• Save
Harley davidson Co. Strategic Audit
Upcoming SlideShare
Loading in...5
×
 

Harley davidson Co. Strategic Audit

on

  • 10,872 views

 

Statistics

Views

Total Views
10,872
Views on SlideShare
10,868
Embed Views
4

Actions

Likes
10
Downloads
0
Comments
2

3 Embeds 4

http://www.linkedin.com 2
http://cruiserbikinganswers.jusst.us 1
https://www.linkedin.com 1

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
  • May I please download this presentation.
    Semper-Fi
    Are you sure you want to
    Your message goes here
    Processing…
  • please send me your presentation
    i have next day presentation about harly com
    my email : abdelhamidelsadawy2010@gmail.com
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Harley davidson Co. Strategic Audit Harley davidson Co. Strategic Audit Presentation Transcript

  • Strategic AuditBusiness Strategies Tim Fowler
  • Harley-Davidson Motorcycle Company is considered a successful company for four key reasons… 1. Strong brand loyalty 2. Independent women riders 3. Increasing plant efficiency by reorganizing 4. Expanding international markets… which has lead to an increase in market share and cost savings … 2
  • Harley-Davidson has a strong brand loyaltyamong their customers• In 2011, 65% of people that purchased a new Harley-Davidson motorcycle in the U.S. had owned a Harley-Davidson previously in their lifetime.1• 57% of people that purchased a new motorcycle around the globe had previously owned a Harley-Davidson.1• In the U.S. Harley-Davidson owns over 1 50% of the motorcycle market.2• The Harley Owners Group (H.O.G) is a site where the owners of Harleys can register to receive special benefits.3• The Harley Owners Group has over 1,400 chapters all over the world.3 11http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=irol-demographics&locale=en_US&bmLocale=en_US2http://finance.yahoo.com/news/harley-davidson-remains-outperform-153018666.html3http://www.harley-davidson.com/en_US/Content/Pages/HOG/HOG.html 3
  • Harley-Davidson is expanding their target market to include independent women riders • According to theMotorcycle Industry Council, women riders have increased to 7.2 million of 27 million riders.1 • Harley-Davidson is producing more motorcycles that are low to the ground, so women can plant their feet firmly at rest.2 – They have also developed narrower seats and softer clutches; they are also adjusting handlebars and windshields to make their bikes more comfortable for smaller riders. 2 • Approximately 12% of all Harley-Davidson motorcycle sales are to women. Roughly 32,000 new bikes in 2006 – compared to 4% in 1990, and 9% in 1998, and 10.6% in 2003.3 • It is estimated that women will spend around $300 million on Harley-Davidson motorcycles this year in the United States, not including accessories, riding gear, or clothing.3 • In July 2011, Harley-Davidson launched the $7,990 Harley Superlow, designed to appeal to both women and first-time riders.4 – The bike is 150 pounds lighter than a typical Harley-Davidson motorcycle, with a generous rear-suspension travel, a deeply cushioned seat, easy-reach handlebar and the lowest seat (25.5″) in Harley’s 32-bike lineup.4 • The company now has a 53% point market-share lead among female motorcycle riders.41http://www.cbsnews.com/8301-201_162-57465216/women-riding-motorcycles-in-increasing-numbers/2http://www.nytimes.com/2007/07/25/business/25biker.html?_r=03http://www.nytimes.com/2007/07/25/business/25biker.html?_r=04http://cyrilhuzeblog.com/2010/10/03/harley-davidson-scoring-high-after-intensively-courting-women/ 4
  • Harley-Davidson is increasing theirefficiency by reorganizing their plants• Restructuring the plants has allowed the • By reorganizing their plants, Harley-Davidson will company to have “surge capability” to match in turn increase their EPS. The impact of production with seasonal demands.1 restructuring costs and benefit changes in 2012 and 2013, is add +$0.25 in 2012, and another• The company is also restructuring the inner- +$0.25 in 2013.3 workings of the plants to allow for more employee feedback.1 Harley-DavidsonAnnual Units: 2000-2011• Harley-Davidson has eliminated the problem with bottlenecks in the development process by loading finished products directly on the trucks; this doubles the staging capability in the plants.1• Improvements that used to take months, now are completed in only weeks.1• As a result of these changes, Harley-Davidson will build more motorcycles in one facility this year than they did in all 41 facilities in 2011.1• Harley-Davidson also is trying to reduce the 3 amount of time it takes to develop a new product from five years down to three. 2 Despite some reasonable unit growth this year, Harley-Davidsons bike units are still substantially below the average level of the past 10 years. The trough in unit sales appears to have come as recently as 2010.3 1http://www.harley-davidson.com 2http://www.manufacturing.net/news/2010/11/harley-davidson-restructuring-plans-in-place 3http://seekingalpha.com/article/317846-harley-davidson-could-have-25-upside-based-on-restructuring-benefits-and-volume-increases 5
  • Harley-Davidson has expanded internationally into other markets • In 2011, Harley-Davidson announced the opening of their Latin American headquarters in Miami, FL.1 • Harley-Davidson is now implementing a “multi-generational and multi-cultural marketing strategy” as it looks to increase sales to non-core customer (women, young adults, and ethnically diverse adults) without alienating its core customer base.1 • Harley-Davidson predicts that sales outside of the United States will exceed 40% by 2014.2 • By implementing permanent headquarters in Miami, Harley-Davidson is able to better accommodate Latin American customers more quickly.3 • “There is a longstanding history between Hispanics and Harley-Davidson and we want to celebrate it,” said Karina Jaramillo-Saa, manager of market outreach, Harley-Davidson Motor Company.3 • “Harlistas” section on website showcasing stories of Latino riders and their bikes, also features short films on Latino heritage and culture.3 • For the full year 2012, retail unit sales of new Harley-Davidson motorcycles grew 6.2% worldwide, with increases of 6.6% in the U.S. and 5.6% internationally compared to 2011.3 • Dealers sold 249,849 new Harley-Davidson motorcycles worldwide in 2012, with retail unit sales up 39.2% in the Latin America region, 14.3% in the Asia Pacific region and 6.2% in the North America region (U.S. and Canada).31http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=irol-newsArticle&id=16167762http://seekingalpha.com/article/281976-harley-davidson-riding-on-international-growth-and-new-riders3http://www.motorcycle-usa.com/568/3071/Motorcycle-Article/Harley-Davidson-Celebrates-Hispanic-Riders.aspx 6
  • Harley-Davidsons strategies have lead to increased market share and cost savings• Harley-Davidson’s international sales has increased.3 – In 2006, 80% of sales were in the U.S. – By 2010, only 60% of sales were in the U.S.• Restructuring activities have saved Harley- Davidson over $217 million dollars.1 1• In the fourth quarter of 2010 revenue was $697.8 million, up 26.4% compared to 2009.2• Harley-Davidson’s market share in the U.S., their biggest market, increased 54.9% in 2010, from 53.3% in 2009, and 45.4% in 2008, for the sales of the 651+cc.2 1 * Estimated savings 1http://www.zacks.com/stock/news/76075/harley-davidson-remains-outperform 2http://www.cyclenews.com/articles/industry-news/2011/01/25/harley-davidson-increases-u-s-market-share 3http://www.trefis.com/stock/hog/articles/65441/harley/2011-07-21 7
  • Harley-Davidson faces 3 external opportunities and 3 external threats External Factor Analysis SummaryOpportunities: Comments/Data:1. The improvement of the economy in 1. China has entered the World Trade other countries Organization.2. A new generation/younger 2. Anything can be customized from generation to market to – clothing, cars, food, toys, etc. customization trend3. The economy (current & future)Threats: Comments/Data:1. The aging baby boomers population 1. Baby boomers make up2. Competitors approximately 28% of the U.S.3. The economy (2008-current) population. 2. BMW holds a considerable size of the market share in Europe. 3. The amount of disposable income is dramatically lower. 8
  • Improving economies around the world will provide theopportunity to expand into other markets• Chinas economic reforms and Asia: 2012 GDP Growth Forecast entry into the World Trade Organization have improved the companys investment opportunities and warmed up the countrys leisure heavyweight motorcycle market.1• The International Monetary Fund (IMF) and the World Bank have helped many countries to improve their economic management.2 – They have provided temporary financial assistance to countries to help ease balance-of-payment difficulties and offered training for government finance officials.• The Universal Postal Union (UPU) facilitates the exchange of international mail and develops social, cultural and commercial communications between peoples and businesses with up-to-date 3 postal services and products.21https://www.chinabusinessreview.com/public/1201/miller.html2http://www.un.org/un60/60ways/ec_dev.shtml3http://www.imf.org/external/pubs/ft/weo/2012/01/pdf/text.pdf 9
  • Younger generations are demanding customization for their products… • In todays market, people can customize just about anything they buy.1 – Anything can be customized, from clothing, cars, food, toys, electronic, etc. – Many brands are taking products to the next level by offering incremental customization to refresh established products. – The customization trend ranges from products that spice it up with customized features, to products that are customized from the inside out. • Founded 13 years ago, Build-A-Bear Workshop was an early entrant into mass customization. • With more than 400 stores worldwide, it has successfully scaled to become the largest chain dedicated to the create-your-own trend. …which is a great opportunity for Harley-Davidson1http://www.articlesbase.com/marketing-tips-articles/the-customization-consumer-trend-2953150.html 10
  • The economy is an excellent opportunity for Harley- Davidson because the rise in sales is steadily growing with each year • Any sales increase is a positive sign for the economy, but sales of high-end equipment are especially important.1 – In the technology sector, large servers and other expensive electronic equipment have increased. The purchase of specialized medical testing equipment by hospitals and labs has also increased from the end of 2010 through early 2011. • According to the Brookings Institution, in the third quarter of 2010, housing prices rose in 80 of the 100 largest metropolitan areas in the U.S.1 – They rose 0.6 percent overall among those 100 cities. While the gain is small, its significant because each of those 100 cities had experienced a decline in housing prices for the previous three quarters. • Standard & Poors 500 Index shows 2010 was the third-best year for corporations since 1998.1 – Even adjusted for inflation, corporate profits were much more robust in 2010 than in 2009, showing a 17 percent increase. – This figure excludes financial corporations, who had such a terrible 2009 that theyd make those profits look artificially huge if they were included. • The National Retail Federations 2011 economic forecast predicts a 4 percent increase in retail sales.1 – Retail growth has enjoyed seven months of continual growth, and retailers had a pretty good 2010 holiday shopping season.1http://www.howstuffworks.com/10-signs-the-economy-is-improving.htm#page=1 11
  • The aging baby boomer population is a major threat to Harley-Davidson • Baby boomers make up approximately 28% of the U.S. population.1 • By 2020, the population of Americans between ages 55 to 64 will have increased 73% since 2000.2 • On January 1, 2011, as the baby boomers begin to celebrate their 65th birthdays, 10,000 people will turn 65 every day. This trend will continue for 20 years.5 • 20% of Harley-Davidson riders are over the age of 55.3 4 – Someday thousands of those Harley- Davidson riders will have to trade in their hogs for rocking chairs The increasing number1http://www.babyboomer-magazine.com/news/165/ARTICLE/1437/2010-04-04.html of Americans 65 and2http://www.huffingtonpost.com/2012/04/02/aging-in-america-baby-boomers-arianna-huffington_n_1397686.html3http://www.brandchannel.com/features_effect.asp?pf_id=55 older is a growing trend4http://insiderlouisville.com/news/2011/02/02/louisville-adds-dharma-construction-building-long-term-care-industry-hub/ 125http://mayoresearch.mayo.edu/aging_center/aging_demographics.cfm
  • A threat to Harley-Davidson is competition from other companies Harley Davidson faces competition from four major companies: Suzuki, Yamaha, BMW, and Polaris. • BMW is currently Harley-Davidson’s biggest competitor. • BMW currently holds a considerable size of market share in the European market. BMW and Harley-Davidson currently hold the same brand image when it comes to consumers. BMW continues to fashion their marketing strategies to appeal to current Harley-Davidson customers.1 • Suzuki is a Japanese company that holds a large market share in the Asian markets. • They have a diverse portfolio of different motorcycle styles that compete with Harley-Davidson. They are considered competition to Harley-Davidson because they develop motorcycles that are affordable.1 • Yamaha like Suzuki manufacture a wide variety of motorcycle styles that appeal to consumers. • Yamaha is a major competitor to Harley-Davidson because they can supply parts to other manufactures in the industry.1 • Polaris is Harley-Davidson’s biggest competitor in the 1400cc and up engine size for motorcycles. • Polaris has been able to compete with Harley-Davidson by offering bikes that are less expensive. Polaris was able to compete with Harley-Davidson by purchasing Indian.21http://bmw.ezinemark.com/harley-davidson-competitor-analysis-1866a32568f.html2http://money.cnn.com/2012/10/03/auto/harley-davidson-polaris.fortune/index.html 13
  • The economy has been a major threat to Harley- Davidson because of the lack of disposable income in the United States • The disposable income of Americans is still trying to reach what it was in 2008. The average measure of disposable income on a per capita basis is still 20% lower than what it was in 2007. 1 • The average per capita disposable personal income rose 4.7% from four years ago, which is the smallest gain since the late 1940s. Adjusted for inflation, the income of the average American is 2.1% lower than four years ago. 1 • Data released by the Commerce Department showed that personal income fell 3.6% in January 2013.3 – Real personal disposable income, after taxes and inflation are taken out, fell by 4% which was the biggest monthly drop in half a century. • Disposable Personal Income in the United States decreased to 11,923.20 Billion in January of 2013 from 12,422.40 Billion in December of 2012.4 41http://www.nytimes.com/2012/06/09/business/economy/as-recovery-drags-on-income-and-wealth-lag.html?_r=02http://www.nytimes.com/interactive/2012/06/08/business/Earning-Less-and-Worth-Less.html?ref=economy3http://business.time.com/2013/03/05/why-many-americans-feel-like-theyre-getting-poorer/4http://www.tradingeconomics.com/united-states/disposable-personal-income 14
  • Harley-Davidson faces 4 internal strengths and 3 internal weaknesses Internal Factor Analysis SummaryStrengths: Comments/Data:1. Harley-Davidson can reduce production 1. They are consolidating their current 41 buildings cost/streamline their factories into 1 large facility2. They have created a strong brand loyalty and 2. In 2011 Harley-Davidson made over a billion dealer network dollars in selling Harley-Davison branded3. They have great cash equivalents merchandise4. They have the opportunity to expand their 3. HOGs liquidity remains strong, with $1.1 billion customization options of cash, cash equivalents and marketable securities 4. H-D1™ is the full customization process made easyWeaknesses: Comments/Data:1. Their price point is too high 1. The Harley-Davidson Financial Services financed2. Harley-Davidson has created quite a bit of debt roughly 47.9% of all new Harley-Davidson3. They have a limited market 2. Harley-Davidson current has an estimated $5.10 billion dollars in debt 3. In 2003, baby boomer riders outnumbered Gen Y motorcyclists almost four to one 15
  • An internal strength of Harley-Davidson is their low production costs • Consolidating their current 41 buildings at the York Plant to one large new facility in Kansas City, MO.1 • Brought in automation to reduce their work force by up to 50%.1 • Harley-Davidson no longer needs peak production levels to achieve strong profits.1 • They have negotiated new terms with unions to help control production costs.1 • Revamping has allowed Harley-Davidson to quickly increase or cut production in response to shifting demand.1 • In 2013, they will have finished all of the reorganization of the major plants which brings the large cash flows to an end.1 • Revenue has not fully recovered, but profits are increasing due to this strategy.1 1 Harley-Davidson is slowly recovering their Net Income although their sales are still fairly low.1http://online.wsj.com/article/SB10000872396390443720204578004164199848452.html 16
  • One of Harley-Davidson’s internal strengths istheir strong brand loyalty and devoted marketfollowing• In 2011 Harley-Davidson made Sales by Product Line over a billion dollars in selling Harley-Davison branded merchandise and accessories.1• Harley-Davidson established Harley Owners Groups (HOG), a motorcycle group with over a million members belonging to over 1,400 owner groups across the U.S.2• They grew their brand loyalty by sponsoring huge motorcycle rallies in Florida and South Dakota, which each attract over half a million riders each year.2 31http://media.corporate-ir.net/media_files/IROL/87/87981/HD.pdf2http://cultbrands.net/harley-davidson/3http://www.harley-davidson/com 17
  • Harley-Davidson’s strong cash equivalents is an internal strength • HOGs liquidity remains strong, with $1.1 billion of cash, cash equivalents and marketable securities as of April 1, 2012. 1 • After backing out its debt, it was in a $761 million net cash position. This was despite the company making another $200 million voluntary contribution to its pension plans.1 • Fitch, a company that rates corporate credit, recently upgraded Harleys outlook from "Negative" to "Stable" due to: "[Harleys] leading market position, strong cash position and relatively low debt levels."2 • This strong cash position gives Harley-Davidson the ability to respond to negative conditions, expand or acquire debt relatively easy to accomplish strategies for the future.21http://www.reuters.com/article/2012/07/20/idUSWNA1575201207202http://motorcycles.about.com/b/2010/08/04/harleys-upgrade-to-stable-suggests-light-at-the-end-of-the-tunnel.htm 18
  • Customization options is another internal strength for Harley-Davidson H-D1™ is the full customization process made easy. Only H-D1™ brings the exclusive parts, processes and expertise together so you can build your one-of-a-kind Harley-Davidson® motorcycle.1 • Fit – A good fit is like your favorite pair of jeans - the better you fit your motorcycle, the better the ride. The right fit is crucial for maximizing comfort and getting the most out of every ride. Once youve chosen your Harley, take the time to custom fit your handlebars, seat, foot controls and suspension. To find the right fit for you visit the H-D Fit Shop.2 • Function – Decide how you want to roll. Solo and stripped down, two-up and fully loaded, or anywhere in between, you can tailor any H-D motorcycle to meet the demands of the byways. If you crave maximum storage capacity and on-road versatility, detachable accessories can be changed in seconds.2 • Style – With Harley, your custom style possibilities are endless. Have an overall plan to maximize installation efficiency and minimize your time off the road.2 • Performance – Lets talk torque, horsepower, brute force and speed. Whether youre into aggressive riding or need to haul a heavy load, Screamin Eagle® Performance Parts are proven on the track and engineered for the streets.2 Factory Customization From your plan, to our factory, to you. In as little as 4 weeks.3 3 Easy Steps: 1) H-D1 Bike Builder Only you can design your perfect bike. Use the online H-D1 Bike Builder tool to build a bike that fits your style and personality.3 2) Head to your dealer Bring your plan to your Harley-Davidson dealer for consultation and to place your order.3 3) We build it Our employees go to work, building your motorcycle according to your design and in about 4 weeks* your masterpiece will be ready for you at your dealer.31http://www.harley-davidson.com/en_US/Content/Pages/H-D1_Customization/h-d1_customization.html?locale=en_US&bmLocale=en_US2http://www.harley-davidson.com/en_US/Content/Pages/H-D1_Customization/guide-to-customizing.html?locale=en_US&bmLocale=en_US3http://www.harley-davidson.com/en_US/Content/Pages/H-D1_Customization/factory-customization.html?locale=en_US&bmLocale=en_US 19
  • The number of motorcycles that are beingfinanced is an internal weakness• A motorcycle loan is a way for those who dont have the cash on hand to buy outright.1• At the end of 2011, the net accounts receivables for Harley-Davidson was $4,026,214. At the end of 2012, it rose to $4,038,807. – Those numbers are astonishing because that is the amount of money that consumers owe to Harley-Davidson based on their purchases on credit.2• Asset quality performance has shown stabilization and, recently, improvement. Annualized losses on HDFS’ managed retail motorcycle loans were 2.04% during the first half of 2010 compared to 2.69% during the first half of last year.3• The Financial Services segment recorded operating income of $62 million in the third quarter, compared to operating income of $50.9 million in the year-ago quarter. – The increase in year-over-year operating income was largely the result of continued improvement in credit performance at Harley-Davidson Financial Services. Through nine months, operating income from financial services was $212 million, compared to operating income of $138.4 million in the first three quarters of 2010.4• The Harley-Davidson Financial Services financed roughly 47.9% of all new Harley- Davidson purchases in the United States in 2010, which shows that Americans do not have the disposable income that they have had in prior years.51http://www.ehow.com/about_4680984_motorcycle-loans.html2http://www.harley-davidson.com/en_US/Content/Pages/HD_News/Company/news.html?article=en_US/News/1611_press_release.hdnews3http://motorsportsnewswire.wordpress.com/2010/08/02/fitch-raises-outlook-on-harley-davidson-debt-0802101/4http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=irol-newsArticle&id=1618163 205http://www.asphaltandrubber.com/banter/five-interesting-facts-harley-davidson-annual-report/
  • Harley-Davidson has an internal weakness because of the amount of debt they have • Harley-Davidson current has an estimated $5.10 billion dollars in debt.1 • For the first nine months of 2012, Harley Davidson had an interest expense of 4 $34,528,000.2 • Harley-Davidson currently has a 72.1 This graph shows the long term debt times total liabilities to that Harley-Davidson has. It is broken down by quarter, and starts from the total assets ratio.3 third quarter of 2010, and is extended until the fourth quarter of 2012.1http://finance.yahoo.com/q/ks?s=HOG+Key+Statistics2http://www.sec.gov/Archives/edgar/data/793952/000144530512003553/hog-09302012x10q.htm3http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=HOG 214http://www.wikinvest.com/stock/Harley-Davidson_(HOG)/Data/Long-Term_Debt
  • Harley-Davidson’s limited market is aninternal weakness• A New Generation is Riding – “In 2003, baby boomer riders outnumbered Gen Y motorcyclists almost four to one. But Gen Y motorcycle ownership grew 62 percent since 2003, putting the current ratio of baby boomers to Gen Y at two to one.”1 – Due to fuel prices, more riders are transitioning to using motorcycles more often for transportation. 1 • Riders are doing it for transportation, not just recreation. Motorcycling for Americans is primarily about recreation and the pure joy of riding, but among the reasons given for motorcycling, transportation climbed to second place in the 2008 survey.1• Sport Bikes Rule With Gen Y – 1/2 of baby boomer motorcyclists surveyed ride traditional cruisers, but among Gen Y motorcyclists, modern, high-tech sport bikes lead the way with 30% of those riders.1• Motorcyclists Make More Money – While owning a motorcycle is much more affordable in many ways compared to having a car, the median household income of motorcycle owners exceeds that of the average American. Two-wheel households average $59,290 while the U.S. average is $50,233.1• Of all the motorcycles registered in the USA, (6,567,197) 4.3% of them are used for year-round primary transportation (282,389), with an additional 9.9% used seasonally for this purpose (932,542 total).2• Out of a total 129,141,982 commuters in this country 147,703 ride motorcycles to work regularly. That’s about 1.1 percent.21http://www.womenridersnow.com/pages/story_detail.aspx?lid=12212http://trafficsafety.org/safety/sharing/motorcycle/motor-facts/motorcycling-to-work.com 22
  • Based on EFAS and IFAS analyses, we haveidentified 13 potential strategies and a ‘wildidea’… Potential and Recommended Strategies, and a ‘wild idea’1. Harley-Davidson could license their 7. Expand into more areas of Southlogo to other companies and do America making their customizationpartnership deals options more affordable for people to use2. Create a three wheeler type bike to 8. Create focus groups to get feedbackmarket to their aging baby boomer from the biking communitygeneration 9.Create a fuel efficient bike3. Introduce a build your bike from 10. Enter the ATV marketscratch option 11. Electric/Hybrid bikes4. Sell a line of cheap sport bikes 12. A bike you can ride on waterunder a different brand name 13. A bike shell5. Market to a younger generation 14. Wild Idea: Hover bikewith a more affordable line of‘beginner’ bikes6. Create a new sportier bike (crotchrocket style) …and we recommend 5 of these ideas for implementation 23
  • The key components of our first strategyincludes reaching out to current clientele…• Beginning to design their new ‘easy rider’ bikes• Reach out to already established clientele that are moving up in age• Start the initiative as soon as they have a bike available• Use their own stores / facilities to reach their customers• Reach their customers through the Harley-Davidson forums that exist• Start working on a design immediately with their creative engineers• Research similar bikes that other companies have made as a starting off point• Test their idea at biker gatherings like Sturgis (and similar venues) 24
  • …which presents several benefits andrisks to Harley-Davidson Key benefits and risks of strategy baby boomers Benefits Risks • This idea will keep clients that • Current clients won’t want to are already Harley-Davidson switch to the new kind of bike owners riding the bikes long • It will change the overall image into their retirement for Harley-Davidson from • The idea expands on a market “tough” to “accommodating” that Harley-Davidson already • The cost of developing a new line has of bikes will add to Harley- • Will create a “bike for any age” Davidson’s overall debt issues. promotion for Harley-Davidson 25
  • The key components of selling cheaper starterand sport bikes under a different brandnameinclude marketing a new brand…• Design the brand name, logo, and register them• Design cheaper bikes that more customers can afford• Create the supply chain – including cheaper lightweight materials – new dealerships• Design a market campaign• Market the new brand• Evaluate the results and make improvements 26
  • …which present several benefits and risks toHarley-Davidson Key benefits and risks of selling cheaper starter bikes Benefits Risks• New markets for Harley- • Requires significant resources Davidson to compete in • May have to issue more debt• A new source for profits • The process might take a long• Keeps the Harley-Davidson time to see a profit image of a higher priced quality • Consumers may avoid buying brand bikes from a new brand in favor• More diversification of established brands• Harley-Davidson could use the • Harley-Davidson may not be ideas and experiences from the able to keep costs low enough new brand to improve current to compete on prices process • Employees and management may resist the new brand 27
  • The key components of the sport bike strategyinclude building cheaper and fastermotorcycles...• Building motorcycles that are faster• Motorcycles that are cheaper• Motorcycles that are Light weight• Sleek looking• Motorcycles that appeal to the younger generation• Less noisy 28
  • …which present several benefits and risksto Harley-Davidson Key benefits and risks of the sport bike strategy Benefits Risks• It will appeal more to younger • Their current customer base could riders such as Generation Y alienate them• They will have a motorcycle • Could lose loyal customers that will be in same category as • If a motorcycle is introduced a their major competitors lower price point it could dilute • BMW, Suzuki, and Yamaha Harley-Davidson motorcycle values• It would be a motorcycle that • Has the possibility to fail because would be introduced at a lower Harley-Davidson’s competitor have price point already perfected the art of making• With the economy being what sport bikes it is, people would get the Harley-Davidson brand at a lower price 29
  • The key components of the fuel efficient bikestrategy include increasing fuel economy andMPG…• Currently, Harley-Davidson’s most fuel-efficient bike is the Iron 883 weighing 553lbs and gets 51 MPG – Prototype: 400-500 cc Engine with MPG greater than 60 MSRP around $6,000• Smaller engines accompanied by smaller frames• Focus on consumer wants and needs with smaller bikes• Target fuel economy: greater than 60 mpg• More diverse selling markets• More transportation use 30
  • …which presents several benefits andrisks to Harley-Davidson Key benefits and risks of a fuel efficient bike Benefits Risks • More diverse selling markets • Bike will lose “Harley- such as India and Latin America Davidson” brand feel • Motorcycles can be used for • Customers will not support transportation purposes more brand change • Lower selling costs • Market to entry-level riders and • May not have classic younger consumers “Harley Davidson” sound • Smaller, more eco-friendly bikes • Overpriced compared to may appeal to new riders competitors • Compete with over brands such as Honda, Kawasaki, and BMW who offer fuel-efficient models already 31
  • The key components of entering the ATVmarket includes expanding their customerbase…• Increases customer base due to new product line.• A unique advertising campaign marketed not only to Harley- Davidson riders, but also to outdoor enthusiasts in general.• If production design and pricing schedules were developed now, the company could be geared towards release in Spring 2014.• Market through current Harley-Davidson channels (commercials, dealerships, etc.)• Get feedback from / demonstrate a model to current clients at events (such as Sturgis). 32
  • …which presents several benefits andrisks to Harley-Davidson Key benefits and risks of entering the ATV market Benefits Risks 1. A new source of revenue for 1. Products may be too Harley-Davidson. expensive for people to 2. Dedicated following already reasonably afford. exists; the company would now 2. May not be “off-road” be meeting an additional need. enough. 3. New market and new potential 3. ATVs for recreation or customers. transport? The company 4. Freedom for Harley to design would have to decide. from scratch to meet the needs 4. The demand for ATVs may of their customers. not be high enough to 5. Steal market share from some justify production. competitors. 5. Could potentially alienate current customers. 33
  • The key components of the “wild idea” ofcreating a hover bike includes developing anti-gravitation technology…• It would be made from lightweight materials• It would feature an anti-gravity mechanism that would allow the bike to rise to any height• Engineered for maximum enjoyment and freedom• It would still feature the traditional Harley-Davidson look and sound• It would feature an innovative way for the bike to stay parked so it does not scrape the bottom of the bike.• Engineered with safety features that would keep the rider from falling off the bike 34
  • …which presents several benefits and risks toHarley-Davidson Key benefits and risks of the hover bike Benefits Risks1. It would be the first of its kind to 1. Could anger some of the “old be manufactured school” riders2. It would reduce the chance of an 2. Could be a complete flop, and accident with another vehicle waste the company’s time and3. It would reduce the time of the money. commute for the user 3. Research and Development4. It could virtually go any where would be costly to design the since it does not touch the new product. ground 4. It could be unreliable since it5. It would allow the user to avoid would be the first of its kind any traffic on their commute 35
  • The ATV strategy will take 1 ½ years to complete and willcost approximately $34,350,000 to implement Strategy ATV action plan and costsSample Action Plan, with Cost EstimatesItem Description Responsibility Duration Units Start Date End Date Estimated CostCollect information from client base Marketing Dept. 6 Months 4/1/2013 9/30/2013 $300,000Create team of professionals to design the product R&D Dept. 6 Months 4/1/2013 9/30/2013 $1,500,000Gather research on exisiting production plants CFO 3 Months 4/1/2013 7/1/2013 $0Inform internal employees of new direction CEO 2 Months 6/1/2013 8/1/2013 $75,000Build prototypes of possible design ATV specialist 3 Months 10/1/2013 1/5/2014 $1,500,000Secure component suppliers Operations Manager 2 Months 10/1/2013 12/1/2013 $0Build production plant CEO / Construction Co. 9 Months 7/1/2013 4/1/2013 $7,500,000Create marking plan Marketing Dept. 2 Months 10/1/2013 12/1/2013 $150,000Implement new advertising campaign Marketing/Sales team 2 Months 1/5/2014 3/1/2014 $750,000Take product models to shows/events to debut Marketing/Sales team 4 Months 2/1/2014 6/1/2014 $75,000Take pre-orders Sales Team 2 Months 6/15/2014 8/15/2014 $0Mass produce ATVs Operations Manager 5 Months 6/15/2014 11/15/2014 $15,000,000Distribute to current sales facilities Distribution Center 2 Months 8/1/2014 8/15/2014 $7,500,000 Total $34,350,000 Team estimates 36
  • … and there are several key implementation considerations thatmust be addressed for the ATV strategy to be successful.ATV strategy key implementation considerations• This will be a costly venture, that will take a significant amount of time to complete.• There will be a lot of data that is collected in the beginning of this strategy; all of which must be considered before progressing further with the project.• Current Harley client’s feedback will be vital to the progression of this new venture.• Harley may have to consider changing it’s image to accommodate a new product line. 37
  • Success of the ATV strategy will beassessed through financial and customermeasures… ATV Strategy – Financial and Customer Measures Measurement Area Baseline Target Financial 1. The R&D within 1. R&D under $95,000 budget $100,000 2. Total budget 2. Total budget stays $1,930,000 under 1,930,000 3. Earnings per share** 3. Earnings per share** 4. Profit Margin** 4. Profit Margin** Customer 1. ATV is affordable 1. Affordable, yet good 2. Under $10,000 quality ($4,000-10,000) 2. Price competes with 3. Track amount of competitors purchases 3. 10,000 ATVs made and sold every year 38
  • …as well as through business process, andinnovation and learning measures ATV Strategy – Business Process and Innovation and Learning Measures Measurement Area Baseline Target Business Process 1. Effective and efficient 1. Comparable to biggest operations while staying under competition in the market budget 2. Operations fulfilling 2. Keep operations under production needs of 10,00 ATVs budget 3. Keep Inventory turnover 3. Inventory turnover 8.42** 8.42 ** 4. Cash Conversion Cycle** 4. Cash Conversion Cycle** Innovation and Learning 1. Track new product lines emerging 1. Research 4 new product lines in on the market depth every year 2. Track customer wants and needs 2. Research recent ATV trends every in ATV (survey 1 per year) 6 months 3. Research customer feedback on 3. Track feedback on competitors ATVs (2 surveys per year) (Compile once per year) 4. 0 people trained 4. Train 2 people per store 5. Duration** (4 years 9 months) 5. Duration** 4 years target according to task descriptions in section5 39
  • Harley-Davidson’s five year projected inflowsand outflows for the ATV strategy… Implementation Year 1 Year 2 Year 3 Year 4 Year 5 TotalInitialinvestment ($34,350,000) $0 $0 $0 $0 $0 ($34,350,000)Cost ofgoods sold $0 ($37,500,000) ($75,000,000) ($112,500,000) ($135,000,000) ($105,000,000) ($465,000,000)Sales $0 $50,000,000 $100,000,000 $150,000,000 $180,000,000 $140,000,000 $620,000,000Net per year ($34,350,000) $12,500,000 $25,000,000 $37,500,000 $45,000,000 $35,000,000 $120,650,000Team estimates 40
  • …will provide a ROI of 24%• Inflows: $620,000,000.• Outflows: $499,350,000.• ROI: (620,000,000 – 499,350,000) = 24% 499,350,000 41
  • Questions? 42