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Strategic Audit Report 2009 GHOST RIDER CREWS Son Thai Thanh [Vincent] – 5162313 Trinh Ly Le [Kelly] – 5162319 An Vo Thi Thuy [Anna] – 5162302 Vy Vo Thuy [Rachel] – 5162320 Thao Doan Trung [Ryan] – 5162315 Minh Tran Quang – 5162309
Company Overview In 2008, Harley-Davidson’s net revenue decreased 2.3 percent to $5.59 billion compared to 2007, on an 8.2 percent reduction in shipments of Harley-Davidson® motorcycles. Net income decreased 29.9 percent from the prior year to $654.7 million, reflecting both the performance of the Company’s motorcycle business and lower profitability at Harley-Davidson Financial Services. Revenue from sales of Harley-Davidson motorcycles decreased to $4.28 billion in 2008, a decline of 3.8 percent from 2007. Revenue from Genuine Parts and Accessories in 2008 totaled $858.7 million, a 1.1 percent decrease from the previous year, and General Merchandise revenue was $313.8 million, an increase of 2.8 percent compared to 2007. Harley-Davidson continues to effectively manage its balance sheet and realized a return on invested capital (ROIC) at the end of 2008 of 17.0 percent.
Company Overview The Company’s share price declined 63.7 percent during 2008, further reflecting the impact of macro-economic conditions on Harley-Davidson’s performance. For the ten-year period ending on December 31, 2008, Harley-Davidson shares experienced a negative compound annual total return of 2.2 percent per year, which compares to a positive compound annual total return of 13.9 percent for the ten years ending December 31, 2007. The Company paid out dividends of $1.29 per share in 2008, a 21.7 percent increase over 2007. Harley-Davidson has paid a dividend every year since 1993.
Company Overview Mission: "We fulfill dreams through the experiences 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." Objectives "We deliver experiences“ Developing relationships with all stakeholders customers, employees, investors, suppliers, governments, and society. Provide a good quality cycle Employees are both enthusiasts and customers Continue growth of 7 to 9% annually Expand customer base Rebuild investor's confidence in Harley Davidson
Strategies 1981 13 H-D executives, including William Davidson (grandson of founder Arthur Davidson), conducted a leveraged buyout of AMF to reacquire H-D and ward off bankruptcy of the company. Implemented Total Quality Management Implemented Just-In-Time inventory Lobbied Washington for tariffs on imports Direct marketing to the loyal customer base Sponsored the Harley Owners' Group (HOG) Launched Super Ride to attract a new customer base Offered customers a free one-year membership to groups, publications, receptions, etc.
Policy statement Harley-Davidson believes in protecting the environment. The Company is committed to the advancement of operating and management practices that minimize, within reasonable limits, the impact of its operations on the environment.
2008 BOARD OF DIRECTORS, HARLEY-DAVIDSON, INC. BARRY K. ALLEN: Senior Advisor, Providence Equity Partners President, Allen Enterprises, LLC RICHARD I. BEATTIE : Chairman, Simpson Thacher & Bartlett LLP 3. JEFFREY L. BLEUSTEIN : Chairman of the Board, Harley-Davidson, Inc. 4. GEORGE H. CONRADES : Executive Chairman, Akamai Technologies, Inc. 5. JUDSON C. GREEN : President and Chief Executive Officer, NAVTEQ 6. DONALD A. JAMES : Chairman and Chief Executive Officer, Deeley Harley-Davidson Canada/Fred Deeley Imports Ltd. 7. SARA L. LEVINSON : Former President of the Women's Group of Rodale, Inc. 8. N. THOMAS LINEBARGER : President and Chief Operating Officer, Cummins, Inc. 9. GEORGE L. MILES, JR. : President and Chief Executive Officer, WQED Multimedia 10. JAMES A. NORLING : Chairman of the Board, Chartered Semiconductor Manufacturing Ltd. 11. JOCHEN ZEITZ : Chief Executive Officer and Chairman of the Board, Puma AG 12. JAMES L. Z IEMER : President and Chief Executive Officer, Harley-Davidson, Inc.
External environment: Opportunities The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world Women and younger riders are increasingly becoming interested in bikes The international heavy weight market is growing and is now larger than the U. S. heavyweight market. Market share increasing in Europe and Asia for the last two years. Increasing demand in US markets for bikes. 92% of its motorcycle customers intend to repurchase. Customers value quality parts. Harley-Davidson have a good brand value among its customers and in U.S people.
External environment: Threats Harley’s ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years. High rise in the Oil prices. Harley’s average buying age is 42 years old and increasing. The European Union’s motorcycles noise standards are more stringent than those of Environmental Protection Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified. Environmental protection laws. Buell division needs to continue to produce a quality motorcycle under Harley’s brand name.
Internal environment: Strengths The standard and performance segments of Harley Davidson make up 70% of the European heavy weight motorcycle market Harley-Davidson operates in two segments: Harley-Davidson motorcycles & related products and HDFS Harley-Davidson is the only major American heavyweight motorcycle manufacturer. Strong brand name, one of the main things which are required for all companies in this industry. The HOG (Harley Owners Group), which have over 1,100,000 member worldwide, is the industry’s largest company sponsored motorcycle enthusiast organization. Buell Riders Adventure Group (BRAG) was also formed recent Customization of the bikes, this is Harley-Davidson’s major revenue maker. Harley-Davidson has a good marketing division
Internal environment: Weaknesses Decreased revenue, net income and diluted earnings per share. High price, Harley-Davidson bikes are the costly bikes in this category. They just started making some bikes in the low cost category Harley-Davidson has problems in gaining more market share in some European countries (That’s one of the main markets for Heavyweight motorcycles outside U.S) Required production is not met, analyzing the future of Heavyweight motorcycle market Lack of international distribution channel Bad image of motorcyclist – barrier to entry
Strategic Alternatives Growth Through Concentric Diversification: Acquire a motorcycle brand name in a related industry. Pros: To form a new line of products and new brand which it can be first. Society and environment change gradually, they lead demand to change. It can transfer its technology and operation experience to the new corporation to lead the acquisition to success. Cons: Harley Davidson must appoint some qualified people to train and monitor staffs and operation in new acquisition.
Strategic Alternatives Differentiation focus: Geographic market focus and differentiation in the target market: every country has its own culture, behavior, habit, etc. So it should research the potential areas, and then find a good partner to work with.
Recommendations Expand European and Asian market.
Recommendations (cont.) Increase the sales of Buell sport bike and Harley-Davidson to younger customers and females.
Recommendations (cont.) Horizontal diversification: acquires or develops new products that could appeal to its current customer groups even though those new products may be technologically unrelated to the existing product lines.
Develop the “green” motorcycle for the new generations who have more concerns about the environment.
Who are the purchasers of Harley Davidson?
Implementation Research and find out the opportunity for marketing. Guess the trend in the future Find and struggle for current marketing opportunities Create new marketing opportunities Create new marketing opportunities by joining changed consumers’ taste or change their taste to match the company’s products Create new marketing opportunities by learning from the competitors Find new technology advancement All of this phase will be in charge of marketing research department.
Implementation (cont.) Formulate the tactics to break into and hold the market. Product development: be in charge of R&D department. Market development: be in charge of marketing department. Public relation It will be in charge of media department.
Implementation (cont.) Formulate the tactics to expand the market scope. PR: It should continue to do PR. Brand is just created by PR. Advertising: After its brand becomes familiar with everybody, it will use advertising to maintain the brand image.In order to develop or expand the markets, it should use a wide range of promotional tools such as TVC, magazine, newspaper, billboard, etc. Expand the distribution channel system: it is useless if the company just create a good image into the customers’ mind but the customers can’t buy or know how to buy the products. Then the distribution channel is very important to push the products to customers.It will be in charge of Regional Sales Director. 100th Anniversary of H-D
Implementation (cont.) Formulate the tactics to protect current markets. Be forever vigilant in scanning for potential attackers. Assess the strength of the competitor. Consider the amount of support that the attacker might muster from allies. The best defense is to attack itself. Attack its weak spots and rebuild itself anew.
Evaluation Identify what to measure. Create the criteria for evaluation. Analyze all the financial ratios and final result. If any advantage, then implement the new strategy, otherwise continue with the present one.