1. PESTEL analysis (10%) Considering these six environments, identify the one that you believe had the most impact on the eventual results and explain why you think so. Was this environmental challenge foreseeable?

2. Industry analysis: (20%) Is the heavyweight segment for motorcycles a favorable industry? (Hint, you will have to provide your brief assessment of all five forces, with one or two sentences for each force. Then add on summary sentence indicating whether your analysis indicates if industry is favorable or not.)

Identify two barriers to entry (review the text for a list of barriers to entry, starts on p. 56) that you see as presenting the most significant challenges for Polaris to overcome and explain why you think so from evidence in the case.

3. Value proposition (30%) Assume that you are a potential or current customer for a motorcycle in the in the heavyweight motorcycle sector. (Try very hard to think like someone in the target market.) Insert your customer assessment score from minus two (-2 = very weak) to plus two (+2 very strong) indicating your assessment of the strength for each component of the value proposition. Score from target market Harley Davidson Honda Polaris Victory (Scoring example...) +1 +2 +2 Value (benefits/cost) Product quality Distribution network Product capability Brand attraction Brand awareness Based on the above, briefly discuss two or three areas of the value proposition that you see as a weakness for the Victory brand.

4. Competition in the heavyweight segment (10%) Identify and briefly describe two or three strengths and two or three weaknesses for the following competitors. (Four to six sentences total across the two competitors.) Harley Davidson: Honda:

5. The decision (30%) What factors influenced the companys decision to enter the heavyweight segment of the motorcycle market in the mid-1990s? Do you think the choice of this segment was optimal considering your analysis of the case? Were they successful? Explain. Use multiple paragraphs.

Answer what you can with the given text, thank you!

Polaris and Victory: Entering and Growing the Motorcycle Business We will continue to win..., of course, but to take our busi- million, 7 percent of company sales for that year. 2 In 2009 nesses to a higher level we intend to change how the game Victory Motorcycles celebrated its first decade in the is played. Polaris has grown and changed significantly motorcycle business, but a global recession led to poor from the little company that Edgar and Allan Hetteen sales, corporate restructuring, and company-wide layoffs. and David Johnson founded 60 years ago in Roseau, In that year Polaris, Victory's parent company, announced Minnesota. But just as they relied on innovation and hard a new 'on-road' vehicle division of which Victory would had continually innovated throughout its first fifteen brand. Recent sales were strong but competition was years in business. Yet Menneto pondered the recurring also getting stronger. The challenge now was how to conquestionsfacingVictoryMotorcyclesandPolaris.Hewonderediftheinitialdecisiontodiversifyintoheavy-tinuetoinnovateandgrowinanincreasinglycrowdedanddifficultmarketsegment.Theneedtoexaminethe wondered if the initial decision to diversify into heavy- and difficult market segment. The need to examine the weight motorcycles was the right road to take. He real- ized Polaris took a big risk by moving into motorcycles and going up against the recognized powerhouses in the industry. Would the Indian brand live up to its tremendous potential and capture market share at the high end Polaris Industries, Inc., designed, engineered and manuoftheheavyweightsegment?WouldVictorycontinuevehicles(ATVs),motorcyclesandpersonalwatercraftfacturedsnowmobiles,allterrainrecreationalandutility successfullycompetingagainsttheJapanesegiants,newenergeticandinnovativemotorcyclecompanies,andvehicles(ATVs),motorcyclesandpersonalwatercraft(PWC),onandoff-roadvehicles,andlowemissionvehi- energeticandinnovativemotorcyclecompanies,andtheirclosestrivalHarley-Davidson?Couldthecompanycles;andmarketedthem,togetherwithrelatedreplacement continue to produce state-of-the-art motorcycles while parts, garments and accessories (PG\&A) through dealers maintaining the heritage of some of its iconic brands? and distributors principally located in the United States, Victory began making motorcycles in 1998. From Canada and Europe under the brand names of Victory, 1998 to 2006 Polaris had invested over $100 million in Indian, Ranger, Sportsman, RZR, Switchback, and others. 4 motorcycle development and by 2006 the division was profitable for the first time. Victory sales were $113 C-162 Part 4: Case Studies Case 13: Polaris And Victory: Entering And Growing The Motorcycle Business C-163 have on-road motorcycles to sell. Consultants believed product (Harley-Davidson). To sell against an image is that a functionally superior cruiser built in America very, very difficult, and that was my biggest concern. 15 In couldfindcompetitivespacebetweenHarley-DavidsonandtheJapaneseproducers."WefocusedinonHarleywiththestudytoseeifitfitwithexistingmanufacturingAugust1993,theofficergroupgavetheokaytocontinue and the Japanese producers. "We focused in on Harley with the study to see if it fit with existing manufacturing and the Japanese manufacturers and said to ourselves, systems and if it could make money. 'Is Harley vulnerable from any standpoint?' We thought that their costs were high," Nygaard said. "We thought that, based on re-engineering the Harley bike, we could builditforlessmoney.WefeltthatcustomerswerewaitingtoolongtotakedeliveryoftheirHarleys,andthey(Harley-Davidson)werevulnerablefromthatstandpoint.Wecouldgettomarketwithabikethatwecouldmakemoney,andtheheavycruiserendofitwascertainlywhatwewantedtotargetbecausethatswherethe(sales)numberswere,andthatswherethe(profit)marginwas.Itwasthebestfitforus,inthattheJapanesewerevulnerablethere.TheyreallyhadntbeenabletotackleHarley,becauseitmightlooklikeaHarley,Anearlydecisionwastodeterminewhichpartstomakeorbuy.DapperandKlancherexplainedthat"theyboughtaHondaShadowandaHarley-DavidsonFXRS,tookthemcompletelyapart,weighed,measuredandestimatedthecostofeverysinglepart,anddeterminedforeachpartwhethertheywouldmakeitorbuyit."15Afterfiguringmanufacturer,dealer,profitsandsalesvolumes,theconsultantsandmanagersfelttherewasagoodopportunityinthemotorcyclebusiness,andinFebruary1994theofficersgroupgavetheokaytomove buttherealriderknewthatitwasntanAmerican-madebikefromanAmericanmanufacturer.Wewereclose(atthetime)tobeinginthedomesticenginebusiness,andwecouldbuildourownU.S.engine,andthatgaveusamajorlegupontheJapanese.WewereanAmericancompany.""Theresultofthestudywas,believeitornot,yes,forwardandbuildaprototype.AmajorboosttothemotorcycledevelopmentoccurredinSeptember1994whenGeoffBurgessagreedtoleadtheVictoryteam.HisextensivemotorcycleindustryexperiencesandhisemphasisonthoroughanalysisanddesignworksetthedirectionfortheVictorydevelopment.TheVictoryteamtookaverythorough, therewasatremendousopportunityinthemotorcy-clemarket,"Parkssaid."Itsnottheoff-roadmotorcy-developmentsotheprogramdidntwastetime,money,methodical,andanalyticalapproachtoresearchand clemarket,"Parkssaid."Itsnottheoff-roadmotorcy-clemarket;itstheon-roadmotorcyclemarket,andthedevelopmentsotheprogramdidntwastetime,money,orvaluableresources.Extensivecomputer-aideddesign entry point, the best entry point, would be in the cruiser market." for leisurely travel. Research showed that many cruiser owners immediately replaced many components, such The Victory team began an in-depth benchmarking study by obtaining and extensively road-testing a fleet of frame stiffeners, and intake systems on their brand-new Arizona. The Yamaha Royal Star and Virago, Honda motorcycles. This was interpreted as an opportunity to Shadow ACE and Valkyrie, Harley-Davidson Road fulfill demand created by undershot customers in the King, Ducati Monster and BMW Ri1ooRS were evalu- market. market.Polarishadexperienceproducingrecreationalthecompetitionbuttofindthebenchmarksforbuildingated,compared,andranked.Thegoalwasnottocopy vehicles for over 44 years. It had the engineering tal- a superior cruiser. The cost of producing the best feaent and production capabilities to design and produce tures was also analyzed to ensure they could produce the distinctly different vehicle lines - snowmobiles, ATVs, motorcycle within their target price range. and personal watercraft - and produce its own engines The Victory team contacted Dunlop, manufacturer for many of those vehicles. Parks said the study showed and tire supplier of Polaris ATVs, to obtain informa"themanufacturingcapabilitiesandtechnologicalknow-howrequiredtoproducecruisersseemedwithinPolaristionaboutmotorcycletires.StevePaulos,aDunloptesttechnicianwithanimpressivemotorcycleindustry price, let me sell against features and benefits, let me petitors' development and production process inforsell against more advertising, and I can find ways to do mation. He accompanied the Victory team to Arizona that," Nygaard said. "Help me to sell against the lifestyle, and shared valuable insights about the benchmarked with loyalty that is as passionate as I've ever seen on any bikes. C-164 Part 4: Case Studies Case 13: Polaris And Victory: Entering And Growing The Motorcycle Business C165 The Victory team found that it could eliminate virtu- Bike Week in March 1998. After taking the bikes for a ally all traces of vibration, but it refused to do so because ride, experiencing street speeds, corners and brakes, ridthey felt it was a trademark of a cruiser. They had to ers were given a questionnaire and interviewed by the determine the proper balance of vibration. Cruisers are Victory marketing staff. The riders' feedback indicated supposed to have vibration. As described by Dapper and the bikes delivered outstanding handling and power. The Klancher, "In the perfect world, there is imperfection. Victory staff also made a few adjustments to the motorWithoutit,thingsjustdontseemright.Motorcyclesneedtohavepersonality;alittlerumblehereandtinglecyclebasedoncustomerfeedback.19TheVictoryteamfeltthebikewasreadytorolland alive and kicking." 8V-twin engine, "92" for the engine's 92 -cubic inch disThe braking system was a concern of the Victory placement, and " C indicated cruiser. The V92C had the team and they set out to develop braking similar to stiffest frame of any cruiser on the market (as stiff as ically on cruisers. They chose Brembo hardware and member (fundamental component) of the frame for worked with Brembo technicians to develop the desired increased strength and rigidity. Complementing the stiff feel and responsiveness. In addition, the Victory team frame were its large 45mm diameter fork tubes with a decided to make its own master brake cylinder. rear suspension incorporating a stiff triangulated swingnumerous rigorous tests of the engine, chassis, and other The Victory V92C delivered up to 50% more horsepower components. The first prototype bikes with Victory than any of its direct competitors. Victory motorcycles engines were known as C bikes and an early prototype were first produced in "Knock-Your-Socks-Off Blue" or 1996 , the Victory concept bike C-1 (engine and chassis together for its first test ride) was first ridden at the first Victory V 92C motorcycles rolled off the assemblylineatthePolarisplantinSpiritLake,Io Osceola, Wisconsin municipal airport. Eighteen people the Fourth of July, 1998 just over a year after unveiling the witnessed the event. prototype. p20 Previously, in May 1998 , Cycle World, the Polaris and Victory: Entering and Growing the Motorcycle Business We will continue to win..., of course, but to take our busi- million, 7 percent of company sales for that year. 2 In 2009 nesses to a higher level we intend to change how the game Victory Motorcycles celebrated its first decade in the is played. Polaris has grown and changed significantly motorcycle business, but a global recession led to poor from the little company that Edgar and Allan Hetteen sales, corporate restructuring, and company-wide layoffs. and David Johnson founded 60 years ago in Roseau, In that year Polaris, Victory's parent company, announced Minnesota. But just as they relied on innovation and hard a new 'on-road' vehicle division of which Victory would had continually innovated throughout its first fifteen brand. Recent sales were strong but competition was years in business. Yet Menneto pondered the recurring also getting stronger. The challenge now was how to conquestionsfacingVictoryMotorcyclesandPolaris.Hewonderediftheinitialdecisiontodiversifyintoheavy-tinuetoinnovateandgrowinanincreasinglycrowdedanddifficultmarketsegment.Theneedtoexaminethe wondered if the initial decision to diversify into heavy- and difficult market segment. The need to examine the weight motorcycles was the right road to take. He real- ized Polaris took a big risk by moving into motorcycles and going up against the recognized powerhouses in the industry. Would the Indian brand live up to its tremendous potential and capture market share at the high end Polaris Industries, Inc., designed, engineered and manuoftheheavyweightsegment?WouldVictorycontinuevehicles(ATVs),motorcyclesandpersonalwatercraftfacturedsnowmobiles,allterrainrecreationalandutility successfullycompetingagainsttheJapanesegiants,newenergeticandinnovativemotorcyclecompanies,andvehicles(ATVs),motorcyclesandpersonalwatercraft(PWC),onandoff-roadvehicles,andlowemissionvehi- energeticandinnovativemotorcyclecompanies,andtheirclosestrivalHarley-Davidson?Couldthecompanycles;andmarketedthem,togetherwithrelatedreplacement continue to produce state-of-the-art motorcycles while parts, garments and accessories (PG\&A) through dealers maintaining the heritage of some of its iconic brands? and distributors principally located in the United States, Victory began making motorcycles in 1998. From Canada and Europe under the brand names of Victory, 1998 to 2006 Polaris had invested over $100 million in Indian, Ranger, Sportsman, RZR, Switchback, and others. 4 motorcycle development and by 2006 the division was profitable for the first time. Victory sales were $113 C-162 Part 4: Case Studies Case 13: Polaris And Victory: Entering And Growing The Motorcycle Business C-163 have on-road motorcycles to sell. Consultants believed product (Harley-Davidson). To sell against an image is that a functionally superior cruiser built in America very, very difficult, and that was my biggest concern. 15 In couldfindcompetitivespacebetweenHarley-DavidsonandtheJapaneseproducers."WefocusedinonHarleywiththestudytoseeifitfitwithexistingmanufacturingAugust1993,theofficergroupgavetheokaytocontinue and the Japanese producers. "We focused in on Harley with the study to see if it fit with existing manufacturing and the Japanese manufacturers and said to ourselves, systems and if it could make money. 'Is Harley vulnerable from any standpoint?' We thought that their costs were high," Nygaard said. "We thought that, based on re-engineering the Harley bike, we could builditforlessmoney.WefeltthatcustomerswerewaitingtoolongtotakedeliveryoftheirHarleys,andthey(Harley-Davidson)werevulnerablefromthatstandpoint.Wecouldgettomarketwithabikethatwecouldmakemoney,andtheheavycruiserendofitwascertainlywhatwewantedtotargetbecausethatswherethe(sales)numberswere,andthatswherethe(profit)marginwas.Itwasthebestfitforus,inthattheJapanesewerevulnerablethere.TheyreallyhadntbeenabletotackleHarley,becauseitmightlooklikeaHarley,Anearlydecisionwastodeterminewhichpartstomakeorbuy.DapperandKlancherexplainedthat"theyboughtaHondaShadowandaHarley-DavidsonFXRS,tookthemcompletelyapart,weighed,measuredandestimatedthecostofeverysinglepart,anddeterminedforeachpartwhethertheywouldmakeitorbuyit."15Afterfiguringmanufacturer,dealer,profitsandsalesvolumes,theconsultantsandmanagersfelttherewasagoodopportunityinthemotorcyclebusiness,andinFebruary1994theofficersgroupgavetheokaytomove buttherealriderknewthatitwasntanAmerican-madebikefromanAmericanmanufacturer.Wewereclose(atthetime)tobeinginthedomesticenginebusiness,andwecouldbuildourownU.S.engine,andthatgaveusamajorlegupontheJapanese.WewereanAmericancompany.""Theresultofthestudywas,believeitornot,yes,forwardandbuildaprototype.AmajorboosttothemotorcycledevelopmentoccurredinSeptember1994whenGeoffBurgessagreedtoleadtheVictoryteam.HisextensivemotorcycleindustryexperiencesandhisemphasisonthoroughanalysisanddesignworksetthedirectionfortheVictorydevelopment.TheVictoryteamtookaverythorough, therewasatremendousopportunityinthemotorcy-clemarket,"Parkssaid."Itsnottheoff-roadmotorcy-developmentsotheprogramdidntwastetime,money,methodical,andanalyticalapproachtoresearchand clemarket,"Parkssaid."Itsnottheoff-roadmotorcy-clemarket;itstheon-roadmotorcyclemarket,andthedevelopmentsotheprogramdidntwastetime,money,orvaluableresources.Extensivecomputer-aideddesign entry point, the best entry point, would be in the cruiser market." for leisurely travel. Research showed that many cruiser owners immediately replaced many components, such The Victory team began an in-depth benchmarking study by obtaining and extensively road-testing a fleet of frame stiffeners, and intake systems on their brand-new Arizona. The Yamaha Royal Star and Virago, Honda motorcycles. This was interpreted as an opportunity to Shadow ACE and Valkyrie, Harley-Davidson Road fulfill demand created by undershot customers in the King, Ducati Monster and BMW Ri1ooRS were evalu- market. market.Polarishadexperienceproducingrecreationalthecompetitionbuttofindthebenchmarksforbuildingated,compared,andranked.Thegoalwasnottocopy vehicles for over 44 years. It had the engineering tal- a superior cruiser. The cost of producing the best feaent and production capabilities to design and produce tures was also analyzed to ensure they could produce the distinctly different vehicle lines - snowmobiles, ATVs, motorcycle within their target price range. and personal watercraft - and produce its own engines The Victory team contacted Dunlop, manufacturer for many of those vehicles. Parks said the study showed and tire supplier of Polaris ATVs, to obtain informa"themanufacturingcapabilitiesandtechnologicalknow-howrequiredtoproducecruisersseemedwithinPolaristionaboutmotorcycletires.StevePaulos,aDunloptesttechnicianwithanimpressivemotorcycleindustry price, let me sell against features and benefits, let me petitors' development and production process inforsell against more advertising, and I can find ways to do mation. He accompanied the Victory team to Arizona that," Nygaard said. "Help me to sell against the lifestyle, and shared valuable insights about the benchmarked with loyalty that is as passionate as I've ever seen on any bikes. C-164 Part 4: Case Studies Case 13: Polaris And Victory: Entering And Growing The Motorcycle Business C165 The Victory team found that it could eliminate virtu- Bike Week in March 1998. After taking the bikes for a ally all traces of vibration, but it refused to do so because ride, experiencing street speeds, corners and brakes, ridthey felt it was a trademark of a cruiser. They had to ers were given a questionnaire and interviewed by the determine the proper balance of vibration. Cruisers are Victory marketing staff. The riders' feedback indicated supposed to have vibration. As described by Dapper and the bikes delivered outstanding handling and power. The Klancher, "In the perfect world, there is imperfection. Victory staff also made a few adjustments to the motorWithoutit,thingsjustdontseemright.Motorcyclesneedtohavepersonality;alittlerumblehereandtinglecyclebasedoncustomerfeedback.19TheVictoryteamfeltthebikewasreadytorolland alive and kicking." 8V-twin engine, "92" for the engine's 92 -cubic inch disThe braking system was a concern of the Victory placement, and " C indicated cruiser. The V92C had the team and they set out to develop braking similar to stiffest frame of any cruiser on the market (as stiff as ically on cruisers. They chose Brembo hardware and member (fundamental component) of the frame for worked with Brembo technicians to develop the desired increased strength and rigidity. Complementing the stiff feel and responsiveness. In addition, the Victory team frame were its large 45mm diameter fork tubes with a decided to make its own master brake cylinder. rear suspension incorporating a stiff triangulated swingnumerous rigorous tests of the engine, chassis, and other The Victory V92C delivered up to 50% more horsepower components. The first prototype bikes with Victory than any of its direct competitors. Victory motorcycles engines were known as C bikes and an early prototype were first produced in "Knock-Your-Socks-Off Blue" or 1996 , the Victory concept bike C-1 (engine and chassis together for its first test ride) was first ridden at the first Victory V 92C motorcycles rolled off the assemblylineatthePolarisplantinSpiritLake,Io Osceola, Wisconsin municipal airport. Eighteen people the Fourth of July, 1998 just over a year after unveiling the witnessed the event. prototype. p20 Previously, in May 1998 , Cycle World, the