Plan Part 2

The Analysis of H-D's External Environment.

It is necessary for the business to be aware of the external and internal environment surrounding it. This will ensure that the business is prepared for all factors that might influence the business in any way. The business environment is comprised of factors that are beyond the control of the business (Grundy 217). Certain factors constitute the major driving force for change in the external market of the motorcycle industry. Change in public perception about motorcycles has instituted change in the motorcycle industry. Motorcycles are deemed risky. Therefore, companies are continuously innovating to ensure that they produce motorcycles that fit the safety threshold desirable by the public. Government regulations on the production of vehicles that fit the safety standards of the country have also initiated change in the external environment. Motorcycle production plants are conducting extensive research and development to ensure that they manufacture motorcycles that fit local and international safety standards.

Competition is to be expected in business. Competition in the motorcycle industry is inescapable. The industry has several companies ultimately compete for the attention of the customers. Moreover, the competitors will influence supplier trends and preferences. Suppliers will opt for a company that offers suitable deals.

The motorcycle industry is characterized by various innovations. Therefore, there is high potential for entry. The industry does not have substantial barriers to entry. Therefore, different companies can join the industry hence diluting the effect of the already established industries.

The motorcycle industry has specific suppliers. This limited number of suppliers increases the level of competition among existing motorcycle production companies. This level of competition shifts the power to the supplier who end up dictating the industry. They therefore settle for companies that offer competitive deals.

The industry has numerous customers who desire various makes of motorcycles. That dilutes the aspect of stiff competition among players in the industry. The respective companies engage in massive customizations that appeal to their selected clients. Competition is therefore not stiff since each player controls its own segment.

The motorcycle industry faces threats from various substitutes. These are substitutes in the sector of transportation. For instance, the customers can choose to substitute the motorcycles with other modes of transportation like vehicles.

The United States of America produces substantial numbers of motorcycles. The state of California has the largest number of registered motorcycles in the country. The number stands at 813,771 units. The US received 4,419.1 million dollars’ worth of revenue from motorcycles. Harley Davidson for instance sold 168,240 units. In overall, the US produced approximately 500, 000 motorcycles in the year 2015 (Statista 1).

Firms in this industry face various strategic challenges. For instance, increase in production costs is a drawback to most firms in this industry. This is in comparison to other motorcycle producing firms in other countries that have production plants operating at very low costs. The motorcycle industry is highly competitive with various countries producing differentiated products. It is therefore difficult for a certain company to exert explicit control over the market.

The Analysis of H-D's Current Strategy

The financial perspective is an important perspective to focus on in the balanced scorecard metric (Grundy 220). The company aims to improve its financial performance through various ways. For instance, employing financial reporting techniques that will improve the company`s efficiency. The company aims to put up financial targets that will guide its budgetary plans throughout the fiscal year. The above metrics should be measured in the BSC analysis.

The customer perspective is a fundamental component of the BSC. The company should ensure that it reviews the important components that will improve its standing among the customers. For instance, the company should ensure that it establishes brand awareness across the country and internationally. Moreover, the company should ensure that the customer satisfaction level is maintained at a higher level. Those metrics should be measured.

Internal process is an important perspective of the BSC. The company should focus on various components of the internal process. For instance, the company should ensure that it improves processes for better productivity. Moreover, the firm should ensure that it improves its systems and realize quality optimization. The firm should also ensure that it utilizes its capacity fully. The metrics mentioned above should be measured for a comprehensive BSC analysis.

The learning and growth component of the BSC has certain metrics that should be analyzed. For instance, staff engagement in the organization is a good measure in the BSC assessment. Skills assessment can also be conducted to review the skill level of the employees in the organization.

H-D's Financial Ratios

2011 Debt Ratio = total debt/total assets = 15,000/9000 =1.67 0r 16.7%.

2012 Debt Ratio = 12000/9000 = 1.33 or 13.3%

2013 Debt Ratio = 16000/12000 = 1.33 or 13.3%

2014 Debt Ratio = 17000/12000 = 1.41 or 14.1%

These ratios indicate a trend. The company is highly leveraged as seen from the level of debt the company has.

2011 Return on Assets = net income total assets = 3000/9000 = 0.333 or 33.3%

2012 ROA = 2000/9000 = 0.222 or 22.2%

2013 ROA = 3000/12000 = 0.25 or 25%

2014 ROA = 5000/12000 = 0.416 or 41.6%

The trend indicates that the company is profitable despite its investments. The company is earning a substantial amount of money given the little investment.

Competitor Analysis

The company faces stiff competition from Drex Inc and Phantom Inc. The following are the financial ratios of the two company over a four-year period.

Drex Inc Financial Analysis

2011 Debt Ratio = total debt/total assets = 12,000/8000 =1.5 0r 15%.

2012 Debt Ratio = 10000/7000 = 1.42 or 14.2%

2013 Debt Ratio = 13000/11000 = 1.18 or 18.1%

2014 Debt Ratio = 14000/11000 = 1.27 or 12.7%

The company is highly leveraged as seen from the level of debt the company has. The company uses a substantial amount of debt to finance its operations.

2011 Return on Assets = net income total assets = 1000/8000 = 1.25 or 12.5%

2012 ROA = 2000/7000 = 0.286 or 28.6%

2013 ROA = 2000/11000 = 0.182 or 18.2%

2014 ROA = 4000/11000 = 0.363 or 36.3%

References

Dess, G., Lumpkin, G. T., Eisner, A., & McNamara, G. (2012). Strategic Management. New York, NY, USA: McGraw-Hill/Irwin.

https://digitalbookshelf.argosy.edu/books/007768639X/id/P1-9

Grundy, Tony. "Rethinking and reinventing Michael Porter's five forces model." Strategic

Change 15.5 (2006): 213-229. Print

Statista. The Statistics Portal: Statistics and Facts about the U.S. Motorcycle Industry

https://www.statista.com/topics/1305/motorcycles-in-the-us/ retrieved Nov 30, 2016 [online]