Presentation on theme: "I. Current Situation Dillon Shepley A.Current Performance Arose from near demise as a company in 1985 back to the top of the motorcycle industry but are."— Presentation transcript:
I. Current Situation Dillon Shepley A.Current Performance Arose from near demise as a company in 1985 back to the top of the motorcycle industry but are now being threatened by the current recession and have seen a slowdown in sales and stock price growth in 2007. Opening a museum in 2008 Facing a challenge of growing 7%-9%
I. Current Situation Dillon Shepley B.Strategic Posture 1. Mission We fulfill dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality. Design, manufacture, and sell premium motorcycles for the heavyweight market
I. Current Situation Dillon Shepley B.Strategic Posture 2. Objectives Respond to market changes Recruit riders of the younger generations. Recruit women riders. Have more say in the design and planning process. Grow both their HOG and Buell Riders Adventure Group (BRAG) organizations Utilize E-Commerce to increase sales Survive the recession Stay on top of the heavyweight motorcycle market. Increase safety awareness
I. Current Situation Dillon Shepley B.Strategic Posture 3. Strategies Acquired Buell Motorcycle Company in 1993. Acquired Eaglemark Financial services to produce revenues from customer credit. Internal makeover of the company Use technology to cut back on communication times and administrative trivia. Introduce bikes that appeal to younger generations and international markets. Introduced a new beginner rider’s course aimed at the first time Harley owner and rider. Introduced 17 year old Jennifer Snyder as the newest member of the Harley Davidson racing team. Partnered with Jane magazine in 2005 Held Harley Owners Group rallies (HOG)
I. Current Situation Dillon Shepley B.Strategic Posture 4. Policies Maintain the quality Harley-Davidson image. Traditional styling Design simplicity Durability Ease of service Evolutionary change
II. Strategic Managers Jayson Brayall A.Board of Directors 1. A substantial majority of the Directors on the Board (9 of 11) are independent. a) Stock rose 23,000% since going public (1986-2006) Core business - resonates w/ ‘motor heads & suits’ Graying of its prime sector (med age = 47) Shifting & tuning focus – younger/sports world riders World expansion = XX digit growth, weakening N. American Ops Grow brand in Latin America, Asia (India/China) & EU.
II. Strategic Managers Jayson Brayall A.Board of Directors 1. A substantial majority of the Directors on the Board (9 of 11) are independent. b) Stock symbol = HOG Director(Non mgt) AN retainer of $100K, at least ½ to be paid in common stock Encourages SR Mgmt to interact w/ the Directors Audit, HR, $Comp & Nominating & Corp Governance Cmtes = Independents Furthering steps for compliance to enviro- emissions, noise & safety stnds- which positions it better for EU and Japanese mkts
II. Strategic Managers Jayson Brayall A.Board of Directors 1. A substantial majority of the Directors on the Board (9 of 11) are independent. c) Specialization & Experience (Core & Expansion) Technical Engineering Transportation & Logistics (SCM) Dealer relationships Recapitalization / Private to Public M&A / Leveraged Buy-Outs / Corp Law Financial e-Busn, IT, TeleCom, Media International Mkting & Merchandizing
II. Strategic Managers Jayson Brayall B.Top Management 50% of all Harley employees ride the brand CEO & Board’s direction to Mgmt- intimately know customers design / offer great products operational excellence mfr’ing & Supply Chain Mgmt (SCM) Direction to strengthen credit division (including franchising (wholesale & retail) income stream ‘Top 100 Global Brands’ and in Fortune’s ‘Most Admired Companies’ and Forbes ‘Company of the Year’ Mkt confidence buying back stock during a multi-year repurchase effort valued over $200M.
II. Strategic Managers Jayson Brayall B.Top Management Mgmt Accused of stock manipulation- forcing dealers to accept stock(book corp sales) US dealers, 80% sold Harley’s exclusively - burdened to shoulder costs until sold more bikes 2004- retiring CEO made $40M w/ pay & stock options Several class action lawsuits filed (‘06) claiming Board & Mgmt fraud Main Production – York, PA- (‘07) full contract strike Management Makeup Next to no info published regarding experience / backgrounds or $compensation for the Mgmt team Harley’s By-Laws- Director & Mgmt Pay = cash & stocks; restricted, deferred & nonqualified options
Exhibit #5A Jayson Brayall Harley-Davidson_Exhibit 5A (In thousands, except per-share amnts)20082007 Income statement data: Net revenue5,594,3075,726,848 Cost of goods sold3,663,4883,612,748 Gross profit 1,930,8192,114,100 Financial services income376,970416,196 Financial services expense294,205204,027 Operating income from financial services82,765212,169 Selling, administrative and engineering expense984,560900,708 Income from operations1,029,0241,425,561 Investment income9,49522,258 Interest expense4,5420 Income before provision for income taxes1,033,9771,447,819 Provision for income taxes379,259513,976 Net income 654,718933,843 Weighted-average common shares: Basic234,225249,205 Diluted234,477249,882 Earnings per common share:(in dollars)2.803.75 Basic2.793.74 Diluted1.291.06 Dividends paid per common share1.291.06
Exhibit #5B Jayson Brayall Harley-Davidson_Exhibit 5B200820072006 (In thousands, except per-share amnts) Balance sheet data: Working capital2,774,1241,562,2351,954,956 Finance receivables held for sale2,443,965781,280547,106 Finance receivables held for investment, net2,195,5632,420,3272,280,217 Total assets7,828,6255,656,6065,532,150 Current debt1,738,6491,119,955832,491 Long-term debt2,176,238980,000870,000 Total debt3,914,8872,099,9551,702,491 Shareholder equity2,115,6032,375,4912,756,737 Number of shareholders of record89,29890,74888,995
Exhibit #5C Jayson Brayall Harley-Davidson_Exhibit 5C Assets, Depreciation & Capital Expenditures Yr Ending Dec 31 (Ammount In thousands) Motorcycles & Related Products Finacial Services 2007Identifiable Assets 1,804,202 3,447,075 Depreciation and Amortization 197,6556,517 Net Capital Expenditures 232,1399,974 2006Identifiable Assets 1,683,7242,951,896 Depreciation and Amortization 205,9547,815 Net Capital Expenditures 209,05510,547 2005Identifiable Assets 2,845,8022,363,235 Depreciation and Amortization 198,8336,872 Net Capital Expenditures 188,07810,311
III. External Environment Jeff Austin A.Natural Physical Environment: Sustainability Issues Harley has been very wary of raw material usage and purchase recently. The biggest concern for Harley when considering environmental issues will be seasonal changes. B.Societal Environment 1. Economic The current recession will be a continual threat (T) Expansion into China (O) Growth in target rider market (O) Restructuring cost could exceed $110 million (T) Many wholesaler and retailer compete to carry the Harley name (O)
III. External Environment Jeff Austin B.Societal Environment 2. Technological Research and development of new motorcycles to appeal to different rider groups (O) Development of faster, sleeker motorcycles to appeal to younger market (O) Redesigned manufacturing process geared toward cost reduction and flexibility to market changes (O) R&D bring professional and employees together to consider redesign and product creation (O) R&D spent over $163 million (T) Internet sales available to public market (O)
III. External Environment Jeff Austin B.Societal Environment 3. Political/Legal Regulations concerned with air, water, and noise pollution (T) Product recall to ensure consumer safety (T) Must rely on independent dealers for sales (T) 4. Socio Cultural Restructuring will close numerous plants down (T)(O) Reaching out to younger generation and female riders (O) Offer for new riders to participate in Rider’s Edge program (O) New product offerings for non-riding public (O) Sponsorship of local events and races (O)
III. External Environment Jeff Austin C.Task Environment Threat of new entrants – Low - Harley has the history to repel any new production or competitor Bargaining powers of buyers – Medium – They are not the only motorcycle dealer, one bad experience from a consumer may send them looking toward Honda or Kawasaki. Threat of substitute products or service – Low – No imitators known at this time Bargaining power of suppliers – Medium Rivalry among competing firms – High – Previously mentioned competitors jockey for market groups targeted by Harley Power of unions, government, special interest groups – Low
III. External Environment Jeff Austin D. Summary of External Factors External FactorsWeight Ratin g Weighted Score Comments Opportunities Expansion into China0.24.20.84 Huge opportunity in expanding westernized market Marketing to different rider market0.130.3 Chance to sell to younger generation and females Redesign of manufactoring process0.052.20.11 Eliminates unnecassary plants New product offerings0.053.30.165 clothing lines are big sellers Product development0.1530.45 sportier bikes attract different markets Threats Current recession0.154.30.645 sales could be affected due to lack of finances Regulations0.052.80.14 Air,emissions, and noise pollution a factor Restructuring of operations0.052.70.135 may lose local vendors/stakeholde rs R&D expenses0.053.30.165 will extreme R&D expenses jeopardize revenue Product recall0.053.70.185 could blemish public image Independent dealers0.12.60.26 may affect pricing and sales income Totals1 3.395
IV. Internal Environment Jeff Taylor A.Corporate Structure Harley-Davidson has an 11 member Board of Directors consisting of 9 non-employee and 2 employee members. They serve in three-year staggered terms. The president and CEO, James C. Ziemer has set three constants for success that he expects his employees to follow closely. There is no information provided describing the decision making process or the timeline for major decisions to be made. B.Corporate Culture Management pushes the employees to see what the customers see so they make the employees go through a dealer to purchase their bikes if they buy them. 50% of the employees ride Harleys, so this accounts for a great deal of training. The employees are offered opportunities to obtain union representation to make sure they are taken care of for their hard work. The CEO implements 3 main objectives for success: Passion for the business, sense of purpose, and operational excellence.
IV. Internal Environment Jeff Taylor C.Corporate Resources 1. Marketing Most marketing efforts are divided between dealer promotions, customer events, magazine and mail advertising, public relations, cooperative programs with dealers, and national television ads. Harley-Davidson stays involved with all major motorcycle consumer shows and rallies, and also sponsors racing activities and different promotional events. 2. Finance Since Harley went public, its shares have risen over 23,000%. As of February 2008, there are over 90,000 shareholders of Harley-Davidson common stock. Due to the down economy in 2007, the company experienced their first declines in over 20 years. Motorcycle revenue dropped 1.27% and total revenue fell 0.69%. The biggest decline during this time was a 10.74% drop in operating income. Between 2003 and 2006, net income rose grew by over 30%.
IV. Internal Environment Jeff Taylor C.Corporate Resources 3. Research and Development Harley strongly believes that research and development is a factor in keeping them in the front of the market for custom and touring motorcycles, and ready to develop products for the performance segment. They have a Product Development Center (PDC) that brings employees from styling, purchasing, and manufacturing together with regulatory professionals, and supplier representatives to create a well rounded process development team. Over the span of 2005 to 2007, research and development expenses averaged over $180.5 million a year.
IV. Internal Environment Jeff Taylor C.Corporate Resources 4. Operations and Logistics Research and development leading to the company entering the market for both female and younger riders helped them stay at the head of the motorcycling industry. Harley sells its products at wholesale to a group of around 684 independently-owned full-service Harley-Davidson dealerships. 5. Human Resources Management The relationships with unions and employees are typically very good. As of the end of 2007, there are 9,000 employees working for the company. The majority of these employees are unionized and have representation from either the Paper Allied-Industrial Chemical and Energy Workers International Union, or the International Association of Machinist and Aerospace Workers.
IV. Internal Environment Jeff Taylor C.Corporate Resources 6. Information Technology IT systems are not mentioned in this case. Garry Berryman, an intense procurement expert, brought Harley’s top suppliers into the design and planning process because he felt that new technology and the Internet would make it very easy to form bonds this way.
Exhibit #2 Jeff Taylor Table 5-2Internal Factor Analysis Summary Internal FactorsWeightRatingWeighted ScoreComments Strengths: Employee unions0.0530.15Employee representation Male and female customers of all ages0.24.50.9Broad customer base Rider training and safety programs0.140.4Offered by Harley Foreign operations0.154.20.63Quickly growing Harley Owners Group (H.O.G.)0.153.90.59 Largest motorcycle club on Earth Weaknesses: Image of who rides Harleys0.154.20.63 Negative stigma assosiated with brand Performance market0.051.20.06Not involved enough Expensive0.13.10.31 No options for lower- middle class Advertising0.051.90.1 Don't reach put to potential riders Total scores13.77
V. Analysis of Strategic Factors Benjamin Howard A.Situational Analysis (SWOT) 1. Strengths Net income of 2003 was $760mn, its more than 30% as compared to the previous year. The standard and performance segments of Harley Davidson make up 70% of the European heavy weight motorcycle market Harley-Davidson operates in two segments: Harley-Davidson motorcycles & related products and HDFS (Harley-Davidson Financial Services). Harley-Davidson is the only major American heavyweight motorcycle manufacturer. Strong brand name. The HOG (Harley Owners Group), which have a 7,50,000 members world wide is the industry’s largest company sponsored motorcycle enthusiast organization. Buell Riders Adventure Group (BRAG) was also formed recent Customization of the bikes, this is Harley-Davidson’s major revenue maker. Harley-Davidson have a good marketing division and its divided as dealer promotions, customer events, magazine and direct-mail advertising, and public relations.
V. Analysis of Strategic Factors Benjamin Howard A.Situational Analysis (SWOT) 2. Weaknesses High price Harley-Davidson has problems in gaining more market share in some European countries (That’s one of the main markets for Heavyweight motorcycles outside U.S). They didn’t yet start its sales in India, one of the biggest markets. Required production is not met, analyzing the future of Heavyweight motorcycle market
V. Analysis of Strategic Factors Benjamin Howard A.Situational Analysis (SWOT) 3. Opportunities The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world. Women and younger riders are increasing becoming interested in bikes The international heavy weight market is growing and is now larger than the U. S. heavyweight market Market share increasing in Europe and Asia for the last two years Increasing demand in US markets for bikes Customers value quality parts
V. Analysis of Strategic Factors Benjamin Howard A.Situational Analysis (SWOT) 3. Threats Harleys ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years Harleys average buying age is 42 years old and increasing The European Union’s motorcycles noise standards are more stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified Environmental protection laws Buell division needs to continue to produce a quality motorcycle under Harley’s brand name.
V. Analysis of Strategic Factors Benjamin Howard B.Review of Current Mission and Objectives Mission Statement “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” Objective To be branded as the best motorcycle in the world.
Exhibit #4 Benjamin Howard Liquidity Ratio2008 Current1.3 (Current Assets/Current Liabilities) Quick0.401 (current Assets-inventory/current liabilities) Leverage Ratio Debt to Total Assets42.30% (Total Debt/Total Assets) Debt To Equity73% (Total Debt/Total Assets) Activity Ratios Inventory Turnover-sales8.74% (Net Sales/Inventory) Average collection (days)55 (Inventory/COGS divided by 365) Fixed Asset Turnover3.77% (Sales/Fixed Asset) Total Asset Turnover1.87% (sales/total asset) Profitability Ratios Gross Profit Margin51.7% (Sales-COGS/Net Sales) Net Operating Margin10.70% (Net Profit After taxes/Net Sales) Profit Margin on Sales35.08% 1-(COGS/Sales) Return on Total Assets14.27% (Net Profit After Taxes/Total Assets) Return on Equity24.92% (Net Profit After taxes/Shareholder’s equity)
VI. Strategic Alternatives Jeff Austin A.Strategic Alternatives Market development Marketing strategy Product development Alternatives and Pros and Cons Operations strategy (This is a win lose situation for all involved) Purchasing strategy needs to be considered when selling and using raw materials. Logistics strategy can also be seen when discussing the consolidation of plants and distributors.
VI. Recommended Strategy Benjamin Howard B.Recommended Strategy Design to continuously improve product quality, increase productivity, reduce costs and increase flexibility to respond to changes in the marketplace This market naturally wants something different from what the older generation rode. They are looking for more cool and sleek sport bikes The Company continues to establish and reinforce long-term, mutually beneficial relationships with its suppliers. Through these collaborative relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives The Company must continue to be successful in promoting motorcycling to customers new to the sport of motorcycling including women, younger riders and more ethnically diverse riders Harley has adopted several new marketing objectives to target the younger market with its new product line: expand its current market, diversify its product line, and modify its marketing mix to target a younger demographic
VII. Implementation Jayson Brayall Old facilities –v- efficient Asian competitor Optimize production facilities & SCM Strikes & reinventing labor interactions Graying of its prime UW sector (med age = 47) Retuning focus – young/sports riders- +up World expansion = XX dig growth, weak N. American Ops- Grow brand in Latin America, Asia (India/China) & EU
VIII. Evaluation and Control Jeff Taylor Sales information is tracked to the specific dealer where the product was sold. Harley is able to record the age, gender, and even the household income of their buyers after most purchases. The company identifies its strengths, weaknesses, opportunities and threats by carefully evaluating their customer feedback, monitoring the competition, and using an extensive research and development group. Devising a system to suggest the most prominent locations for dealerships based on previously gathered information would be an effective way for Harley Davidson to position their company most efficiently.