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Industry Analysis

Essay by   •  November 8, 2010  •  1,120 Words (5 Pages)  •  1,730 Views

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Company History:

• Company was founded in 1903 By William Harley and Arthur Davidson.

• Motorcycle back then was used more for transportation and less for recreation however that quickly changed as motorcycle racing and hill climbs became popular.

• Incorporated in 1907.

• By 1920 they were the largest manufacturer in the world and they had dealers in 67 countries (Data monitor)

• Harley Davidson produced motorcycles for the allied forces which further helped to establish their reputation in Europe.

• In 1969 HD merged with American Machine and Foundry Co. (AMF). Following this merger the company reorganized it production facilities to meet the increased demand for motorcycles. The result was a motorcycle that was poor in quality and almost ruined HD.

• In 1981 HD senior executives initiated a management buybackвЂ"they focused on improving the quality of their bikes and removing the AMF nightmare. Since that time they have enjoyed record sales.

• Underwent further production reorg to compete with foreign motorcycle manufacturers.

• In 1986 the company was listed on the American Stock Exchange and on the New York Stock Exchange the following year.

• Entered strategic partnership with Buell in early 1990’s acquired them in 1998

• Celebrated their 100th anniversary in 2003. They celebrated with a variety of corporate sponsored rides and parties with the culmination of a huge week long party in Milwaukee WI-corporate headquarters of HD.

• 2004 signed a memo of understanding ? with Zongshen Motorcycle group which could facilitate HD entry in the Chinese motorcycle market.

Business Description and Basic Facts.

• Headquartered in Milwaukee WI

• Operate through

2 main business segments-Motorcycles and Related Products and Financial Services.

• Motorcycle unit is responsible for the design manufacture and selling of primarily heavy weight touring and custom performance motorcycles, accessories and general merchandise (Data monitor)

• Financial Service-HD Financial Services involved in the financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (Datamonitor)вЂ"also deal with insurance and various service contracts

SWOT analysis (Taken directly from Datamonitor)

Strengths Weaknesses

Strength of position globally Questions regarding growth rate

Strong Sales and Financials Aggressive shipments could damage brand

Expansion of production facilities Supplier Network maintanence

HDFS Buell Operating performance

Opportunities Threats

Target higher margin sales Competition

Market demographics Fluctuations in currencies and interest rates

Organic development Threats from own brands

Chinese market

Strengths:

Strength of Position Globally:

• 25% market share in worldwide heavyweight motorcycle market

• 50% market share in the US heavyweight motorcycle market

• One of the most recognizable brands in the world

• Brand helps to generate sales in the face of competition

• HD brand enjoys favorable brand perceptions and strong brand associations

Strong sales and financials:

• Increased sales in both us and world

• This increase in sales has led to increased revenues for fiscal 2003.

• Their strategy during this time was to increase price per unit of productsвЂ"these increases did not affect sales demonstrating that demand for HD motorcycles is inelastic

Expansion of production facilities:

• They expanded their production facilities in York PA which will lead to increased capacity and more simplified production.

• Should help them keep up with demand despite prohibitive costs associated with outdated production facilities.

Harley-Davidson Financial Services (HDFS)

• HDFS had a 61% growth rate in fiscal 2003

• Market share at that time was increased to 38% of new bikes sold at retail by end of 2003 as compared to 35% in 2002.

• HDFS has benefited from declining interest rates over the last few yearsвЂ"this has increased the spread between rates at which HD borrows and loans money.

• Not expected to continue in 2004.

Weakenesses:

Growth rate

• Currently @ 15% annually-not sustainable

• Reduction in growth rate could impact investor confidence.

• Need to grow the heavyweight motorcycle market by 11% per year for 10 years to maintain their current growth rate.

Aggressive shipments could damage the brand.

• The increased demand for HD motorcycles has led to aggressive growth and high retail inventory. For example in 2003 the large inventory led HD to unprecedented levels of promotional activity and resulted in some dealers advertising at below

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