehicles). THREATS Economic Forces Honda sales are favorable, particularly in Asia and it is looking to increase production in India, which will eventually get some of the customer of Harley-Davidson.
Shares of Harley-Davidson (HOG) fall 10.4% despite the company beating the estimate of analysts with its Q2 report. Weak dealer sales and the company’s outlook for the rest of the year have traders edgy,” according to an Aug. 1 short note on the Seeking Alpha website.
Social, cultural, demographic and natural environment forces Harley-Davidson has competitors headquartered in the United States These competitors generally offer heavyweight motorcycles with traditional styling that compete directly with many of Harley-Davidson’s product. Technological Forces Computer based inventory control system could play a role in managing motorcycle inventories Technology also impacts design Competitive Forces Harley’s competitors include Honda, Yamaha, Suzuki, Kawasaki, Polaris, BMW and Triumph Honda is planning for growth in Asia, continued recovery in Europe and for a probable downturn in United States. Like Honda, Yamaha are also more diversified than Harley in terms of product offering. Political, Governmental and Legal Forces Harley and Lorillard had previously entered into an agreement where Lorillard could use Harley s trademark on its cigarettes. Due to the increase in smoker s lawsuits against cigarette companies, Harley became concerned over the risk of potential related legal liability exposure. Harley decided to break their nine-year old licensing contract with Lorillard, and as a result, Lorillard filed a lawsuit. Harley and Lorillard have since reached a settlement over the licensing dispute, but the details of the settlement are still pending (Harley net B6).
c. Competitive Profile Matrix (CPM)
Critical Success Factor
HARLEY-DAVIDSON INC Weighted Weight Rating Score
HONDA YAMAHA Weighted Weighted Rating Score Rating Score
Advertising
0.15
3
0.45
3
0.45
4
0.60
Product Quality
0.15
4
0.60
3
0.45
2
0.30
Sales Distribution Price Competitiveness
0.06
2
0.12
4
0.24
3
0.18
0.10
1
0.10
4
0.40
3
0.30
Financial Position Customer Loyalty Global Expansion
0.08 0.15 0.04
2 4 2
0.16 0.60 0.08
4 3 4
0.32 0.45 0.16
3 2 3
0.24 0.30 0.12
Management
0.07
3
0.21
4
0.28
2
0.14
0.05
3
0.15
4
0.20
3
0.15
0.05 0.10
2 4
0.10 0.40
4 3
0.20 0.30
3 3
0.60 0.30
Production Capacity Union Relations E-Commerce Total
1.00
2.97
3.45
3.23
Note: (1) The ratings values are as follows: 1=major weakness, 2=minor weakness, 3=minor strength, 4=major strength. (2) As indicated by the total weighted score of 2.85, Harley Davidson is the weakest.
As seen in the table, three major success factors needed to be able to succeed in their line of industry, as specified by the weights of 0.15 the highest possible weight used in evaluating the companies. These are Advertising, Product Quality and Customer Loyalty. Yamaha is the strongest on “advertising” with the rate of 4; while for the “product quality” and “customer loyalty” factor is the Harley-Davidson came the strongest with a weight of 4. It is because the Harley-Davidson’s products well known for it last longer than the competitors are, same as in the customer’s loyalty are the passion to many customers and admirers that runs so deep where they decided to have a Harley tattoo to express that passion. Note that Honda has the top rating in most of the success key factors and best strategic positions, having the total weighted score of 3.45 second is the Yamaha scoring of 3.32. These competitors are more favorable on Asia, wherein most people are patronizing motorcycles than medium vehicles also; they expand and have their headquarters to different parts of Europe and downtown of United States. In terms of Harley-Davidson they got the weakest containing a total weighted score of 2.97 because of their competitors are more diversified in their products, their management and union relations are also weak they don’t have enough strategies, also having a low score on expanding to the global consumers and varying their products.
V. Strategy Formulation a. Boston Consulting Group (BCG) Matrix
Relative Market Share Position High 1.0
Medium 0.5
Low .0
Industry Growth Rate
High +50
Medium 0
Low -50 RELATIVE MARKET SHARE: 48% INDUSTRY GROWTH RATE: 13.029 STRATEGY: Market Penetration, Market Development, Product Development, Divestiture The circle is located at quadrant I or question mark which has low market share position yet they compete in a high growth industry Harley Davidson Inc., must decide whether to strength by pursuing an intensive strategy which is market Penetration, Market Development, Product development, divestiture
b. Strategic Position And Action Evaluation (SPACE) Matrix
7 6 Aggressive
Conservative
5 Market Penetration Market Development Product Development Related Diversification
4 3
Vertical Integration Market Penetration Market Development Diversification
2 -7
-6
-5
-4
-3
-2
-1
1
CP
IP -1
1
2
3
4
7 -2
Competitive
Defensive
-3 Retrenchment Divestures liquidation Related Diversification
-4 -5 -6 -7
SP
Vertical Integration Market Penetration Product Development
5
6
Financial Position (FP) Leverage Liquidity Return on Investment Working Capital
Rating 6 4 3 __4__ 17
Stability Position (SP) Competitive Pressure Risk Price Range of Competing Products Demand Fluctuations
Rating -5 -4 -4
__-4__ -17
Competitive Position (CP) Market Share Customer Loyalty Product Life Cycle Product Quality
Rating
3 -4 -3 __-4__ -14
Industry Position (IP)
Growth Potential Profit Potential Capacity Utilization Ease to Entry
Rating
5 4 4 __5__ 18
Conclusion FP = 17.00/4 = 4.25 IP = 18.00/4 = 4.50 SP = -17.00/4 = -4.25 CP = -14.00/4 = -3.5
x-axis = (-3.50) + (4.50) = 1 y-axis = (-4.25) + (4.25) = 0
The result of the analysis and diagram concludes that the best strategy for Harley Davidson, INC. is Aggressive Strategies which contains of Vertical integration, Market penetration, Market development and Diversification.
c. Grand Strategy Matrix (GSM)
II
I
III
IV
Slow Market Growth The graph shows that Harley Davidson is located in Quadrant I of the Grand Strategy Matrix, which has an excellent strategic position. Harley-Davidson Inc. is concentrated on present markets like market penetration; market development and product development which helps them improve to have a strong strategy. It also states that if Harley-Davidson has excessive resources, then backward, forward or horizontal integration may be effective strategies.
Strong Competitive Position
Weak Competitive Position
Rapid Market Growth
d. Internal-External (IE) Matrix THE IFE TOTAL WEIGHTED SCORES Average 2.0-2.99
Low 1.0-1.99
II
III
IV
V
VI
VII
VIII
IX
THE EFE TOTAL WEIGHTED SCORES
High 3.0-4.0
High 3.0-4.0
3.01
Medium 2.0-2.99
GROW AND BUILD Backward, Forward, or Horizontal Integration
2.85
Market Penetration Market Development Product Development I
Low 1.0-1.99
The IFE total weighted score is 2.85 and it represents an average. The EFE total weighted score is 3.01 and it is considered high. The circle falls in cell II and it is in grow and build strategies. The circle is positioned in grow and build strategies appropriate for Division 2 which contributes the greatest portion of the total profits.
e. TOWS
OPPORTUNITIES 1. Company shipment in international customers increased 2. Strategic focus on global markets 3. Comes first for retail unit registration in U.S 4. Company website used to market its products and services 5. Website features online catalog, use a dealer locator and place locator
STRENGTHS
1. Strong brand name
6. Competes heavily in touring and customs segments 7. Competitors have lower production and sales volumes 8. Known for associating with charity SO STRATEGIES 1. Through product customs and customizations HarleyDavidson can compete in heavy touring and custom segmentation. (S4, O6 )
2. Strong motivation for customers
2. Double digit growth for revenues and earnings while competitors have lower production and sales volume. (S6, O7)
3. Remain profitable throughout the crisis
3. Having a strong brand name Harley-Davidson known for its name in associating with charity. (S1,O8)
THREATS 1. Honda sales are favorable particularly in Asia 2. Shares fall 10.4 % 3. Competitors has headquarters in U.S 4. Competitors offers traditional styling 5. Honda and Yamaha are more diversified than Harley in terms of product offering 6. Involvement to Lorillard that has potential related legal liability
ST STRATEGIES 1. Focusing on growth and corporate governance will be more diversified in terms of product offering. (S9, T5)
2. High production in sales will help them to increase their shares. (S7, T2)
4. Product customs and customizations
5. Provides insurance and related products to dealers and customers 6. Double digit growth for revenues and earnings 7. High productions and sales 8. Employee Ethics 9. Focus on growth and corporate governance WEAKNESSES
1. High price
2. Senior Leadership Group is not a decision-making body
4. Focus on growth and corporate governance Harley-Davidson strategic focus on global markets. (S9, O2)
WO STRATEGIES 1. Harley-Davidson must lower their product price to be the first for retail unit registration. (W1, O3) 2. The Harley-Davidson must be more diversified to have strategic focus on global markets. (W4, O2)
WT STRATEGIES 1. Harley-Davidson must be more diversified so they can compete on offering in traditional styling. (S4, T4)
3. Employees have no union 4. Competitors are more diversified
Threats-Opportunities-Weaknesses-Strengths (TOWS) is an important matching tool that helps managers develop four types of strategies; SO (Strengths-Opportunities) Strategies, WO (Weaknesses-Opportunities) Strategies, ST (Strengths- Threats) Strategies, and WT (Weaknesses-Threats) Strategies. SO Strategies uses a firm’s internal strengths to take advantage of external opportunities. WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities. ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats. WT Strategies are defensive tactics directed at reducing internal weaknesses and avoiding external threats.
b. Over-all Summary of Strategy Formulation Matrix
Strategies Market penetration, Market Boston Consulting Group (BCG) Matrix development, Product development, Divestiture Backward integration, Forward Strategic Position And Action Evaluation integration, Horizontal integration, (SPACE) Matrix Market penetration, Market development, Product development Market development, Market Grand Strategy Matrix (GSM) penetration, Product development, Horizontal integration, Divestiture, Liquidation Backward, Forward and Horizontal Internal-External (IE) Matrix integration, Market penetration, Market development, Product development Market penetration, Market TOWS development, Product development Related diversification, horizontal integration The table shows the strategy uses in every matrix. Majority of strategies that uses by the company are market penetration, market development and product development. These are the intensive strategies that needed a severe efforts from a Harley’s competitive situation with existing products is to develop. Using this kind of strategies is very hard, Harley-Davidson employed different divisions to pursue the intensive strategy and to avoid indebtedness. While the least strategy they have been using are related diversification and divestiture. These strategies are allowing a HarleyDavidson to gain control over distributors, suppliers and competitors.
c. Quantitative Strategic Planning Method (QSPM) STRATEGIC ALTERNATIVES 1 Related Diversification Key Factors
2 Market Penetration
Weighted score
AS
TAS
AS
TAS
0.14 0.06
4 -
0.56 -
2 -
0.28 -
0.05
3
0.15
2
0.10
0.05
4
0.20
3
0.15
products to dealers and customers 6. Double digit growth for revenues and earnings 7. High productions and sales 8. Employee Ethics 9. Focus on growth and corporate governance Weaknesses
0.07
4
0.28
1
0.07
0.06
3
0.18
2
0.12
0.08 0.07 0.07
4 -
0.32 -
3 -
0.24 -
1. High price 2. Senior Leadership Group is not a decision-making body 3. Employees have no union 4. Competitors are more diversified
0.14 0.06
2 -
0.28 -
2 -
0.28 -
0.07 0.08
4
0.32
3
0.24
Strengths 1. Strong brand name 2. Strong motivation for customers 3. Remain profitable throughout the
crisis 4. Product customs and
customizations 5. Provides insurance and related
1.00
Opportunities 1. Company shipment in international customers increased 2. Strategic focus on global markets 3. Comes first for retail unit registration in U.S 4. Company website used to market its products and services 5. Website features online catalog, use a dealer locator and place locator 6. Competes heavily in touring and customs segments 7. Competitors have lower production and sales volumes 8. Known for associating with charity Threats
0.07
-
-
-
-
0.09 0.05
4 -
0.36 -
3 -
0.27 -
0.08
2
0.16
4
0.32
0.09
2
0.18
4
0.36
0.08
-
-
-
-
0.07
2
0.14
2
0.14
0.07
1
0.07
2
0.14
1. Honda sales are favorable particularly in Asia 2. Shares fall 10.4 % 3. Competitors has headquarters in U.S 4. Competitors offers traditional styling 5. Honda and Yamaha are more diversified than Harley in terms of product offering 6. Involvement to Lorillard that has potential related legal liability
0.08
4
0.32
1
0.08
0.05 0.06
1 -
0.05 -
1 -
0.05 -
0.07
3
0.21
2
0.14
0.08
4
0.32
1
0.08
-
-
TOTAL
1.00
0.06
-
-
6.25
5.28
Quantitative Strategic Planning Matrix is the stage 3 of the strategy-formulation analytical framework. It is an analytical tool used in formulating strategies. It reveals the relative attractiveness of alternative strategies and it provides objective basis for selecting specific strategies. The Internal (Strengths and Weaknesses) Key Factors and the External (Opportunities and Threats) Key Factors enumerated and all the weighs in the QSPM Matrix were all from the IFE (Internal Factor Evaluation) and EFE (External Factor Evaluation) Matrixes respectively. Each factor was being rated as to its level of attractiveness with the scale of 1 to 4. Where 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 = most acceptable; 0 = not relevant. Assigning
the level of attractiveness, one must serve this question as the basis: Does this factor make a difference in our decision about which strategy to pursue? The QSPM sum total attractiveness scores of 6.25 versus 5.28. The final score determines how attractive one strategy is over another, making the decision-making or problem-solving process easier. QSPM is most used in major decisions. It was identified in strategy formulation that the strategy can be executed in two ways. One strategy is expanding their product line. The other strategy is to increase advertising. Our group came to a conclusion that expanding their product line is a better option. This is given by the Sum Total Attractiveness Score figure.
VI. Strategy Recommendation Based on the research we conducted regarding Harley Davidson Inc. we recommend the related diversification, market penetration, and product development strategy. 1. Related Diversification Related diversification is a process that takes place when a business expands its activities into product lines that are similar to those it currently offers. Harley Davidson should add new products or bring new types of recreational vehicles to new markets to enhance their current product lines. 2. Market Penetration Market Penetration is a strategy of increasing the market share of an existing product or promoting a new product. Seeking increased market share for present products or services in present markets through greater marketing efforts. It includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts. Having competitors like Honda and Yamaha, they are more focus on promoting their inexpensive products unlike the Harley Davidson. Harley Davidson should increase their advertising expenditures even though they have a strong brand name in order to increase their market and it is easy for them to eat up the competitor market share if they can provide some more customer benefit.
VII. Action Plan Period Action st 1 Expand the Quarter product lines and product development nd 2 Increase the Quarter advertising costs and market development
Men Top Management, Middle Management Top Management, Middle Management
Materials Raw materials
Methods Research and development
Machines Computers
Money P 500 M
Tarpaulins, billboards, flyers, websites
Commercials Computers
P200 M
VIII. Financial Projection
Motorcycles and related products revenue Gross profit Selling, administrative and engineering expense Restructuring expense Operating income from motorcycles & related products
Q1 Q2 1,273,369 1,569,047 456,510 563,817 236,995 248,038 11,451 6,220
Q3 Q4 1,089,268 1,010,898 377,904 321,957 223,982 267,209 9,170 1,634
Total 4,942,582 1,720,188 976,224 28,475
208,064
309,559
144,752
53,114
715,489
Financial services revenue Financial services expense Operating income from financial services
156,322 88,928 245,250
160,613 78,659 81,954
161,027 88,677 72,350
159,962 96,973 62,989
637,924 353,237 284,687
Operating income Investment income Interest expense Income (loss) before income taxes Provision (benefit) for income taxes Income (loss) from continuing operations Income (loss) from discontinued operations, net of tax Net income (loss)
275,458 1,933 11,495 265,896 93,861 172,035
391,513 2,231 11,595 382,149 134,899 247,250
217,102 1,447 11,438 207,111 73,110 134,001
116,103 1,758 11,505 106,356 35,717 70,639
1,000,176 7,369 46,033 961,512 337,587 623,925
172,035
247,250
134,001
70,639
623,925
IX.
Conclusion Based from the strategies we formulated the results in the Quantitative Strategic Planning Matrix shows that related diversification strategy is higher than the market penetration strategy. The related diversification has a score of 6.25 whereas the market penetration has a score of 5.28. Expanding their product line is the best strategy that Harley Davidson can use to increase their market. As a result, Harley-Davidson must implement their latest technology and facilities, widen up their product choices for the customers will help them get what are really the choice of the customers. With a strong brand image and a growing loyal customer base, Harley can maintain strong sales with effective marketing efforts. However, with revenues declining since 2007 and many projects currently underway, a stability strategy will help Harley evaluate its current condition and adequately prepare for the future. Horizontal diversification acquires or develops new product that could appeal to its current customer groups even though those new products may be technologically unrelated to the existing product lines. Develop the environment friendly motorcycles that can catch the attention of the new generation who is more concern in the environment. Building marketing opportunities, Harley Davidson can create new opportunities by joining changed customers’ taste and change their preferences in terms of company’s product line. Creating also a new market opportunities by learning from the competitors and finding out new technology advancement. All of this phase will be in charge of marketing research and development. In line with this, helping the firm expand overseas, Harley could use licensing agreements to enter into new foreign markets with least investments and risks. Harley-Davidson will continue for many more years if it can successfully complete the appropriate corporate and business strategies.
