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CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-12
• There are three kinds of distributors: full-service dealerships and
secondary retail outlets, which are authorized to sell and service
motorcycles; and the alternative retail outlets, which sell licensed
products.
• Promotion: H-D’s primarily goals in marketing are:
• To increase their relationship and brand awareness with current
customers through The Harley Owners Club (HOC);
• The company also maintains two interesting marketing programs:
• First, it has a 130,000 square foot museum to bolster
Finance Objectives:
• The main financial objective is to increase efficiency of operations
by:
• Consolidating suppliers, eliminating excess capacity, increasing
asset utilization, reducing administrative costs, and exiting
noncore businesses.
• As of year-end 2011, the company hasn’t recovered from the 2008
recession. Signs of concern are evident in the number of registrations
in the US and in Europe (the only information provided).
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
the company could repay its current liabilities in the very short-term.
While this indicator improved from 2010 to 2011, it is still far from
1, which is what creditors would want. As presented on Exhibit 6, it is
currently 0.62.
• In terms of profitability, the company’s efforts in consolidating
operations to reduce costs have been paying off. The net profit margin,
Exhibit 6: Selected Financial Ratios
• The activity ratios show consistency with the company’s overall goal of
reducing excess capacity. For instance, the days of inventory remained
low at around 0.11 days, meaning the company is keeping its inventory
at very low levels and basically producing once the orders arrive.
• Conversely, the company’s inventory turnover remains at a five-year
low, at 11.15 times a year. For reference, this ratio was at 16.38 in
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-14
Research and Development Objectives:
• H-D is clearly focused on reducing costs and it’s time-to-market. If
the company achieves these goals, it will be able to meet customer
demands faster all while increasing operating efficiencies.
Operations and Logistics Objectives:
• By the end of 2012, H-D had over 695 full service dealerships in the
United States and seventy-three in Canada, and another 700 full
dealerships in Europe, the Middle East, Asia, and Latin America.
• The availability of full dealerships was considered the best way to
promote sales, as it allowed customers to come into a local shop, test
drive a bike, look at options, and understand their financing options
• One of H-D’s weaknesses from an operational standpoint was its
inability to generate revenue streams from product lines other than
motorcycles.
• Between 2009 and 2014, H-D undertook a number of different
restructuring initiatives with the goal of streamlining operations and
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
the wheels for the company’s products. Instead, the company decided to
source these components through existing suppliers, as more efficient
and cost effective (Research and Markets).
Human Resources Management/Ethical Concerns:
Current HR Management Strategy:
• Objectives:
▪ To provide quality and reliable products Harley-Davidson needs
to retain effective and dedicated employees.
▪ In addition to creating a “customers for life” image they are
• Strategies:
▪ To expand globally, they are establishing new dealers and
distribution centers throughout the world.
▪ Critical to maintain a reputation of diversity and inclusion
in its workforce.
• Performance:
▪ No statistical data provided in regards to workforce
composition.
▪ Restructuring effort during 2010-2011 was due to an excess in
• Diversity:
▪ The company understands to maintain a positive public image it
promotes diversity and is unbiased in any way with regard to
employment of any particular minority groups or causes.
• Work Place Safety:
▪ Harley leverages the same strict work environment safety
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-16
• Human Resource Managers:
Information Systems (IS):
• Current Information Systems Strategy:
• Very little provided as to how Harley utilizes Information
Technology.
• Information Systems utilization evaluation:
• Harley does not appear to utilize very heavily Information Systems
technology as a competitive advantage.
• Statistical analysis does reveal that historically its key
demographic has been a Caucasian middle-age male.
▪ The data has also revealed that this previously profitable
segment will decline with changing demographic desires:
• Safety
• Comfortably
• Performance:
▪ Little information was provided with regard to how Harley’s
competition is using Information Systems, but given that its
two largest competitors (Honda and Kawasaki) are doing fairly
well they will need to find additional ways to differentiate
their brand if they want to continue to be an expensive global
product.
• Information Systems Management:
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
SUMMARY OF INTERNAL FACTORS
• See Appendix B.
I. ANALYSIS OF STRATEGIC FACTORS
A. SITUATIONAL ANALYSIS
• See Appendix C.
B. REVIEW OF MISSION AND OBJECTIVES
• The mission and objectives do not fully align to the strategic factors and
problems. While Harley-Davidson invests in R&D, is committed to
improvement, and has established a strong market presence, the risks posed
by the inability to reach a younger market combined with a steep price,
put the future financial health of the company in jeopardy.
II. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
A. STRATEGIC ALTERNATIVES
• Current Objectives Evaluation
• The following objectives of H-D can be met in the short-term with
the current strategies being implemented:
▪ Quality and reliable products.
• The objectives H-D has established are good goals to have as a
healthy company, but are unsustainable given the underlying
strategies that are so closely tied to their aging demographic.
▪ Middle aged white males with disposable income will
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-18
▪ Merchandising will continue to be profitable, so long as
the brand image (which is directly tied to the core
product) is maintained or evolved in correlation with
current market trends.
▪ R&D is crucial right now for the success of the brand, but
needs to include experimenting with new products to attract
other demographics.
values.
• Alternative Strategy Evaluation:
• Business Strategies
▪ Cost Leadership—Not implemented
• Pros:
• Increase sales globally.
• Slightly increase sales domestically for a
short period.
• Cons:
• Would significantly diminish brand value.
▪ Differentiation—Current strategy
• Pros:
• Maintain brand quality.
• Maintain brand loyalty.
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
• Effective strategy for Harley-Davidson during a
recession because their products are very
discretionary.
• Cons:
• Increased short term costs.
• Can cause companies to over leverage
themselves.
▪ Retrenchment—Most recent strategy
• Pros:
• Allows for poorly performing businesses to
recover.
• Functional Strategies
▪ Marketing strategy:
• Market Development:
• Capture a larger share of an existing market
for current products through market saturation
and market penetration.
• Flexible ability to raise capital to accommodate
business level strategies.
▪ Research and Development strategy
• Different types of R&D
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-20
• Basic.
• Product.
• Process.
• Obtaining the raw materials, parts, and supplies
needed to perform the operations function.
▪ Logistics Strategy:
• Flow of products into and out of the manufacturing
process
▪ Human Resource Management Strategy:
• Types of workforce:
B. RECOMMENDED STRATEGY
• Predicted result of recommendations:
• By differentiating its products to new demographics, using its
core competencies as a quality iconic American brand sold in an
extensive international network, Harley-Davidson should be in a
good position to grow their market share with increased sales and
profit.
• Harley-Davidson needs to grow in the short-term by holding its
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
• Harley-Davidson should expand in international markets interested
in the “Rebel Lifestyle”
▪ While the baby boomers are aging, other international
• Business level:
▪ Short-Term—Differentiation:
• Switching to low-cost at this time would put them
into a highly competitive market that they do not
currently have the infrastructure to compete.
▪ Long-Term—Differentiation:
▪ Long-Term—Growth:
• Maintain an emphasis on quality and product
improvements.
• Increased expenditures on R&D, in conjunction with
global dealer network expansion, should increase
market share for demographic efficient products.
• Function level—Marketing Strategy:
• International growth is difficult to do with a
differentiation strategy based in a strong economic
market.
• Not all markets have the discretionary funds to
purchase most of Harley-Davidson’s core
products.
CASE 9
HARLEY DAVIDSON: AN OVERRELIANCE ON AGING BABY BOOMERS
9-22
• Lower income markets do have a desire for price
efficient products if the quality can
compensate for the higher price.
III. IMPLEMENTATION
In order to execute on the strategy recommendations above, the following
programs should be leveraged:
• Surveying & Statistical Analysis (data science)—surveys of domestic and
international markets should be done to understand where to invest
(territory optimization) and what products to create—where is the
market going.
• Based on the survey and data analysis Harley-Davidson should repurpose
its marketing spend—proportionally to meet short & long-term
objectives.
• If the analysis performed above indicates internal innovation and
should be implemented.
• If the company plans to change its mission and objective down the road,
a Corporate Culture transformation needs to take place.
• HR needs to target young, hungry, driven, and innovative
employees to help rebrand the company to the market of the
future—evolving the culture, consistent with the market, will
help Harley-Davidson survive.
IV. EVALUATION AND CONTROL
• Control measures to enforce conformance with strategic plan:
elaborate on how Harley intends to incentivize its workforce.
