Harley Davidson Case study PDF

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Harley Davidson Case Analysis

Table of Contents Introduction………..……..……………………………………………………………………….2 Executive Summary……………………………………………………………………………….3 Opportunities and Challenges……………………………………………………………………..6 International Business Policies and Ethics………………………………………………………..9 Recommendations………………………………………………………………………………..11 Conclusion…………………………………………………………………………………….…13 Work Cited………………………………………………………………………………..……...14

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Founded in 1903, Harley Davidson .Inc is an iconic American motorcycle manufacturer company, and one of the leading entity of the motorcycle industry. Even though the company has faced intense periods of poor economic growth as well as intense global competition, it has still been able to thrive back and secure its reputation as one of the most valuable brands and luxurious brand not only the United States of America, but across the whole world. This  report would be centred around Harley Davidson. Inc’s overall performance. Various aspects of the company, including the opportunities and challenges it faces in this modern day world of globalized market, would be analyzed using Harley Davidson’s official annual report 2018 (10K), “Harley Davidson Case Study,” and several other external resources, as well as my personal understanding of the company and the economic trends. The analysis would also be followed by my recommendations for the company.

Executive Summary Harley-Davidson, Inc. manufactures and sells heavyweight cruiser, touring and custom motorcycles. It’s mission statement is as follows:

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“We 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.” The company is divided into two segments: Motorcycles and Related Products and Financial Services. With some ups and downs, Harley Davidson still remains a relatively financially strong and stable company. However, there has been a decrease in the net income of the company, from $752,207 in 2015 to $521,759 in 2017. The chart below has been taken from Yahoo Finance and it shows the trends of stock price for Harley Davidson in the past eighteen years. The trends will be discussed in the following paragraphs.

In spite of being the fifth biggest player in the global motorcycle market (Thompson 2017), and having a strong  overall financial outlook, the stock price of the company has not been favourable and attractive over the past few years. In 2005, the company reported the 19th

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consecutive year of record revenues and record earnings surpassed $5 Billion in Revenue which, even though was not as well as the double digit annual profit the company saw throughout the 90’s and late 80’s, clearly shows how well the company had been doing (HDI 2005). As seen in the chart above, the company expanded exuberantly until 2006, and the stock prices hit its maximum value of $73.23 in the final year after which it fell drastically low to $8.33 in 2009 because of a reason that seemed almost impossible to battle: demographics. The faltering economy of the United States along with the  demographics had almost shattered the company. “The aging customer base at the end of the decade had significantly dented sales” (Taylor 2010). The company kept on decreasing their advertisements,  and did  little to attract new, younger customers. Additionally, Harley did not offer a ton of new product designs to appeal its already existing customers which of course made it less appealing and trendy. As a result, the company was forecasted to be doomed because it seemed to that it would fail to raise back up to the standard of the market. What once was a symbol of luxury and standard had then become just any other bike. However, after 2009, Harley Davidson made a come back and exceeded all expectations. The company increased its capacity and built  303,000 motorcycles, which is almost twice the 159,000 it assembled in 2000 (Taylor 2010). Furthermore, the company also consolidated operations, terminated its Buell line of sport bikes, and sold its MV Agusta Italian motorcycles back to its founder (Taylor 2010). These necessary steps as a result of better leadership made the company survive and recover from the damages that it had gone through. However, even though Harley Davidson actually produced great results in the following years, the stock price has yet to recover to its highest earlier levels. The stock price hit $72.14 in 2014, which is the second

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highest from its highest value in 2006, but after the year, with certain ups and downs, the general trend of the company’s stock market value is decreasing. However this decrease in growth rate is primarily a result of the maturing markets, which have affected growth rates for not only the Harley-Davidson company, but all the members of the motorcycle sub-industry.

Opportunities and Challenges The globalization of business have brought forward great opportunities for businesses that seek to increase their revenues and profits. Having said that, Harley Davidson has huge

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market potential in countries that are part of Asia as well as Europe. Even though the countries have competitors that offer similar products on good prices, Harley Davidson’s reputation of being unique and high-quality still has been unparalleled. While Europe, Middle East and Africa have the highest demand and amount of dealerships after the US, trends also show that places like Canada and Asia Pacific have an increase demand in Harley Davidson, creating huge opportunity for the company in such regions. This is the era of technology and convenience. There is a huge demand in the younger generation segment for new, more efficient and technologically advanced products. Even though introducing such smart products can be very expensive for a company, seeing Harley Davidson’s overall performance in the last decade and current financial statements, the company absolutely has the ability to finance it. This provides another great opportunity for the company to expand its segments and attract customers through such bikes. With the introduction of advanced products like the LiveWire electric motorcycle, there lies great hope for future of the company (Duprey 2018). Finally, the company there is huge market opportunity for Harley Davidson in the introduction of lower CC bikes. By launching new, less heavyweight bikes, the company will open new doors for customers who can then use the bike for daily purposes. This will especially attract young men and women who, in this age and era, are seeking convenience. Again, making it more pleasing to millenials, and expanding their customer base both domestically and internationally. However with so much of the opportunities that lie ahead of the company, it faces certain challenges too that the CEO Matt Levatich will have to tackle. Harley Davidson is a “American”

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company that it takes, and should take, huge pride in. However, as a business seeking safety and stability in this globalized era of business, it is very critical for the company to foresight the challenges that it may have as well in America alone. As a matter of fact, almost sixty-five percent of the company sales are dependant upon the 701 dealership stores that are located in the USA. However, trends also suggest a decrease of the retail sales by almost 3.9%. These trends can be a huge challenge for the company because their “over-dependence” can lead to external problems. Another, yet one of the most significant challenge that the company faces is very a high competition, both locally and internationally. Harley Davidson is a high-class luxury bike. While there is certainly a market for high-class expensive items, the demand for such items is not as high as it is for relatively cheaper items. With an increase in cheaper and substitute bikes from foreign markets such as that from India, Europe, Japan, etc, attracting new as well as maintaining previous customers can be a huge challenge. Lastly, The rise in dollar value against other very important currencies such as Japanese Yen, Indian Rupee, Euro, etc, has lead to a loss in revenues for Harley Davidson (Forbes 2015). With almost sixteen percent of the company’s sales coming from from Europe, it can be extremely challenging for the company to come up with policies to adjust to the currency rates, and maintain its customers while simultaneously ensuring profits because these negative currency exchanges may bring the gross margins down.

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 International Business Policies and Ethics

International expansion and the foreign policy go hand in hand. Businesses tend to be radically affected as the government changes or restructures its foreign policies. Foreign policy itself is an extremely critical factor in determining the international expansion, making it easier or harder for trade to be flourished between other countries(Stanford 2017). Tariffs and quotas

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on imports and exports, as well as subsidies on certain good are some of the points to consider when considering the foreign opportunities. The  foreign policy of a country is often times focused on facilitating trade and investments across international borders (Stanford 2017). This consists of, but is not limited to, reducing import and export tariffs in order to encourage foreign investment, growth and maximized profits. However, let us suppose that the relationship between the two counties performing trade is not ideal, then in such cases the foreign policies become rigid and entirely self-benefitting which leads to an embargo being imposed and restriction on trade in general. For example, the US’s foreign trade policies towards countries like Canada, Mexico have all proven extremely beneficial in terms of raising its GDP. Friendly relation and Foreign Trade Agreements have paved the way for huge multiple foreign direct investments throughout the region, and only worked in favour of the country (U.S. Chamber of Commerce 2018). Harley Davidson is the prime example when it comes to the effects of foreign policies. As also mentioned in the Case Study, Harley Davidson could have saved so much in India, Thailand and Malaysia where the tariff barriers were sky high. Now let us talk about how politics and ethics and and how businesses in America are affected by them. A country’s political and economic environments are both interdependent. For example political events may cause a stock price of a company to rise or fall. In the US specifically, politics significantly impact the businesses of the country. There is a day to day increase in the US businesses forming political identities and taking stances on social problems. Ian Chipman in his article for Stanford mentions that the rise in political polarization ranges“from Hobby Lobby’s Supreme Court case over reproductive rights to Google and Walmart shying away from their traditional partnership with the Republican National

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Convention in response to Donald Trump’s divisive campaign” (Chipman 2016). According to Steven Callander, a Political Economy Professor at Stanford University, no matter how harsh this may sound, companies throughout the US may be faced with tough decisions on political grounds (Chipman 2016). I believe, political pressure on American companies is a two-sided story to consider. It may be ethical in certain cases but unethical in others. Legal and ethical are absolutely not synonymous, and must be considered whilst the decision. For example when Nike and companies as such were pressured by the higher authorities to abide by the Fair Labor Association Workplace Code of Conduct, as well as formulate a Ethical Fashion Report, the result was as increased minimum wage and increased factory audits. Having  said that, I think regulations are good. However, if the pressure in solely based on personal interests and violates the ethical codes, then it is a problem.

Recommendations

As stated in Harley Davidson’s mission statement, the company focuses on selected market segments. When you think of Harley Davidson bike riders, you think of middle-aged White Americans. This is exactly what the company needs to focus on if it wishes to grow its

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sales. The product line and services of the company need to be more diverse, and must not be limited to just middle-aged White American folks. Having said that, I believe introducing product like new electric scooter and motorbikes that appeal to the young men and women will be the way forward if Harley Davidson wants to thrive in this era of technology. Furthermore, the company seeks to have international success through its expansion in the global market. In order strategy to thrive, I think it will have to make significant changes in its global strategy, and adjust its prices accordingly while ensuring good quality standards. This is essentially because of the currency exchange rates that make it harder for the customers to buy in countries with comparatively lower economy. Even though the Harley Davidson bike may be high-quality and an American symbol of pride, there is a huge competition in the international market, especially in places such as Europe, China, India, Japan, etc, where the demand is high too (Dupley 2018). However, because the market is huge is such countries, they have similar products available in prices which are much cheaper than Harley Davidson’s (Dupley 2018). Therefore, even though this may be one of the company’s biggest challenge to overcome, if executed efficiently, will make the company stronger than ever before. When it comes to marketing, it is clearly evident from the company’s history that one of the highly significant reasons why Harley Davidson's profits dropped dramatically low was because of the fact that they had stopped investing much in advertisement of their products. In order to ensure that history does not repeat itself negatively, the Chief Marketing Officer must devote sufficient funds towards international advertising, and construct the adds in a way that appeals young people of color as well, and not just a specific group. They must sponsor and form strategic alliances with companies abroad in order to reach out to a broader audience.

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As the company works on adopting the above mentioned recommendations, I am positive that this would allow them to grow its sales. As the sales and revenues increase, Harley Davidson will then enjoy a better reputation in the business market and amongst investors. Its  high profit margins would give it the ability to cover its new investments and its payout to investors. As  the reputation of the company improves over time, this in turn will cause the stock price of the company to rise, and who knows, maybe even more than that of 2006, which was its highest in the past two decades.

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The world of business can be very unpredictable and problematic, and is not something outlandish for a well-established company to be doomed, and vice versa. However, what is most critical is how a company or firm deals with those problems and casualties. Harley Davidson. Inc has proved its strengths as it has paved its way through all the tough times. What once was predicted to be destined to doom, has emerged once again as a highly regarded and reputable company. While Harley Davidson definitely has challenges and bumps on its way ahead, there is also great hope for the company in future. With adopting certain strategies and restructuring its goals, Harley Davidson has the absolute capacity to reach its zenith, or maybe even higher.

Works Cited “The Benefits of International Trade.” U.S. Chamber of Commerce , 5 Apr. 2018, www.uschamber.com/international/international-policy/benefits-international-trade. “Davidson Announces Record Fourth Quarter And 19th Consecutive Record Year | Harley-Davidson USA.” Harley,

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investor.harley-davidson.com/news-releases/news-release-details/harley-davidson-announ ces-record-fourth-quarter-and-19th. Duprey, Rich. “Can Harley-Davidson's Dividend Survive Another Year of Falling Sales?” The Motley Fool , The Motley Fool, 18 Dec. 2018, www.fool.com/investing/2018/12/18/can-harley-davidsons-dividend-survive-another-year. aspx. Duprey, Rich. “For Harley-Davidson, There's Opportunity (and Risk) in an Electric-Bike Maker's Woes.” The Motley Fool , The Motley Fool, 15 Nov. 2018, www.fool.com/investing/2018/11/15/for-harley-davidson-theres-opportunity-and-risk-in.a spx. “Harley-Davidson's Aging Biker Problem.” CNNMoney , Cable News Network, money.cnn.com/2010/09/17/autos/harley_davidson_fall.fortune/index.htm. “Harley-Davidson, Inc. (HOG) Income Statement.” Yahoo! Finance , Yahoo!, 10 May 2019, finance.yahoo.com/quote/HOG/financials?p=HOG. “SEC Filing | Harley-Davidson USA.” Harley , investor.harley-davidson.com/node/17156/html. Stanford, Carl. “How Markets and Trade Relations Affect Business.” Fleximize , 14 Nov. 2017, fleximize.com/articles/001264/how-markets-and-trade-relations-affect-business. Team, Trefis. “Roadblocks In The Way For Harley-Davidson.” Forbes , Forbes Magazine, 11 Sept. 2015, www.forbes.com/sites/greatspeculations/2015/09/11/roadblocks-in-the-way-for-harley-dav idson/#fa8b8723b05b. “When Business Gets Political.” Stanford Graduate School of Business ,

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www.gsb.stanford.edu/insights/when-business-gets-political....