The Harley Davidson, Inc is a manufacturer of motorcycles in heavy weight category. The parent company consists of Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS) . It offers a range of 30 models through a network of 1,600 dealers spread across six continents. It also provides retail and whole financing through its HDFS, primarily to dealer and customers.
Recently, the company has reported an increase in its revenue to $5,311.71 million for the fiscal year ending Dec 2011. This is an increase of 9.31% over the previous year, which is 2010. Its operating profit has also increased to $829.97 million for the same fiscal year, which is an increase of 74.59%. For the same year, its net profit has increased to $599.11 million, which is an increase of 308.83% over previous year.
Harley-Davidson is primarily a manufacturer of heavy weight motorcycles, with it market spread across North America, Asia/Pacific, Europe and Latin America. Its strong brand image along with its product range makes it the leader in the market segment. However, its dependence on North American market is a cause of great concern. To overcome it vulnerability, it is making concerted effort to make foray in to Asian market.
Its biggest strength is its brand image, which allows it to “attract and retain” loyal customers. Therefore, it is ranked as one of the most valuable brands in the world. In fact has been continuously ranked as one of the top 100 brands in the world. One of the reasons it hold 55.7% of US heavy weight market share. It is also ranked either #1 or #2 brand it its segment in nine countries in Europe.
Also, it offers products and services through two of its division, the HDMC & HDFS. HDMC produces family of motorcycles called: Touring, Dyna, Softail, Sportster and V-Rod. Similarly, HDFS finances its own products through its dealers in US and Canada.
It has a dedicated research and development facility. Its Product Development Center (PDC) plays central role in developing innovative products. One recent example will be the Softail motorcycle that have 1584 cc engine that has new features such as hand controls, larger odometer and anti-lock breaking system.
It has great opportunity in trikes business, a segment which has seen great surge in recent past. Their three outsourcing agreement with Lehmann Trikes, has allowed them test the market. They have not renewed their contract with them, and are now manufacturing it on their own in their Pennsylvania plant .
Harley-Davidson is concerned about it product recalls, as it could have a long-term impact on its performance as it affects customer confidence. It has had a series of recalls, with one such, as recent as February 2012 when it fixed faulty breaks in approximately 1,228 units, including that of Road King and the Electra Glide Ultra Classic. This is not something new as way back in October 2011; they had to do world-wide recall of models such as Touring, CVO Touring and Tike motorbike.
Also its client segment is too narrow. It is just “too dependent on old white males and isn’t diversifying its owner base quickly enough”. Also, it is not making efforts to set up low-cost factories overseas, and is unable to keep pace with Asian competitors in productivity and quality measures.
One of their major weaknesses is near complete reliance on US market for major part of their revenue. For the year ending 2011, 67.7% of their revenue came from sales within US. As for the financial sales business, their 95.5% of sales came from US, and remaining from the rest of the world. Such dependence on one market makes them very susceptible to economic downturn.
In an effort to enhance its product line, in February 2012, Harley-Davidson launched two new models: Seventy-Two and Softail Slim in the heavyweight category. In the year previous to that, it offered H-D1, which is a set of customization tools. It also launched new Softail motorcycles with 1584 cc engine. Through its touring motorcycle line, offered “Electra Glide Classic, Road King, Road King Classic, Ultra Classic Electra Glide and Electra Glide Ultra Limited touring bikes”.
It also has the opportunity to take advantage of increased sales in year ending 2012 .
Among their major threats is that of increasing strict emission standards for two wheelers. In Europe there are plans to increase the standards from Euro 3 to Euro 5 by 2015. This may require Harley-Davidson to redesign vehicles to meet these standards. It is supposed to have an impact on their bottom lines, especially increased operating costs. On top of that, failure to comply with these standards can lead to penalties, which will impact short-term profit margins.
Like any other manufacturing environment, Harley-Davidson is dependent upon the supplier of raw material. What is different about them is that they are dependent upon a single supplier for certain of their raw materials. It makes them vulnerable if that supplier isn’t able to deliver in time. Also, with just one supplier, they are not able to take advantage of price competitiveness. As they are dependent on single supplier for a lot of their components, in case of any delay, the delivery of their product can be affected.
Although Harley-Davidson has manufacturing facility across US, Canada, Asia and Europe, their competitors have a more diversified business model.
And almost all of them compete in all segment of motorcycle business. Also their retail prices are generally higher than that of their competitors. In case of economic downturn, the market becomes price sensitive, and therefore has a negative impact on Harley-Davidson’s fortunes. Its financial services business also faces competition from banks and other financial institutions. Such financial institutions are much more diversified, and therefore can offer competitive rates to the customers. “The company’s failure to address and respond to these competitive pressures worldwide would have a material adverse effect on its market share”.
It also faces significant threats from domestic players such as Polaris, the maker of Victory and Indian brand of heavy weight motorcycle. Polaris has surged ahead of Asian brands in this market segment to become the number 2 player after Harley .
GlobalData. (2012, 08 03). Harley-Davidson, Inc - Financial and Strategic Analysis Review. Retrieved from GlobalData: http://callisto.ggsrv.com/imgsrv/Fetch?banner=4d609cd7&digest=27b6b6d33026b58ef227e0025dda7d42&contentSet=SWOT&recordID=47405_GDAUT29887FSA
Looney, D. C., & Ryerson, A. (n.d.). Lehman Trikes: A Story Within A Story. Retrieved from BrainMass.com: http://brainmass.com/file/1415147/Case+Study.pdf
Taylor III, A. (2012, 10 03). The Hurdles at Harley-Davidson. Retrieved from CNN Money: http://money.cnn.com/2012/10/03/autos/harley-davidson-polaris.fortune/index.html
UMC Staff. (2013, 01 29). Harley-Davidson | 2012 Worldwide Sales Up 6.2%. Retrieved from Ultimate Motor Cycling : http://ultimatemotorcycling.com/harley-davidson-2012-worldwide-sales-up-6-2/