Strategic Analysis of Harley Davidson
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Transcript of Strategic Analysis of Harley Davidson
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Team 7Gabriella Kawilarang, MinJae Park, Kripa Shroff, Leanne Tremblay
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Background
• Founded in Milwaukee in 1901
• NYSE: HOG• Manufacturer of high
end motorcycles• Vision: “Fulfilling dreams
of personal freedom”Source: Harley Davidson Twitter
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Mission
• Create superior value for shareholders • 52 week range from $49.15 to $74.13• Four pillars: Continuous improvement,
leadership development, sustainability, and growth
Source: Yahoo Finance
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Business Segments
• Motorcycles and Related Products: 89% of Total Revenue
• Financial Services: 11% of Total Revenue
Source: ThompsonOne
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Industry
• Leading in the motorcycle, bike and parts manufacturing industry
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Direct Motorcycle Competitors
2013 Revenue from US Market (Millions)
• Harley: USD 4,189• BMW: USD 2,092• Honda: USD 1,099• Yamaha: USD 491• Polaris: USD 220
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Major Target Market
Caucasian Male 35+
Source: Harley Davidson Twitter
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International Markets
• 2013: 29% of revenues from International Sales
• Europe: 13%• “Others”: 4%• Canada and Japan:
4%• Australia: 3%
Source: ThompsonOne
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How to Win in this Industry
• Create the RIGHT EXPERIENCE• Older Caucasian Males
– Membership in an exclusive club– Feeling roaring engine– High Quality Bike– Exclusive Look– Psychologically benefiting from premium brand status
Create the … right experience for the target market
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Financial StructureRevenue Growth Rate is Declining
Source: Bloomberg
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Projected)Revenue 5320.5 5673.8 6185.6 6143 5955.4 4781.9 4859.3 5311.7 5580.5 5899.9 6054.7Cogs 3232.3 3441.7 3742 3816.8 3784 3184.6 3114.8 3352.8 3440.6 3621.4 3748.2Operating Income 1361.5 2232.1 1597.2 1425.6 1071.6 448.8 724.1 898 1028.7 1151.6 1211.2Net Income 889.8 959.6 1043.2 933.8 654.7 -55.1 146.5 599.1 623.9 734 775.8Rev g 8.50% 6.64% 9.02% -0.69% -3.05% -19.70% 1.62% 9.31% 5.06% 5.72% 2.62%Cog g 5.28% 6.48% 8.73% 2.00% -0.86% -15.84% -2.19% 7.64% 2.62% 5.25% 3.50%OI g 18.46% 63.94% -28.44% -10.74% -24.83% -58.12% 61.34% 24.02% 14.55% 11.95% 5.18%NI g 16.94% 7.84% 8.71% -10.49% -29.89% -108.42% -365.88% 308.94% 4.14% 17.65% 5.69%cog/rev 60.75% 60.66% 60.50% 62.13% 63.54% 66.60% 64.10% 63.12% 61.65% 61.38% 61.91%ni/rev 16.72% 16.91% 16.86% 15.20% 10.99% -1.15% 3.01% 11.28% 11.18% 12.44% 12.81%OI/rev 25.59% 39.34% 25.82% 23.21% 17.99% 9.39% 14.90% 16.91% 18.43% 19.52% 20.00%
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Possible Explanations
• Strong competition from BMW• Harley’s focus on psychological
experience• BMW’s focus on products with
cutting edge design• Sleeker & smaller• Faster in acceleration
• Competitor’s marketing budgets are larger• Harley spends only 15% of its
revenue on marketing expenses
Source: BMW Motorcycle Website
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Core Complication
Shrinking target market: AGING BABY BOOMERS GENERATION
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Complications of Aging Baby Boomers
• Baby Boomer Generation is much larger in comparison to subsequent generations
• No obvious replacement segment
Population Size
• 60+• Impede them from riding and buying bikes
Health Issues
• Brand image: “Freedom and Independence”
• Less attractive
Change of Perception
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Expanding Customer Base
Younger Generations Women
International Markets
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Failed Attempts
Younger Generations
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Failed Attempts to Target Younger Generations
• Harley STOPPED reporting the average age of their riders
• The average age of a Harley rider rose from 43.4 years old in 1999 to 49.5 years old in 2014.
Source: Harley-Davidson Website
Qualitative Quantitative
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Dark Custom Lineup
• Customizable Small Bikes• Example: Iron 883
– Small & Customizable– $8000 - 50% Cheaper than
traditional bikes– Attracted young riders and was
the best selling model
Source: Google search of Iron 883
• Weak Value Proposition– Lost to BMW Sport Bikes due to
performance• Weak Execution
– Advertisement features an older, Caucasian men
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Marketing Strategy
• Music Festivals– Musicians Lynyrd Skynyrd &
Dropkick Murphys
• Social Media– Facebook: 6.1 Million Likes– Twitter: 203K Followers– Instagram: 170K Followers
• Older Management StaffSource: Google search of Harley 110th Anniversary Party
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Failed Attempts
Female Market
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Harley’s Female Market Growth
• Decade long strategy
• 10% of sales mix• 62.8% market
share in 2013• 13.1% (2.62%/yr)
market share growth
• 8.2% (1.64%/yr) market share acquired
• 5% (1%/yr) market growth
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833 Low Bike
Slimmer - Smaller Handle Bars - Lighter Weight
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Poor Brand Perception
YIKES…
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Reality of Customer Acquisition
Most women who own a Harley have a significant other who also owns a Harley…
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Female Market Growth
According to the Motorcycle Industry Council, from 2009-2012…
Female motorcycle OPERATORS grew about
30% (10%/yr)
Female motorcycle OWNERS grew 20%(6.6%/yr)
OPERATORS THAT ARE NOT OWNERS ACCOUNT FOR 3.4% POTENTIAL GROWTH!
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Create the Right Experience
Luxury Accessories
for Men
Luxury Accessories for Woman
TRANSLATED
Woman, biologically and culturally, do not desire the same psychological benefits from luxury goods as men.
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The Right Experience By Gender
“Dreams of Personal Freedom”
MEN
WO
MENStrong
Macho
Independent
Sexy
Confident
Empowered
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Failed Attempts
International Market
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Potential Growth in Emerging Markets
• 60% of world population is in the emerging markets
• Booming economy• Growing number of
HNIs (High Net Worth Individuals)
Source: marketsmedia
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Difficulties in International Market
• is complex and costly in ChinaConflicting Market Demand
• 27M motorcycles• 99% are small bikes
(*Small bikes: Engines below 600cc (Harley: 800-1600cc)) Source: motor-bikes.com
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Regulations • Vehicle Registration• Out of 1.74M applicants, only 240,000 accepted• Now decreasing the number to 150,000
• Compulsory Scrap Policy• All bikes must be scrapped after 11 years
• Driving Restriction• Motorcycles restricted on freeways and downtown core
• complex and costly in China
Difficulties in China
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Difficulties in India
• Small Market Share• In India, Harley’s market share is 0.08%
• Large Import Tariffs• The country is imposing large import tariffs
that nearly double the original price
• complex and costly in China
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Core Question
How can Harley Davidson improve their customer base expansion strategies in order to ensure sustainable revenue
growth?
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Solution
Younger Generations
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Possible Solutions
• Steady as She Goes• Expand their “Used
Bike Market”• Enter the Dirt Bike ATV
market• Partner with General
Motors
Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-boomer-demographics/
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Our Optimal Solution
• Manufacture and Introduce customizable, affordable and superior performance bikes.
• Sponsor music bands and festivals that younger generations listen to. For example: One Republic
• Sponsor movies instead of fighting championships
• Transform website to better incorporate social media
Source: Google search of music festival
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Implementation
Costs: Increase spending on R&D & Minimal increase in marketing budget
2016Motorcycle Usage Growth Rate 3.16%Number of Motorcycle users in 2009 (Million) 10.4No of Motorcycle users (Million) 12.53Generation X and Y users to Baby Boomers (2:1) 0.33Generation XY users (Million) 4New Motorcycle Purchase Rate 46%New Motorcycle Purchases (Million) 2Harley Davidson Market Share Growth Rate 3%% of Population purchasing Futuristic Sports Bikes 30%Harley Davidson capturing competitors market 2%Harley Davidson Market Share 58%Total number of people buying Harley (Million) 1.12Lower price of Harley 8,000$ Revenues (Millions) 8,939$
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Solution
Female Market
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Possible Solutions for Women
Macho
Independent
Sexy
Empowered
• Steady as She Goes
• License the Harley Davidson Brand
• Sell a Line of Woman Bikes under a Different Brand Name
• Bring the Leather Jacket Back
• Celebrity Endorsements for the Bike
• Partnership with Fashion Retailers
• Update Advertising Strategy
• Equalize Gender Bias in Human Capital
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Optimal Solutions
Macho
Independent
Sexy
Empowered
• Partnership with Fashion Retailers
• Update Advertising Strategy
• Equalize Gender Bias in Human Capital
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Partnership with MK
Macho
Independent Empowered
• Incorporate their leather and metallic goods in the Harley Davidson bikes and accessories
• Complimentary business relationship
• Leverage loyal customers• “Luxury accessory” brand
association• Valued MK customers receive
“Free Riding Lesson” pass
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Update Advertising Strategy
Macho
Independent
Sexy
Empowered
A New American Legend Is Born…
It’s time to ride
Video that depicts a woman riding her Harley through the “glass ceiling” with the catch phrase “It’s time to ride.”
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Equalize Gender Bias in Human Capital
Macho
Independent
Sexy
Empowered
Recruit women who will be able to connect with their target market
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Implementation
We believe the successful creation of “the right experience” for women riders’ “dreams of personal freedom” will increase their market share and revenues
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Forecasted Market Share
2013 2014 2015 20160.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
62.8000%67.8400%
72.8800%77.9200%
37.20%32.20%
27.12%22.08%
Female Motorcycle Market
Harley Others
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Forecasted Sales Revenue
2013 2014 2015 2016 $380,000,000
$400,000,000
$420,000,000
$440,000,000
$460,000,000
$480,000,000
$500,000,000
$418,900,000
$440,012,560
$462,189,193
$485,483,528
HD Female Motorcycle Revenue
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Solution
International Market
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Possible Solutions
• Steady as She Goes• Pull Out- Harley could stop focusing
on International Markets and should start focusing on the domestic market.
• License- Harley Davidson’s brand to be used by experts in these markets.
• Expand the Product Line of Associated Goods- Expand the product line for leather jackets, boots, and other associated riding goods.
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Optimal Solution
• International division/second headquarter • Harley Davidson should start to centralize the
operations in international markets and focus on issues that are region specific.
• Partnerships with local players • Will not only give Harley a better chance to
increase their market share, but also help them to better understand the market.
• Expand the sales of used-bikes –• Will attract more customers as people in the
International market are more price-sensitive. Source: entrepreneur.com
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Implementation
Estimated Implementation Results• Small bikes• 29M bikes * $500 = $13.8B• 5% market share = $690M
• Used bikes• 37.27M *.54 *2000 = $40B• 5% market share = $2B54% of people who get motorcycles get used bikes
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Competitors
China• Baotian• Lifan• Qingqi• Zongshen• Znen
India• Hero• Moto Corp• Bajaj Auto• TVS Motor• Triumph
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Cumulative Results
2013 2014 2015 20160
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Total Revenue Forecast
Younger Female International Traditional
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Thank You
We will be taking questions at this time
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Possible Solutions
• Steady as She Goes– Target population
would not reach its age until 2035
– Revenues will not increase in the near future
Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-boomer-demographics/
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Possible Solutions
• Expand their “Used Bike Market”– Buy Back Used Harley’s,
service them and sell them– Accompanied Service
Packages– Lower Margins in Service Packages
and Used Bikes
Source: https://answers.yahoo.com/question/index?qid=20120517141007AAorbzJ
-Yahoo Comment
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Possible Solutions
Source: Google search of dirt bike ATV wall paper
• Enter the Dirt Bike ATV market– Similar image– Attracts younger generation– A new source of revenue– Attract more customers to the
store-cross sell– Fiscal 2013 Cash on Hand: 378
days– Already Saturated Market – Loss of focus from their
current product
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Possible Solutions
Source: General Motors Partner
• Partner with General Motors– Attract more customers to the
store-cross sell– American multinational
cooperation– Same brand image of
“freedom”– Harley senior employees are
ex-GM employees– Loss of individual brand image– Possible Conflicts in
workspace