Harley davidson case study marketing management

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

Offer parts, accessories, riding gear, apparel, and general merchandise

They have many regular customers and built strong customer loyalty

Their motorcycles feature classic styling, innovative design, distinctive sound, and superior quality with the ability to customize

Revenue increased by $329 million in one year

Gross profit increased from $2,148 million in 2013 to $2,441 million in 2014

Net income increased by $110 million from 2013 to 2014

Harley-Davidson Financial Services (HDFS) reported $661 million in revenue from financial services up from $641 million 2013

Harley’s revenue per employee was $958,000, which is attractive for the company

20-year run of excellent profitability and stock price performance

Company manufactures 6 platforms of motorcycles: Touring, Dyna, Softail, Sportster, V-Road, and Street

Internal Weaknesses

11% decline in profits in 2015, which were just $1.44 per share

Struggled to create products relevant to younger riders and women

Faced challenges in developing international sales in countries such as India

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

Harley has about 1,400 independently owned dealers

Provides wholesale and retail financing and insurance to Harley-Davidson dealers and riders in the U.S., Canada, and other select international markets

Harley was the number one seller of new on-road motorcycles

Has two primary business segments (Motorcycle & Related Products and Financial Services)

External Threats

A 9% drop in consolidated revenue to $1.82 billion

1.4% reduction in worldwide new motorcycle sales through its dealers

Noise regulation are strict which puts Harley at risk

Primary rivals are Triumph Motorcycles Limited, Ultra Motorcycle Company, and Viper Motorcycle Company

Other competitors are Polaris Industries, Honda Motor Company Ltd, and Suzuki Motor Company

Their engine displacement falls into the category (501cc-1,000cc) which accounts for the highest number of motorcycle related fatalities

SWOT Analysis
Strengths

Sales in 90 countries

1,400 independently owned dealers

20-year run of excellent profitability and stock price performance

Harley’s worldwide sales were up 2.7% versus the prior year

Has grown among its traditional customer base

Have many regular customers and customer loyalty

Manufactures 6 platforms of motorcycles (Touring, Dyna, Softail, Sportster, V-Road, and Street)

Retail sales worldwide increased marginally in 2014

Weaknesses

Struggles in developing products relevant to younger riders and women

Struggles to develop international sales in countries such as India

EPS ratio is lower than Polaris (Harley’s 3.73, Polaris’ 6.83)

Market cap. is lower than Honda’s (Harley’s $12,280 million, Honda’s $61,190 million)

Harley’s revenue is lower than Honda’s. (Harley’s $6,228 million and Honda’s $111,137 million)

Opportunities

1,400 independently owned dealers

Pursuing efforts to lower the environmental impact of its products and operations

2 business segments (Motorcycle & Related Products, and Financial services)

Threats

9% decrease in consolidated revenue to $1.82 billion

11% decline in profits

1.4% reduction in worldwide new motorcycles sales through dealers

Motorcycles cause a high number of fatalities

Many big competitors

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

Strength Opportunity

The Harley experiences (“Freedom to ride”)

Uniqueness

Community

Products which are also financeable.

Weakness Opportunity

Shrinking demand in North America

Lower profits

Lower revenues

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

Exhibit 2 Harley-Davidson, Inc. Income Statement (in millions of USD)

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.