Jeffrey Thoenen

CISS 479

Drop Box Assignment 1

August 28, 2010

Harley-Davidson, Inc. operates in the Consumer Goods sector, within the Recreational

Vehicle industry, and specifically in the heavyweight motorcycle segment. Harley-Davidson has

two operational segments, motorcycle and financing.

The Motorcycle segment designs, manufactures, and sells at wholesale, primarily

heavyweight (engine displacement of 651+cc) touring, custom and performance motorcycles. It

also produces a line of motorcycle parts, accessories, general merchandise and related services.

Harley-Davidson, which is the only major American motorcycle manufacturer, conducts

business on a global basis, with sales primarily in North America, Europe, Asia/Pacific and Latin

America.

The primary business of the Motorcycles segment is to design and manufacture premium

motorcycles for the heavyweight market and sell them at wholesale. The Company is best known

for its Harley-Davidson motorcycle products. The Company’s worldwide motorcycle sales

generate approximately 80% of the total net revenue in the Motorcycles segment during each of

the years 2008, 2007 and 2006, respectively… Harley-Davidson branded motorcycle products

emphasizes traditional styling, design simplicity, durability and quality. Harley-Davidson has

been a leader in the industry for the past 21 years.

 Harley-Davidson additionally operates a Financial Services segment with facilities in

Carson City, Nevada, Plano, Texas, and European operations in Oxford, England. Harley-

Davidson Financial Services provide wholesale financial services to Harley-Davidson and Buell

dealers and retail financing to consumers. HDFS is financed by operating cash flow, advances,

and loans from Harley-Davidson. HDFS main competition is from banks, credit unions, and

other financial institutions. Its insurance business competition tends to come from other national

insurance carriers along with local and regional markets.

Resources Tangible

 Plant

o Wauwatosa, Wisconsin

o Menomonee Falls, Wisconsin

o Tomahawk, Wisconsin

o York, Pennsylvania

o Kansas City, Missouri

o East Troy Wisconsin

o Manaus, Brazil

o Harley-Davidson Museum

 Finances

o Strong Revenues

o Strong Stock Prices

o Internal Finance Department

 Location
 o United States Dealers

o Europe/Middle East/Africa Dealers

o Asia-Pacific

o Latin America

o Canada

 Human assets

o Board of Directors

o Employees

o Vertical Management

Resources Intangible

 Technology

o Just in Time System

o E-Commerce

o Research and Development

o Patents

o Trademarks

 Culture

o HOG Clubs

o Sponsorships

Capabilities

 Integrated Technologies
  Empowered Employees

 Brand Recognition

 Marketing and Distribution

 Customer Financing

 Dealer Financing

 Streamlined Manufacturing Capabilities

 Collaborative Supplier Relationships

Core Competencies

 Integrated Technologies

 Brand Recognition

 Empowered Employees

 Streamlined Manufacturing Capabilities

Finding of Fact #1: Harley-Davidson is noticing lower sales directly related to the aging

of its core customer base.

HD has targeted the baby boomer generation for years as its base customer. The average

HD owner is 47.3 years old and they have an average household income of $81,300. As the Baby

Boomers age, Harley needs to replace that customer with a new customer base. I believe Harley-

Davidson needs to concentrate its efforts on appealing more towards the 20 and 30 year olds with

social networking marketing and motorcycles that appeal more toward the younger generation.

Harley is known for its heavyweight division motorcycles. HD needs to set up a social

networking site like Facebook or MySpace to attract the younger crowd that utilizes these
popular sites for socializing. HD could attract followers by promoting a free give away and get

valuable information by having the “follower” fill out a short survey to enter the drawing. Harley

needs this information to develop the motorcycle for this targeted group and fill the needs and

wants of a younger generation of motorcyclists.

I believe that the younger generation still recognizes the Harley-Davidson brand, but they

perceive the motorcycles to be out of their budgets. Harley-Davidson will need to develop

another entry-level line of motorcycles to get first time buyers away from the crotch rockets and

into their brand. I believe the Buell is a good start for Harley, but Harley needs to take that

design and put a Harley name plate on it to promote progression to the higher profitable Harley

heavyweight products though the years.

Finding of Fact #2: Harley-Davidson has positive cash flow, but negative income from

operations and investing activities.

Harley-Davidson needs to focus investing activities in order to augment working capital

structure. Its stock price is at its lowest average price market value in years. Its working capital is

constantly decreasing, while although HD cash flow is increasing on a yearly basis, they still

cannot find financing to support company growth from American institutions.

With foreign operations increasing in volume, as well as capital investments and

relationships with suppliers overseas HD can invest its excess cash into relationships with

strategic partners in Europe and/or Asia as well as investing in and building upon relationships

with franchises and other retailers in those countries. Since HD does not have the working capital

to finance growth, yet they do have a positive cash flow, HD must put their excess the cash flow

to work in order to generate capital.

 Due to strong currency trends in these countries and weakening values of the American

Dollar and an available cash flow, HD should pursue other short-term investments and long-term

partnerships in the European Union and China. In this way HD can possibly augment its cash

flow exponentially during the current economic recession and increase its current ratio while also

increasing its working capital.

Finding of Fact #3: Harley-Davidson motorcycle sales are decreasing in the United

States because of the recession and it is seen as a recreational item.

As disposable income dries up, recreational items can be deferred, reducing sales of

Harley-Davidson motorcycles. Harley-Davidson is noticing deferred purchases of their

motorcycles similar to what the automotive manufacturers went through recently. Harley-

Davidson needs to hype demand for their motorcycles by implementing a marketing plan that

explains that motorcycles can be used as cheap transportation as well as used in a recreational

style.

Most marketing for the Harley-Davidson motorcycles today is for the HD lifestyle. I

believe Harley-Davidson needs to implement a marketing strategy that targets the city worker

and shows the benefits and gas savings of utilizing its motorcycles. Harley-Davidson

motorcycles can achieve from the mid-30s to the mid-50s in miles per gallon. With the price and

volatility of motor fuel the cost-savings of using a Harley over a normal car can be seen

instantly.

Additional benefits of using a motorcycle can be shown as well including lower

insurance costs, maintenance costs, traffic navigation, and parking. Targeting the younger
working class can also benefit Harley-Davidson as it is targeting a different demographic group

than Harley’s core customer.

Harley-Davidson could place ads on “green” web sites to target the environmentally

friendly customers. Additionally, HD could develop web sites on free social networking web

sites like Facebook and MySpace. They could explain the cost benefits of a motorcycle over an

automobile and embed links to its innovative Harley-Davidson website.