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Strategic Analysis of Harley Davidson

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This slide deck provides an in-depth look at Harley Davidson and a consulting analysis of recommended strategic actions for the company's future.

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Strategic Analysis of Harley Davidson

  1. 1. Team 7 Gabriella Kawilarang, MinJae Park, Kripa Shroff, Leanne Tremblay
  2. 2. Background • Founded in Milwaukee in 1901 • NYSE: HOG • Manufacturer of high end motorcycles • Vision: “Fulfilling dreams of personal freedom” Source: Harley Davidson Twitter
  3. 3. Mission • Create superior value for shareholders • 52 week range from $49.15 to $74.13 • Four pillars: Continuous improvement, leadership development, sustainability, and growth Source: Yahoo Finance
  4. 4. Business Segments • Motorcycles and Related Products: 89% of Total Revenue • Financial Services: 11% of Total Revenue Source: ThompsonOne
  5. 5. Industry • Leading in the motorcycle, bike and parts manufacturing industry
  6. 6. Direct Motorcycle Competitors 2013 Revenue from US Market (Millions) • Harley: USD 4,189 • BMW: USD 2,092 • Honda: USD 1,099 • Yamaha: USD 491 • Polaris: USD 220
  7. 7. Major Target Market Caucasian Male 35+ Source: Harley Davidson Twitter
  8. 8. International Markets • 2013: 29% of revenues from International Sales • Europe: 13% • “Others”: 4% • Canada and Japan: 4% • Australia: 3%Source: ThompsonOne
  9. 9. How to Win in this Industry • Create the RIGHT EXPERIENCE • Older Caucasian Males – Membership in an exclusive club – Feeling roaring engine – High Quality Bike – Exclusive Look – Psychologically benefiting from premium brand status Create the … right experience for the target market
  10. 10. Financial Structure Revenue Growth Rate is Declining Source: Bloomberg 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(Projected) Revenue 5320.5 5673.8 6185.6 6143 5955.4 4781.9 4859.3 5311.7 5580.5 5899.9 6054.7 Cogs 3232.3 3441.7 3742 3816.8 3784 3184.6 3114.8 3352.8 3440.6 3621.4 3748.2 OperatingIncome 1361.5 2232.1 1597.2 1425.6 1071.6 448.8 724.1 898 1028.7 1151.6 1211.2 NetIncome 889.8 959.6 1043.2 933.8 654.7 -55.1 146.5 599.1 623.9 734 775.8 Revg 8.50% 6.64% 9.02% -0.69% -3.05% -19.70% 1.62% 9.31% 5.06% 5.72% 2.62% Cogg 5.28% 6.48% 8.73% 2.00% -0.86% -15.84% -2.19% 7.64% 2.62% 5.25% 3.50% OIg 18.46% 63.94% -28.44% -10.74% -24.83% -58.12% 61.34% 24.02% 14.55% 11.95% 5.18% NIg 16.94% 7.84% 8.71% -10.49% -29.89% -108.42% -365.88% 308.94% 4.14% 17.65% 5.69% cog/rev 60.75% 60.66% 60.50% 62.13% 63.54% 66.60% 64.10% 63.12% 61.65% 61.38% 61.91% ni/rev 16.72% 16.91% 16.86% 15.20% 10.99% -1.15% 3.01% 11.28% 11.18% 12.44% 12.81% OI/rev 25.59% 39.34% 25.82% 23.21% 17.99% 9.39% 14.90% 16.91% 18.43% 19.52% 20.00%
  11. 11. Possible Explanations • Strong competition from BMW • Harley’s focus on psychological experience • BMW’s focus on products with cutting edge design • Sleeker & smaller • Faster in acceleration • Competitor’s marketing budgets are larger • Harley spends only 15% of its revenue on marketing expenses Source: BMW Motorcycle Website
  12. 12. Core Complication Shrinking target market: AGING BABY BOOMERS GENERATION
  13. 13. Complications of Aging Baby Boomers • Baby Boomer Generation is much larger in comparison to subsequent generations • No obvious replacement segment Population Size • 60+ • Impede them from riding and buying bikes Health Issues • Brand image: “Freedom and Independence” • Less attractive Change of Perception
  14. 14. Expanding Customer Base Younger Generations Women International Markets
  15. 15. Failed Attempts Younger Generations
  16. 16. Failed Attempts to Target Younger Generations • Harley STOPPED reporting the average age of their riders • The average age of a Harley rider rose from 43.4 years old in 1999 to 49.5 years old in 2014. Source: Harley-Davidson Website Qualitative Quantitative
  17. 17. Dark Custom Lineup • Customizable Small Bikes • Example: Iron 883 – Small & Customizable – $8000 - 50% Cheaper than traditional bikes – Attracted young riders and was the best selling model Source: Google search of Iron 883 • Weak Value Proposition – Lost to BMW Sport Bikes due to performance • Weak Execution – Advertisement features an older, Caucasian men
  18. 18. Marketing Strategy • Music Festivals – Musicians Lynyrd Skynyrd & Dropkick Murphys • Social Media – Facebook: 6.1 Million Likes – Twitter: 203K Followers – Instagram: 170K Followers • Older Management Staff Source: Google search of Harley 110th Anniversary Party
  19. 19. Failed Attempts Female Market
  20. 20. Harley’s Female Market Growth • Decade long strategy • 10% of sales mix • 62.8% market share in 2013 • 13.1% (2.62%/yr) market share growth • 8.2% (1.64%/yr) market share acquired • 5% (1%/yr) market growth
  21. 21. 833 Low Bike Slimmer - Smaller Handle Bars - Lighter Weight
  22. 22. Poor Brand Perception YIKES…
  23. 23. Reality of Customer Acquisition Most women who own a Harley have a significant other who also owns a Harley…
  24. 24. Female Market Growth According to the Motorcycle Industry Council, from 2009- 2012… Female motorcycle OPERATORS grew about 30% (10%/yr) Female motorcycle OWNERS grew 20% (6.6%/yr) OPERATORS THAT ARE NOT OWNERS ACCOUNT FOR 3.4% POTENTIAL GROWTH!
  25. 25. Create the Right Experience Luxury Accessories for Men Luxury Accessories for Woman TRANSLATED Woman, biologically and culturally, do not desire the same psychological benefits from luxury goods as men.
  26. 26. The Right Experience By Gender “Dreams of Personal Freedom” Strong Macho Independent Sexy Confident Empowered
  27. 27. Failed Attempts International Market
  28. 28. Potential Growth in Emerging Markets • 60% of world population is in the emerging markets • Booming economy • Growing number of HNIs (High Net Worth Individuals) Source: marketsmedia
  29. 29. Difficulties in International Market • is complex and costly in China Conflicting Market Demand • 27M motorcycles • 99% are small bikes (*Small bikes: Engines below 600cc (Harley: 800-1600cc)) Source: motor-bikes.com
  30. 30. Regulations • Vehicle Registration • Out of 1.74M applicants, only 240,000 accepted • Now decreasing the number to 150,000 • Compulsory Scrap Policy • All bikes must be scrapped after 11 years • Driving Restriction • Motorcycles restricted on freeways and downtown core • complex and costly in China Difficulties in China
  31. 31. Difficulties in India • Small Market Share • In India, Harley’s market share is 0.08% • Large Import Tariffs • The country is imposing large import tariffs that nearly double the original price • complex and costly in China
  32. 32. Core Question How can Harley Davidson improve their customer base expansion strategies in order to ensure sustainable revenue growth?
  33. 33. Solution Younger Generations
  34. 34. Possible Solutions • Steady as She Goes • Expand their “Used Bike Market” • Enter the Dirt Bike ATV market • Partner with General Motors Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby- boomer-demographics/
  35. 35. Our Optimal Solution • Manufacture and Introduce customizable, affordable and superior performance bikes. • Sponsor music bands and festivals that younger generations listen to. For example: One Republic • Sponsor movies instead of fighting championships • Transform website to better incorporate social media Source: Google search of music festival
  36. 36. Implementation Costs: Increase spending on R&D & Minimal increase in marketing budget 2016 Motorcycle Usage Growth Rate 3.16% Number of Motorcycle users in 2009 (Million) 10.4 No of Motorcycle users (Million) 12.53 Generation X and Y users to Baby Boomers (2:1) 0.33 Generation XY users (Million) 4 New Motorcycle Purchase Rate 46% New Motorcycle Purchases (Million) 2 Harley Davidson Market Share Growth Rate 3% % of Population purchasing Futuristic Sports Bikes 30% Harley Davidson capturing competitors market 2% Harley Davidson Market Share 58% Total number of people buying Harley (Million) 1.12 Lower price of Harley 8,000$ Revenues (Millions) 8,939$
  37. 37. Solution Female Market
  38. 38. Possible Solutions for Women Macho Independent Sexy Empowered • Steady as She Goes • License the Harley Davidson Brand • Sell a Line of Woman Bikes under a Different Brand Name • Bring the Leather Jacket Back • Celebrity Endorsements for the Bike • Partnership with Fashion Retailers • Update Advertising Strategy • Equalize Gender Bias in Human Capital
  39. 39. Optimal Solutions Macho Independent Sexy Empowered • Partnership with Fashion Retailers • Update Advertising Strategy • Equalize Gender Bias in Human Capital
  40. 40. Partnership with MK Macho Independent Empowered • Incorporate their leather and metallic goods in the Harley Davidson bikes and accessories • Complimentary business relationship • Leverage loyal customers • “Luxury accessory” brand association • Valued MK customers receive “Free Riding Lesson” pass
  41. 41. Update Advertising Strategy Macho Independent Sexy Empowered A New American Legend Is Born… Video that depicts a woman riding her Harley through the “glass ceiling” with the catch phrase “It’s time to ride.”
  42. 42. Equalize Gender Bias in Human Capital Macho Independent Sexy Empowered Recruit women who will be able to connect with their target market
  43. 43. Implementation We believe the successful creation of “the right experience” for women riders’ “dreams of personal freedom” will increase their market share and revenues
  44. 44. Forecasted Market Share 62.80% 67.8400% 72.8800% 77.9200% 37.20% 32.20% 27.12% 22.08% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 2013 2014 2015 2016 Female Motorcycle Market Harley Others
  45. 45. Forecasted Sales Revenue $418,900,000 $440,012,560 $462,189,193 $485,483,528 $380,000,000 $400,000,000 $420,000,000 $440,000,000 $460,000,000 $480,000,000 $500,000,000 2013 2014 2015 2016 HD Female Motorcycle Revenue
  46. 46. Solution International Market
  47. 47. Possible Solutions • Steady as She Goes • Pull Out- Harley could stop focusing on International Markets and should start focusing on the domestic market. • License- Harley Davidson’s brand to be used by experts in these markets. • Expand the Product Line of Associated Goods- Expand the product line for leather jackets, boots, and other associated riding goods.
  48. 48. Optimal Solution • International division/second headquarter • Harley Davidson should start to centralize the operations in international markets and focus on issues that are region specific. • Partnerships with local players • Will not only give Harley a better chance to increase their market share, but also help them to better understand the market. • Expand the sales of used-bikes – • Will attract more customers as people in the International market are more price-sensitive. Source: entrepreneur.com
  49. 49. Implementation Estimated Implementation Results • Small bikes • 29M bikes * $500 = $13.8B • 5% market share = $690M • Used bikes • 37.27M *.54 *2000 = $40B • 5% market share = $2B 54% of people who get motorcycles get used bikes
  50. 50. Competitors China • Baotian • Lifan • Qingqi • Zongshen • Znen India • Hero • Moto Corp • Bajaj Auto • TVS Motor • Triumph
  51. 51. Cumulative Results 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 2013 2014 2015 2016 Total Revenue Forecast Younger Female International Traditional
  52. 52. Thank You We will be taking questions at this time
  53. 53. Possible Solutions • Steady as She Goes – Target population would not reach its age until 2035 – Revenues will not increase in the near future Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby- boomer-demographics/
  54. 54. Possible Solutions • Expand their “Used Bike Market” – Buy Back Used Harley’s, service them and sell them – Accompanied Service Packages – Lower Margins in Service Packages and Used Bikes Source: https://answers.yahoo.com/question/index?qid=20120517141007AAorbzJ -Yahoo Comment
  55. 55. Possible Solutions Source: Google search of dirt bike ATV wall paper • Enter the Dirt Bike ATV market – Similar image – Attracts younger generation – A new source of revenue – Attract more customers to the store-cross sell – Fiscal 2013 Cash on Hand: 378 days – Already Saturated Market – Loss of focus from their current product
  56. 56. Possible Solutions Source: General Motors Partner • Partner with General Motors – Attract more customers to the store-cross sell – American multinational cooperation – Same brand image of “freedom” – Harley senior employees are ex-GM employees – Loss of individual brand image – Possible Conflicts in workspace
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This slide deck provides an in-depth look at Harley Davidson and a consulting analysis of recommended strategic actions for the company's future.

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