Strategic Management and Policy Case Study of Harley-Davidson Inc

Strategic Management and Policy

Case Study of

Harley-Davidson, Inc.

August 19, 2006

Introduction

In 1903, a legendary motorcycle company was formed when William S. Harley and the Davidson brothers, William D., Arthur and Walter, handcrafted their first three motorcycles. In 1909, Harley-Davidson introduced the first V-Twin engine, which is still the company standard to this day. From 1917-1918, the company supplied 20,000 motorcycles for the military during World War I, and during this time major design advancements of motorcycles were made with Harley-Davidson as the leader. By the end of the Great Depression, only Harley-Davidson and Indian (Hendee Manufacturing) were the sole U.S. motorcycle manufactures that survived through the 1930's. Throughout the 1940's, Harley-Davidson supplied more that 90,000 motorcycles to the military for World War II, added additional facilities and started to decertify by selling apparel - the classic black leather jacket. After Indian closed in 1953, Harley-Davison was the sole American motorcycle manufacture for the next 46 years. Private ownership ended in 1965 whit their Initial Public Offering and four years later, the company merged with American Machine and Foundry (AMF).

By the early 1970's, huge numbers of lower-priced Japanese motorcycles were being imported into the U.S., and these firms were able to capture a large portion of Harley's market share. Additionally, due to Harley's rapid production expansion, the company was experiencing quality problems. In 1981, thirteen members of Harley-Davidson's senior management purchased the company from AMF in a leverage buyout and implemented new quality management and manufacturing methods. The company successfully petitioned the U.S. federal government, relying on recommendations from the International Trade Commission (ITC), to impose additional tariffs on imported Japanese motorcycles (over 750cc's) for five years starting in 1983. Harley-Davidson, Inc. again became a publicly held firm for the first time since 1969 in 1986 and again regained its place in the top spot of the U.S. super-heavyweight market, beating out Honda. At the request of Harley-Davidson in 1987, tariffs on Japanese motorcycles ended one year ahead of schedule and the company was listed on the New York Stock Exchange. By the end of the 90's, Harley-Davidson fully acquires Buell Motorcycle Company to manufacture American sport motorcycles using Harley-Davidson's XL 883 and 1200 engines. The company's stock split for the fifth time since 1986 in 2000, in 2001 the VRSCA V-Rod is introduced for the 2002 model year, inspired by the VR-1000 racing motorcycle, as is Harley-Davidson's first motorcycle to combine fuel injection, overhead cams and liquid cooling, and delivers 115 horsepower. Harley-Davidson, Inc celebrated its 100th year anniversary in 2003 with more than 250,000 people coming to Milwaukee for the final stop of the Open Road Tour and celebration, and Harley gathering and trips worldwide. Harley-Davidson not only survived a difficult time, but it became an American icon.

Key concerns facing Harley-Davidson's continued growth and financial performance are:

1.Limited availability of motorcycles to consumers

2.Higher cost of ownership

3.Narrowing/aging demographic group

4.Competition from rival companies

5.Tariffs and Environmental regulations

Current Vision, Mission, Goals and Strategies

Vision:

To dedicate, to grow value and strengthen the brand, Harley-Davidson deliver products and deliver the services that fulfill dreams

Mission:

To fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

Goals:

-Continue growth in all of its product lines. Harley-Davidson expects the growth rate for P&A revenues to be slightly higher than the motorcycle unit growth rate whereas the General Merchandise growth rate is expected to be lower than the motorcycle unit growth rate. The Company expects the Haley-Davidson Financial Services (HDFS) growth rate to be slightly higher than the Company's motorcycle unit growth rate.

-The company will continue to realize production efficiencies at its production facilities through the implementation of innovation manufacturing techniques.

Strategies:

-To continue the Motor Company's ongoing manufacturing strategy design to increase capacity, improve product quality, reduce costs and increase flexibility to respond to changes in the marketplace.

-Continued use of just-in-time inventory principles that allows the company to minimize its inventories of raw materials and work in process, and to minimize scrap and rework costs.

-Continue to establish and/or reinforce long-term, mutually beneficial relationships with suppliers.

-Continue research and development to lead the custom and touring motorcycling market and to develop products for the performance segment.

-Continue to ensure that its facilities and products comply with all applicable environmental regulations and standards.

-Increase HDFS's competitive advantage ability to offer a package of wholesale and retail financial services.

Internal Analysis

INTERNAL FACTOR EVALUATION (IFE) Matrix

KEY INTERNAL FACTORS

WEIGHT RATING WEIGHTED SCORE

Internal Strengths

1. Strong brand recognition and equity

0.20 4 0.80

2. Strong financials

0.15 4 0.60

3. Strong dealers network