I. Current Situation Dillon Shepley

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I. Current SituationDillon ShepleyCurrent Performance

Arose from near demise as a company in 1985 back to the top of the motorcycle industry but are now being threatened by the current recession and have seen a slowdown in sales and stock price growth in 2007.

Opening a museum in 2008

Facing a challenge of growing 7%-9%

I. Current SituationDillon ShepleyStrategic Posture

1. Mission

We fulfill dreams inspired by the many roads of the world by providing extraordinary motorcycles and customer experiences. We fuel the passion for freedom in our customers to express their own individuality.

Design, manufacture, and sell premium motorcycles for the heavyweight market

I. Current SituationDillon ShepleyStrategic Posture2. Objectives

Respond to market changes Recruit riders of the younger generations. Recruit women riders. Have more say in the design and planning process. Grow both their HOG and Buell Riders Adventure Group (BRAG) organizations Utilize E-Commerce to increase sales Survive the recession Stay on top of the heavyweight motorcycle market. Increase safety awareness


3. Strategies

Acquired Buell Motorcycle Company in 1993. Acquired Eaglemark Financial services to produce revenues from customer credit. Internal makeover of the company Use technology to cut back on communication times and administrative trivia. Introduce bikes that appeal to younger generations and international markets. Introduced a new beginner riders course aimed at the first time Harley owner and rider. Introduced 17 year old Jennifer Snyder as the newest member of the Harley Davidson racing team. Partnered with Jane magazine in 2005 Held Harley Owners Group rallies (HOG)


4. Policies

Maintain the quality Harley-Davidson image. Traditional styling Design simplicity Durability Ease of service Evolutionary change

II. Strategic ManagersJayson BrayallBoard of Directors

1. A substantial majority of the Directors on the Board (9 of 11) are independent. a) Stock rose 23,000% since going public (1986-2006) Core business - resonates w/ motor heads & suits Graying of its prime sector (med age = 47) Shifting & tuning focus younger/sports world riders World expansion = XX digit growth, weakening N. American Ops Grow brand in Latin America, Asia (India/China) & EU.


1. A substantial majority of the Directors on the Board (9 of 11) are independent. b)

Stock symbol = HOG Director(Non mgt) AN retainer of $100K, at least to be paid in common stock Encourages SR Mgmt to interact w/ the Directors Audit , HR, $Comp & Nominating & Corp Governance Cmtes = Independents Furthering steps for compliance to enviro- emissions, noise & safety stnds- which positions it better for EU and Japanese mkts


1. A substantial majority of the Directors on the Board (9 of 11) are independent. c)

Specialization & Experience (Core & Expansion) Technical Engineering Transportation & Logistics (SCM) Dealer relationships Recapitalization / Private to Public M&A / Leveraged Buy-Outs / Corp Law Financial e-Busn, IT, TeleCom, Media International Mkting & Merchandizing

II. Strategic ManagersJayson BrayallTop Management 50% of all Harley employees ride the brand CEO & Boards direction to Mgmt- intimately know customers design / offer great products operational excellence mfring & Supply Chain Mgmt (SCM) Direction to strengthen credit division (including franchising (wholesale & retail) income stream Top 100 Global Brands and in Fortunes Most Admired Companies and Forbes Company of the Year Mkt confidence buying back stock during a multi-year repurchase effort valued over $200M.

II. Strategic ManagersJayson BrayallTop Management

Mgmt Accused of stock manipulation- forcing dealers to accept stock(book corp sales) US dealers, 80% sold Harleys exclusively - burdened to shoulder costs until sold more bikes 2004- retiring CEO made $40M w/ pay & stock options Several class action lawsuits filed (06) claiming Board & Mgmt fraud Main Production York, PA- (07) full contract strike

Management Makeup

Next to no info published regarding experience / backgrounds or $compensation for the Mgmt team

Harleys By-Laws- Director & Mgmt Pay = cash & stocks; restricted, deferred & nonqualified options

Exhibit #5AJayson BrayallHarley-Davidson_Exhibit 5A(In thousands, except per-share amnts) 20082007Income statement data:Net revenue 5,594,3075,726,848 Cost of goods sold 3,663,4883,612,748Gross profit 1,930,8192,114,100Financial services income 376,970416,196 Financial services expense 294,205204,027Operating income from financial services 82,765212,169 Selling, administrative and engineering expense 984,560900,708Income from operations 1,029,0241,425,561Investment income 9,49522,258 Interest expense 4,5420Income before provision for income taxes 1,033,9771,447,819 Provision for income taxes 379,259513,976Net income 654,718933,843Weighted-average common shares:Basic 234,225249,205Diluted 234,477249,882Earnings per common share:(in dollars)2.803.75Basic 2.793.74Diluted 1.291.06Dividends paid per common share 1.291.06

Exhibit #5BJayson BrayallHarley-Davidson_Exhibit 5B200820072006(In thousands, except per-share amnts) Balance sheet data:Working capital 2,774,1241,562,2351,954,956Finance receivables held for sale 2,443,965781,280547,106Finance receivables held for investment, net 2,195,5632,420,3272,280,217Total assets 7,828,6255,656,6065,532,150Current debt 1,738,6491,119,955832,491Long-term debt 2,176,238980,000870,000Total debt 3,914,8872,099,9551,702,491Shareholder equity 2,115,6032,375,4912,756,737Number of shareholders of record 89,29890,74888,995Exhibit #5CJayson BrayallHarley-Davidson_Exhibit 5CAssets, Depreciation & Capital ExpendituresYr Ending Dec 31 (Ammount In thousands)Motorcycles & Related ProductsFinacial Services2007Identifiable Assets 1,804,202 3,447,075 Depreciation and Amortization197,655 6,517 Net Capital Expenditures 232,139 9,974 2006Identifiable Assets1,683,724 2,951,896 Depreciation and Amortization205,954 7,815 Net Capital Expenditures 209,055 10,547 2005Identifiable Assets2,845,802 2,363,235 Depreciation and Amortization198,833 6,872 Net Capital Expenditures 188,078 10,311

III. External EnvironmentJeff AustinNatural Physical Environment: Sustainability Issues

Harley has been very wary of raw material usage and purchase recently. The biggest concern for Harley when considering environmental issues will be seasonal changes.

Societal Environment

1. Economic

The current recession will be a continual threat (T) Expansion into China (O) Growth in target rider market (O) Restructuring cost could exceed $110 million (T) Many wholesaler and retailer compete to carry the Harley name (O)

III. External EnvironmentJeff AustinSocietal Environment

2. Technological

Research and development of new motorcycles to appeal to different rider groups (O) Development of faster, sleeker motorcycles to appeal to younger market (O) Redesigned manufacturing process geared toward cost reduction and flexibility to market changes (O) R&D bring professional and employees together to consider redesign and product creation (O) R&D spent over $163 million (T) Internet sales available to public market (O)

III. External EnvironmentJeff AustinSocietal Environment

3. Political/Legal

Regulations concerned with air, water, and noise pollution (T) Product recall to ensure consumer safety (T) Must rely on independent dealers for sales (T)

4. Socio Cultural

Restructuring will close numerous plants down (T)(O) Reaching out to younger generation and female riders (O) Offer for new riders to participate in Riders Edge program (O) New product offerings for non-riding public (O) Sponsorship of local events and races (O)

III. External EnvironmentJeff AustinTask Environment

Threat of new entrants Low - Harley has the history to repel any new production or competitor Bargaining powers of buyers Medium They are not the only motorcycle dealer, one bad experience from a consumer may send them looking toward Honda or Kawasaki. Threat of substitute products or service Low No imitators known at this time Bargaining power of suppliers Medium Rivalry among competing firms High Previously mentioned competitors jockey for market groups targeted by Harley Power of unions, government, special interest groups Low

III. External EnvironmentJeff AustinD. Summary of External FactorsExternal FactorsWeightRatingWeighted ScoreCommentsOpportunitiesExpansion into China0.24.20.84Huge opportunity in expanding westernized marketMarketing to different rider market0.130.3Chance to sell to younger generation and femalesRedesign of manufactoring process0.052.20.11Eliminates unnecassary plantsNew product offerings0.053.30.165clothing lines are big sellersProduct development0.1530.45sportier bikes attract different marketsThreatsCurrent recession0.154.30.645sales could be affected due to lack of financesRegulations0.052.80.14Air,emissions, and noise pollution a factorRestructuring of operations0.052.70.135may lose local vendors/stakeholdersR&D expenses0.053.30.165will extreme R&D expenses jeopardize revenueProduct recall0.053.70.185could blemish public image Independent dealers0.12.60.26may affect pricing and sales incomeTotals13.395

IV. Internal EnvironmentJeff TaylorCorporate Structure

Harley-Davidson has an 11 member Board of Directors consisting of 9 non-employee and 2 employee members. They serve in three-year staggered terms. The president and CEO, James C. Ziemer has set three constants for success that he expects his employees to follow closely. There is no information provided describing the decision making process or the timeline for major decisions to be made.

Corporate Culture

Management pushes the employees to see what the customers see so they make the employees go through a dealer to purchase their bikes if they buy them. 50% of the employees ride Harleys, so this accounts for a great deal of training. The employees are offered opportunities to obtain union representation to make sure they are taken care of for their hard work. The CEO implements 3 main objectives for success: Passion for the business, sense of purpose, and operational excellence.

IV. Internal EnvironmentJeff TaylorCorporate Resources

1. Marketing

Most marketing efforts are divided between dealer promotions, customer events, magazine and mail advertising, public relations, cooperative programs with dealers, and national television ads. Harley-Davidson stays involved with all major motorcycle consumer shows and rallies, and also sponsors racing activities and different promotional events.

2. Finance

Since Harley went public, its shares have risen over 23,000%. As of February 2008, there are over 90,000 shareholders of Harley-Davidson common stock. Due to the down economy in 2007, the company experienced their first declines in over 20 years. Motorcycle revenue dropped 1.27% and total revenue fell 0.69%. The biggest decline during this time was a 10.74% drop in operating income. Between 2003 and 2006, net income rose grew by over 30%.


3. Research and Development

Harley strongly believes that research and development is a factor in keeping them in the front of the market for custom and touring motorcycles, and ready to develop products for the performance segment. They have a Product Development Center (PDC) that brings employees from styling, purchasing, and manufacturing together with regulatory professionals, and supplier representatives to create a well rounded process development team. Over the span of 2005 to 2007, research and development expenses averaged over $180.5 million a year.


4. Operations and Logistics Research and development leading to the company entering the market for both female and younger riders helped them stay at the head of the motorcycling industry. Harley sells its products at wholesale to a group of around 684 independently-owned full-service Harley-Davidson dealerships.

5. Human Resources Management

The relationships with unions and employees are typically very good. As of the end of 2007, there are 9,000 employees working for the company. The majority of these employees are unionized and have representation from either the Paper Allied-Industrial Chemical and Energy Workers International Union, or the International Association of Machinist and Aerospace Workers.


6. Information Technology

IT systems are not mentioned in this case. Garry Berryman, an intense procurement expert, brought Harleys top suppliers into the design and planning process because he felt that new technology and the Internet would make it very easy to form bonds this way.

Exhibit #2Jeff TaylorTable 5-2Internal Factor Analysis SummaryInternal FactorsWeightRatingWeighted ScoreCommentsStrengths:Employee unions0.0530.15Employee representationMale and female customers of all ages0.24.50.9Broad customer baseRider training and safety programs0.140.4Offered by HarleyForeign operations0.154.20.63Quickly growingHarley Owners Group (H.O.G.)0.153.90.59Largest motorcycle club on EarthWeaknesses:Image of who rides Harleys0.154.20.63Negative stigma assosiated with brandPerformance market0.051.20.06Not involved enoughExpensive0.13.10.31No options for lower-middle classAdvertising0.051.90.1Don't reach put to potential ridersTotal scores13.77

V. Analysis of Strategic FactorsBenjamin HowardSituational Analysis (SWOT)

1. Strengths

Net income of 2003 was $760mn, its more than 30% as compared to the previous year. The standard and performance segments of Harley Davidson make up 70% of the European heavy weight motorcycle market Harley-Davidson operates in two segments: Harley-Davidson motorcycles & related products and HDFS (Harley-Davidson Financial Services). Harley-Davidson is the only major American heavyweight motorcycle manufacturer. Strong brand name. The HOG (Harley Owners Group), which have a 7,50,000 members world wide is the industrys largest company sponsored motorcycle enthusiast organization. Buell Riders Adventure Group (BRAG) was also formed recent Customization of the bikes, this is Harley-Davidsons major revenue maker. Harley-Davidson have a good marketing division and its divided as dealer promotions, customer events, magazine and direct-mail advertising, and public relations.


2. Weaknesses

High price Harley-Davidson has problems in gaining more market share in some European countries (Thats one of the main markets for Heavyweight motorcycles outside U.S). They didnt yet start its sales in India, one of the biggest markets. Required production is not met, analyzing the future of Heavyweight motorcycle market


3. Opportunities

The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world. Women and younger riders are increasing becoming interested in bikes The international heavy weight market is growing and is now larger than the U. S. heavyweight market Market share increasing in Europe and Asia for the last two years Increasing demand in US markets for bikes Customers value quality parts


3. Threats

Harleys ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years Harleys average buying age is 42 years old and increasing The European Unions motorcycles noise standards are more stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified Environmental protection laws Buell division needs to continue to produce a quality motorcycle under Harleys brand name.

V. Analysis of Strategic FactorsBenjamin HowardReview of Current Mission and Objectives

Mission Statement

We fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles, branded products and services in selected market segments

Objective

To be branded as the best motorcycle in the world.

Exhibit #4Benjamin HowardLiquidity Ratio2008Current1.3(Current Assets/Current Liabilities)Quick0.401(current Assets-inventory/current liabilities)Leverage RatioDebt to Total Assets42.30%(Total Debt/Total Assets)Debt To Equity73%(Total Debt/Total Assets)Activity RatiosInventory Turnover-sales8.74%(Net Sales/Inventory)Average collection (days)55(Inventory/COGS divided by 365)Fixed Asset Turnover3.77%(Sales/Fixed Asset)Total Asset Turnover1.87%(sales/total asset)Profitability RatiosGross Profit Margin51.7%

(Sales-COGS/Net Sales)Net Operating Margin10.70%(Net Profit After taxes/Net Sales)Profit Margin on Sales35.08%1-(COGS/Sales)Return on Total Assets14.27%(Net Profit After Taxes/Total Assets)Return on Equity24.92%(Net Profit After taxes/Shareholders equity)

VI. Strategic AlternativesJeff AustinStrategic Alternatives

Market developmentMarketing strategyProduct development

Alternatives and Pros and Cons

Operations strategy (This is a win lose situation for all involved)Purchasing strategy needs to be considered when selling and using raw materials. Logistics strategy can also be seen when discussing the consolidation of plants and distributors.

VI. Recommended StrategyBenjamin HowardRecommended Strategy

Design to continuously improve product quality, increase productivity, reduce costs and increase flexibility to respond to changes in the marketplace This market naturally wants something different from what the older generation rode. They are looking for more cool and sleek sport bikes The Company continues to establish and reinforce long-term, mutually beneficial relationships with its suppliers. Through these collaborative relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives The Company must continue to be successful in promoting motorcycling to customers new to the sport of motorcycling including women, younger riders and more ethnically diverse riders Harley has adopted several new marketing objectives to target the younger market with its new product line: expand its current market, diversify its product line, and modify its marketing mix to target a younger demographic

VII. ImplementationJayson Brayall Old facilities v- efficient Asian competitor

Optimize production facilities & SCM

Strikes & reinventing labor interactions

Graying of its prime UW sector (med age = 47)

Retuning focus young/sports riders- +up

World expansion = XX dig growth, weak N. American Ops- Grow brand in Latin America, Asia (India/China) & EU

VIII. Evaluation and ControlJeff Taylor Sales information is tracked to the specific dealer where the product was sold. Harley is able to record the age, gender, and even the household income of their buyers after most purchases.

The company identifies its strengths, weaknesses, opportunities and threats by carefully evaluating their customer feedback, monitoring the competition, and using an extensive research and development group.

Devising a system to suggest the most prominent locations for dealerships based on previously gathered information would be an effective way for Harley Davidson to position their company most efficiently.

I. Current Situation Dillon Shepley

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