strategic audit of harley-davidson
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Strategic Audit of Harley-Davidson. Case 16 Strategic Management MGMT 436 Group 5 . Current Situation Jw Hayes. Current Performance 2008 Revenue 2008 $5.59 billion down from $5.73 billion in 2007 Net Income $654.7 million down from $933.8 million in 2007 - PowerPoint PPT PresentationTRANSCRIPT
Strategic Audit of Harley-Davidson
Case 16 Strategic Management MGMT 436Group 5
Current Situation Jw Hayes A. Current Performance 2008
Revenue 2008 $5.59 billion down from $5.73 billion in 2007
Net Income $654.7 million down from $933.8 million in 2007
Earnings per stock share $2.70 down from $3.74 in 2007
Motorcycles sold 303,470 down from 330,619 in 2007
http://investor.harley-davidson.com/ReleaseDetail.cfm?ReleaseID=360949
B. Strategic Posture Mission
We ride with our customers and apply this deep connection
in every market we serve to create superior value for all of our
stakeholders.
Objectives We fulfill dreams inspired by the many roads of the world by
providing extraordinary motorcycles and customer
experiences. We fuel the passion for freedom in our
customers to express their own individuality.
Strategies
Get Cost structure correct
Obtain funding for Harley-Davidson Financial Services
Invest in the Harley-Davidson Brand
PoliciesCustomers for life….
Harley-Davidson values the deep emotional connection
that is created with our customers through our products,
services and experiences. We are fueled by brand loyalty
and trust that our customers place in us to deliver premium
quality and the promise of a fulfilling lifetime ownership
experience. We exemplify this commitment by embracing
a culture of personal responsibility and stewardship for
quality in everything we do.
2. Corporate Governance Jw Hayes
A. Board of Directors
DIRECTORS JOB TITLE
CHAIRMAN OF THE
BOARD DATE OF BOARD
COMMENCEMENT
NOMINATING AND
CORPORATE GOVERNANCE COMMITTEE
AUDIT COMMITTEE
HUMAN RESOURCES COMMITTE
EOTHER
DIRECTORSHIPS
Barry K. Allen
Senior Advisor to Providence Equity Partners President,
Allen Enterprises, LLC X May-92 X
Fiduciary Management
BCE Inc.
Richard I. BeattieChairman of Simpson Thacher & Bartlett LLP Aug-96 X X
Heidrick & Struggles
International Inc. Evercore Partners Inc.
Jefferey L. BleusteinChairman of the Board Harley-Davidson, Inc. X Jun-97
George H. Conrades
Executive Chairman, Akamai Technologies,
Inc. May-02 X X
Akamai Technologies,
Inc. Oracle Corporation.
Ironwood Pharmaceuticals
, Inc.
Judson C. Green Vice Chairman, NAVTEQ Nov-04 X X
DreamWorks Animation. Aon
Corporation.
Donald A. James
Co-founder, equity owner and Chairman and Chief Executive
Officer of Deeley Harley-Davidson
Canada/Fred Deeley Imports Ltd. May-91
Sara L. Levinson
Former Non-Executive Chairman of ClubMom,
Inc. Feb-96 X X Macy’s Inc.
George L. Miles, Jr.Chair, Chester Engineers, Inc. Aug-02 X X
WESCO Intn’l Inc. EQT
Corporation. American
International Group, Inc. HFF,
Inc.
James A. NorlingChairman of the Board,
GlobalFoundries Inc. Dec-93 X X
James L. ZeimerPresident and CEO,
Harley-Davidson, Inc. 2004CFO Harley-Davidson
Jochen Zeitz
Chief Executive Officer and Chairman of the
Board, Puma AG Aug-07 X X Puma AG. PPR.
B.Top ManagementNames Title Names Title
Motor Company Leadership
Joanne M. Bischmann VP, Marketing Steven R. PhillipsVP, Quality, Reliability and Tech
Services
David P. Bozeman GM, Powertrain Operations Harold A. Scott VP, Human Resources
James M. Brostowitz VP, Treasurer Patrick Smith GM, General MerchandiseLeroy Coleman VP, Advanced Operations W. Kenneth Sutton Jr. VP, engineering
Rodney J. Copes VP & GM, Powertrain Operations Michael van der Sande Managing Director, HD Europe
William B. Dannehl VP, North American Sales and Dealer Services Jerry G. WilkeVP, Customer Relationships and
Product Planning William G. Davidson VP, Chief Styling Officer
Karl M. Eberle VP & GM, Kansas City Operations Corporate Officers Harley-Davidson, Inc.
Robert S. Farchione GM, Parts and Accessories James L. Zeimer President and CEO
Fred C. Gates GM, York Operations Thomas E. Bergmann Executive VP and CFO
James E. Haney VP, Chief Information Officer Gail A. Lione VP, General Counsel and Secretary
Michael P. Heerhold GM, Tomahawk James M BrostowitzVP, Treasure, Chief Accounting
OfficerTimothy K. Hoelter VP, Government Affairs
Ronald M Hutchinson VP, New Business Harley-Davidson Financial Services Leadership
Michael D. Keefe VP & Director Harley Owners Group Lawrence G. Hund VP, Operations, CFO
Kathleen A. Lawler VP, Communications Kathryn H MarczakVP, Chief credit and Administrative
OfficerLara L. Lee VP, Enthusiast Services Saiyid T. Naqvi President
Matthew S. Levatich VP, Materials Management
Gail A. Lione VP, General Counsel Beull Motorcycle Company Leadership
James A McCaslin President and COO Erik F. BuellChairman and Chief Technical
Officer
Jefferey A Merten Managing Director, Asia Pacific and Latin America Jon R. Flickinger President and COOLouis N. Netz VP & Director, Styling John A Olin VP, Controller
External Environment (John Taylor)
A. Natural Environment• Rising gas prices will affect transportation
and shipping costs, negatively affecting company profits. Some consumers will not buy another vehicle to put expensive fuel in while others may buy a motorcycle for better gas mileage during higher prices.
External Environment (John Taylor)
-North American market is steady and the international market is growing. Numbers reflected that sales in the foreign
markets were... 19% in 2005, 20% in 2006, and 27% in 2007 of Harley Davidson's overall sales.
--Constant rising gas prices since the Terrorists attacks on the US in 2001, have a continued impact on sales and the cost of
production and overall company profits.
Rivalry High.. Competition Motorcycle manufacturers continue to improve designs and provide a competitive market for Harley Davidson to compete for new consumers.
. Buyers Power High, With many 30 different models of Harley's ranging from $6,695-$20,645 and 8 models of Buell Bikes
from $4,695-$11,995, consumers have many options of finding the bike that meets their needs while staying in their price
range
Distributors Power High. Harley-Davidson has 684 independently –owned full-service dealerships, 307 of them which are
combined H.D. and Buell Dealers. As of 2007, 370 Independent H.D. Dealerships and distributors serving 32 European
Countries. 323 of which were combined H.D. and Buell dealers. A new dealership coming to South Africa in 2008.
Threat of Substitutes Medium. Honda is a big competitor of motorcycles from small “crotch rockets” and large cruising and touring bikes.
External Environment (John Taylor)
B. Societal EnvironmentSTEEP
Category ISSUE Threat/Opportunity Ranking
Economic Rising Fuel prices Threat 1
Pending recession Threat 2Double digit growth in international dealer network during 2007 Opportunity 4
Planned opening of dealership in S. Africa Opportunity 3
Addition of Buell motorcycles to H.D. dealerships Opportunity 5
Technological Creation of www.harley-davidson.com in 2001 Opportunity 2
Just-in-time Inventory Strength 1
Political-Legal U.S. and Foreign environment control (EPA) Threat 1
National Traffic and Motor Vehicle Safety Admin. (NHTSA) Threat 2
Sociocultural Rider Training and Safety Strength 1
External Factors WEIGHT RATINGWEIGHTED
SCORE COMMENTS
Opportunities
Double digit growth in international market 0.1 4 0.4 Growth doubled in international dealer network for 2007
New dealership in S. Africa 0.1 3 0.3 New dealership being built in South Africa in 2008
Addition of Buell motorcycle line 0.2 5 1 Soaring Profits from adding the Buell line to H.D. dealers
E-commerce, online catalog 0.03 1 0.03 www.harley-davidson.com developed in 2001
Threats
Rising Fuel Prices 0.3 1 0.03 Steady sharp rise in fuel prices since 9/11
Pending recession 0.2 2 0.4Consumers may keep aging motorcycles or wait to
purchase
U.S and Foreign environment controls (EPA) 0.03 2 0.06Stricter Government environmental controls add to cost
of production.
National Traffic and Motor Vehicle Safety Admin 0.03 2 0.06
Stricter Government environmental controls add to cost of production.
Total Scores 1 2.28
EFAS Table (John Taylor)
4. Internal Environment
C. Corporate Resources Travis Toborg
Marketing
Marketing was divided into several different areas that are common for most all
companies. These Areas included Dealer promotions, Customer Events, Magazines,
Direct Mail advertising, Public Relations, Cooperative Programs with Harley/Buell, and
TV commercials. You will also see Harley promotions at several popular sporting
evens such as racing and even UFC.
Finance
In 1985 Harley-Davidson was 4 hours from shutting there doors. Citicorp, Harleys
main lender denied lending money in 1985 but with only 4 hours remaining to find a
lending company, Harley made a deal with Heller Financial and managed to save the
company. At this current time it is now funded by HDFS (Harley-Davidson Financial
Services). Which is a lending company for Harley-Davidson motorcycles among
several other helping factors. This means the company basically now funds itself.
R&D
Harley feels that research and development of there custom and touring motorcycles is a
large part of the way they compete against the competition. They spent $178.5 million in
2005, $177.7 million in 2006, and $185.5 million in 2007 in areas such as style,
purchasing, and manufacturing.
Operations
Harley-Davidson has 684 dealerships in the U.S. and of those 307 were also Buell dealers.
Their are 104 Secondary Retail Locations (SRL's), 68 Alternate Retail Outlets (ARO's), and
12 Seasonal Retail Outlets (SRO's). This makes the US the largest supplier in sales of
Harley-Davidson motorcycles.
22% of the companies sales came from foreign Operations in Europe/Middle East/Africa
at 370 dealers with 323 being combined with Buell, Asia-Pacific 130 Harley dealers with
57 selling both brands, Latin America with 31 dealers none of which also sold Buell's, and
Canada which has 75 dealers, 45 of which sell both brands of motorcycles.
Human Resources
Approximately 50% of the manufacturing employees of Harley-Davidson's own
Harley's themselves and buy from dealerships so they have first hand experience with
what they are contributing too as a work force. There are roughly 9,000 employees of
Harley-Davidson
Information Systems
V. Analysis of Strategic Factors (John Lerch)
• A. Situational Analysis (SWOT)
• Strengths• Acquiring Buell
• Financial Self Reliability
• Weaknesses• Seasons
• Baby Boomer Era Ending
• Competition with Several Japanese Companies
• Opportunities• Addition of Buell Motorcycle Line
• Double Digit Growth in International Market
• Threats• Pending Recession
• Rising Fuel Prices
V. Analysis of Strategic Factors (John Lerch)
B. Review of Current Mission and Objectives1. Harley Davidson’s Mission and Objectives focus on the customers and the acquisition of Buell falls in line with the mission.
2. They should continue on with current
mission and objectives and seek ways to continue capitalizing on the international market.
Duration
Strategic FactorsWeigh
t Rating
Weighted Score Short
Intermediate Long Comments
S4 Acquiring Buell 0.2 5 1 X Drive sales up with more options
S1 Self Reliable Financially 0.15 5 0.75 X X Could possibly end but lenders would step in
W4 Seasons 0.1 4 0.4 X Create sales spikes and drops
W1 Baby Boomer Era Ending 0.15 2 0.3 X X Drove sales
W2 Competition with several Japanese Companies 0.15 2 0.3 X Cost more to own and repair
O3 Addition of Buell Motorcycle Line 0.2 5 1 X X Soaring Profits from adding the Buell line to H.D. dealers
O2 Double digit growth in international market 0.1 4 0.4 X Growth doubled in international dealer network for
2007
T2 Pending recession 0.2 2 0.4 X XConsumers may keep aging motorcycles or wait to
purchase
T1 Rising Fuel Prices 0.3 1 0.03 X Steady sharp rise in fuel prices since 9/11
V. SFAS Matrix (John Lerch)
VI. Strategic Alternatives and Recommended Strategy (Shavera Leveille)A. Strategic Alternatives
1. Stability Strategy: Pause/Proceed with caution. Analyze the effects the recession will
have on the company then react accordingly.
a. Pros: Acknowledgment of areas that are weak and need improvement. The
profit strategy would not beneficial it only masks the issues instead of confronting
them.
b. Cons: Strong Competition from competitors that are larger, established, and
more diversified.
2. Growth Strategy: Horizontal growth strategy; concentric diversification, strategic
alliance, and joint ventures. Target new market segments by developing products and
services for females and younger bikers both domestically and internationally.
3. Retrenchment Strategy: Turnaround strategy; close down unprofitable foreign
plants and consolidate operations.
a. Pros: Allows for concentration on business segments and plants that are profitable.
Prevents further losses.
b. Cons: Hinders growth
B. Recommended Strategy
a. Pros: New markets would help increase customer base, brand loyalty, and
profitability.
b. Cons: The new market segments may not be able to afford the products and
services offered. Strategic alliances and joint ventures may result in loss of control
over operations, conflicts, and higher risks.
Recommend alternative #2 which is growth for Harley-Davidson. The current customers
are mainly comprised of the Baby Boomers. Harley-Davidson Inc. may benefit from
recruiting younger customers to possibly build lifetime customer loyalty that can be
passed down to younger generations. Women are also a great market segment to target
because research shows that the number of female riders has risen significantly over the
past few years. Concentric diversification, strategic alliances and joint ventures enable
entry into foreign markets, knowledge of local conditions, sharing of costs, resources,
and assets. Although, the company is facing a recession the costs of Harley-Davidson
products and services should not be reduced, but rather competitively priced so that
quality is not sacrificed