Harley Davidson Strategic Management Case Study

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[. . .] (Nariman, nd)

In May 2009, Keith Wandell became CEO of Harley Davidson following the first decline in revenue since 1984 as well as a decline in shipment of motorcycles. Employees were laid off and amalgamate plants cut capacity. These problems were in the opinion of Wandell to be cyclical in nature. The heavyweight motorcycle segment was the fastest growing world motorcycle market between the years of 1990 and 2007. Harley Davidson is reported to have "consolidated its market leadership" in North America which accounted for approximately fifty percent of bike sales but overseas the story was quite different. The management team at Harley Davidson set out to broaden the market appeal of the product.

Reported as central to the product strategy of Harley Davidson was the idea that "every Harley rider would own a unique, personalized motorcycle as a result of the company offering a wide range of customization opportunities." ( ) However, the reconciliation of product differentiation with scales of economies is reported to have been an ongoing challenge for the Harley Davidson Company. The solution is stated to have been offering "a wide range of customization options while standardizing on key components." ( )

Wandell is reported to have focused on the short-term problems that the company was facing in July 2009 on a conference call and specifically that of a depressed demand and the responses of the company to cost reduction and cutbacks in production. Wandell expressed confidence that Harley would "emerge from the 2008-2009 recession in strong shape." ( ) Wandell was encouraged by the fact that Harley's 2009 sales demonstrating "greater resilience than those of its main competitors -- as a result Harley's share of the U.S. heavyweight market had jumped from 50 to 58%." ( ) It is reported that the longer-term threats were "more troubling." ( )

It is reported that opportunities that Harley Davidson has presented include that the international heavy weight market is larger than the U.S. heavy weight market and it is still growing. Furthermore, the demand for Harley Davidson in Europe is the highest demand in the international market and is representative of the largest world motorcycle market. In addition, interest rates are historically low and women and younger riders are potential customers as their interests in bikes is growing. Threats to Harley Davidson include the fact that the average buying age for a Harley Davidson is the age of 42 years and increasing. Furthermore, the motorcycle noise standards in Europe are tougher than the EPA regulations in the United States. Environmental protection laws are also a consideration that must be addressed and the shifts in buyers needs and the tastes of buyers is also considered as a threat. (External Analysis of Harley Davidson, 2008)

Harley Davidson Third-Quarter 2010 Earnings

The third quarter 2010 earnings of the Harley Davidson company showed that the company is continuing in its progress. The earnings were reported at $93.7 million compared to $56.4 million from the same quarter last year. It is reported that the third quarter earnings were "drive by continued performance improvement at the Company's financial services unit, Harley Davidson Financial Services as the company recorded operating income from financial services of $50.9 million, compared to a loss of $31.5 million in last year's third quarter. (Harley Davidson Company Report, 2010) Wandell is noted to have stated as follows:

"Despite the continued challenges in the economy, we are making solid, steady progress at transforming our business. With our strategic focus on future growth initiatives and continuous improvement, we are positioning Harley-Davidson to succeed at today's volumes, as well as to grow and restore greater profitability longer term. The results we are seeing stem directly from the actions we are taking to restructure the business, driven by the creativity and extraordinary efforts of our entire team. From manufacturing and product development to marketing, international operations, dealer capabilities and across the entire enterprise, we are transforming Harley-Davidson with a focus on delivering unparalleled customer experiences and value." (Harley Davidson Company Report, 2010)

Wandell also stated that the Harley Davidson brand "…has remarkable strength globally. Few products or brands rank as highly in terms of awareness and affinity on the part of customers and non-customers alike. We have continued to gain market share in the U.S. And Europe. Since 2008, we also have been the U.S. leader in new motorcycle sales to young adults for the entire on-road motorcycle category. Going forward, we will continue to build on this brand strength and leadership position." (Harley Davidson Company Report, 2010)

It is reported that Harley Davidson "…is narrowing its guidance for full year 2010 shipments and now expects to ship 207,000 to 212,000 Harley-Davidson motorcycles to dealers, a decrease of approximately five to seven percent from 2009. Prior shipments guidance was 201,000 to 212,000 motorcycles. The Company is also refining its guidance for capital expenditures, which are now expected to be $190 million to $210 million for the full year, compared to prior guidance of $235 million to $255 million. Capital expenditures guidance for 2010 includes $75 million to $90 million to support restructuring activities, a revision from prior guidance of $95 million to $110 million for restructuring activities in 2010. Harley-Davidson continues to expect gross margin to be between 32.5% and 34.0% for the full year." (Harley Davidson Company Report, 2010) The cost estimate has been lowered by Harley Davidson for completion of its restructuring activities stating that they expect to save $150 to $165 million in 2010 form restructuring activities and that the company continues to expect "annual ongoing savings of $290 million to $310 million, beginning in 2013 upon completion of the restructuring activities." (Harley Davidson Company Report, 2010) It is reported that Harley Davidson's ability to meet the targeted expectations is dependent upon the ability of the company to: (1) execute its business strategy and divest certain company assets, (2) effectively execute the Company's restructuring plans within expected costs and timing, (3) successfully achieve with our labor unions flexible and cost-effective agreements to accomplish restructuring goals and long-term competitiveness, (4) manage the risks that our independent dealers may have difficulty obtaining capital, and adjusting to the recession and slowdown in consumer demand, (5) manage supply chain issues, (6) anticipate the level of consumer confidence in the economy, (7) continue to have access to reliable sources of capital funding and adjust to fluctuations in the cost of capital, (8) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (9) continue to realize production efficiencies at its production facilities and manage operating costs including materials, labor and overhead, (10) manage production capacity and production changes, (11) provide products, services and experiences that are successful in the marketplace, (12) develop and implement sales and marketing plans that retain existing retail customers and attract new retail customers in an increasingly competitive marketplace, (13) sell all of its motorcycles and related products and services to its independent dealers, (14) continue to develop the capabilities of its distributor and dealer network, (15) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (16) adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (17) adjust to healthcare inflation and reform, pension reform and tax changes, (18) retain and attract talented employees, (20) detect any issues with our motorcycles or manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation, and (21) implement and manage enterprise-wide information technology solutions and secure data contained in those systems.( Harley Davidson Company Report, 2010)

Summary and Conclusion

This work has examined the historical and financial data for Harley Davidson Company and the initiatives used by Wandell to address the problems that the company has been experiencing. Wandell is doing a fantastic job with the company… [END OF PREVIEW]

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