HARLEY DAVIDSON

Free Essay Database Online

HARLEY DAVIDSON

EXECUTIVE SUMMARY
Harley-Davidson
is the largest market share holder of motorcycles over 750cc in the United
States. After the expansion of our production and distribution capacity, we
will be in the position to meet the increasing demand for our motorcycles and
other products.

Growth potential appears very good especially in the overseas
market. Gaining a larger market share in these area may require a further
increase in production and distribution capacities. We must plan for expansion
now and continue to grow as a company.
COMPANY DESCRIPTION
In Milwaukee,
William Harley, 21, and Arthur Davidson, 20, began experiments on taking the
work out of bicycling. They were soon joined by Arthurs brothers, Walter and
William. Many changes were made to the engine design before its builders were
satisfied. After the new looped from was finalized, they were ready to begin
production. In 1903 they produced three motorcycles. Harley-Davidson erected
its first building the current Juneau avenue site in 1906 and incorporated
in 1907. In 1907 Harley-Davidson produced 150 motorcycles.


SITUATION ANALYSIS
The
motorcycle market over 750cc has been increasing over the last five years.

The Harley-Davidson 1996 model year production line, sold though a world wide
network of more than 1,000 dealers, includes 20 cruiser, factory custom and
touring motorcycles, as well as police motorcycles. Harley-Davidson benefits
form having one of the worlds most recognized and respected brand names and
our motorcycle model names are among the best known in the industry:
The
Competition and Market share
This chart shows the competition and market
share for 1995 in the United States:
Current Market Situation
Overall
Net
sales for 1995 of $1.4 billion were $191.6 million, or 16.5%, higher than net
sales for 1994. Net income and earnings per
share from continuing operations
were $111.1 million and $1.48, for 1995 as compared with $96.2 million and
$1.26, for 1994. Net income and earnings per share from discontinued operations
were $1.4 million and $.02, for 1995 as compared with $8.0 million and $.11,
for 1994, which included a $4.6 million, or $.06 per-share, one-time tax benefit
related to the legal reorganization of Holiday Rambler. On January 22, 1996,
the Company announced its strategic decision to discontinue the operations
of the Transportation Vehicles segment in order to concentrate its financial
and human resources on its core motorcycle business. The Company does not anticipate
a loss on the discontinuance of the Transportation Vehicles segment. The results
of the Transportation Vehicles segment have been reported separately as
discontinued
operations for each year presented. On November 14, 1995, the Company acquired
substantially all of the common stock and common stock equivalents of Eaglemark
Financial Services, Inc. that it did not already own. The purchase price was
approximately $45 million, which was paid from internally generated funds and
short-term borrowings. The Company has included the results of operations of
the Financial Services segment ($3.6 million) in its statement of operations
for the year ended December 31, 1995 as though it had been acquired at the
beginning of the year and deducted the preacquisition earnings as part of non-operating
expense. The Company increased its quarterly dividend in September from $.04
per share to $.05 per share which resulted in a total year pay out of $.18
per share.

Units Shipped and Net Sales
The Motorcycles and Related Products
(Motorcycles) segment’s net sales increased 16.5% over 1994 due primarily to
a 9,293 unit (9.7%) increase in motorcycle shipments, as well as a 14.0% increase
in its Parts and Accessories business. The increase in motorcycle shipments
is the result of ongoing implementation of the Company’s manufacturing strategy
and efforts to
satisfy demand. The manufacturing strategy is designed to
increase capacity, adjust to changes in the market place and further improve
product quality while reducing costs.
Sales of Buell motorcycles (which
are distributed through select Harley-Davidson dealers) increased to $14 million
in 1995 as compared to $6 million in 1994.

The Company began 1995 at a scheduled
motorcycle production rate of 395 units per day. As the implementation of the
manufacturing strategy continued, the rate increased to 470 units per day by
the end of the year. The Company exceeded its production goal of 100,000 units
in 1995 and anticipates 1996 production will reach at least 115,000 units.

The Company is currently reviewing alternative sites for the construction of
a new manufacturing facility to enable it to achieve its long-term goal of
doubling motorcycle production by 2003.
Year-end data indicates that the
domestic (United States) motorcycle market continued to grow throughout 1995.

Compared to 1994, industry registrations of domestic heavyweight (engine displacements
in excess of 751cc) motorcycles were up 11.3% . The Company ended 1995 with
a domestic market share of 55.8% compared to 56.1% in 1994. This decrease is
a reflection of the Company’s constrained production capacity in a growing
heavyweight motorcycle market. Demand for the Company’s motorcycles continues
to exceed supply with nearly all of the Company’s independent domestic dealers
reporting retail orders on all of their remaining 1996 model year motorcycle
allocations (production through June, 1996).
Export revenues totaled $394.8
million during 1995, an increase of approximately $63.6 million (19.2%) over
1994. The Company has exported approximately 30% of its motorcycle unit shipments
since 1990 and expects to maintain approximately the same percentage during
1996. The Company distributes approximately one-half of its exported units
through its wholly owned subsidiaries in Germany, Japan and the United Kingdom,
which allows the Company flexibility in responding to changing economic conditions
in a variety of foreign markets. While definitive market share information
(engine displacements in excess of 751cc) is not available in many foreign
countries, the Company believes it holds an approximate 11% market share in
the European markets in which it competes and a 22% market share in the Pacific
Rim.
During 1995, the Parts and Accessories business generated $292.3 million
in revenues, an increase of 14.0% over 1994. The rate of increase is lower
than experienced in recent years, however, management believes the 1995 increase
is more indicative of the long-term growth potential of the Parts and Accessories
business. The Motorclothes business, which accounted for approximately $100
million of Parts and Accessories sales in 1995, is expected to remain stable
in 1996, while the Motor Parts and Motor Accessories businesses are expected
to increase. The Parts and Accessories business is expected to grow at an annual
rate similar to the annual growth rate in motorcycle shipments.
The Company
is developing an improved system to better monitor domestic dealer inventories
and retail traffic. In addition, the Company initiated several promotional
programs in the fourth quarter of 1995 to increase dealer floor traffic and
plans to continue this promotional strategy in 1996. To further strengthen
its ability to process and fill orders for the Parts and Accessories business,
the Company plans to construct a new distribution center (at an approximate
cost of $17 million).

Construction is scheduled to begin in the second quarter
of 1996, and the facility should be fully operational by the first quarter
of 1997.
Gross Profit
Gross profit increased $53.1 million, or 14.8%, in
1995 as compared with 1994 primarily due to an increase in volume. The gross
profit margin was 30.5% in 1995 as compared with 30.9% in 1994. The gross profit
margin was negatively affected by the overtime incurred to produce additional
motorcycle units and make up for production time lost because production employees
were involved in numerous strategic planning sessions during 1995.

Internal
; External Analysis
Strengths
? Customer Loyalty and Following
? Very High
Product Demand
? Profitable Product Line and Market Mix
? Highest Market
Share for Motorcycles over 750cc in the United States
? Union Contract That
is beneficial to both the Firm and the Employees
? Significant opportunities
in the growing worldwide motorcycle market
? A proven management team thats
committed to build a beneficial relationship with all of the stakeholders for
the long term
? Increased capacity with the construction of new plant and
distribution center
Weaknesses
? Inefficiency due to Large Production Level
?
More Demand than Supply
? Lower Than expected Sales in Motor Clothes
? Lingering
biker image
MARKETING PLAN OBJECTIVES
Harley-Davidson, Inc. is an action-oriented,
international company-a leader in its commitment to continuously improve the
quality
of mutually beneficial relationships with stakeholders (customers, dealers,
employees, suppliers, investors, governments
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. This value
added mentality helps us to improve our product quality. It important to us
to offer the highest quality product possible.

In addition to quality we
have also been focusing on service. Many of our dealers are continuing to make
major investments in the future growth of their businesses-such as converting
their dealerships into world-class retail sales establishments through our
Designer Store program, building larger dealerships, expanding their existing
service areas or opening alternate ‘satellite” stores in high traffic areas.

Both we and our dealers are investing in training and education, to better
serve the motorcycling community.
We will also be focusing more strongly
than ever before on new product development. With worldwide motorcycle market
growth expected to continue, we’re dedicated to maintaining leadership in our
traditional motorcycle segments and gaining further penetration into the performance
market through our joint venture with Buell. We want to ensure that while our
competitors are busy copying our past work, we’re re-defining the market with
exciting new products. Our new Product Development Center, expected to be completed
by year-end ’96 in Milwaukee, should give our staff the room and tools they
need
to maintain our market leadership.

Organization Goals
? By the year 2003,
we will produce 200,000 motorcycles annually
? Complete the production of
our Product Development Center in Milwaukee by the end of 1996
? Meet the
demand by expanding our existing distribution and manufacturing capacity, and
where necessary, adding new production and retail distribution points
? Grow
Parts and Accessories sales volume, as a percent of total revenue, for both
new and used vehicle customers
? Drive financial results to the levels achieved
by acknowledged high performing companies
TARGET MARKETS
THE HARLEY OWNERS
GROUP
The Harley Owners Group, or H.O.G., is the world’s largest
factory-sponsored motorcycle organization, with more than 300,000 members and
900 local chapters located around the globe.

Besides the H.O.G. pin and patch,
membership card and H.O.G. atlas, members get treated to benefits that are
as helpful as the suspension under a Softail seat. There’s Hog Tales magazine
to keep you up on club events. If you’re off to certain far flung spots, our
Fly & Ride program can get you aboard a rental Harley.
The owners of Harley-Davidson
motorcycles are among the most diverse group of consumers in any industry.

They range from blue collar factory workers to Doctors and Layers. Recently
our target market has shifted more toward the upper end of the buyer market,
but we will never forget where we came from.

Harleys are not just for men.

Over the last decade women have become a significant purchaser of motorcycles,
especially Harley-Davidsons.

MARKETING STRATEGY
The Americas
Our top
priority in the United States is to grow primarily through our existing dealers.

Plans for 1996 include analysis of dealer five-year plans and local market
variables to establish priorities for implementation of dealership improvements
and additions. We’ll also begin to bring more consistency to our dealer network
by helping dealers improve their businesses based on a “best practice” model
that incorporates local market data and customer input with characteristics
of our most successful dealerships.
Our second priority is to grow through
new dealers on an as-needed basis, while adding new “satellite” outlets where
necessary
to increase customer convenience and satisfaction. These outlets,
typically located in high traffic areas, are smaller, dealer-owned motorcycle
service facilities or stores carrying mostly MotorClothes, Genuine Motor Accessories
and Genuine Motor Parts.
Although still in the developmental stages, we’re
allocating more resources to future growth of South and Central America, Mexico
and the Caribbean. In 1995, new dealerships opened in the major market cities
of Bogota, Colombia and Lima, Peru. We are currently considering new markets
in which to open additional dealerships in 1996 and beyond.
Europe
Although
our European presence goes back over 80 years, we consider this to be a market
that is ripe with new opportunities. Our emphasis in 1995 was simply to “focus
on the basics” by establishing Harley-Davidson Europe headquarters in the United
Kingdom and creating an in-country management team dedicated to improving the
bond between Harley-Davidson and our distributors, dealers and customers there.

The start-up of a European Distribution Center in Rotterdam has consolidated
our motorcycle and P&A distribution under one roof, allowing us to improve
service levels and develop a stronger competitive advantage in the marketplace.

To further bolster
Harley-Davidson’s brand image, we’ve opened two flagship
stores in major markets-North London and Central Paris-and are currently studying
the feasibility of opening similar stores in other markets.
Going forward,
our short-term focus will remain on improving customer satisfaction through
gradual expansion of our dealer network, conversion of more existing dealerships
into Designer Stores, improved management information systems, better product
availability and consistent pricing, enhanced technical service training, expansion
of Harley Owners Group activities and development of new markets.
Asia/Pacific
This
evolving market is one we’re watching very closely. The infrastructure and
strategies that we’ve put in place will provide a solid foundation for continued
success as the heavyweight motorcycle market grows and develops here. Findings
of an intensive market study, the early stages of which were completed in 1995,
show that short-term growth opportunities will come from existing markets in
this region-led by Japan and Australia-with long-term growth coming from developing
new markets.
Like Europe, we’ll also be focused intensely on “the basics”
to ensure consistency among our dealer network, but with special emphasis on
increasing technical service competencies. We’ll also work to enhance customer
relationship-building activities through Harley Owners Group and cohesive direct
marketing and brand image-building initiatives.

MARKETING MIX
The sportster,
First introduced in 1957, the Sportster is Harley-Davidson in its purest
form. It is an uncompromising exercise in getting power to pavement. As it
turns forty, the Sportster certainly isn’t experiencing a mid-life crisis.

It just keeps getting better.

The Softtail
The Softails offer a retro look,
inspired by the classic hardtail frame, brought up-to-date with the reliability
of moderntechnology. These bikes move you ahead by moving you back
in time.

Dyna
There is a place
where the past and future mingle, taking oneach other’s qualities until
they become a new incarnation of the here and now. This is the land of the
Dyna Glides – with a smooth ride dictated by computer-aided engineering and
a look inspired by classic Harley-Davidson styling.

Touring
Harley-Davidson
touring motorcycles offer a lot more than meets the eye. Like small town coffee
shops and historic landmarks. Distant rallies and forgotten highways. Campgrounds,
sunsets, burger joints and national parks. Even thunderstorms. And now it’s
all available with electronic sequential port fuel injection on most models.

Racing
In
his first year of superbike racing, Chris Carr won rookie-of-the-year honors
and finished twelfth in overall points, while still winning dirt-track races.

This year, he is committed full- time to road racing and his poll position
at Laguna Seca proved it. This year, he is joined on the VR 1000 racing team
by Thomas Wilson, fresh from tremendous success in the 600 and 750 Supersport
classes. On the dirt track, Scott Parker, coming off his record sixth AMA Grand
National Championship, continues to dominate aboard his XR 750.
Other Segments
Eaglemark
Eaglemark
began in 1993 as an independent company with Harley-Davidson holding a minority
stake. Following Eaglemark’s
success in achieving our initial goals, Harley-Davidson
acquired essentially full ownership in November of 1995 to fully benefit
from
future growth and value creation.
Eaglemark was established to better meet
the financial needs of Harley dealers and owners, while producing attractive
returns. We use the name Harley Credit and Insurance, rather than Eaglemark,
to build on the loyalty customers have for the Harley-Davidson brand. Consistent
with the brand’s image, our services aim to provide real value to customers
through one-stop shopping, fast personal service, competitive terms and a thorough
knowledge of the products we finance and insure.

Parts and Accessories
As
successful as our P&A business has been over the last several years, we took
some major steps in 1995-including repositioning our replacement parts and
mechanical accessories lines-to re-energize our approach and maintain our market
leadership. To address dealer and customer dissatisfaction with backorders
on popular items, we’re establishing closer ties with our suppliers, to ensure
they have adequate capacity to handle demand. And the new P&A distribution
center,
when it comes on stream, will help speed the flow of parts to dealers.
Ninety
percent of our MotorClothes revenue comes from the domestic market, which has
become a very tough environment for apparel sales. And we’ve found that our
international markets have very specific needs for fit, styling and pricing
that our current broad-based line doesn’t adequately support.

From these
challenges come opportunities. In 1996, we’re creating a global, unified MotorClothes
product line, developed by a centralized styling department. This group will
develop overall concepts, then work with regional MotorClothes managers to
produce market-specific products. We’re also increasing our promotional efforts
toward the non-riding public, to attract them into our dealerships.
Buell
Although
still a start-up operation- approximately 1,400 Buell units were shipped in
1995-the Buell team is continuing to explore and evaluate new opportunities
in the sport/performance market.

While traditional sportbikes utilize complex
technology with the sole purpose of increasing speed, Buell’s mission is to
develop and employ innovative technology to enhance “the ride” and give Buell
owners
a motorcycling experience that no other brand can provide.
Buell expanded
its 1996 model year product line by adding two new models, the S1 Lightning
and S2 Touring, to support its flagship S2 Thunderbolt. Buell also added more
than 100 new dealers in 1995 (Buells are distributed only through select U.S.

Harley-Davidson dealerships), bringing the year-end total to approximately
150. In 1996, the Buell team will complete its study of the European sport/performance
market, which is four times larger than its U.S. counterpart, to prepare for
a possible future launch there.
Promotion
The majority of our advertising
comes from bike rallies and special events that are held that are held across
the United States. Our Rallies draw between 5,000 and 200,000 people. The majority
of the attendants are Harley owners. Harley Davidson as an organization does
very little mainstream advertising.
BUDGETS CONTROL AND ACCOUNTABILITY
Standards
should be specified in terms of sales, and production. Costs should be identified
and target cost levels specified to facilitate their control. Standards should
be established in terms of consumers attitudes. Attitude standards, in terms
of perceptions, and desires should be specified. Controls should be implemented
and monitored by appropriate administrators. The president, vice-president,
administrators, and other individuals should be responsible for controlling
the marketing mix implemented.
Business