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Harley Davidson Motor Cycles

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Graphics by T. Gauvin HD Bar and Shield Logo property of Harley Davidson, Inc Overview Brief History of HD Where we are now New Vision and Mission External Analysis ... – PowerPoint PPT presentation

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Title: Harley Davidson Motor Cycles


1
Graphics by T. Gauvin
HD Bar and Shield Logo property of Harley
Davidson, Inc
2
Overview
  • Brief History of HD
  • Where we are now
  • New Vision and Mission
  • External Analysis
  • CPM
  • EFE
  • Summary
  • Internal Analysis
  • IFE
  • Financial ratio analysis
  • Net Worth Analysis
  • Summary
  • Strategic Analysis
  • SWOT Matrix
  • SPACE
  • Grand Strategy Matrix
  • IE matrix
  • Summary
  • Possible strategies
  • QSPM
  • Recommendations
  • Strategic implementation and desired results
  • Annual objectives (goal) and polices
  • Evaluation Procedure

3
Brief History of HD
  • 1903
  • 21-year old William S. Harley and 20-year old
    Arthur Davidson make available to the public the
    first production Harley-Davidson motorcycle. The
    bike was built to be a racer, with a 3-1/8 inch
    bore and 3-1/2 inch stroke. The factory in which
    they worked was a 10 x 15-foot wooden shed with
    the words "Harley-Davidson Motor Company" crudely
    scrawled on the door.

Picture and history from www.harley-davidson.com
4
Brief History of HD
  • 1906
  • A new factory, measuring 28 x 80 feet, is built
    on the Chestnut St. site, later renamed Juneau
    Avenue. Staff size is increased to six full-time
    employees. Also, the first motorcycle catalog is
    produced by the Company and the nickname "Silent
    Gray Fellow" is used for the first time.

Picture and history from www.harley-davidson.com
5
Brief History of HD
  • 1909
  • The six-year-old Harley-Davidson Motor Company
    introduces its first V-twin powered motorcycle.
    With a displacement of 49.5 cubic inches, the
    bike produces seven horsepower. The image of two
    cylinders in a 45-degree configuration would fast
    become one of the most enduring icons of
    Harley-Davidson history.

Picture and history from www.harley-davidson.com
6
Brief History of HD
  • 1916
  • The Enthusiast begins its reign as the longest
    continuously published motorcycle magazine in the
    world. 
  • 1917
  • During this year, roughly one-third of all
    Harley-Davidson motorcycles produced are sold to
    the U.S. military.
  • 1918
  • Almost half of all Harley-Davidson motorcycles
    produced are sold for use by the U.S. military in
    World War I. At War's end, it is estimated that
    the Army used some 20,000 motorcycles in their
    efforts, most of which were Harley-Davidsons. One
    day after the signing of the Armistice, Corporal
    Roy Holtz of Chippewa Falls, Wis., is the first
    American to enter Germany. He is riding a
    Harley-Davidson.

Picture and history from www.harley-davidson.com
7
Brief History of HD
  • 1922
  • The first 74 cubic inch V-twin engine is
    introduced on the JD and FD models.
    Harley-Davidson dealerships are now found in
    sixty-seven countries.
  • 1925
  • Gas tanks on all models now have a distinct
    teardrop shape. This basic appearance is set for
    all subsequent Harley-Davidson motorcycles.
  • 1928
  • The first Harley-Davidson two cam engine is made
    available to the public on the JD series
    motorcycles. The bike is capable of top speeds
    between 85 - 100 mph.
  • 1929
  • The 45 cubic inch V-twin engine (later to be
    known as the "flathead") is introduced on the D
    model. The engine proves to be so reliable that
    variations of it are available on Harley-Davidson
    motorcycles as late as 1973.

Picture and history from www.harley-davidson.com
8
Brief History of HD
  • 1932
  • The 45 cubic inch-driven, three-wheeled Servi-car
    begins its 41 year run as a popular commercial
    and police vehicle.
  • 1933
  • An art-deco "eagle" design is painted on all gas
    tanks. This marks the beginning of graphic
    designs on Harley-Davidson motorcycles (with the
    exception of previously special order-only paint
    schemes). This styling decision was made in part
    to stimulate the low sales numbers caused by the
    Great Depression.
  • 1936
  • Harley-Davidson introduces the EL, an overhead
    valve, 61 cubic inch powered bike. With increased
    horsepower and bold styling changes, the
    motorcycle quickly earns the nickname of
    "Knucklehead," due to the shape of its rocker
    boxes. The same year, the Motor Company
    introduces a 80 cubic inch side valve engine.

Picture and history from www.harley-davidson.com
9
Brief History of HD
  • 1941
  • America is plunged into World War II. Production
    of civilian motorcycles is almost entirely
    suspended in favor of military production. The
    Service School is converted back to the
    Quartermasters School for the training of
    military mechanics.
  • 1942
  • Among other motorcycles made for the Army, H-D
    produces the unique XA 750, a motorcycle with
    horizontally opposed cylinders and shaft drive,
    designed for desert use. The contract is
    cancelled early due to war combat moving out of
    North Africa. Only 1,011 XA's are built.
  • 1945
  • World War II ends, and Harley-Davidson has
    produced almost 90,000 WLA models for military
    use. Wasting no time, production of civilian
    motorcycles resumes in November.

Picture and history from www.harley-davidson.com
10
Brief History of HD
  • 1953
  • Harley-Davidson celebrates its 50th Anniversary
    in style. An attractive logo is created,
    depicting a "V" in honor of the engine which had
    brought the Company so far, with a bar overlaid
    reading "Harley-Davidson" and the words, above
    and below, "50 years--American made." A medallion
    version of this logo is placed on the front
    fenders of the 1954 models.
  • 1957
  • The motorcycling public met a new motorcycle
    called the Sportster. It premiers as a 55 cubic
    inch overhead valve engine, and within one year
    of its debut, becomes known as the first of the
    "Superbikes." Another Harley-Davidson tradition
    and legend is born.

Picture and history from www.harley-davidson.com
11
Brief History of HD
  • 1960
  •   Harley-Davidson purchases a half interest in
    Aeronatica-Macchi, forming Aermacchi
    Harley-Davidson, a European division that will
    produce small, single cylinder motorcycles. 
  • 1969
  • Harley-Davidson merges with the American Machine
    and Foundry Company (AMF), a longtime producer of
    leisure products.

Picture and history from www.harley-davidson.com
12
Brief History of HD
  • 1971
  • In response to the customizing craze,
    Harley-Davidson introduces the FX 1200 Super
    Glide, which combined a sporty front end
    (similar to that of the XL series) with the frame
    and powertrain of the FL series. A new class of
    motorcycle, the cruiser, is born.  
  • First year of Harley-Davidson snowmobile
    production.
  • 1973
  • Motorcycle production is upgraded when all
    assembly operations are moved to a modern 400,000
    square foot plant in York, Penn. All other
    production operations remain in Milwaukee and
    Tomahawk. The Capitol Drive plant in Milwaukee
    begins production of engines.

Picture and history from www.harley-davidson.com
13
Brief History of HD
  • 1981
  • On February 26, thirteen Harley-Davidson senior
    executives sign a letter of intent to purchase
    Harley-Davidson Motor Company from AMF. By
    mid-June, the buyback is official, and the phrase
    "The Eagle Soars Alone" becomes a rallying cry.
  • 1983
  • Harley-Davidson successfully petitions the
    International Trade Commission (ITC) for tariff
    relief, which is granted April 1, 1983. The
    tariff, scheduled to end five years later, is
    placed on all imported Japanese motorcycles 700cc
    or larger as a response to Japanese motorcycle
    manufacturers stockpiling inventories of unsold
    motorcycles in the United States.
  • 1986
  • The Motor Company is listed on the American Stock
    Exchange, the first time Harley-Davidson is
    publicly traded since 1969, the year of the AMF
    merger.  
  • To diversify its holdings, Harley-Davidson
    purchases Holiday Rambler Corporation, producer
    of quality motor homes.
  • 1987
  • Harley-Davidson is listed on the New York Stock
    Exchange.  
  • Harley-Davidson makes both business and American
    history. H-D petitions the International Trade
    Commission for early termination of the five-year
    tariffs on heavyweight motorcycles. In effect,
    the move demonstrated confidence in H-D's ability
    to compete in the marketplace.

Picture and history from www.harley-davidson.com
14
Brief History of HD
  • 1991
  • Installation of a 31 million state of the art
    paint facility begins at the York, Penn.,
    factory. It becomes fully operational in 1992.
  • 1996
  • A new, state-of-the-art Parts and Accessories
    Distribution Center opens in Franklin, Wis. By
    the beginning of 1997, all inventory is moved
    from the original warehouse at Juneau Avenue to
    the new 250,000-sq.-ft. facility.
  • 1997
  • A new 217,000-sq.-ft. Product Development Center
    opens next to the Capitol Drive plant in
    Milwaukee. The building is dedicated to Willie G.
    Davidson.  
  • Powertrain Operations at Capitol Drive expanded
    its capacity by moving FL engine and transmission
    production to a newly purchased plant located in
    Menomonee Falls. XL engines and transmissions, as
    well as Genuine Parts Manufacturing, remain at
    Capitol Drive. 
  • A new 330,000-sq.-ft. plant in Kansas City
    produces its first Sportster.

Picture and history from www.harley-davidson.com
15
Brief History of HD
  • 1998
  • A new assembly facility opens in Manaus, Brazil,
    the first operations outside of the U.S.  
  • Harley-Davidson buys a remaining 49 interest in
    Buell Motorcycle Company. Erik Buell is named
    Chairman of Buell operations.
  • 2000
  •   Buell introduces the Blast, a single-cylinder
    motorcycle, for the 2000 model year. The Blast
    receives excellent reviews. It's introduced in
    tandem with the Rider's Edge Academy of
    Motorcycling, a beginner's rider course available
    through Harley-Davidson and Buell dealerships.
  • 2001
  • The VRSCA V-Rod is introduced for the 2002 model
    year. Inspired by the VR-1000 racing motorcycle,
    the V-Rod is Harley-Davidson's first motorcycle
    to combine fuel injection, overhead cams and
    liquid cooling, and delivers 115 horsepower.
  • 2002
  • The Open Road Tour debuts in Atlanta, GA, in
    July to celebrate the upcoming Harley-Davidson
    100th Anniversary. 
  • 2003
  • Buell Motorcycle Company unleashes the Lightning
    XB9S

Picture and history from www.harley-davidson.com
16
HD Today
  • Harley-Davidson, Inc. manufactures heavyweight
    custom and touring motorcycles and related
    products.
  • Also owns Buell Motorcycle (sport and performance
    motorcycles) and Eaglemark Financial, a wholesale
    and retail finance unit.
  • Sold Holiday Rambler Corp. in 1995.
  • Harley is the only major American manufacturer of
    heavyweight motorcycles.
  • Polaris Victory Motorcycles claims different
  • Has over 1,000 dealers worldwide.
  • Foreign business is about 18 of sales RD,
    3.2.
  • '03 depreciation rate 9.0.
  • Has about 8,800 employees.
  • Officers directors own 1.5 of stock.
  • Harley-Davidson recorded its 19th consecutive
    year of record earnings in 2004.

Source Valueline
17
Existing Vision
  • Harley-Davidson, Inc. is an action-oriented,
    international company, a leader in its commitment
    to continuously improve our mutually beneficial
    relationships with stakeholders (customers,
    suppliers, employees, shareholders, governments
    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.

18
Existing Mission
  • We fulfill dreams thorough the experience of
    motorcycling, by providing to motorcyclists and
    to the general public an expanding line of
    motorcycles, branded products and services in
    selected market segments.

19
HD Values
  • These are our values. They are the heart of how
    we run our business. They guide our actions and
    serve as the framework for the decisions and
    contributions our employees make at every level
    of the Company.
  • Tell the Truth.
  • Be Fair.
  • Keep Your Promises.
  • Respect the Individual.
  • Encourage Intellectual Curiosity.

20
Proposed Vision
  • The be recognized as the best in motorcycle
    company in the world.

21
Proposed Mission
  • Harley Davidson is committed to providing the
    highest quality products and financial services
    to all of our customers worldwide. The Harley
    Davidson name stands for customer satisfaction
    and we would like all Harley Davidson customers
    to relay their satisfaction to all of the
    motorcycle dreamers that want to experience a
    taste of reality. Harley Davidson is a global
    organization that is dedicated to using advanced
    technology to produce the most superior
    motorcycle in the domestic and international
    markets. Our philosophy is to stay competitive
    and continue growth worldwide to remain
    profitable and survive. Harley Davidson employees
    are the foundation of our company and they are
    the driving force behind the Harley Davidson
    name. We are able to compete because of the
    total team effort of our employees. Harley
    Davidson is devoted to fulfilling dreams of
    customers and we believe that there is not a
    motorcycle riding experience like a Harley
    Davidsons. We push excellence though our Harley
    Davidson bar and shield logo that says superior
    quality. Harley believes in honesty and loyalty
    and these morals are the heartbeat of our
    organization. We continue to do our part in
    supporting all environmental laws in every
    country we do business. Harley Davidson intends
    to stay committed and determined.

22
External Analysis
  • Opportunities
  • The international heavy weight market is growing
    and is now larger than the U. S. heavyweight
    market
  • The European demand for Harley Davidson is the
    highest in the international market and
    represents the single largest motorcycle market
    in the world.
  • Interest rates are at historical lows.
  • Women and younger riders are increasing becoming
    interested in bikes.
  • Alliances with Ford Motor Company or other
    automobile manufacturers are possible.
  • Industry registrations of domestic heavyweight
    motorcycles are increasing.
  • Market share increasing in Europe and Asia for
    the last two years.
  • Increasing demand in US markets for bikes.
  • Customers value quality parts.

23
External Analysis
  • Threats
  • Harleys ongoing capacity restraints caused a
    shortage supply and a loss in domestic market
    share in recent years.
  • Harleys average buying age is 42 years old and
    increasing.
  • The European Unions motorcycles noise standards
    are more stringent than those of Environmental
    Protection Agencies in the U.S and increased
    environmental stand.
  • Some competitors of Harley Davidson have larger
    financial and marketing resources and they are
    more diversified.
  • Environmental protection laws.
  • Shifts in buyers needs and tastes.
  • Customer loyalty in European and Asian Countries.
  • Costs could become expensive from international
    importing.
  • The Buell division needs to continue to produce a
    quality motorcycle under Harleys brand name.

24
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities Opportunities Opportunities Opportunities
1. The international heavy weight market is growing and is now larger than the U. S. heavyweight market 0.150 2 0.300
2. The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world 0.150 2 0.300
3. Interest rates are at historical lows. 0.100 2 0.200
4. Women and younger riders are increasing becoming interested in bikes. 0.100 4 0.400
5. Alliances with Ford Motor Company or other automobile manufacturers are possible. 0.025 1 0.025
6. Industry registrations of domestic heavyweight motorcycles are increasing. 0.050 3 0.150
7. Market share increasing in Europe and Asia for the last two years. 0.025 3 0.075
8. Increasing demand in US markets for bikes. 0.025 4 0.100
9. Customers value quality parts. 0.025 3 0.075
25
EFE Matrix
Threats
1. Harleys ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years. 0.100 2 0.200
2. Harleys average buying age is 42 years old and increasing. 0.050 2 0.100
3. The European Unions motorcycles noise standards are more stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand. 0.050 2 0.100
4. Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified. 0.025 1 0.025
5. Environmental protection laws. 0.025 3 0.075
6. Shifts in buyers needs and tastes. 0.025 3 0.075
7. Customer loyalty in European and Asian Countries. 0.025 2 0.050
8. Costs could become expensive from international importing. 0.025 2 0.050
9. The Buell division needs to continue to produce a quality motorcycle under Harleys brand name. 0.025 3 0.075
Total 1.00 2.38
26
CPM
Harley Harley Honda Honda Yamaha Yamaha
Critical Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score
Advertising Product Quality Price Competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share 0.20 0.15 0.10 0.10 0.15 0.10 0.15 0.05 4 4 2 3 4 3 2 3 0.80 0.60 0.20 0.30 0.60 0.30 0.30 0.15 2 3 2 2 3 2 2 2 0.40 0.45 0.20 0.20 0.45 0.20 0.30 0.10 2 3 2 2 2 2 2 2 0.40 0.45 0.20 0.20 0.30 0.20 0.30 0.10
Total 1.00 3.25 2.30 2.15
Competitive Profile Matrix
27
External Analysis Summary
  • At what point does market saturation occur
  • Our traditional customer base is aging
  • Women and younger riders are increasing becoming
    interested in bikes.
  • Regulation is a large issue
  • Many imitators
  • Many elements of HD style are non-patentable
  • Polaris Victory Motorcycles is a new major threat
  • http//www.victorymotorcycles.com/victory/default.
    aspx

28
Internal Analysis
  • Strengths
  • Net income in 2003 was 760 million, which was 31
    percent higher than in 2002.
  • Strong relationships built on trust and respect
    with suppliers and dealers.
  • The standard and performance segments of Harley
    Davidson make up 70 of the European heavy weight
    motorcycle market.
  • Harley Davidson operates in two principal
    business segments Motorcycles and Related
    Products, and Financial Services.
  • Harley Davidson is the only major American
    motorcycle manufacturer.
  • Strong brand name.
  • The company has continued to focus its capital
    expenditures on capacity expansion at its new and
    previously existing facilities.
  • The Harley Owners Group (HOG) is the industrys
    largest company sponsored motorcycle enthusiast
    organization, which currently has approximately
    430,000 members worldwide.
  • Harley Davidson offers a custom segment that
    allows owners the opportunity to customize their
    bikes, this division makes up the highest number
    of Harley Davidsons sold.
  • Harley Davidson has a strong marketing
    department, which sponsors and participates in
    all major motorcycle consumer shows and rallies.

29
Internal Analysis
  • Weaknesses
  • Harley Davidson does not emphasize price in its
    product.
  • Harley Davidson has had difficulty gaining market
    share in some European countries.
  • Registrations for the Asia/Pacific market are
    decreasing.
  • Facing ongoing capacity constraints.
  • Only a small portion of the company's annual
    capital expenditures relate to equipment, which
    has the sole purpose of meeting environmental
    compliance obligations.
  • The top Board of Directors for Harley-Davidson
    are all men.
  • The leadership strategy council is comprised
    completely of vice presidents.
  • Difficult to attract and retain talented
    employee.
  • Lack of opportunity for advancement.
  • Loss of benefits.

30
IFE Matrix
Key Internal Factors Weight Rating Weighted Score
Strengths
1. Net income in 2003 was 760 million, which was 31 percent higher than in 2002. 0.075 4 0.300
2. Strong relationships built on trust and respect with suppliers and dealers. 0.075 4 0.300
3. The standard and performance segments of Harley Davidson make up 70 of the European heavy weight motorcycle market. 0.065 4 0.260
4. Harley Davidson operates in two principal business segments Motorcycles and Related Products, and Financial Services. 0.050 3 0.150
5. Harley Davidson is the only major American motorcycle manufacturer. 0.050 3 0.150
6. Strong brand name. 0.050 4 0.200
7. The company has continued to focus its capital expenditures on capacity expansion at its new and previously existing facilities. 0.040 3 0.120
8. The Harley Owners Group (HOG) is the industrys largest company sponsored motorcycle enthusiast organization, which currently has approximately 430,000 members worldwide. 0.040 3 0.120
9. Harley Davidson offers a custom segment that allows owners the opportunity to customize their bikes, this division makes up the highest number of Harley Davidsons sold. 0.030 3 0.090
10. Harley Davidson has a strong marketing department, which sponsors and participates in all major motorcycle consumer shows and rallies. 0.030 3 0.090
31
IFE Matrix
Weaknesses
1. Harley Davidson does not emphasize price in its product. 0.075 1 0.075
2. Harley Davidson has had difficulty gaining market shore in some European countries. 0.075 1 0.075
3. Registrations for the Asia/Pacific market are decreasing 0.060 1 0.060
4. Facing ongoing capacity constraints. 0.055 1 0.055
5. Only a small portion of the company's annual capital expenditures relate to equipment, which has the sole purpose of meeting environmental compliance obligations. 0.050 2 0.050
6. The top Board of Directors for Harley-Davidson are all men. 0.045 2 0.090
7. The leadership strategy council is comprised completely of vice presidents. 0.040 2 0.080
8. Difficult to attract and retain talented employee. 0.035 2 0.070
9. Lack of opportunity for advancement. 0.030 2 0.060
10. Loss of benefits 0.030 2 0.060
TOTAL 1.00 2.51
32
Ratio Analysis
Valuation Ratios Company Industry Sector SP 500
P/E Ratio (TTM) 20.55 20.11 20.86 24.01
P/E High - Last 5 Yrs 49.48 43.52 37.56 45.41
P/E Low - Last 5 Yrs 18.80 14.06 10.28 16.26
Beta 1.13 0.84 1.05 1.00
Price to Sales (TTM) 3.19 2.21 1.19 3.33
Price to Book (MRQ) 5.24 3.94 3.21 4.29
Price to Tangible Book (MRQ) 5.23 6.67 6.04 7.56
Price to Cash Flow (TTM) 16.32 14.31 11.18 17.32
Price to Free Cash Flow (TTM) 24.07 24.93 24.73 28.97
Owned Institutions 72.94 56.96 51.37 64.19
Dividends
Dividend Yield 0.62 1.32 2.30 2.04
Dividend Yield - 5 Yr Avg 0.30 0.96 2.38 1.48
Dividend 5 Yr Growth Rate 20.27 7.13 -3.77 6.48
Payout Ratio (TTM) 7.74 16.59 25.54 26.78
33
Ratio Analysis
Growth Rates Company Industry Sector SP 500
Sales (MRQ) vs Qtr 1 Yr Ago 12.98 12.91 10.85 13.40
Sales (TTM) vs TTM 1 Yr Ago 13.98 10.99 7.63 11.90
Sales - 5 Yr Growth Rate 18.90 12.18 6.94 9.30
EPS (MRQ) vs Qtr 1 Yr Ago 21.01 30.16 26.58 28.69
EPS (TTM) vs TTM 1 Yr Ago 31.39 29.80 18.81 21.92
EPS - 5 Yr Growth Rate 29.36 21.20 5.91 12.15
Capital Spending - 5 Yr Growth Rate 4.45 1.04 -1.52 4.06
Financial Strength
Quick Ratio (MRQ) 2.55 1.85 1.47 1.26
Current Ratio (MRQ) 2.86 2.49 2.24 1.76
LT Debt to Equity (MRQ) 0.23 0.25 2.65 0.68
Total Debt to Equity (MRQ) 0.34 0.32 2.80 0.85
Interest Coverage (TTM) NM 8.64 8.14 11.86
34
Ratio Analysis
Profitability Ratios Company Industry Sector SP 500
Gross Margin (TTM) 33.60 40.70 28.55 47.32
Gross Margin - 5 Yr Avg 31.00 38.59 28.17 47.01
EBITD Margin (TTM) 27.45 20.07 11.46 20.79
EBITD - 5 Yr Avg 23.26 16.55 10.32 20.82
Operating Margin (TTM) 23.44 16.76 7.23 20.33
Operating Margin - 5 Yr Avg 19.04 12.63 6.72 18.35
Pre-Tax Margin (TTM) 23.78 16.29 7.38 17.27
Pre-Tax Margin - 5 Yr Avg 19.44 11.51 6.20 17.54
Net Profit Margin (TTM) 15.52 11.53 4.34 13.12
Net Profit Margin - 5 Yr Avg 12.56 7.41 3.83 11.59
Effective Tax Rate (TTM) 34.74 32.48 30.43 31.31
Effective Tax Rate - 5 Yr Avg 35.47 34.25 38.14 34.20
35
Ratio Analysis
Management Effectiveness Company Industry Sector SP 500
Return on Assets (TTM) 17.63 12.67 6.06 6.40
Return on Assets - 5 Yr Avg 15.65 9.82 5.57 6.79
Return on Investment (TTM) 22.91 17.50 8.45 9.97
Return on Investment - 5 Yr Avg 20.33 13.84 8.00 10.93
Return on Equity (TTM) 29.57 23.40 13.72 18.71
Return on Equity - 5 Yr Avg 27.52 16.29 13.87 19.22
Efficiency
Revenue/Employee (TTM) 557,242 482,389 369,451 622,866
Net Income/Employee (TTM) 86,469 79,982 27,449 81,707
Receivable Turnover (TTM) 4.71 7.46 6.44 9.76
Inventory Turnover (TTM) 14.51 8.29 9.16 10.46
Asset Turnover (TTM 1.14 1.23 1.18 0.92
36
Net Worth Analysis
Net Worth Analysis (year-end 2003 in millions)
1. Stockholders Equity 2,957 2,957
2. Net income x 5 760 x 5 3,800
3. Share price 45 /EPS 2.51 x Net Income 760 13,625
4. Number of Shares Outstanding X Share Price 302 x 45 13,590
Method Average 8,493
37
5 Year Stock Perfromance
38
180 times original investment
39
Internal Analysis Summary
  • Through great marketing, HD is sold as life
    style choice and not just a product
  • Strong growth
  • Outstanding financials
  • Capacity problems
  • Lack of employee diversity
  • Strong Brand buts it is identified as an
    American Brand

40
Matrix Analysis
  • SWOT Matrix
  • S-O Strategies
  • Expand production into Europe (S1, S2, O2, O3)
  • Expand production into Asia (S1, S2, 07)
  • S-T Strategies
  • Increase strong brand name (S6, T9)
  • Increase marketing to younger customer (S6, T2)
  • W-O Strategies
  • W-T Strategies
  • Improve employee relationships (W7, T4)

41
Space Matrix
Y axis Financial strength 6 1 worst to 6
best Y axis 6 (-4) 2 Environmental
stability -4 -1 best to 6 worst X
axis Industry strength 5 1 worst to 6 best X
axis 5 (-2) 3 Competitive advantage -2 -1
best to -6 worst
42
Grand Strategy Matrix
RAPID MARKET GROWTH RAPID MARKET GROWTH
Quadrant II Quadrant II Quadrant I
Harley Harley
WEAK STRONG
COMPETITIVE COMPETITIVE
POSITION POSITION
Quadrant III Quadrant III Quadrant III Quadrant IV Quadrant IV Quadrant IV
SLOW MARKET GROWTH SLOW MARKET GROWTH SLOW MARKET GROWTH
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IE MATRIX
Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to 3.99 I II III
Medium IV V VI
2.0 to 2.99 IV V VI
Low VII VIII IX
1.0 to 1.99 VII VIII IX
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Matrix Analysis and SWOT Summary
Alternative Strategies IE SPACE GRAND COUNT
Forward Integration X X X 3
Backward Integration X X X 3
Horizontal Integration X X X 3
Market Penetration X X X 3
Market Development X X X 3
Product Development X X X 3
Concentric Diversification X X 2
Conglomerate Diversification X 1
Horizontal Diversification X 1
Joint Venture
Retrenchment
Divestiture
Liquidation
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Possible Strategies
  • Expand into Foreign Markets
  • Asia
  • Europe
  • Prduct Development
  • Expand Motorcycle line for younger market
  • Buell expansion
  • Concentric Diversification
  • Other recreational vehicles

46
QSPM
Strategic Alternatives Strategic Alternatives Strategic Alternatives Strategic Alternatives Strategic Alternatives Strategic Alternatives
Key Internal Factors Weight Key Internal Factors Weight Joint venture in Europe Joint venture in Europe Joint venture in Asia Joint venture in Asia
Strengths Strengths AS TAS AS TAS
1. Net income in 2003 was 760 million, which was 31 percent higher than in 2002. 0.075 4 0.3 3 0.225
2. Strong relationships built on trust and respect with suppliers and dealers. 0.075 0 0 0 0
3. The standard and performance segments of Harley Davidson make up 70 of the European heavy weight motorcycle market. 0.065 4 0.26 2 0.13
4. Harley Davidson operates in two principal business segments Motorcycles and Related Products, and Financial Services. 0.050 0 0 0 0
5. Harley Davidson is the only major American motorcycle manufacturer. 0.050 0 0 0 0
6. Strong brand name. 0.050 0 0 0 0
7. The company has continued to focus its capital expenditures on capacity expansion at its new and previously existing facilities. 0.040 0 0 0 0
8. The Harley Owners Group (HOG) is the industrys largest company sponsored motorcycle enthusiast organization, which currently has approximately 430,000 members worldwide. 0.040 0 0 0 0
9. Harley Davidson offers a custom segment that allows owners the opportunity to customize their bikes, this division makes up the highest number of Harley Davidsons sold. 0.030 0 0 0 0
10. Harley Davidson has a strong marketing department, which sponsors and participates in all major motorcycle consumer shows and rallies. 0.030 0 0 0 0
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QSPM
Weaknesses
1. Harley Davidson does not emphasize price in its product. 0.075 0 0 0 0
2. Harley Davidson has had difficulty gaining market share in some European countries. 0.060 1 0.06 3 0.18
3. Registrations for the Asia/Pacific market are decreasing 0.055 3 0 2 0
4. Facing ongoing capacity constraints. 0.050 0 0 0 0
5. Only a small portion of the company's annual capital expenditures relate to equipment, which has the sole purpose of meeting environmental compliance obligations. 0.045 0 0 0
6. The top Board of Directors for Harley-Davidson are all men. 0.040 0 0 0 0
7. The leadership strategy council is comprised completely of vice presidents. 0.035 0 0 0 0
8. Difficult to attract and retain talented employee. 0.030 0 0 0 0
9. Lack of opportunity for advancement. 0.030 0 0 0 0
10. Loss of benefits 0.075 0 0 0 0
Total 0.620 0.535
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QSPM
Key External Factors Weight Key External Factors Weight Joint venture in Europe Joint venture in Europe Joint venture in Asia Joint venture in Asia
Opportunities Opportunities AS TAS AS TAS
1. The international heavy weight market is growing and is now larger than the U. S. heavyweight market 0.150 4 3
2. The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world 0.150 4 2
3. Interest rates are at historical lows. 0.100 4 3
4. Women and younger riders are increasing becoming interested in bikes. 0.100 3 1
5. Alliances with Ford Motor Company or other automobile manufacturers are possible. 0.025 0 0
6. Industry registrations of domestic heavyweight motorcycles are increasing. 0.050 0 0
7. Market share increasing in Europe and Asia for the last two years. 0.025 3 4
8. Increasing demand in US markets for bikes. 0.025 0 0
9. Customers value quality parts. 0.025 0 0
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QSPM
Threats
1. Harleys ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years. 0.100 0 0
2. Harleys average buying age is 42 years old and increasing. 0.050 0 0
3. The European Unions motorcycles noise standards are more stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand. 0.050 4 3
4. Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified. 0.025 0 0
5. Environmental protection laws. 0.025 2 3
6. Shifts in buyers needs and tastes. 0.025 0 0
7. Customer loyalty in European and Asian Countries. 0.025 3 4
8. Costs could become expensive from international importing. 0.025 2 1
9. The Buell division needs to continue to produce a quality motorcycle under Harleys brand name. 0.025 0 0
SUBTOTAL 2.350 1.600
SUM TOTAL ATTRACTIVENESS SCORE 2.97 2.135
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Recommendations
  • Primary Strategy
  • Expand into European market
  • Secondary
  • Increase sales to younger customer by expanding
    the Buell line
  • Horizontal Diversifications into other lifestyle
    products
  • Expand HOG and BRAG owner member groups offering
  • Builds structural marketing
  • Concentric diversification into other
    recreational vehicles
  • Conglomerate Diversification??

51
Strategic implementation and desired results
  • Increase European sales to 50 of Domestics in
    next three years while increasing domestic sales
    at rate of 10 per year
  • Sales targets 05, 06 and 07
  • Domestic (in millions)
  • 4,516.60 4,968.26 5,465.09
  • International
  • 1,354.98 1,987.30 2,732.54

52
Projected Financials
Current Projected
2004 2005 2006 2007
Domestic Sales 4,106.00 4,516.60 4,968.26 5,465.09
International Sales 909.20 1,354.98 1,987.30 2,732.54
Total 5,015.20 5,871.58 6,955.56 8,197.63

Gross Profit 1,899.50 2,223.85 2,634.41 3,104.84
Operating Expense 710.00 831.24 984.70 1,160.54
GA 16.60 19.43 23.02 27.13
Financial Service Oper. income 188.60 220.80 261.57 308.28
Operating Income 1,361.50 1,593.99 1,888.26 2,225.45
Other exp -5.10 -5.97 -7.07 -8.34
EBIT 1,356.40 1,588.01 1,881.19 2,217.11
Interest 23.10 27.04 32.04 37.76
Pretax Income 1,379.50 1,615.06 1,913.22 2,254.87
Net Income 889.80 1,041.74 1,234.06 1,454.43

EPS 3.00 3.51 4.16 4.90
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Other Goals
  • Increase diversity programming
  • Explore opportunities for physical plant
    expansion into other geographic areas to increase
    labor pool
  • US and International

54
Evaluations
  • Qtr Yearly financial reports
  • Balanced Scorecard
  • Yearly strategic meeting of division management
    and corporate management

55
HD in the news
  • April 13, 2005
  • HDI announced earnings "Harley-Davidson Stock
    Dips on Outlook Cut."
  • April 13, 2005
  • HARLEY-DAVIDSON REPORTS RECORD FIRST QUARTER
    MODERATES 2005 MOTORCYCLE SHIPMENT GROWTH
    FORECAST

56
Extra HD resources
  • Company Brochure
  • Financial data
  • 2004 Annual report
  • ValueLine Report

57
Questions
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