alternative courses of action, suggested courses of action.
Proforma & Financials (balance sheet, statement of cashflows, income statement, stockholder equity,) attached at the end of document. Same financials provided in separate document.
I have provided sufficient background on the current state of the corporation. I truly appreciate your time and consideration.
Harley Davidson Case Study
With over 6,000 employees, 1,400 franchises, and nine
production facilities, Harley-Davidson has managed to
survive the economic downturn that was in full force in
late 2007 and for the next few years; but the firm is not
out of the woods yet. In fact, Harley-Davidson is struggling with three pivotal issues, the first of which is that
the firm’s products are viewed as leisure items. The other
two issues are similar in nature in that they deal with
the fact that managing the firm’s target market is challenging, particularly as demand for its products is changing. Individually and collectively these issues pose a real
challenge to the company’s long-term success. Without
addressing these issues, Harley-Davidson may lose its
ability to create value for customers and to serve stakeholders’ needs as a result.
As noted, the first
Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page CaseStudies-176). South-Western College Pub.
As noted, the first issue Harley-Davidson must successfully address is the fact that consumers see the firm’s
products primarily as leisure items. This means that in
many consumers’ eyes, purchasing motorcycles, performance parts, and high-dollar apparel is a luxury rather
than a necessity. Because of this, Harley’s products must
compete for funds from what at least sometimes can
be volatile discretionary budgets for consumers. When
economic conditions are challenging, the motorcycle
market tends to experience difficulties in terms of generating adequate sales. While Harley-Davidson’s revenue
streams originate from several sources, very few of them
appeal to a cost-sensitive consumer base.
Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page CaseStudies-176). South-Western College Pub. Kindle Edition.
As noted, the first issue Harley-Davidson must successfully address is the fact that consumers see the firm’s
products primarily as leisure items. This means that in
many consumers’ eyes, purchasing motorcycles, performance parts, and high-dollar apparel is a luxury rather
than a necessity. Because of this, Harley’s products must
compete for funds from what at least sometimes can
be volatile discretionary budgets for consumers. When
economic conditions are challenging, the motorcycle
market tends to experience difficulties in terms of generating adequate sales. While Harley-Davidson’s revenue
streams originate from several sources, very few of them
appeal to a cost-sensitive consumer base.
Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page CaseStudies-176). South-Western College Pub. Kindle Edition.
Second, Harley-Davidson is challenged to effectively
specify its target market as a first step to appropriately
serving that market’s needs. Historically, the firm’s
target market has been males between the ages of 29
and 55. However, in the last decade, Harley-Davidson
has pursued younger riders and women as a means of
expanding its target customer segments. But expanding
the segments the firm serves with its products is not a
risk-free decision or choice for the firm to make in that
serving others might cause the firm to lose its ability to
effectively serve the specific needs of the 29- to 55-yearold male (again, the historical target customer). This
matter is considered more fully later in the case.
Third, demands and cost drivers for the motorcycle market are ever changing. Overseas competitors
have shifted their focus from being the least expensive
to being affordable and to providing a wider variety of
motorcycles to customers as options to purchase. This
competitive shift has put pressure on Harley-Davidson’s
key markets and has forced the firm to respond. With
over 12 percent and 55 percent of the European and U.S.
heavyweight motorcycle market respectively, HarleyDavidson has a substantial territory to defend.
History.
Harley-Davidson, Inc. has been a publicly traded firm since 1987. It has two primary divisions: Motorcycles and Related Products and Financial
Services. The Financial Services Division provides credit
to motorcycle buyers and dealerships as well as risk management and insurance services for all parts of the firm.
The Motorcycles and Related Products
The Motorcycles and Related Products Division currently operates through eight primary segments:
■■Parts & Accessories (17.5 percent of net revenue in
2011)
■■General Merchandise (5.9 percent of net revenue in
2011)
■■Licensing ($43.2 million of net revenue in 2011)
■■Harley-Davidson Museum
■■International Sales (32 percent of net motorcycle revenue in 2011)
■■Patents and Trademarks
■■Other Services
■■Marketing
In 1903, William S. Harley and Arthur Davidson
founded Harley-Davidson Motor Company, known
by enthusiasts as “the Motor Company,” in order to
fund their racing pursuits. Accordingly, their first
motorcycles were merely contemporary bicycles with
small engines retrofitted to the frame. It was HarleyDavidson’s early success in motorcycle racing that
Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page CaseStudies-177). South-Western College Pub. Kindle Edition.
fueled the demand for its early models, which were sold
in dealerships as early as 1904. Because these turn of the
century races were as much about endurance as speed,
Harley-Davidson acquired invaluable knowledge pertinent to practicality and robust design. After significant
success in road and endurance races, Harley-Davidson
broke fresh ground with the introduction of the V-Twin
engine design. Superior to large single-cylinder engines,
the lighter V-Twin design allowed similar displacement
in a lighter package with a shape that fit naturally into
the bicycle-inspired frames of the early 1900s. Few suspected that this design would become so integral to
modern motorcycles.
Having dedicated over a third of its production to
the U.S. Army, Harley-Davidson sales exploded during
World War I. With the advent of motorized warfare, the
motorcycle proved itself to be far more than just a novel
invention. In addition to proving itself to the Army,
Harley-Davidson also proved itself to soldiers. After
the war, soldiers returned home and became a loyal
customer base for the young firm. Through the 1920s,
Harley-Davidson continued to focus on design improvement and racing. It spent much of this decade fighting
for market share with multiple medium and small competitors. During this time, firms producing automobiles,
airplanes, bicycles, and industrial machinery also tried
their hand at building motorcycles.
The 1930s were a unique time for the motorcycle
industry. In the wake of the Great Depression, the public was looking for inexpensive, simple transportation.
At the same time, unemployment and inflation shrank
potential customers’ purchasing power. It was during
Hitt, Michael A.; Ireland, R. Duane; Hoskisson, Robert E. (2014-01-01). Strategic Management: Concepts and Cases: Competitiveness and Globalization (Page CaseStudies-177). South-Western College Pub. Kindle Edition.
power. It was during
this time that many of the smaller motorcycle manufacturers dropped out of the industry. Most of these firms
were subsidiaries of companies in related industries.
These failed motorcycle firms had many of the capabilities needed to produce motorcycles, but lacked the corporate focus and support to continue production during
such a difficult economic time. It was during this time
that the U.S. domestic market shrank, with only Indian
and Harley-Davidson remaining. With the market
divided between only two domestic producers, HarleyDavidson’s production held steady.
With the onset of World War II, Harley-Davidson
found itself to be a major supplier for the Allied war
effort. Again, war vaulted Harley-Davidson into a position of higher volume, improved reputation, and deeper
loyalty with owners and soldiers. As the war came to
an end, the United States was flooded with a surplus of
Army WL45 motorcycles. Suddenly, this country was full
of prospective riders who understood Harley-Davidson’s
product and appreciated how motorcycles could provide
inexpensive, dependable transportation. At this point,
only Indian Motorcycles was a competitor for HarleyDavidson. But in 1956, at the height of an economic
recession, Indian Motorcycles declared bankruptcy and
stopped producing motorcycles altogether, leaving only
Harley as a major producer and seller of motorcycles.
As the sole U.S.-based motorcycle power, HarleyDavidson enjoyed great success. Nevertheless, the lack
of competition nearly became its undoing. This market
condition allowed Harley-Davidson to take more risk
in the form of acquisitions, causing the firm to lose its
tight focus on a single market. It began branching out to
other leisure and motorized products such as off-road
motorcycles, ski boats, and golf carts. At the same time,
the bulk of Harley-Davidson’s revenue stream was still
coming from the sale of its heavy motorcycles. Many
of the acquisitions the firm completed in the latter part
of the 1950s and the early 1960s, such as the Tomahawk
Boat Manufacturing Company in 1962, were in similar
industries, but a poor fit with Harley nonetheless. The
acquired companies were often in deep trouble when
Harley-Davidson purchased them. In the end, HarleyDavidson was hobbled with losing ventures that diluted
its focus and did not fit well with its core competencies.
In 1969, the American Machine and Foundry Company
(AMF – a longtime producer of leisure products such as
tile bowling pins and ball returns) purchased the financially distressed Harley-Davidson.
