Harley-DavidsonA Case Study Analysis

Current Situation

• 1985- Harley Davidson gains new financial support from Heller Financial• 1993- Harley Davidson gains 39% stake in Buell Motorcycle Company• 1996- Harley Davidson turns focus back to motorcycles and sells transportation

vehicle segment• 1998- Harley owns most of Buell and most dealerships sell both brands at

dealership by 2007• Licenses gain a great deal of royalties for Harley through products, rallies, and

demos

Strategic Managers

Board of Directors• President and CEO: James Ziemer• Consists of 11 members: 9 internal and

2 external; 10 males and 1 female• Each member serves 3 staggered terms

and is compensated $100,000/year, half of which is in common stock

• Members have been a part of the Board as early as 1991 and have a variety of backgrounds

• The Board allows stock repurchases

Top Management• Consists of 4 corporate officers: CEO,

CFO, and 2 Vice-President positions• Leadership is represented in three

business segments: • motor company (29 positions)• Buell (2 positions)• Financial Services (3 positions)

• Responsible for the company’s current performance

External Environment (1-2 slides)

• Natural - Manufactured in four seasons stable environments of the USA and Brazil.

• Social – Economics – Harley economy is effected by world economy. 2007 international revenues were $1.52 billion. They are economically stable and prospering.

Technology – They are active in R&D with engine advances and CAD design customization.

Political/Legal – Harley’s are built in compliance with environmental regulatory standards. Their trademarks are protected through registration domestically and internationally.

Sociocultural – The average owner is an upper middle class, married male who rides recreationally.

External EnvironmentCorporate Structure

• Motorcycles and Related Products• Objective is design, manufacture, and sale of premium motorcycles. Domestically, Harley-

Davidson has approximately 684 independently owned full-service Harley-Davidson dealerships and internationally Harley-Davidson has 370 independent dealerships.

• Non-traditional retail outlets sell parts and accessories, general merchandise and licensed products in satellites of main dealerships, retail outlets in high traffic areas such as malls, airports, or popular vacation destinations and seasonal selling in high traffic areas.

• Financial Services • Harley-Davidson Financial Services (HDFS) operates under trade name Harley-Davidson

Credit. Provides wholesale financial services to Harley-Davidson and Buell dealers and retail financing to consumers. HDFS, operating under the trade name Harley-Davidson Insurance, is an agent for the sale of motorcycle insurance policies and also sells extended service warranty agreements, gap contracts, and debt protection products.

External Environment

Corporate Culture• In 1996, Harley-Davidson announced a strategic decision to

discontinue operations of the Transportation Vehicles segment and concentrate on motorcycles. This enabled the company to build motorcycles that appeal to younger markets and female riders.• Harley-Davidson prides itself on the special camaraderie Harley

owners have and visibly promotes and strengthens these relationships among riders, dealers, and Harley-Davidson employees.

External Environment• Marketing.

• Strongest brand name in motorcycles. • Dealer promotions, customer events, magazine and direct mail advertising, public relations,

cooperative programs with Harley-Davidson/Buell dealers, and national television advertising.

• Sponsors racing activities and special promotional events and participates in all major motorcycle consumer shows and rallies.

• Finance. • Sale of motorcycles makes up 78% of the overall revenue of the company, with parts and

accessories making up another 15 %.• Revenues from royalties were approximately $46 million in 2007.

• Research &Development. • Employees from styling, purchasing, and manufacturing work together with regulatory

professionals and suppliers to create a concurrent product and process development team.

External Environment

• Operations. • Manufacturing process to increase capacity, improve product quality, reduce costs, and increase

flexibility to respond to market changes.• Focus on continuous improvement, yet control costs and maintain quality.• Monitors supply, availability, and pricing of raw materials for both suppliers and in-house operations.• Employee involvement, just-in-time inventory principles, partnering agreements with local unions,

high performance work organizations, and statistical process control.

• Human Resources. • Approximately 9000 unionized employees in the motorcycle segment• Financial services segment has 755 non-unionized employees.

• Information Systems. • Highly interactive web site, www.harley-davidson.com• Online catalog giving customers the ability to purchase products that are distributed from dealers

located through the website.

Internal Environment 2-3 slides

Internal Environment

Internal Environment

Analysis of Strategic Factors

Weakening financial position6% European market penetrationLow market share among women

High R & D costsProduction of heavyweight motorcycles costlyRising personnel costs (collective bargaining)

History of increased global sales performanceExpansion into new international markets

Retention of purchasersProduction of lighter, faster motorcycles

Gain women & younger ridersStrengthen Buell partnership

Aging “Baby Boomer” customer baseIncreased safety and regulatory emission standards

Domestic sales dropped (2008)Traditional motorcycles less popular

Global competition growing

STRENGTHS WEAKNESSES

THREATSOPPORTUNITIES

Brand strength and equityCustomer loyalty

Quality product/organizational cultureStrong partnerships within the value chain;

dealerships, suppliers and distributers Strong history of financial performance;

48.7% US market shareCompany is an American classic

Strategic Alternatives and Recommended Strategy (2-3 slides)• Strategic Alternatives (with Pros and Cons)• Recommended Strategy

Strategic Alternatives and Recommended Strategy

Strategic Alternatives and Recommended Strategy

Implementation (2-3 slides)

Traditional simple style has been a trade mark of Harley products for many years. It is also their business style. On numerous occasions they have sold even successful divisions of their company to maintain focus on their classic Harley motorcycle manufacturing and sales. To free up internal resources and increase concentration on manufacturing and sales is also what motivated their decision to outsource IT services. The goal is that the new IT providers will be able to offer best practice IT services to Harley and customers.

Transition: The displaced Harley IT staff will have continued employment options with the company or proprietary placement consideration for openings with the new IT providers.

Implementation

• 2008 - Update all existing data bases. Create specs for IT alignment needs with current IT staff. Expand customer data bases.• 2009 – Beginning accepting IT service bids. Put R&D focus on CAD

design software. Gather data for IT needs of museum, website and social media pages.• 2010 – Current IT staff will collaborate with engineering staff to develop CAD optimization.

Implementation

• 2011 – Select IT provider from among all candidates. Negotiate serviced and

compensation by years end. New IT staff begins working with present IT in

the Fall to begin realignment process.• 2012 – Current IT will work with new providers who will manage

applications, infrastructure support and hosting. Contract will be signed by end of August with new providers. New IT facility construction will begin in Milwaukee, and updated CAD customizations system will be in show rooms by years end.

Evaluation and Control (1-2 slides)

• On one recommendation

Evaluation and Control

• Steering controls implemented which measure variables such as inventory turnover ratios and customer satisfaction will be tracked with computer software provided by the new IT provider. • Strategic controls that focus on the organization as a whole such as return on

investment (ROI) and earnings per share (EPS) need to be closely monitored since Harley-Davidson is a publically traded company.• Implementation of a balanced scorecard approach monitoring key performance

measures such as maintaining and growing market share, customer acceptance of the changes, is Harley-Davidson excelling internally with the IT changes and are these changes helping the company to improve and create value.

Evaluation and Control

• Divisional and functional performance measures will be put in place to monitor various operational programs to make sure that the expected cost of outsourcing the IT department is aligned to the actual cost incurred.• Budgets will be strictly enforced and reviewed monthly with variations addressed

at that time.• As an international company, standards that measure products and services could

become barriers to the outsourcing of the IT department. Categories of standards such as safety/environmental, energy efficiency and testing procedures should be looked at closely and tight controls maintained over how the new IT processes impacts processes such as the new CAD system used to custom design motorcycles for customers .