Essay/Term paper: Harley davidson

Essay, term paper, research paper:  Management

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 Arthur"s 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 world"s 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 that"s

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 modern technology. These bikes move you ahead by moving you back

in time.

Dyna

There is a place

where the past and future mingle, taking on each 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 consumer"s 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.