EXECUTIVE SUMMARY:

This report examines the Harley-Davidson phenomenon. From near bankruptcy to double-digit growth every year, Harley-Davidson has something working for them. That something is called "strategic planning and development." With the growing global economy, companies are looking for ways to improve their market share. Many excellent firms have learned how to beat their competitors through the implementation of new management, marketing, and/or manufacturing techniques. Harley-Davidson is one of those excellent companies whom have challenged traditional ideas. This report will identify those strategies that have worked and brought the company and its shareholders success each year. Harley-Davidson Motor Company based in Milwaukee and Eagelmark Financial Services Inc. based in Chicago, Illinois. These are strategic business units and they are managed separately based on the fundamental differences in their operations, products and services. In addition, there are nearly 1,500 dealerships worldwide. Harley's commitment toward continuous improvement is exemplified in the supplemental financial statements. Harley's strategic objective is to continue to provide safe, high technology heavyweight bikes and keep customer satisfaction at high levels. This quality visions more than doubled HarleyDavidson's market share and increased its brand loyalty. Harley-Davidson's products include: motorcycles, parts & accessories along with financing services. Three main geographic markets comprise the bulk of motorcycle sales: North America, Asia and Europe.

HARLEY DAVIDSON

We fulfill dreams through the experience 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 Harley-Davidson Inc. is a company that has survived through the years having to face different problems such as internationalization, foreign competence and financial problems. But during the 90's Harley-Davidson Inc. has been able to use its outstanding products and strong brand name to rebuild itself as a flexible and modern company able to compete against bigger makers and succeed. Harley-Davidson Inc. proudly produces high quality, unique style heavyweight motorbikes and is the reference point in its segment. Harley-Davidson Inc. also commercializes parts, accessories and financial services to complement its main production line Motorcycles.

Company History
Harley-Davidson Motorcycle Company was established in 1903 by William Harley and Walter, William, and Arthur Davidson, who built their first three motorcycles in a shed in Milwaukee. During World War I, the demand for United States motorcycles overseas grew tremendously. As a result, Harley-Davidson became a leader in innovative engineering in the 1920's. With the introduction of the front brake and "teardrop" gas tanks, Harley was quickly developing its mystic appearance. The industry, which was thriving after World War I, was diminishing quickly as a result of the Great Depression. As one of only two remaining motorcycle companies, Harley-Davidson survived because of exports and sales to the police and military. After the war, Harley went from producing military to recreational bikes. By 1953, HarleyDavidson was the last remaining major motorcycle manufacturer in the US.

Harley-Davidson was taken over by the American Machine and Foundry (AMF) in 1969. AMF put the company up for sale in the late 1970's due to a gross reduction in sales. The reduction in sales was representative of a poor level of quality in the Harley bike compared to their Japanese counterpart. In 1981, thirteen members of the Harley-Davidson management team purchased the company from AMF in a leveraged buy-out. But, within the first year, overall demand for motorcycles dropped dramatically and Harley's share of this market also continued to drop. This even greater reduction in sales for Harley resulted in a large inventory of unsold products. Harley was aware they would no longer be able to

continue their business at their current production level and operating cost. Hours away from bankruptcy in 1985, CEO convinced lenders to accept a restructuring plan. Using management principles adopted from the Japanese, new marketing strategies, and manufacturing techniques, Harley improved quality and began the long battle to regain its market share. Today Harley-Davidson Inc., an employer of 9000 workers, consists of Harley-Davidson Motor Company based in Milwaukee and Eagelmark Financial Services Inc. based in Chicago, Illinois.

OBJECTIVES OF THE COMPANY

The company was started by Davidson with the mission of leading in the industry of motorcycle with the invention of new technologies and features and wants to retain a good brand name in the costumer s perception. The company s objective is not only to produce the bike but make and repairing of related equipments. Following are the main objectives of the company. y Primary objective is to design, manufacture and sale premium motorcycles for the heavy weight market. Good relation with suppliers to increase the quality in order to reduce costumer s complain. With the objective of make changes in the entire product line management, for this purpose company has introduced a system of company aided design. Providing motorcycle experience that no other brand can provide. Increase profitability by reducing the cost of transportation vehicles. Wants to grip and built in the market especially for sleeker and fast riders.

y y y

HARLEYS STRATEGIES

MANAGEMENT

Although Harley was very profitable during World War I and World War II, this status quickly changed during the 1970's. After the leveraged buy-out, Harley's new owners realized that in order to make the necessary improvements, they had to determine what went wrong. After careful analysis, the management team developed the following list of practices which were main contributors to the problems previously experienced:
y y y y

Corporate management focused mostly on short term returns. Management did not listen to its employees or give them responsibility for the quality of what they made. High break-even point that left the company vulnerable to unpredictable market fluctuations. Management that woke up too late to the threat of foreign competition because of the "it can't happen here" syndrome.

As with anything in life, recognizing the problems to any given situation is only half the battle. The development of methods for improvements and gaining company wide support for implementation was the key. CONTINUOUS IMPROVEMMENT IN DEVELOPING MUTUALLY BENEFICIAL RELATIONSHIP WITH STAKEHOLDERS Harley-Davidson, Inc. is an action-oriented, international company, a leader in its commitment to continuously improve its mutually beneficial relationships with stakeholders. They believe the key to success is to balance stakeholders' interests through the empowerment of all employees to focus on value-added activities EMPLOYEE INVOLVEMENT: Harley-Davidson continuous improvement demands involvement from employees. Management's dilemma was how to align employee motivation with company goals. Harley-Davidson's involve all employees to take part in a gain-sharing program and are paid cash incentives for attaining and maintaining quality, profitability, and product delivery goals. MANAGEMENT INVOVLEMENT: Management through its words and actions must demonstrate continuous improvement of quality and efficiency is a way of life, not just another "program". Management must be firmly committed to the people-building philosophy - the belief that employees are thinking, rational human beings and therefore should be encouraged to develop and grow. At Harley-Davidson, they believe being a leader in business includes contributing to the betterment of society. They support community causes as a corporation, and they encourage employees to get involved as donors or volunteers. Charitable contributors are investments in the quality of life, benefiting all their stakeholders: customers, employees,

suppliers, shareholders, government, and the community at large.

INVESTMENT IN RESEARCH AND DEVELOPMENT: Harley Davidson invested in research and development. Management purchased a ComputerAided Design system that allowed the company to make changes in the entire product line and still maintain its traditional styling. This has enable the company to had a quick payoff in that the breakeven point went from 53000 motorcycles in 1982 to 35000 in 1986. RAW MATERIAL QUALITY IMPROVEMENT STRATEGY: Harley was loosing all of its business to Japanese competitors. Harley was unsuccessful at making a reliable, quality product. After going public in 1981 and losing the financial backing of AMF, Harley was forced to make a change. Harley could no longer improve quality through expensive technology. They adopted MATERIAL AS NEEDED (MAN) system to reduce inventories and stabilize the production schedule. This has led to precise production schedule for each month, allowing only a 10% variance.

Harley-Davidson enjoyed a monopoly in the motorcycle industry for many decades. In the 1970's, Japanese manufacturers flooded the market with high quality, low priced bikes. Harley-Davidson could not compete on price against the Japanese motorcycle producers, so it had to establish other market values and improve quality. Harley Davidson has chosen

MARKET DEVELOPMENT: During 1993, the company acquired a 49% interest in Buell Motorcycle Company (a manufacturer of sports/ performance motorcycle).This investment offered the company to enter into select niches within the performance motorcycle market. In 1995, the company acquired all of the common stock of a company in which it was having 49% interest since 1993. RETRENCHMENT STRATEGY

In 1996, Company announces to discontinue its TRANSPORTATION VEHICLE SEGMENT in order to concentrate on its core motorcycle business; the company completed the sale of the segment for an aggregate sale price of approximately $105million. APPLIED JAPANESE KIERTSU STRATEGY In 1997, Garry Berryman (VP of material management/ product cost at Honda) found the supply-chain management neglected. He studied the Japanese kiertsu (Huge vertically integrated companies that foster deep, trusting relationship with suppliers) and applied the same strategic alliances with Harley s top suppliers, brought them into the design and planning process with the help of new technology and the internet. PRODUCT DEVELPOMENT & MARKET DEVELOPMENT STRATEGY The product strategy is any decision that helps the company continues to develop new products around its signature in the market as such. Harley Davidson introduction of the V-Rod in 2001, was the need to create a bike that would appeal to a younger demographic and attain a greater market share for the company. From 2000 TO 2006, the company has introduces new motorcycles by the name SOFTAIL , SPORTSTER , VRSCA V-ROD , DYNA to attract two market females & aging baby boomers. MARKET EXPANSION STRATEGY Harley Davidson moved into new geographical areas, the first dealership was opened in mainland China. Harley Davidson international market includes Europe/Africa, Asia, and Canada.

PROMOTION STRATEGY The Harley-Davidson Corporation has found multiple ways to implement its promotion strategy. HD's primary promotional tool since 1983 has been the HOG; the HOG advertising campaign has been successful for decades. Harley Davidson had licensed the production and sales of broad range of consumer items, including T-shirts, jewelry, small leather goods also uses another strong promotional campaign through its cafes, located in most dealerships. Haley Davidson has also developed an interactive website (www.harley-davidson.com). The website gives the company the chance to expand its operations online.

In an effort to grow and recognize the importance of female riders to Harley Davidson, the company partnered with JANE MAGAZINE in 2005, in contest called the Spirit of Freedom Contest to recognize women who overcome fears and other obstacles to become Harley riders.

PRODUCT DIVERSIFICATION Harley Davidson Company entered into new segment i.e. Harley Davidson Financial Services HDFS, operating under the trade name Harley-Davidson Credit providing wholesale financial services to Harley Davidson and Buell dealers and retail financing to consumers. HarleyDavidson Credit, Eagelmark's largest division provides wholesale financing and insurance programs, including motorcycle floor-planning, parts and accessories trade acceptance and commercial insurance brokerage to Harley-Davidson's US, Canada, & Europe dealer network.

ENVIRONMENT OF THE COMPANY

ECONOMICAL IMPACT Harley Davidson has faced positive economical situation as because of the favorable condition company got the opportunities as aligned below; 1.Double digit growth in international dealer network during 2007 2. Planned opening of dealership in S. Africa 3. Addition of Buell motorcycles to Harley Davidson dealerships

However, one negative economical factor was there to hit the Harley Davidson company i.e. 1.Pending Recession

TECHNOLOGICAL IMPACT Harley Davidson has adopted the modern technology in order to compete in the market which has enhanced the company strength by giving defensive attribute i.e. 1.Material As Needed (MAN)

Harley has also gained the opportunity of interacting with its customer more effectively and of increasing market share by creating website given below; www.harley-davidson.com in 2001.

POLITICAL/LEGAL IMPACT Federal, state, and local authorities have various environment control requirements relating to air, water and noise pollution that affect the business and operations. The motorcycles are subject to certification by the U.S. Environmental Protection Agency (EPA) and as a manufacturer of motorcycle products, are subject to the National Traffic and Motor Vehicle Safety ACT, Which are administered by the National Highway Traffic Safety Administration (NHTSA). So, Harley Davidson endeavors to ensure that its facilities and products comply with all applicable environmental regulations and standards. SOCIO-CULTURAL IMPACT RIDER SAFETY AND TRAINING As considering the 40% riders fatalities in 2000, up from 14% in 1990. Harley Davidson launched an instruction program called Rider s Edge, which teaches the skills necessary to ride a motorcycle.

COMPITITIVE INTENSITY
PORTERS FIVE FORCES MODEL

From the very starting when the company came into existence Harley Davidson was trying to improve his motorcycle and equipment in order to compete in the market by making new strategies and revise the old one. Threat of Internal Rivalry (High): Competition Motorcycle manufacturers continue to improve designs and provide a competitive market for Harley Davidson to compete for new consumers. There were four major competitors, In addition to Harley Davidson, the other three are Yamaha, Honda and Suzuki, and all were Japanese Companies. Threat of New Entrant (Low): Entry barrier is very high in this segment, because this sector require large capital investment and the economies of scale is low in this segment, that is why to compete or gaining market share will be difficult for new entrants. Threat of Substitute Product (High): Harley-Davidson motorcycles are a luxury vehicle, so that there are only a few close substitutes for heavy weight motorcycles that could seriously affect the market. Honda is a big competitor of motorcycles from small and large cruising and touring bikes. Bargaining Power of Buyers (High): With many different models of Harley's ranging from $6,695-$20,695 and 8 models of Buell Bikes from $4,695-$11,995, consumers have many options of finding the bike that meets their needs while staying in their price range Bargaining Power of Supplier (Low): H a r l e y - D a v i d s o n h a s a w i d e s p a n o f s u p p l i e r s , s o t h a t i f o n e supplier attempted to increase the price, they can easily switch to the alternate suppliers without any problem in production

EXTERNAL FACTOR ANALYSIS MATRIX (EFA)

Strategic Alternatives and Recommended Strategy 1. Stability Strategy: Analyze the effects the recession will have on the company to react accordingly.

a) Pros: Acknowledgment of areas that are weak and need improvement. The profit strategy would not beneficial it only masks the issues instead of confronting them. b) Cons: Strong Competition from competitors that are larger, established, and more diversified. 2. Growth Strategy: Horizontal growth strategy; concentric diversification, strategic alliance, and joint ventures. Target new market segments by developing products and services for females and younger bikers both domestically and internationally.

a) Pros: New markets would help increase customer base, brand loyalty, and profitability.

b) Cons: The new market segments may not be able to afford the products and services offered. Strategic alliances and joint ventures may result in loss of control over operations, conflicts, and higher risks. 3).Retrenchment Strategy: Turnaround strategy; close down unprofitable foreign plants and consolidate operations.

a) Pros: Allows for concentration on business segments and plants that are profitable. Prevents further losses. b) Cons: Hinders growth

Recommend alternative #2: This is growth for Harley-Davidson. The current customers are mainly comprised of the Baby Boomers. Harley-Davidson Inc. may benefit from recruiting younger customers to possibly build lifetime customer loyalty that can be passed down to younger generations. Women are also a great market segment to target because research shows that the number of female riders has

risen significantly over the past few years. Concentric diversification, strategic alliances and joint ventures enable entry into foreign markets, knowledge of local conditions, sharing of costs, resources, and assets. Although, the company is facing a recession the costs of HarleyDavidson products and services should not be reduced, but rather competitively priced so that quality is not sacrificed

BIBLIOGRAPHY:

AMF: American Machine Foundry MAN: Material as needed. Parts and raw materials are purchased and built only when as required. This dramatically lowers production & storage costs and improves quality. H.O.G: Harley Owners Group, Created in 1983 and was begun as a way to communicate with the companys end users, and quickly grew into worlds largest motorcycle club. BRAND: Brand is a name, term, symbol or design or a combination of them intended to identify the goods and services of the seller or a group of sellers and to differentiate them from the competition.