Uploaded by Souvik Bose

HARLEY-DAVIDSON INC

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“We fulfill dreams through
the experiences of
motorcycling, by providing to
motorcyclists and to the
general public an expanding
line of motorcycles, branded
products and services in
selected market segments.”
HARLEYDAVIDSON
INC.
ESPINO, Danna Laucil J.
MABULAC, Billie Joyce L.
OBANG, Elysa Marie E.
SAMERA, Karen Joy S.
ZACARIAS,Elisha Marie C.
I. Executive Summary
For over 100 years Harley Davidson has been a leader in the motorcycle
market worldwide. In 1903 the company was founded when Bill Harley and Arthur
Davidson built their first motorcycle. Within five years they had built 150 units. In
2008, retail sales in the United States were at 218,939 motorcycles. There are more
than 1,300 Harley-Davidson dealerships worldwide. Harley-Davidson Motorcycles
are the number one U.S. based motorcycle, holding 28% of the U.S. motorcycle
market.
The motorcycle industry is a consolidated industry. The U.S. and international
heavyweight motorcycle markets are highly competitive. The major players, such as
Yamaha, Suzuki, and Honda, generally have financial and marketing resources that
are substantially greater than the non-major players. Competitions in the
heavyweight motorcycle market are based on several factors; price, quality,
reliability, styling, product features, customer preference, and warranties.
Harley’s first segment is the motorcycle and related products business. It
included designing, manufacturing, and selling primarily heavyweight touring and
custom motorcycles and offering a broad range of related products that included
motorcycle parts and accessories and riding apparel. The custom products charge a
higher price because of its features, styling, and high resale value. Their target
market is mainly in US. By the end of 1997, they have an approximate 48.3% share
in the US market, 6.1% share in European, and 16.5% share in Asia/Pacific. New
competitors have entered the marketplace because demand for the motorcycles has
exceeded production. The demand is prospected to grow in the future, and the
switching cost is low.
Harley Davidson has always been known for its differentiated products that
have continuously stood out from the norm. More advertisement for Harley’s
product can truly help them to attract their customers and to increase their market
share. Harley-Davidson can also expand their product lines to increase their sales.
Related diversification and market penetration are the strategies that Harley should
use to promote its products and services.
II. Vision and Mission
Mission
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.
Vision
Harley-Davidson, Incorporated, is an action-oriented, international company
a leader in its commitment to continuously improve the quality of profitable
relationships with stakeholders (customers, dealers, employees, suppliers,
shareholders, government, and society). Harley-Davidson believes the key to
success is to balance stakeholders' interests through the empowerment of all
employees to focus on value-added activities.
III. Internal Assessment
a. Corporate Profile
In 1903 what was to become a legendary motorcycle company was
formed in the Davidson family’s backyard. The “factory” in which the worked
was a 10-by15- foot wooden shed with words “Harley-Davidson Motor
Company” scrawled in the door. The Davidson brothers, William D., Walter,
Arthur and William S. Harley, made their first motorcycle there.
Achievements
 Finance
Harley Davidson’s 2006 net revenue and net income were down
2.3% and 29.9% respectively, composed to 2007. International retail
sales were up 10.3% as composed to 2007.
 Marketing
Harley Davidson has approximately 686 independently owned
full- service dealership in the United States. The marketing efforts are
divided between dealer promotions, customer, events; and advertising
through national television, print, radio and direct mailings, as well as
electronics advertising. Harley Davidson promotes its products and
lifestyle through The Harley Owners (HOG) which was founded in 1983
and currently has approximately 1.1 million members worldwide.
 Research and Development
Motorcycle manufactures must utilize technology in developing
their product as well as in the process of manufacturing them. More
powerful motors and lighter, stronger structural components led to an
increase in performance, while new brake and suspension systems
help to make riding safer. Technology also plays an important part in
the manufacture and distribution of motorcycles. Computer programs
allow designs to be tested in a virtual environment without having to
pay for expensive prototypes. Computers are also used in
manufacturing, distribution and delivery systems. Motorcycle
manufactures must use all available technology resources to be
successful.
 Technology
Technology has been put to use throughout Harley-Davidson in
order to design and produce the finest motorcycle possible. In 1997,
the Willie G. Davidson Product Development Center (PDC) was
opened to provide research and development facilities for product
development. Employees from various functional units within the
organization meet regularly with material suppliers to come up with
new designs and processes. The PDC has been responsible for the
successful launch of many new product innovations. The research and
development teams are constantly working to find ways to make new
motors with more power and durability. Harley-Davidson has several
upgrade performance packages that were designed, tested, and
perfected at PDC.
Harley-Davidson technology is also being incorporated into Buell
motorcycles. These motorcycles combine cutting-edge performance
with the sport motorcycle design that has become so popular with the
young riders throughout the world.

Management/Human Resource
Motorcycle Segment
In order to survive in the competitive motorcycle industry and
to continue to strive toward their commitment to quality
improvement and production efficiencies, Harley-Davidson s
management realized they needed to foster a perpetual learning
and improving organization. The management believes that open
communication between all levels of employees is essential to the
success of the organization. In order to foster an organizational
environment made up of employees who share the same vision and
values as the company, Harley saw that it was necessary to
communicate the company s high moral values, and educate the
employees about the whole business environment. This quest for
incorporating the company s vision and high moral values into the
organizational structure and expecting the employees to believe in
and carryout this same vision and moral values, could have been
extremely difficult since Harley s workers are unionized. However,
Harley s relationship with the unions is excellent. Both the company
and the unions have stuck by each other during good and bad
times. Because of this, the unions trust Harley s management and
realize that their efforts toward continuous improvement and quality
consciousness are in the best interest of the employees (Vroom,
Vroom). Collective bargaining agreements between the company
and the unions are expected to expire during the first quarter of
1997, but company and union relations are strong and there are no
concerns about future agreements.
Transportation Vehicles Segment
Discussion of human resources and employee relations,
within the transportation vehicle segment is limited. The segment
employs approximately 2,400 people. The employees have no
union representation and there is no discussion of any future efforts
to unionize. The Holiday Rambler segment is committed to the
continuous training and skills improvement of its current workforce,
as is evident by the company s requirement that manufacturing
employees maintain the flexibility to work on the production of any
of its line of vehicles. Part of each employee s compensation
package consists of production group incentives. These incentives
allow an employee to increase their total compensation by meeting
production goals and quality standards.
Management Information System
Harley-Davidson s commitment to manufacturing efficiencies,
quality improvement, and technological advancements, provide
evidence of the company s investments in information systems. By
utilizing just-in-time inventory techniques through close, continuous,
contact with key suppliers the company was required to expend a
substantial amount of effort and resources towards the allocation of
advanced communication systems. Management s earlier
investments in Computer-Aided Design (CAD) systems in the early
1980s drastically increased production efficiencies and reduced the
break-even point from 53,000 motorcycles in 1982 to 35,000 in
1986. Harley-Davidson seems to be making the necessary
commitments in capital and other resources to stay competitive in
this area.
b. Vision and Mission
Mission
We fulfill dreams through the experience of motorcycling, (self-concept)
by providing to motorcyclists and to the general public (customer) an
expanding line of motorcycles and branded products (products) and services
in selected market segments.(segments)
Vision
Harley-Davidson, Incorporated, is an action-oriented, (self-concept)
international company (market) a leader in its commitment to continuously
improve the quality of profitable relationships with stakeholders (customers,
dealers,
employees,
suppliers,
shareholders,
government,
and
society).(concern for employees) Harley-Davidson believes the key to
success is to balance stakeholders' interests through the empowerment of all
employees to focus on value-added activities. (Philosophy, concern for
employees and concern for survival, growth and profitability)
c. Corporate Officers
 President and Chief Operating Officer: Matthew S. Levatich
 Senior Vice President of Manufacturing: Karl M. Eberle
 Executive Vice President for Corporate Product Planning: James A.
McCaslin
 Vice President and General Manager of Materials Management:
Michelle Kumbier
 General Manager of Springettsbury Township Plant: Ed Magee
d. Product Lines
The motorcycle and related products segment of Harley-Davidson
include parts and accessories (P&A), general merchandise; licensing; and
motorcycles. The major P&A products are replacement parts and mechanical
and cosmetic accessories.
e. Internal Factor Evaluation (IFE) Matrix
Key Internal Factors
Weight Rating
Weighted
Scores
Strengths
Strong brand name
Strong motivation for customers
0.14
0.06
4
3
0.56
0.18
Remain profitable throughout the crisis
0.05
3
0.09
Product customs and customizations
0.05
4
0.20
Provides insurance and related products to dealers
and customers
0.07
4
0.28
Double digit growth for revenues and earnings
0.06
3
0.18
High productions and sales
Employee Ethics
0.08
0.07
4
4
0.32
0.28
Focus on growth and corporate governance
0.07
4
0.28
0.14
1
0.14
0.06
2
0.12
0.07
2
0.14
0.08
1
0.08
Weaknesses
High price
Senior Leadership Group is not a decision-making
body
Employees have no union
Competitors are more diversified
Total
1.00
2.85
Note that the two most important factors to be successful in the motorcycling
business are “Strong brand name” and “High price” as indicated by the 0.14 weight.
Also note that the Harley-Davidson Inc. is doing best on “Strong brand name”, “Provides
insurance and related products to dealers and customers”, “High productions and sales”,
and “Employee Ethics”. Overall, this store receives a 2.85 total weighted score,
indicating there is definitely room for improvement in store operations, strategies,
policies and procedures.
STRENGTHS
Marketing
 In the first half of 2010, Harley-Davidson opened its first five
dealerships in India.
 Harley’s heritage is symbolic of the American dream. Harley’s workers
and customers related to find motivation in this American dream that
become reality.
 However, Harley has continued to remain profitable throughout the
economic crisis.
 Harley-Davidson announced that it will shed additional 300-400 hourly
jobs in the 2009-2010 timeframe.
Management
 The values guide their action and serve as the framework for the
decision and contribution its employees make at even level of the
company.
 Mr. Richard Teerlink age 59 joined Harley-Davidson in 1981 and was
elected to the board of directors in 1982. In 1988 he was appointed
President, and he was named Chief Executive Officer in 1989
(Wheelen).
 Teeklink is also focused on growth and corporate governance, which is
reflected in the company’s vision
Finance
 Harley-Davidson provides insurance and insurance related programs
primarily to dealers and their customers.
 Harley has provided consistent financial performance for the last 10
years, with revenue and earnings both showing double-digit growth.
This growth can be expected to continue as long as the responsible
strategies are continued.
Production/Operation
 Harley’s custom segment gives owner the opportunity to customize
their bikes, limited edition.
WEAKNESSES
Marketing
 Its stock declined from 48.05 per share to 9.78 per share in the time
period March 8, 2008 to March 7, 2009
 By the early 1970’s, the Japanese were importing huge numbers of
cover-priced motorcycles into the United States.
 Harley is closing several facilities and has indicated its motorcycle
sales decreased 13% during the first two months of 2009.
Management
 Senior Leadership Group of Harley-Davidson Inc is not a decisionmaking body.
 Discussion of human resources and employee relations, within the
transportation vehicle segment is limited. The segment employs
approximately 2,400 people. The employees have no union
representation and there is no discussion of any future efforts to
unionize.
Finance
 Operating income for the motorcycles segment was down 21.5% and
operating income for the financial services segment decreased 61.0%
 Worldwide retail sales of Harley-Davidson motorcycles were down 71.2%
in 2008 as composed to 2007 which would create a decrease in profit.
Production/Operation
 The heavyweight motorcycle (Harley-Davidson major competitor) have
a large worldwide revenue and are more diversified than HarleyDavidson
 During 2008, the company shipped 303,479 Harley-Davidson
motorcycles, a decrease of 27,140 motorcycles or 8.2% from last year.
IV. External Assessment
a. Porter’s Framework
POTENTIAL DEVELOPMENT OF SUBSTITUTE
PRODUCT – LOW



Very few substitute as luxury bike
No substitute when looking for luxury bike
Cars, bicycle, and sports car are the best substitute
products for Harley-Davidson Inc. products
RIVALRY AMONG
COMPETING
FIRMS – HIGH
BARGAINING POWER
OF SUPPLIERS –
MODERATE

 Consolidated
supplier
 Ease of switching
suppliers
 Outsource steel and
basic electronics
 Assembly within the
company


Honda, Yamaha,
Suzuki with high
existing assets
High exit barriers
Strategic Alliance
between Suzuki
and Kawasaki
through product
diversification
BARGAINING POWER
OF CONSUMERS –
LOW
 High level of
differentiation
 Less number of
dealers
 Low power of
customer as they
are individual
POTENTIAL ENTRY OF NEW COMPETITORS –
LOW




Switching cost is moderate to high
Economies of scale, capital,
distribution channel
High tech involvement
Small scale producers
standards,
b. External Factor Evaluation (EFE) Matrix
Key External Factors
Opportunities
Company shipment in international customers
increased
Strategic focus on global markets
Weight Rating
Weighted
Score
0.07
3
0.28
0.09
4
0.36
Comes first for retail unit registration in U.S
Company website used to market its products and
services
Website features online catalog, use a dealer locator
and place locator
0.05
2
0.10
0.08
4
0.32
0.09
4
0.36
Competes heavily in touring and customs segments
0.08
3
0.24
0.07
3
0.21
0.07
3
0.21
Threats
Honda sales are favorable particularly in Asia
Shares fall 10.4 %
0.08
0.05
3
2
0.24
0.10
Competitors has headquarters in U.S
0.06
3
0.18
Competitors offers traditional styling
Honda and Yamaha are more diversified than Harley
in terms of product offering
Involvement to Lorillard that has potential related
legal liability
Total
0.07
3
0.21
0.08
1
0.08
0.06
2
0.12
Competitors have lower production and sales
volumes
Known for associating with charity
1.00
3.01
Note that the most important factor to being successful in this business is
“Strategic focus on global markets” and “Website features online catalog, use a dealer
locator and place locator” as indicated by the 0.09 weight. Also note that the HarleyDavidson Inc. is doing excellent in regard to handling three factors, “Strategic focus on
global markets”, Company website used to market its products and services”, and
“Website features online catalog, use a dealer locator and place locator”. Finally, note
that the total weighted score of 3.01 is above the average (midpoint) of 2.5, so this
motorcycling business is doing pretty well, taking advantage of external opportunities
and avoiding the threats facing the firm. There is definitely room for improvement,
though, because the highest total weighted score would be 4.0. As indicated by rating of
1, this business needs to capitalize more on the “Honda and Yamaha are more
diversified than Harley in terms of product offering” threat.
OPPORTUNITIES
Economic Forces
 Harley-Davidson announced in April 2009 that it will shed additional
300-400 hourly jobs in the 2009-2010 timeframe, on the top of the
1100 jobs it previously planned to eliminate during that period.
 The company shipment in international customers increased,
consistent with the company’s strategic focus on global markets.
Social, cultural, demographic and natural environment forces
 The passion runs so deep that many customers and admirers sport a
Harley tattoo to express that passion.
 For the last 21 years, Harley-Davidson motorcycles have led the
industry in the United States for retail unit registrations of new
heavyweight motorcycles.
Technological Forces
 The company website, www.harley-davidson.com, is also used to
market its product and services.
 The website features an online catalog that allows retail customers to
create and share product wish lists, use a dealer locator, and place
catalog order.
Competitive Forces
 In the United States, Harley-Davidson competes heavily in the touring
and custom segment of the heavyweight motorcycle market, which
accounted for approximately 84%, 80% and 79% of total heavyweight
retail unit registrations in the US during 2008, 2007 and 2006
respectively.
 These competitors currently have production and sales volumes that
are lower than Harley-Davidson’s and have considerably lower US
market share than Harley-Davidson.
Political, Governmental and Legal Forces
 Harley might be best known for its association with the Muscular
Dystrophy Association, rising upward of $50 million for the charity.
 The amount of public land available for use can be an important
determinant in consumer decision making concerning recreational
vehicles (especially off-road and water-sports vehicles).
THREATS
Economic Forces
 Honda sales are favorable, particularly in Asia and it is looking to
increase production in India, which will eventually get some of the
customer of Harley-Davidson.

Shares of Harley-Davidson (HOG) fall 10.4% despite the company
beating the estimate of analysts with its Q2 report. Weak dealer sales
and the company’s outlook for the rest of the year have traders edgy,”
according to an Aug. 1 short note on the Seeking Alpha website.
Social, cultural, demographic and natural environment forces
 Harley-Davidson has competitors headquartered in the United States
 These competitors generally offer heavyweight motorcycles with
traditional styling that compete directly with many of Harley-Davidson’s
product.
Technological Forces
 Computer based inventory control system could play a role in
managing motorcycle inventories
 Technology also impacts design
Competitive Forces
 Harley’s competitors include Honda, Yamaha, Suzuki, Kawasaki,
Polaris, BMW and Triumph
 Honda is planning for growth in Asia, continued recovery in Europe
and for a probable downturn in United States.
 Like Honda, Yamaha are also more diversified than Harley in terms of
product offering.
Political, Governmental and Legal Forces
 Harley and Lorillard had previously entered into an agreement where
Lorillard could use Harley s trademark on its cigarettes. Due to the
increase in smoker s lawsuits against cigarette companies, Harley
became concerned over the risk of potential related legal liability
exposure.
 Harley decided to break their nine-year old licensing contract with
Lorillard, and as a result, Lorillard filed a lawsuit. Harley and Lorillard
have since reached a settlement over the licensing dispute, but the
details of the settlement are still pending (Harley net B6).
c. Competitive Profile Matrix (CPM)
Critical Success
Factor
HARLEY-DAVIDSON
INC
Weighted
Weight Rating Score
HONDA
YAMAHA
Weighted
Weighted
Rating Score
Rating Score
Advertising
0.15
3
0.45
3
0.45
4
0.60
Product Quality
0.15
4
0.60
3
0.45
2
0.30
Sales Distribution
Price
Competitiveness
0.06
2
0.12
4
0.24
3
0.18
0.10
1
0.10
4
0.40
3
0.30
Financial Position
Customer Loyalty
Global Expansion
0.08
0.15
0.04
2
4
2
0.16
0.60
0.08
4
3
4
0.32
0.45
0.16
3
2
3
0.24
0.30
0.12
Management
0.07
3
0.21
4
0.28
2
0.14
0.05
3
0.15
4
0.20
3
0.15
0.05
0.10
2
4
0.10
0.40
4
3
0.20
0.30
3
3
0.60
0.30
Production Capacity
Union Relations
E-Commerce
Total
1.00
2.97
3.45
3.23
Note: (1) The ratings values are as follows: 1=major weakness, 2=minor weakness, 3=minor strength,
4=major strength. (2) As indicated by the total weighted score of 2.85, Harley Davidson is the weakest.
As seen in the table, three major success factors needed to be able to succeed
in their line of industry, as specified by the weights of 0.15 the highest possible weight
used in evaluating the companies. These are Advertising, Product Quality and
Customer Loyalty. Yamaha is the strongest on “advertising” with the rate of 4; while for
the “product quality” and “customer loyalty” factor is the Harley-Davidson came the
strongest with a weight of 4. It is because the Harley-Davidson’s products well known
for it last longer than the competitors are, same as in the customer’s loyalty are the
passion to many customers and admirers that runs so deep where they decided to have
a Harley tattoo to express that passion.
Note that Honda has the top rating in most of the success key factors and best
strategic positions, having the total weighted score of 3.45 second is the Yamaha
scoring of 3.32. These competitors are more favorable on Asia, wherein most people
are patronizing motorcycles than medium vehicles also; they expand and have their
headquarters to different parts of Europe and downtown of United States. In terms of
Harley-Davidson they got the weakest containing a total weighted score of 2.97
because of their competitors are more diversified in their products, their management
and union relations are also weak they don’t have enough strategies, also having a low
score on expanding to the global consumers and varying their products.
V. Strategy Formulation
a. Boston Consulting Group (BCG) Matrix
Relative Market Share Position
High
1.0
Medium
0.5
Low
.0
Industry Growth Rate
High
+50
Medium
0
Low
-50
RELATIVE MARKET SHARE: 48%
INDUSTRY GROWTH RATE: 13.029
STRATEGY: Market Penetration, Market Development, Product Development,
Divestiture
The circle is located at quadrant I or question mark which has low market share
position yet they compete in a high growth industry Harley Davidson Inc., must decide
whether to strength by pursuing an intensive strategy which is market Penetration,
Market Development, Product development, divestiture
b. Strategic Position And Action Evaluation (SPACE) Matrix
7
6
Aggressive
Conservative




5
Market Penetration
Market Development
Product Development
Related Diversification




4
3
Vertical Integration
Market Penetration
Market Development
Diversification
2
-7
-6
-5
-4
-3
-2
-1
1
CP
IP
-1
1
2
3
4
7
-2
Competitive
Defensive




-3
Retrenchment
Divestures
liquidation
Related Diversification
-4
-5
-6
-7
SP



Vertical Integration
Market Penetration
Product Development
5
6
Financial Position (FP)
Leverage
Liquidity
Return on Investment
Working Capital
Rating
6
4
3
__4__
17
Stability Position (SP)
Competitive Pressure
Risk
Price Range of
Competing Products
Demand Fluctuations
Rating
-5
-4
-4
__-4__
-17
Competitive Position
(CP)
Market Share
Customer Loyalty
Product Life Cycle
Product Quality
Rating
3
-4
-3
__-4__
-14
Industry Position (IP)
Growth Potential
Profit Potential
Capacity Utilization
Ease to Entry
Rating
5
4
4
__5__
18
Conclusion
FP = 17.00/4 = 4.25
IP = 18.00/4 = 4.50
SP = -17.00/4 = -4.25
CP = -14.00/4 = -3.5
x-axis = (-3.50) + (4.50) = 1
y-axis = (-4.25) + (4.25) = 0
The result of the analysis and diagram concludes that the best strategy for Harley
Davidson, INC. is Aggressive Strategies which contains of Vertical integration, Market
penetration, Market development and Diversification.
c. Grand Strategy Matrix (GSM)
II
I
III
IV
Slow Market Growth
The graph shows that Harley Davidson is located in Quadrant I of the Grand
Strategy Matrix, which has an excellent strategic position.
Harley-Davidson Inc. is concentrated on present markets like market penetration;
market development and product development which helps them improve to have a
strong strategy. It also states that if Harley-Davidson has excessive resources, then
backward, forward or horizontal integration may be effective strategies.
Strong Competitive Position
Weak Competitive Position
Rapid Market Growth
d. Internal-External (IE) Matrix
THE IFE TOTAL WEIGHTED SCORES
Average
2.0-2.99
Low
1.0-1.99
II
III
IV
V
VI
VII
VIII
IX
THE EFE TOTAL WEIGHTED SCORES
High
3.0-4.0
High
3.0-4.0

3.01
Medium
2.0-2.99



GROW AND BUILD
Backward, Forward,
or Horizontal
Integration
2.85
Market Penetration
Market Development
Product
Development
I
Low
1.0-1.99
The IFE total weighted score is 2.85 and it represents an average. The EFE total
weighted score is 3.01 and it is considered high. The circle falls in cell II and it is in
grow and build strategies. The circle is positioned in grow and build strategies
appropriate for Division 2 which contributes the greatest portion of the total profits.
e. TOWS
OPPORTUNITIES
1. Company shipment in
international customers
increased
2. Strategic focus on
global markets
3. Comes first for retail
unit registration in U.S
4. Company website
used to market its
products and services
5. Website features
online catalog, use a
dealer locator and place
locator
STRENGTHS
1. Strong brand name
6. Competes heavily in
touring and customs
segments
7. Competitors have
lower production and
sales volumes
8. Known for associating
with charity
SO STRATEGIES
1. Through product
customs and
customizations HarleyDavidson can compete in
heavy touring and
custom segmentation.
(S4, O6 )
2. Strong motivation for
customers
2. Double digit growth for
revenues and earnings
while competitors have
lower production and
sales volume. (S6, O7)
3. Remain profitable
throughout the crisis
3. Having a strong brand
name Harley-Davidson
known for its name in
associating with charity.
(S1,O8)
THREATS
1. Honda sales are favorable
particularly in Asia
2. Shares fall 10.4 %
3. Competitors has headquarters in
U.S
4. Competitors offers traditional
styling
5. Honda and Yamaha are more
diversified than Harley in terms of
product offering
6. Involvement to Lorillard that has
potential related legal liability
ST STRATEGIES
1. Focusing on growth and
corporate governance will be more
diversified in terms of product
offering. (S9, T5)
2. High production in sales will help
them to increase their shares. (S7,
T2)
4. Product customs
and customizations
5. Provides insurance
and related products to
dealers and customers
6. Double digit growth
for revenues and
earnings
7. High productions
and sales
8. Employee Ethics
9. Focus on growth
and corporate
governance
WEAKNESSES
1. High price
2. Senior Leadership
Group is not a
decision-making body
4. Focus on growth and
corporate governance
Harley-Davidson
strategic focus on global
markets. (S9, O2)
WO STRATEGIES
1. Harley-Davidson must
lower their product price
to be the first for retail
unit registration. (W1,
O3)
2. The Harley-Davidson
must be more diversified
to have strategic focus
on global markets. (W4,
O2)
WT STRATEGIES
1. Harley-Davidson must be more
diversified so they can compete on
offering in traditional styling. (S4,
T4)
3. Employees have no
union
4. Competitors are
more diversified
Threats-Opportunities-Weaknesses-Strengths (TOWS) is an important matching
tool that helps managers develop four types of strategies; SO (Strengths-Opportunities)
Strategies, WO (Weaknesses-Opportunities) Strategies, ST (Strengths- Threats)
Strategies, and WT (Weaknesses-Threats) Strategies.
SO Strategies uses a firm’s internal strengths to take advantage of external
opportunities. WO Strategies aim at improving internal weaknesses by taking advantage
of external opportunities. ST Strategies use a firm’s strengths to avoid or reduce the
impact of external threats. WT Strategies are defensive tactics directed at reducing
internal weaknesses and avoiding external threats.
b. Over-all Summary of Strategy Formulation
Matrix
Strategies
Market
penetration,
Market
Boston Consulting Group (BCG) Matrix
development,
Product
development, Divestiture
Backward
integration,
Forward
Strategic Position And Action Evaluation integration, Horizontal integration,
(SPACE) Matrix
Market
penetration,
Market
development, Product development
Market
development,
Market
Grand Strategy Matrix (GSM)
penetration, Product development,
Horizontal integration, Divestiture,
Liquidation
Backward, Forward and Horizontal
Internal-External (IE) Matrix
integration, Market penetration,
Market
development,
Product
development
Market penetration, Market
TOWS
development, Product development
Related diversification, horizontal
integration
The table shows the strategy uses in every matrix. Majority of strategies that
uses by the company are market penetration, market development and product
development. These are the intensive strategies that needed a severe efforts from a
Harley’s competitive situation with existing products is to develop. Using this kind of
strategies is very hard, Harley-Davidson employed different divisions to pursue the
intensive strategy and to avoid indebtedness. While the least strategy they have been
using are related diversification and divestiture. These strategies are allowing a HarleyDavidson to gain control over distributors, suppliers and competitors.
c. Quantitative Strategic Planning Method (QSPM)
STRATEGIC ALTERNATIVES
1
Related
Diversification
Key Factors
2
Market
Penetration
Weighted
score
AS
TAS
AS
TAS
0.14
0.06
4
-
0.56
-
2
-
0.28
-
0.05
3
0.15
2
0.10
0.05
4
0.20
3
0.15
products to dealers and
customers
6. Double digit growth for revenues
and earnings
7. High productions and sales
8. Employee Ethics
9. Focus on growth and corporate
governance
Weaknesses
0.07
4
0.28
1
0.07
0.06
3
0.18
2
0.12
0.08
0.07
0.07
4
-
0.32
-
3
-
0.24
-
1. High price
2. Senior Leadership Group is not a
decision-making body
3. Employees have no union
4. Competitors are more diversified
0.14
0.06
2
-
0.28
-
2
-
0.28
-
0.07
0.08
4
0.32
3
0.24
Strengths
1. Strong brand name
2. Strong motivation for customers
3. Remain profitable throughout the
crisis
4. Product customs and
customizations
5. Provides insurance and related
1.00
Opportunities
1. Company shipment in
international customers increased
2. Strategic focus on global markets
3. Comes first for retail unit
registration in U.S
4. Company website used to market
its products and services
5. Website features online catalog,
use a dealer locator and place
locator
6. Competes heavily in touring and
customs segments
7. Competitors have lower
production and sales volumes
8. Known for associating with charity
Threats
0.07
-
-
-
-
0.09
0.05
4
-
0.36
-
3
-
0.27
-
0.08
2
0.16
4
0.32
0.09
2
0.18
4
0.36
0.08
-
-
-
-
0.07
2
0.14
2
0.14
0.07
1
0.07
2
0.14
1. Honda sales are favorable
particularly in Asia
2. Shares fall 10.4 %
3. Competitors has headquarters in
U.S
4. Competitors offers traditional
styling
5. Honda and Yamaha are more
diversified than Harley in terms of
product offering
6. Involvement to Lorillard that has
potential related legal liability
0.08
4
0.32
1
0.08
0.05
0.06
1
-
0.05
-
1
-
0.05
-
0.07
3
0.21
2
0.14
0.08
4
0.32
1
0.08
-
-
TOTAL
1.00
0.06
-
-
6.25
5.28
Quantitative Strategic Planning Matrix is the stage 3 of the strategy-formulation
analytical framework. It is an analytical tool used in formulating strategies. It reveals the
relative attractiveness of alternative strategies and it provides objective basis for
selecting specific strategies.
The Internal (Strengths and Weaknesses) Key Factors and the External
(Opportunities and Threats) Key Factors enumerated and all the weighs in the QSPM
Matrix were all from the IFE (Internal Factor Evaluation) and EFE (External Factor
Evaluation) Matrixes respectively. Each factor was being rated as to its level of
attractiveness with the scale of 1 to 4. Where 1 = not acceptable; 2 = possibly
acceptable; 3 = probably acceptable; 4 = most acceptable; 0 = not relevant. Assigning
the level of attractiveness, one must serve this question as the basis: Does this factor
make a difference in our decision about which strategy to pursue?
The QSPM sum total attractiveness scores of 6.25 versus 5.28. The final score
determines how attractive one strategy is over another, making the decision-making or
problem-solving process easier. QSPM is most used in major decisions.
It was identified in strategy formulation that the strategy can be executed in two
ways. One strategy is expanding their product line. The other strategy is to increase
advertising. Our group came to a conclusion that expanding their product line is a better
option. This is given by the Sum Total Attractiveness Score figure.
VI. Strategy Recommendation
Based on the research we conducted regarding Harley Davidson Inc. we
recommend the related diversification,
market penetration,
and product
development strategy.
1. Related Diversification
Related diversification is a process that takes place when a business
expands its activities into product lines that are similar to those it currently offers.
Harley Davidson should add new products or bring new types of recreational
vehicles to new markets to enhance their current product lines.
2. Market Penetration
Market Penetration is a strategy of increasing the market share of an
existing product or promoting a new product. Seeking increased market share for
present products or services in present markets through greater marketing efforts.
It includes increasing the number of salespersons, increasing advertising
expenditures, offering extensive sales promotion items, or increasing publicity
efforts. Having competitors like Honda and Yamaha, they are more focus on
promoting their inexpensive products unlike the Harley Davidson. Harley
Davidson should increase their advertising expenditures even though they have
a strong brand name in order to increase their market and it is easy for them to
eat up the competitor market share if they can provide some more customer
benefit.
VII. Action Plan
Period
Action
st
1
Expand the
Quarter product lines
and product
development
nd
2
Increase the
Quarter advertising
costs
and
market
development
Men
Top
Management,
Middle
Management
Top
Management,
Middle
Management
Materials
Raw
materials
Methods
Research
and
development
Machines
Computers
Money
P 500 M
Tarpaulins,
billboards,
flyers,
websites
Commercials Computers
P200 M
VIII. Financial Projection
Motorcycles and related products revenue
Gross profit
Selling, administrative and engineering expense
Restructuring expense
Operating income from motorcycles & related
products
Q1
Q2
1,273,369 1,569,047
456,510
563,817
236,995
248,038
11,451
6,220
Q3
Q4
1,089,268 1,010,898
377,904
321,957
223,982
267,209
9,170
1,634
Total
4,942,582
1,720,188
976,224
28,475
208,064
309,559
144,752
53,114
715,489
Financial services revenue
Financial services expense
Operating income from financial services
156,322
88,928
245,250
160,613
78,659
81,954
161,027
88,677
72,350
159,962
96,973
62,989
637,924
353,237
284,687
Operating income
Investment income
Interest expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of
tax
Net income (loss)
275,458
1,933
11,495
265,896
93,861
172,035
391,513
2,231
11,595
382,149
134,899
247,250
217,102
1,447
11,438
207,111
73,110
134,001
116,103
1,758
11,505
106,356
35,717
70,639
1,000,176
7,369
46,033
961,512
337,587
623,925
172,035
247,250
134,001
70,639
623,925
IX.
Conclusion
Based from the strategies we formulated the results in the Quantitative
Strategic Planning Matrix shows that related diversification strategy is higher than
the market penetration strategy. The related diversification has a score of 6.25
whereas the market penetration has a score of 5.28. Expanding their product line is
the best strategy that Harley Davidson can use to increase their market. As a result,
Harley-Davidson must implement their latest technology and facilities, widen up
their product choices for the customers will help them get what are really the choice
of the customers.
With a strong brand image and a growing loyal customer base, Harley can
maintain strong sales with effective marketing efforts. However, with revenues
declining since 2007 and many projects currently underway, a stability strategy will
help Harley evaluate its current condition and adequately prepare for the future.
Horizontal diversification acquires or develops new product that could appeal to its
current customer groups even though those new products may be technologically
unrelated to the existing product lines. Develop the environment friendly
motorcycles that can catch the attention of the new generation who is more concern
in the environment.
Building marketing opportunities, Harley Davidson can create new
opportunities by joining changed customers’ taste and change their preferences in
terms of company’s product line. Creating also a new market opportunities by
learning from the competitors and finding out new technology advancement. All of
this phase will be in charge of marketing research and development. In line with this,
helping the firm expand overseas, Harley could use licensing agreements to enter
into new foreign markets with least investments and risks. Harley-Davidson will
continue for many more years if it can successfully complete the appropriate
corporate and business strategies.