Harley Davidson
In the analysis of any organizations regardless of status whether private or public, they have both internal and external environments that are strategic during the planning phase of the organization. With reference to external forces, they are the conditions that drive various changes towards any organizations. They usually include statistics about the organization and its industry, competition as well as problems or concerns that might affect the sector. On the other hand, the internal environment comprises of the record an organization uses to determine its financial status, the clients, progress, development, and growth of the organization (Anderson, Swaminathan, & Mehta, 2013). When it comes to the motorcycle industry, Harley Davidson is one of the companies that compete with others for the top position in the sector. With the aid of a business plan, the company will easily be able to maintain the top position in the industry.
Analysis of External Environment
When discussing external environments as stated earlier, it involves forces or state of the environment that influences the decisions made by the company. Nevertheless, in the case of Harley Davidson, this external forces or factors range from environmental, economic, technological, political, to sociocultural factors. Environmental factors include the regulations set by various governments on the product the company produces. For example in Europe as well as some states in America, the company is expected to comply with emissions regulations set by the respective governments (Anderson, Swaminathan, & Mehta, 2013). Economic factors are the financial dynamics of its competitors such as Honda, Yamaha, and BMW among others. If the market is financially stable, Harley Davidson as a company will have various opportunities to develop its main market of America. Political factors that affect the company include the trade agreement between countries that act as barriers locking most of the market out.
The Analysis of H-D's External Environment
The market for Harley Davidson motorcycles is growing at an exponential rate with the current estimates making Europe the biggest market compared to the U.S. In comparison to other countries China, Singapore, and India are the only Asian countries that were not affected by the recession thus making Harley Davidson save money by manufacturing in some of these countries. The overall result of this action was cheaper, and higher production rates. To understand the external environment of this organization Porter’s Analysis will be used because of its unique yet accurate nature. From an overview of the industry, the competitive rivalry is high, bargaining power of the customer is high and, the bargaining power of the supplier is low. Threats due to substitution are moderate and finally, the threat of new entrants is also moderate. When it comes to details, the competitive rivalry is high Harley Davidson due to the high number of companies manufacturing the same product. Moreover, the high availability of other modes of transportation affects its market sales (David, 2011). Bargaining power of the buyer, on the other hand, is strong because of the availability of substitutes and the high knowledge buyers have on the low switching cost. Nonetheless, the bargaining power of the supplier is low because of the nominal forward integration as well as the high stability of product supply. The threat of substitutes is moderate as the switching cost from low in that, when compared to a car, purchasing a motorcycle is cheaper. Finally, the threats of new entrants are medium considering Harley Davison already has economies of scale that make it cheaper for them to produce new products and distribute faster than their competition (David, 2011).
Internal Environment Analysis
Financial
From the financial aspect of Harley Davidson with data collected from 2006 to 2012, it can be speculated that the company is performing well even after the financial recession. The company has enough liquidity assets that can pay off its short-term debts. This is supported by the current ratio and acid-test ratio of 2.69 and 2.11 respectively (Danova, 2018). At this rate the company’s immediate debts will be cleared through the receivables it will generate through its sales as the receivables comprise over 40% of their current assets (Pickett, 2008). In an analysis of the company’s financial data, it was noted that its liquidity ratio was still above 1 through its home nation was heavily hit by the financial recession. The company took advantage of this financial recession to grow it's abroad subsidiaries. These financial records prove that Harley Davidson as a company is still set on its initial plan of maintaining efficiency (Pickett, 2008). Though forced to work with various changes such as the relocation of the Honda manufacturing base to Asia, U.S. labor laws as well as the seasonal demands of its products. This efficiency is important as its accounts receivables as well as current assets are tied together thus making it difficult for the both to be managed. With reference to solvency, the ability of a company to pay its long-term debts in the future, Harley Davison’s Debt-to-equity ratio is set at 2.59 (Danova, 2018). This means that the company has over two and a half times as many liabilities to the creditors compared to its shareholders. Moreover, the company’s debt ratio as of the financial year of 2012 was 0.72 (Danova, 2018).
Competitor Analysis
Harley Davidson as a company is leading in the motorcycle industry, however, the company’s sales are known to dip seasonally. With this in mind, the company’s main competition is Polaris Industries Inc. and Viper Motorcycle Company. These two companies take advantage of the seasonal dip in Harley Davidson’s sales to boost their position in the poles. This drop in sales is mainly because Harley Davidson does not manufacture snowmobiles thus putting them at a disadvantage. When the financial ratios of Polaris Industries are analyzed, it can be stated that the company’s financial status has been slowly dropping. Current data show that the company’s TTM is at an all-time low of 4.8% compared to its 5-year average of 11.58% ("Polaris Industries (PII) Financial Ratios", 2018). This is the same with its growth and profitability as well as asset turnover. They are all declining steadily identifying that the company may not be such a strong contender against Harley Davidson. The Debt-To-Equity ratio is at 164.06% from a TTM of 98% ("Polaris Industries (PII) Financial Ratios", 2018). The current ratio is at 1.56 compared to 0.42. However, the company has been growing with it registering a growth of 57.45% compared to a TTM of 37.61%.
When Viper Motorcycle Company is analyzed, it is the second greatest competitor of Harley Davidson. This company, however, competes with Harley Davidson on the basis of which company can secure more clients or customers. The company deals majorly on building heavyweight motorcycles with the majority of its parts customized to the needs of the client. These range from the engines to other accessories. From a financial stance, the company is slowly growing with the majority of its financial data supporting this notion.
References
Anderson, R. E., Swaminathan, S., & Mehta, R. (2013). How to drive customer satisfaction. MIT Sloan Management Review, 54(4), 13.
Danova, A. (2018). Market Research Reports | Procurement Research Reports | IBISWorld US. Clients1.ibisworld.com. Retrieved 22 February 2018, from http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=856
David, F. R. (2011). Strategic management: Concepts and cases. Peaeson/Prentice Hall.
HOG: Harley-Davidson Inc Top Competitors and Peers. (2018). Financials.morningstar.com. Retrieved 22 February 2018, from http://financials.morningstar.com/competitors/industry-peer.action?t=HOG
Pickett, M. C. (2008). Sustainable growth modeling: A longitudinal analysis of Harley-Davidson Inc. ASBBS e-Journal, 4(1), 171-176.
Polaris Industries (PII) Financial Ratios. (2018). investing.com. Retrieved 22 February 2018, from https://www.investing.com/equities/polaris-industries-ratios
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