Presentation on theme: "Strategic Audit of Harley-Davidson"— Presentation transcript:
1 Strategic Audit of Harley-Davidson Case 16Strategic Management MGMT 436Group 5
2 Current Situation Jw Current Performance 2008 Revenue 2008 $5.59 billion down from $5.73 billion in 2007Net Income $654.7 million down from $933.8 million in 2007Earnings per stock share $2.70 down from $3.74 in 2007Motorcycles sold 303,470 down from 330,619 in 2007
3 B. Strategic Posture Mission Objectives We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.ObjectivesWe 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.
4 Strategies Get Cost structure correct Obtain funding for Harley-Davidson Financial ServicesInvest in the Harley-Davidson Brand
5 Policies Customers for life…. Harley-Davidson values the deep emotional connection that is created with our customers through our products, services and experiences. We are fueled by brand loyalty and trust that our customers place in us to deliver premium quality and the promise of a fulfilling lifetime ownership experience. We exemplify this commitment by embracing a culture of personal responsibility and stewardship for quality in everything we do.
6 2. Corporate Governance Jw Board of DirectorsDIRECTORSJOB TITLECHAIRMAN OF THE BOARDDATE OF BOARD COMMENCEMENTNOMINATING AND CORPORATE GOVERNANCE COMMITTEEAUDIT COMMITTEEHUMAN RESOURCES COMMITTEEOTHER DIRECTORSHIPSBarry K. AllenSenior Advisor to Providence Equity Partners President, Allen Enterprises, LLCXMay-92Fiduciary Management BCE Inc.Richard I. BeattieChairman of Simpson Thacher & Bartlett LLPAug-96Heidrick & Struggles International Inc. Evercore Partners Inc.Jefferey L. BleusteinChairman of the Board Harley-Davidson, Inc.Jun-97George H. ConradesExecutive Chairman, Akamai Technologies, Inc.May-02Akamai Technologies, Inc. Oracle Corporation. Ironwood Pharmaceuticals, Inc.
7 DreamWorks Animation. Aon Corporation. Judson C. GreenVice Chairman, NAVTEQNov-04XDreamWorks Animation. Aon Corporation.Donald A. JamesCo-founder, equity owner and Chairman and Chief Executive Officer of Deeley Harley-Davidson Canada/Fred Deeley Imports Ltd.May-91Sara L. LevinsonFormer Non-Executive Chairman of ClubMom, Inc.Feb-96Macy’s Inc.George L. Miles, Jr.Chair, Chester Engineers, Inc.Aug-02WESCO Intn’l Inc. EQT Corporation. American International Group, Inc. HFF, Inc.James A. NorlingChairman of the Board, GlobalFoundries Inc.Dec-93James L. ZeimerPresident and CEO, Harley-Davidson, Inc.2004CFO Harley-DavidsonJochen ZeitzChief Executive Officer and Chairman of the Board, Puma AGAug-07Puma AG. PPR.
8 Financial Services Leadership Top ManagementNamesTitleMotor CompanyLeadershipJoanne M. BischmannVP, MarketingSteven R. PhillipsVP, Quality, Reliability and Tech ServicesDavid P. BozemanGM, Powertrain OperationsHarold A. ScottVP, Human ResourcesJames M. BrostowitzVP, TreasurerPatrick SmithGM, General MerchandiseLeroy ColemanVP, Advanced OperationsW. Kenneth Sutton Jr.VP, engineeringRodney J. CopesVP & GM, Powertrain OperationsMichael van der SandeManaging Director, HD EuropeWilliam B. DannehlVP, North American Sales and Dealer ServicesJerry G. WilkeVP, Customer Relationships and Product PlanningWilliam G. DavidsonVP, Chief Styling OfficerKarl M. EberleVP & GM, Kansas City OperationsCorporate OfficersHarley-Davidson, Inc.Robert S. FarchioneGM, Parts and AccessoriesJames L. ZeimerPresident and CEOFred C. GatesGM, York OperationsThomas E. BergmannExecutive VP and CFOJames E. HaneyVP, Chief Information OfficerGail A. LioneVP, General Counsel and SecretaryMichael P. HeerholdGM, TomahawkJames M BrostowitzVP, Treasure, Chief Accounting OfficerTimothy K. HoelterVP, Government AffairsRonald M HutchinsonVP, New BusinessHarley-DavidsonFinancial Services LeadershipMichael D. KeefeVP & Director Harley Owners GroupLawrence G. HundVP, Operations, CFOKathleen A. LawlerVP, CommunicationsKathryn H MarczakVP, Chief credit and Administrative OfficerLara L. LeeVP, Enthusiast ServicesSaiyid T. NaqviPresidentMatthew S. LevatichVP, Materials ManagementGail A. LioneVP, General CounselBeull MotorcycleCompany LeadershipJames A McCaslinPresident and COOErik F. BuellChairman and Chief Technical OfficerJefferey A MertenManaging Director, Asia Pacific and Latin AmericaJon R. FlickingerLouis N. NetzVP & Director, StylingJohn A OlinVP, Controller
9 External Environment (John Taylor) Natural EnvironmentRising gas prices will affect transportation and shipping costs, negatively affecting company profits. Some consumers will not buy another vehicle to put expensive fuel in while others may buy a motorcycle for better gas mileage during higher prices.
10 External Environment (John Taylor) -North American market is steady and the international market is growing. Numbers reflected that sales in the foreign markets were... 19% in 2005, 20% in 2006, and 27% in 2007 of Harley Davidsons overall sales. --Constant rising gas prices since the Terrorists attacks on the US in 2001, have a continued impact on sales and the cost of production and overall company profits. Rivalry High.. Competition Motorcycle manufacturers continue to improve designs and provide a competitive market for Harley Davidson to compete for new consumers. . Buyers Power High, With many 30 different models of Harley's ranging from $6,695-$20,645 and 8 models of Buell Bikes from $4,695-$11,995, consumers have many options of finding the bike that meets their needs while staying in their price range Distributors Power High. Harley-Davidson has 684 independently –owned full-service dealerships, 307 of them which are combined H.D. and Buell Dealers. As of 2007, 370 Independent H.D. Dealerships and distributors serving 32 European Countries. 323 of which were combined H.D. and Buell dealers. A new dealership coming to South Africa in Threat of Substitutes Medium. Honda is a big competitor of motorcycles from small “crotch rockets” and large cruising and touring bikes.
11 External Environment (John Taylor) B. Societal EnvironmentSTEEPCategoryISSUEThreat/OpportunityRankingEconomicRising Fuel pricesThreat1Pending recession2Double digit growth in international dealer network during 2007Opportunity4Planned opening of dealership in S. Africa3Addition of Buell motorcycles to H.D. dealerships5TechnologicalCreation of in 2001Just-in-time InventoryStrengthPolitical-LegalU.S. and Foreign environment control (EPA)National Traffic and Motor Vehicle Safety Admin. (NHTSA)SocioculturalRider Training and Safety
12 EFAS Table (John Taylor) External FactorsWEIGHTRATINGWEIGHTED SCORECOMMENTSOpportunitiesDouble digit growth in international market0.140.4Growth doubled in international dealer network for 2007New dealership in S. Africa30.3New dealership being built in South Africa in 2008Addition of Buell motorcycle line0.251Soaring Profits from adding the Buell line to H.D. dealersE-commerce, online catalog0.03developed in 2001ThreatsRising Fuel PricesSteady sharp rise in fuel prices since 9/11Pending recession2Consumers may keep aging motorcycles or wait to purchaseU.S and Foreign environment controls (EPA)0.06Stricter Government environmental controls add to cost of production.National Traffic and Motor Vehicle Safety AdminTotal Scores2.28
15 C. Corporate Resources Travis Toborg MarketingMarketing was divided into several different areas that are common for most all companies. These Areas included Dealer promotions, Customer Events, Magazines, Direct Mail advertising, Public Relations, Cooperative Programs with Harley/Buell, and TV commercials. You will also see Harley promotions at several popular sporting evens such as racing and even UFC.FinanceIn 1985 Harley-Davidson was 4 hours from shutting there doors. Citicorp, Harleys main lender denied lending money in 1985 but with only 4 hours remaining to find a lending company, Harley made a deal with Heller Financial and managed to save the company. At this current time it is now funded by HDFS (Harley-Davidson Financial Services). Which is a lending company for Harley-Davidson motorcycles among several other helping factors. This means the company basically now funds itself.
16 R&DHarley feels that research and development of there custom and touring motorcycles is a large part of the way they compete against the competition. They spent $178.5 million in 2005, $177.7 million in 2006, and $185.5 million in 2007 in areas such as style, purchasing, and manufacturing.OperationsHarley-Davidson has 684 dealerships in the U.S. and of those 307 were also Buell dealers. Their are 104 Secondary Retail Locations (SRL's), 68 Alternate Retail Outlets (ARO's), and 12 Seasonal Retail Outlets (SRO's). This makes the US the largest supplier in sales of Harley-Davidson motorcycles.22% of the companies sales came from foreign Operations in Europe/Middle East/Africa at 370 dealers with 323 being combined with Buell, Asia-Pacific 130 Harley dealers with 57 selling both brands, Latin America with 31 dealers none of which also sold Buell's, and Canada which has 75 dealers, 45 of which sell both brands of motorcycles.
17 Human ResourcesApproximately 50% of the manufacturing employees of Harley-Davidson's own Harley's themselves and buy from dealerships so they have first hand experience with what they are contributing too as a work force. There are roughly 9,000 employees of Harley-DavidsonInformation Systems
18 V. Analysis of Strategic Factors (John Lerch) A. Situational Analysis (SWOT)StrengthsAcquiring BuellFinancial Self ReliabilityWeaknessesSeasonsBaby Boomer Era EndingCompetition with Several Japanese CompaniesOpportunitiesAddition of Buell Motorcycle LineDouble Digit Growth in International MarketThreatsPending RecessionRising Fuel Prices
19 V. Analysis of Strategic Factors (John Lerch) Review of Current Mission and Objectives1. Harley Davidson’s Mission and Objectives focus on the customers and the acquisition of Buell falls in line with the mission.2. They should continue on with current mission and objectives and seek ways to continue capitalizing on the international market.
20 V. SFAS Matrix (John Lerch) DurationStrategic FactorsWeightRatingWeighted ScoreShortIntermediateLongCommentsS4 Acquiring Buell0.251XDrive sales up with more optionsS1 Self Reliable Financially0.150.75Could possibly end but lenders would step inW4 Seasons0.140.4Create sales spikes and dropsW1 Baby Boomer Era Ending20.3Drove salesW2 Competition with several Japanese CompaniesCost more to own and repairO3 Addition of Buell Motorcycle LineSoaring Profits from adding the Buell line to H.D. dealersO2 Double digit growth in international marketGrowth doubled in international dealer network for 2007T2 Pending recessionConsumers may keep aging motorcycles or wait to purchaseT1 Rising Fuel Prices0.03Steady sharp rise in fuel prices since 9/11
21 VI. Strategic Alternatives and Recommended Strategy (Shavera Leveille) A. Strategic Alternatives1. Stability Strategy: Pause/Proceed with caution. Analyze the effects the recession will have on the company then react accordingly. a. Pros: Acknowledgment of areas that are weak and need improvement. The profit strategy would not beneficial it only masks the issues instead of confronting them. b. Cons: Strong Competition from competitors that are larger, established, and more diversified.2. Growth Strategy: Horizontal growth strategy; concentric diversification, strategic alliance, and joint ventures. Target new market segments by developing products and services for females and younger bikers both domestically and internationally.
22 a. Pros: New markets would help increase customer base, brand loyalty, and profitability. b. Cons: The new market segments may not be able to afford the products and services offered. Strategic alliances and joint ventures may result in loss of control over operations, conflicts, and higher risks.3. Retrenchment Strategy: Turnaround strategy; close down unprofitable foreign plants and consolidate operations. a. Pros: Allows for concentration on business segments and plants that are profitable. Prevents further losses. b. Cons: Hinders growth B. Recommended Strategy
23 Recommend alternative #2 which is growth for Harley-Davidson Recommend alternative #2 which is growth for Harley-Davidson. The current customers are mainly comprised of the Baby Boomers. Harley-Davidson Inc. may benefit from recruiting younger customers to possibly build lifetime customer loyalty that can be passed down to younger generations. Women are also a great market segment to target because research shows that the number of female riders has risen significantly over the past few years. Concentric diversification, strategic alliances and joint ventures enable entry into foreign markets, knowledge of local conditions, sharing of costs, resources, and assets. Although, the company is facing a recession the costs of Harley-Davidson products and services should not be reduced, but rather competitively priced so that quality is not sacrificed