Critique of Case Analysis: Harley Davidson Inc.
Introduction
Harley-Davidson, America’s largest motorcycle producer, is an iconic brand worldwide that provides a unique customer experience. The company produces custom, cruiser, and touring motorcycles, and offer parts, accessories, riding gear, apparel, and general merchandise. The latter provides wholesale and retail financing and insurance to Harley-Davidson dealers and riders located in the United States, Canada, and other international markets. (David & David, 2016). The motor cycle industry is an intensely competitive industry with many big competitors, which is why Harley had struggled over the last few years. This report will cover the following; 1) Harley’s vision and mission statements, 2) Internal/external strengths and weaknesses, SWOT Analysis, and lastly, a recommendation on the strategic direction for the company supported by the two Matrices, SPACE Matrix and the SWOT Matrix.
Company Background
Harley Davidson is America’s largest motorcycle producer that was first incorporated in 1907 by William S. Harley and Arthur Davidson. It started off in a small shed in Milwaukee, Wilsconsin with its first dealership opening in Chicago, 1904. They targeted customer needs with its unique offerings and earned price premiums. Harley operates in two primary business segments, Motorcycle & Related Products (Harley-Davidson Motor Company), and Financial Services (Harley-Davidson Financial Services). In 2014, Harley’s worldwide retail sales increased by 2.7% versus the prior year. The company has sales in almost 90 countries, with one-third of its sales coming from outside the United States. (David & David, 2016). Today, Harley remains a dominant force in the market but faces challenges in creating products relevant to younger riders and women, as well as developing international sales in countries such as India. (David & David, 2016).
Mission and Vision Statement
Many organizations today develop a vision statement that answers the following question, “What do we want to become?” “Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement.” (David & David, 2016). Whereas, a mission statement identifies the scope of a firm’s operations in product and market terms. It addresses the standard question which is, “What is our business?”
Harley-Davidson’s current mission statement is as follows, “We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.” The company’s vision for sustainability is, “We preserve and renew the freedom to ride.” (David & David).
We know that Harley-Davidson’s goal is to increase company shipments by 4-6% to 282,000-287,000 motorcycles worldwide, and projects its operating margin for all of 2015 from the Motorcycle segment to be 18-19 percent. We also know that the company’s strategic plan calls for international markets to play an increasingly significant role. (David & David, 2016). I believe that Harley’s current mission statement is too long as mission statements normally should be about 1-2 sentences long. My proposal for a new mission and vision statement that I feel would better represent the company Harley-Davidson would be as follows:
Mission Statement: “With the speed of our new innovative electric model, our brand will continue to expand globally and sustainably with a speedy, rechargeable engine.”
Vision Statement: “With our creative and innovate skills, Harley-Davidson can make dreams come true.”
I believe these statements better represent the company in terms of where their business wants to go and what they want to become. With the new electric models that are now killing the market as they are more sustainable and environmentally friendly, Harley would have to continue to seek new innovative ideas to remain relevant with their competitors. Another reason why I think these statements better represent Harley-Davidson is because they pursued efforts to reduce the environmental impact of its products and operations, while promoting motorcycling and preserving the authentic Harley experience. (David & David, 2016).
Objectives and Strategies
Defining your objectives and strategies are two important steps in business planning. “Strategic business plan objectives provide the specific details about what a company’s expectations are for meeting their identified goals.” (Richards, 2018). Harley Davidson’s goal is to have its full year company shipments increase 4 to 6% to 282,000–287,000 motorcycles worldwide. The company also projects its operating margin for all of 2015 from Motorcycle segment to be 18 -10%. (David & David, 2016). But, the company needs to come up with a strategy to maintain their customer base as they are aging and continue to compete with their rivals.
Innovation is key in the motorcycle industry. In order for Harley to compete against their competitors, they must continually update its existing product base and develop new innovative products that will attract key customer groups. “Harley has been focusing on motorcycles since its inception and is innovating its offering in that market, including electric bikes.” (David & David, 2016). Their strategy is to pursue efforts to reduce the environmental impact of its products and operations, while promoting motorcycling and preserving the authentic Harley experience.
The company came up with a marketing strategy that is designed to reach and engage customers. They spent around 15% of its marketing budget on traditional media. Instead of outsourcing its creative advertising work to a traditional agency, Harley engaged a crowd-sourcing firm and co-creates and tests its marketing ideas with its customers as a way to define their needs. In 2012, the company’s Chief Marketing Officer (CMO) organized an event in Rome, Italy, where Pope Francis blessed thousands of Harley raiders and their motorcycles as part of the company’s 110-year anniversary. (David & David, 2016). Their objective was to spread brand awareness internationally. They had been trying to grow its appeal across generations, cultures, and borders. Internationally, 35.9% of motorcycles were shipped to international markets in 2013. (David & David, 2016).
Internal Strengths & Weaknesses
Internal Strengths
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Offer parts, accessories, riding gear, apparel, and general merchandise
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They have many regular customers and built strong customer loyalty
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Their motorcycles feature classic styling, innovative design, distinctive sound, and superior quality with the ability to customize
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Revenue increased by $329 million in one year
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Gross profit increased from $2,148 million in 2013 to $2,441 million in 2014
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Net income increased by $110 million from 2013 to 2014
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Harley-Davidson Financial Services (HDFS) reported $661 million in revenue from financial services up from $641 million 2013
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Harley’s revenue per employee was $958,000, which is attractive for the company
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20-year run of excellent profitability and stock price performance
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Company manufactures 6 platforms of motorcycles: Touring, Dyna, Softail, Sportster, V-Road, and Street
Internal Weaknesses
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11% decline in profits in 2015, which were just $1.44 per share
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Struggled to create products relevant to younger riders and women
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Faced challenges in developing international sales in countries such as India
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Their engine displacement falls into the category (501cc-1,000cc) which accounts for the highest number of motorcycle related fatalities
External Opportunities & Threats
External Opportunities
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Harley has about 1,400 independently owned dealers
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Provides wholesale and retail financing and insurance to Harley-Davidson dealers and riders in the U.S., Canada, and other select international markets
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Harley was the number one seller of new on-road motorcycles
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Has two primary business segments (Motorcycle & Related Products and Financial Services)
External Threats
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A 9% drop in consolidated revenue to $1.82 billion
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1.4% reduction in worldwide new motorcycle sales through its dealers
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Noise regulation are strict which puts Harley at risk
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Primary rivals are Triumph Motorcycles Limited, Ultra Motorcycle Company, and Viper Motorcycle Company
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Other competitors are Polaris Industries, Honda Motor Company Ltd, and Suzuki Motor Company
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Their engine displacement falls into the category (501cc-1,000cc) which accounts for the highest number of motorcycle related fatalities
SWOT Analysis
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Strengths
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Weaknesses
|
|
Opportunities
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Threats
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Recommendation
One of the matrices provided are the SWOT Matrix which can help identify internal strengths which allow managers or companies to take advantage of external opportunities and repeat successes. There is always room for improvement and the necessity of continuous improvements. These are called strength opportunities and weakness opportunities. Identifying strength threats can help Harley-Davidson protect themselves from external threats and competition. Strength threats on the other hand are a little more difficult to identify and could be in departments that indirectly support the main product. Weakness threats protect the company from internal weaknesses which could be determinantal to the success-path of Harley-Davidson. (David & David, 2016).
The second matrix used for strategic direction is the SPACE Matrix which builds on the SWOT Matrix. It selects variables and through analysis select an aggressive or conservative strategic plan. The quadrant is built upon two axis, a financial position – Stability Position Axis and an Industry position - Competitive Position axis. These are Harley Davidson’s determinants for the overall strategic position. These quadrants are conservative, aggressive, defensive and competitive. This Matrix is to incorporate EFE Matrix basis to help identify the correct strategic plan for Harley. (David & David, 2016).
Based on what we can see in both matrices below in the Appendix, the company needs to work on their financial position as the increased competition have been impacting their revenue. Looking at the SPACE Matrix score, their financial position average scored a 4.571429, indicating that it is doing okay but can do better considering it’s a well-known Motorcycle company that has succeeded many times in the past. The industry position scored an average of 3.5 and that is again due to the intense competition. Harley’s Davidson’s stability position scored an average of -3, which indicates that the company is still stable despite the competition. Lastly, the competitive position scored an average of -1.5 as Harley Davidson faces many big competitors like Triumph Motorcycles Limited, Ultra Motorcycle Company, and Viper Motorcycle Company.
Based on these averages, I would recommend that Harley Davidson works a litter harder on new innovative ideas that helps differentiate them from their rivals. I also think they should develop a new motorcycle model that can help them connect with the new generation and the women, perhaps a more safe, light weight, driver friendly model that will make it easier for women to drive motorcycles. I think part of the reason why, if not most, females do not often ride motorcycles is because they are afraid to fall and not know how to control the motorcycles. By developing a more simplified, light weight model may attract the new generation as well as the women.
Conclusion
Despite the challenges and competition faced, Harley-Davidson and their team managed to survive on the market and remain relevant with their competitors. Bringing in the new electric model to the market really helped increase their market development and stay in-sync with the demands of the younger generation. Although sales for the electric motorcycle were small, the market is expected to grow tenfold by 2018. With the right strategic plan and strategic direction, the company can overcome their weaknesses and use their opportunities to minimize their threats. As long as Harley-Davidson continues to update its existing product base and develop new innovative products that will attract key customer groups, they will remain as the number one leader in the motorcycle industry. (David & David, 2016).
Appendix
SWOT Matrix
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Strength Opportunity The Harley experiences (“Freedom to ride”) Uniqueness Community Products which are also financeable.
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Weakness Opportunity Shrinking demand in North America Lower profits Lower revenues |
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Strength Threat Harley international market segment is growing and is going strong. Marketing strategies that focus on diversifying their customers by focusing on minorities including women. Their supply chain and relationship with their suppliers is very tightly knit and based on trust, openness and collaboration. |
Weakness Threat Harley has not been able to diversify or connect with new generation and women internally but is attempting to. |
SPACE Matrix
Table 1 - Space Matrix Categories and Financial Data of Harley Davidson
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Exhibit 2 Harley-Davidson, Inc. Income Statement (in millions of USD) |
||||
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Report Date |
31-Dec-14 |
31-Dec-13 |
Score |
Category |
|
Revenues |
$6,229 |
$5,900 |
6 |
financial position |
|
Cost of revenue |
3,788 |
3,752 |
-2 |
stability position |
|
Gross profit |
2,441 |
2,148 |
5 |
financial position |
|
Operating expenses |
1,160 |
994 |
-4 |
stability position |
|
EBIT |
1,281 |
1,154 |
5 |
financial position |
|
Interest & other |
2 |
-40 |
-1 |
stability position |
|
EBT |
1,283 |
1,114 |
4 |
financial position |
|
Tax |
439 |
380 |
-3 |
stability position |
|
Net income |
844 |
734 |
|
|
|
|
|
|
|
|
|
Exhibit 3 Harley-Davidson, Inc. Balance Sheet (in millions of USD) |
||||
|
Report Date |
31-Dec-14 |
31-Dec-13 |
|
|
|
Assets |
|
|
|
|
|
Cash and equivalents |
$907 |
$1,067 |
-3 |
stability position |
|
Accounts receivable |
2,164 |
2,035 |
-3 |
stability position |
|
Inventories |
449 |
425 |
-3 |
stability position |
|
Other current assets |
428 |
462 |
-5 |
stability position |
|
Total current assets |
3,948 |
3,989 |
-3 |
stability position |
|
Property, plant & equipment |
883 |
842 |
5 |
industry position |
|
Notes receivable |
4,516 |
4,226 |
-1 |
stability position |
|
Goodwill & intangibles |
28 |
30 |
3 |
Industry Position |
|
Other assets |
153 |
318 |
-6 |
stability position |
|
Total assets |
9,528 |
9,405 |
|
|
|
Liabilities |
|
|
|
|
|
Accounts payable |
197 |
240 |
2 |
financial position |
|
Short-term debt |
1,743 |
1,842 |
-2 |
stability position |
|
Other current liabilities |
449 |
427 |
2 |
industry position |
|
Total current liabilities |
2,389 |
2,509 |
4 |
industry position |
|
Long-term debt |
3,761 |
3,417 |
-5 |
stability position |
|
Other liabilities |
469 |
470 |
-3 |
stability position |
|
Total liabilities |
6,619 |
6,396 |
|
|
|
Common stock |
3 |
3 |
-1 |
stability position |
|
Retained earnings |
8,459 |
7,853 |
6 |
financial position |
|
Treasury stock |
-6,303 |
-5,689 |
4 |
financial position |
|
Paid in capital and other |
750 |
842 |
-1 |
Competitive Position |
|
Total equity |
2,909 |
3,009 |
|
|
|
Total liabilities & equity |
9,528 |
9,405 |
|
|
|
Customer Loyalty |
|
|
-1 |
Competitive Position |
|
Brand Allure |
|
|
-2 |
Competitive Position |
|
Retail Access |
|
|
-2 |
Competitive Position |
Table 2 - Score per Category
|
|
Financial Position |
Industry Position |
Stability Position |
Competitive Position |
|
|
6 |
5 |
-2 |
-1 |
|
|
5 |
3 |
-4 |
-1 |
|
|
5 |
2 |
-1 |
-2 |
|
|
4 |
4 |
-3 |
-2 |
|
|
2 |
|
-3 |
|
|
|
6 |
|
-3 |
|
|
|
4 |
|
-3 |
|
|
|
|
|
-5 |
|
|
|
|
|
-3 |
|
|
|
|
|
-1 |
|
|
|
|
|
-6 |
|
|
|
|
|
-2 |
|
|
|
|
|
-5 |
|
|
|
|
|
-3 |
|
|
|
|
|
-1 |
|
|
Average |
4.571429 |
3.5 |
-3 |
-1.5 |
|
CP-IP Axis |
2 |
|
|
|
|
FP-SP Axis |
1.571429 |
|
|
|
Table 3 - Graphical Representation of Space Matrix
References
David, F. R., & David, F. R. (2016). In Strategic management: A competitive advantage approach, concepts and cases, global edition (16th ed.). London, United Kingdom: Pearson Education Limited.
Richards, L. (2018). Elements of strategic business plan objectives. Chron. Retrieved from http://smallbusiness.chron.com/elements-strategic-business-plan-objectives-2718.html
Case Analysis 2- Harley Davidson, Inc.
Running Head: CASE ANALYSIS 2- HARLEY DAVIDSON, INC.