Harley-Davidson, Inc. - 2009 Case Notes Prepared by: Dr. Mernoush Banton Case Authors: Carol Pope and Joanne Mack Case Abstract Harley-Davidson, Inc. (www.harley-davidson.com) is a comprehensive strategic management case that includes the company's calendar December 31, 2008 financial statements, competitor information and more. The case time setting is the year 2009. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan for the company. Headquartered in Milwaukee, WI, Harley-Davidson, Inc. is traded on the New York Stock Exchange under ticker symbol HOG. Vision Statement (Actual) Harley-Davidson is an action-oriented, international company, a leader in its commitment to continuously improve its mutually beneficial relationships with stakeholders (customers, suppliers, employees, 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. Vision Statement (Proposed) We want to make your motorcycle ride a safe and a lifetime experience. Mission Statement (Actual) 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. Mission Statement (Proposed) Harley-Davidson is committed to providing the highest quality products and financial services to men and women worldwide (1, 3). The Harley name stands for customer satisfaction (7) and we would like all Harley customers to relay their satisfaction to all motorcycle dreamers. Harley-Davidson uses advanced technology to produce the superior motorcycles (4). Our philosophy is to conduct business with utmost integrity while serving our customers, employees, and shareholders (6). We appreciate the hard work of our employees (9). We push excellence though our Harley-Davidson bar and shield logo and the Harley Owners Group (HOG) (7). We continue to do our part in supporting all environmental laws in every country we do business (8). Harley-Davidson intends to stay committed and determined. 1. Customer 2. Products or services 3. Markets 4. Technology 5. Concern for survival, profitability, growth 6. Philosophy 7. Self-concept 8. Concern for public image 9. Concern for employees INTERNAL & EXTERNAL AUDIT CPM - Competitive Profile Matrix Harley- Davidson d Score Honda Ratin g d Score Critical Success Factors Weigh t Ratin g Advertising 0.08 Top Management 0.05 Customer Service 0.10 Technological Advances 0.09 International Market Sales 0.07 Global Expansion 0.06 Financial Position 0.07 Customer Loyalty 0.11 Market Share 0.09 Product Quality 0.10 Marketing 0.10 Price Competitiveness 0.08 Total 1.00 Weighte Weighte Yamaha Ratin g Weighte d Score Current Situation 1. Economy in Europe and other regions is growing at a better rate than United States 2. Gasoline price has been stabilized in 2009 3. Competition has reduced their production of motorcycle in 2009 4. Currently, Yamaha has seen decreasing motorcycle sales in Japan, the United States, and Europe, but is doing better in Southeast Asia and Latin America 5. Honda, Yamaha and Suzuki are more diversified than Harley in terms of product offerings 6. Female riders are on the rise 7. Honda, Yamaha and Suzuki focus on ATVs, scooters, and marine and watercraft in addition to various motorcycle product lines 8. Motorcycles typically are considered a good replacement for automobiles when gas prices are on the rise 9. Additional job cuts has helped the company to improve its profit margin 10. Harley-Davidson motorcycles have led the industry in the United States for retail unit registrations of new heavyweight motorcycles 11. Harley-Davidson operates in two segments: (1) financial services and (2) motorcycles and related products. 12. Harley-Davidson has 5 divisions: (1) Parts & Accessories (P&A); (2) General Merchandise; (3) Licensing; and (4) Motorcycles 13. The Company offers a wide range of families of motorcycles: (1) Touring, (2) Dyna, (3) Softail, (4) Sportster, and (5) VRSC 14. In terms of non-U.S. distribution, Harley-Davidson has 71 full service dealerships in Canada, 383 in Europe, 201 in Asia Pacific, and 32 in Latin America 15. Strong brand recognition and customer loyalty 16. International retail sales were up 10.3 percent as compared to 2007 17. Total current asset increased by $1.9 billion dollars from 2007 to 2008 Current Situation 1. Economy in Europe and other regions is growing at a better rate than United States 2. Gasoline price has been stabilized in 2009 3. Competition has reduced their production of motorcycle in 2009 4. Currently, Yamaha has seen decreasing motorcycle sales in Japan, the United States, and Europe, but is doing better in Southeast Asia and Latin America 5. Honda, Yamaha and Suzuki are more diversified than Harley in terms of product offerings 6. Female riders are on the rise 7. Honda, Yamaha and Suzuki focus on ATVs, scooters, and marine and watercraft in addition to various motorcycle product lines 8. Motorcycles typically are considered a good replacement for automobiles when gas prices are on the rise 9. Additional job cuts has helped the company to improve its profit margin 10. Harley-Davidson motorcycles have led the industry in the United States for retail unit registrations of new heavyweight motorcycles 11.Harley-Davidson operates in two segments: (1) financial services and (2) motorcycles and related products. 12. Harley-Davidson has 5 divisions: (1) Parts & Accessories (P&A); (2) General Merchandise; (3) Licensing; and (4) Motorcycles 13. The Company offers a wide range of families of motorcycles: (1) Touring, (2) Dyna, (3) Softail, (4) Sportster, and (5) VRSC 14. In terms of non-U.S. distribution, Harley-Davidson has 71 full service dealerships in Canada, 383 in Europe, 201 in Asia Pacific, and 32 in Latin America 15. Strong brand recognition and customer loyalty 16. International retail sales were up 10.3 percent as compared to 2007 17. Total current asset increased by $1.9 billion dollars from 2007 to 2008 18. Harley offers financing of its bikes through HDFS 19. The Harley-Davidson motorcycle share of the heavyweight market was 45.5 percent and 48.7 percent in 2008 and 2007, respectively 20. Only 12 percent of U.S. retail motorcycle sales of new Harley-Davidson motorcycles are to female buyers 21. A typical buyer of Harley bike has an average of median household income of approximately $87,000 22. For the full year 2009, Harley-Davidson plans to ship between 264,000 and 273,000 new Harley-Davidson motorcycles, a 10 to 13 percent reduction from 2008 23. Total worldwide retail sales dropped by 7.15 in 2008 from previous year 24. International retail sales growth slowed to 0.7 percent during the fourth quarter of 2008 as a result of deteriorating economic conditions outside the United States 25. In the United States, retail sales of Harley-Davidson motorcycles in 2008 were down 13.0 percent 26. Total operating income dropped by about $400 million from 2007 to 2008 27. Unemployment is on the rise in the United States among middle class who could afford to buy a motorcycle 28. Competitors are reducing their prices so they can improve sales 29. Disposable income is falling among professionals between the age of 35 and 54 30. Competition is strong in markets outside the United States 31. Increase in fuel price could impact the industry sales 32. Rise in interest rate could impact the buyers from purchasing and financing high ticket items 33. Environmental protection laws could impact product design and cost 34. Shifts in buyers' needs and tastes