Harley-Davidson

SITUATIONANALYSIS
ArthurandWalterDavidsonandWilliamHarveyformtheHarleyDavidson Companyin1903. FirstmajorinnovationwastheVTwinEnginein1909 Becomestheworldslargestmotorcyclecompanyin1918producing28000 motorcycles. Imageandlifestylemarketinginlate1930sfrompreviouscampaignsof utilitarianvehicles. AmericanmakeandmanufactureremainedoneofitsgreatestUSPs JapanesemotorcyclemanufacturersledbyHondaenterUSmarketin1959 OtherJapanesefirmsincludedKawasaki,YamahaandSuzukiandthey targetedoldermalesandyoungerwomen. In1965,1outofeverytwomotorcyclessoldinUSAwasaHonda.

SITUATIONANALYSIS
HarleyDavidsongoespublicin1965toraisecapitalandexpand production. AcquiredinafriendlytakeoverbyAMF Productionwasincreasedsubsequentlybutqualitysuffered. BrandnewHarleyssittingonthedealershipfloorhadtohave cardboardputdownbeneaththemtosopuptheleakingoil. HondaintroducestheGoldwing,a1000ccmotorcycleandisfollowedby Kawasaki. HarleyDavidsonsshareinitstraditionalstrongholdofheavyweight bikesreduces Between1970and1980HarleyDavidsonssharedeclinesby80%.

SITUATIONANALYSIS
In1980,thereisabuybackofcompanysharesusingdebt. Inthe1980sbenchmarkingagainstHondabegins. HarleyDavidsonadoptssomeJapanesemanagerialstylesanddidthree mainthings: QualityCircles MaterialsasNeeded(MAN) StatisticalOperatorControl(SOC) HarleyDavidsonseekstariffprotectionfromthegovernmentin1983to protectitfromcompetition. Changesinoperationsleadstoa50%productivityimprovementand 80%increaseininternationalrevenues. AsksUSGovernmenttolift5yeartariffprotectiononeyearinadvance in1987. In1989thefirmgoespublicagain

EMERGENCEOFHARLEYDAVIDSON OWNERSGROUP
Formedin1983toactivelyinvolveownersofthebikes Industryslargestmotorcycleenthusiastorganization with900000membersattheendof2004. InterestamongwomanriderswasgeneratedbyThe LadiesofHarley TeerlinkresignsasCEOin1997andissucceededby JeffreyBleustein. Revenuesgrownfrom$1.5Billionin1996to$5Billion in2004. NetIncomegrewfrom$143Millionto$890Millionin thesameperiod.

PREPARINGFORTHENEXTCENTURY
MedianageofHarleycustomerswas35yearsin1987and47 yearsin2004. Thiswasbecausemostoftheloyalcustomerswerebaby boomers. HarleyDavidsonacquiredBuellcompletelyin1998 ThesewerecheaperracingbikescomparedtoHarleysand cateredtoyoungerbikers. ColdDayinHell IntroducesTheVRod,a110horsepowermotorbikewithawater cooledengine.

PREPARINGFORTHENEXTCENTURY
Numberofbasicrulesgoverningthefunctions Thebenchmarkforthevariousoperationneededtobechanged Thelatestproductiontechniquesneededtobeincorporated Betterinventorymanagement FocusofR&Dneededtobeincreased TheRidersEdgeandRentalProgram In1999Harleyoffersarentalprogramtohookcustomers Surveysshowedthat32%ofcustomersrentingaHarleybikebought oneafterwardsand37%plannedtobuywithinayear. RidersEdgeprogramwasamotorcycleridinglessonfor4daysand approximately70%oftheparticipantsboughtabikewithin18 months.

BENCHMARKINGHONDA
Parameter Productionline Structure InventoryControl Management Honda Streamlinedandorganized productionlines Minimizedpaperwork JustinTimesystemofinventory controlandbikesbuiltorder Bettermanagement HarleyDavidson Clutteredandunorganized Hierarchicaland bureaucratic 2million$computerized inventorysystem QuantitytargetsMultiple qualitychecks Measurementoferrorsin production 50%passedquality inspection Low Low

Quality Productivity Valueaddedper employee

95%passedqualityinspection 30%higher 23timesSuzukiandYamaha

BENCHMARKINGHONDA
Initiative Employee Involvement Description Worker participationin qualitycircles JustinTime InventoryControl practice Trainingemployees todetect,trackand correctquality problems Objective Employee Empowerment JobEnrichment Increaseliquidity Highlightsquality problems HRInterventions Flatorganization structure Jobdescriptionsand responsibilities

MANprogram

SOC

Incentivizeworkers toimplement initiatives Payfor performance Minimize productionsdefects Employeeincentive programs

BENCHMARKINGHONDA
JobRationalization Eliminatedauditor positions(Sr.V.P.) Maximizevalue addedper employee Teambasedwork culture

LeadershipInstitute Homogenousacross Transformationtoa Payfor hierarchiesand learning performance voluntaryinnature organization Communicating fairnessand uniformity Supplementary Training Interrelations betweenproducts, sales,profits Nontechnical explanationsof financialprocesses VisionMission alignment Visioncascaded downtoalllevelsto improvelineof sightandownership

MANAGEMENTTHEN
Typicalmanagementpracticesincluded: Corporatemanagementsfocusmostlyon shorttermreturns Lackofemployeeempowerment Highinventoriesofpartsleadingtolow liquidity&reducedproductivity Beliefinquickfixesforproblems Highbreakevenpointthatleftthe companyvulnerabletounpredictablemarket fluctuations Managementthatwokeuptoolateto thethreatofforeigncompetitionbecauseof the"itcan'thappenhere"syndrome

MANAGEMENTNOW
ContinuousImprovement EagelmarkFinancialServices ManagementInvolvementinCommunity Development CatalystforAction&Ideas Listening&providinghospitality CrisisIntervention(ThroughHOGsFlyn

Rideprogram) ChangeinPeopleProcesseswithinthefirm Changesintheperformancesystems Empoweringemployees

MARKETINGMANAGEMENT

MANUFACTURING

More Emphasis On

S W O T A N A L Y S I S

IMPACTSONTHEORGANIZATION

LOW

HIGH

LOW

HIGH

AMBIGUITYINTHEENVIRONMENT FORHD

TheentryofJapaneselowcostproducers TheLossofthemarketshare Thesizeofthemarketpiehadincreased AMFtakeover Qualitystandardsandreliability comparativelylower Productivitywaslow

NUMBEROFBASICRULES GOVERNINGTHEFUNCTIONS

Thebenchmarkforthevariousoperation neededtobechanged Thelatestproductiontechniquesneededto beincorporated Betterinventorymanagement FocusofR&Dneededtobeincreased

FLEXIBILITYOFOPERATION DEPENDINGONSITUATIONS Continuousimprovement Movetoateambasedapproacheg:create demandteam,productsupportteam Complimentarychanges:anewrewardand incentivesystem

AMOUNTOFUNCERTAINTY REMOVED FROMTHEENVIRONMENT

EmergenceofHOG Aloyalcustomerbase Alsoameanstogenerateinterestinthenew marketsegments Technologicalinnovations BuellAcquisition Productdiversification

FUTUREPROSPECTS ExpandalongtheValueChain Grownewproducts&services Usenewdistributionchannels Enternewgeographies Addressnewcustomersegments(Modifythe provenproduct) Moveintoawhitespacewithanewbusiness builtaroundthecapability

CRITERIA
MarketAdvantage:IncreaseinthemarketsizeforHD Harleyissuccessfulinselling400,000motorcyclesby2007 TheParentingAdvantage:HDbecomesthemostpreferred motorcycleintheUS&otherpartsoftheworld Annualearningsgrowthratesisinthemidteens Feasibility:Harleyisabletoexpanditscustomerbase Harleyattractsyoungerriders&womenasitscustomerbase Accountability&Flexibility:Harleyisabletosustainthe changes&developnewstrategiesonanongoingbasis UnitswithinHarley

MARKETINGSTRATEGIESOFCOMPETITORS
Honda Intherecenttimesthefocushasbeenonexpandingtheirproduct portfolio Venturedintotheoffroadsegmentaswell Focusonthecustomization Strategy:highvalueatlowprices BMWmotorcylces Openhouse,openthrottle Heavyspendingontheadvertising.Havestartedfocusingononline advertising Advertisinginlifestyleandmassappealmagazinestofocusoncycle enthusiastpubs Alaunchofrecord5newmodelsthisyear Guerrilla&eventmarketing

CUSTOMERDISSATISFACTION ATHARLEY

TECHNOLOGICALINNOVATIONS
Allthecompetitorsarefocusingonthedevelopmentofnew technology Thefocusisondevelopingtechnologycateringtothevarious segments 100candbelow Powerbikes Sports&racingtechnologies Focusonaftersalesserviceshasalsoincreased:apingthe conceptoftheHOG

GROWTHSTRATEGYFORHARLEY
New market Existing market

Existing market

Marketpenetration throughproduct diversification

Developmentand promotionoflife style

New market

Expandproductrange anddeveloplowcost productsand capitalizeonthe brandname

Movementtoglobal marketsinEurope

FUTUREPROSPECTSFORHD
Internationalheavyweightmarketisgrowingandis significantlylargerthantheU.S.heavyweightmarket Europehasthelargestmotorcycleindustry Targetheavyweightandsportsmotorcycles(themarketis fourtimestheUSmarket) BuildamotorcycleplantintheEuropeanbyusingstrategy allianceorjointventure Reducetransportationcost Increasecompanysinternationalexperience

FUTUREPROSPECTSFORHD
TheimagebuiltinUSmightnotbesuitabletotheEurope market Strategyalliancesissuitableinthiscasesincethecompany cancreatevaluefromtransferringcompetenciesorsharing resourcesbetweendiversifiedbusinessesinordertorealize economiesofscope. Theyshoulddoresearchonthemarkets:learnfromthe initialdebaclesintheEuropemarket

ADAPTIVEORIENTATION
Hyperturbulent

RenewingTransformational

Reactive

Environmental Stability Satisfying Stable (HarleyDavidson) SluggishThermostat

High

Adaptive orientation

Low

HOWHDCOULDGOABOUT THECHANGE

POTENTIALGROWTHPATH
Theabovefuturegrowthstrategycanbedoneoverthe courseofthreeyears Firstyear:Targetnewmarketsanddevelopinfrastructure there Secondyear:UtilizethesecondarymarketliketheHOGto expanditscustomerbase Takeasurvey UtilizetheHOGcustomerblogasasourceofdata Thirdyear:Modifyproductsaspertheneedsofthemarket Developlesspowerfulbikes

ORGANIZATIONCULTUREEVOLUTION
Need for action Long Term Degree Of certainty Short Term

Consensualculture

Development/ ideologicalculture

Hierarchicalculture High Low

Rationalculture

PLANNEDORGANISATIONAL CHANGESTRATEGIES
Incremental Change Strategies Transformational Change Strategies

Collaborative modes

Participative evolution

Charismatic transformation

Coercive modes

ForcedEvolution

Dictatorial Transformation

Long Term TIME FRAME

Short Term

ROLESTOBEPLAYEDBY THETOPMANAGEMENT PractitionerStyle ApproachtoChange TeamInterdependenciestoConflictresolution

PRACTITIONERSTYLE
High E F F E C T I V E N E S S Low

CHEERLEADER PATHFINDER

PERSUADER

STABILIZER

ANALYZER
High

APPROACHTOCHANGE
Thechangeagent

Behavioural strategy

Structural strategy

Technological strategy

Change in attitudes & values

Change in structure & designs

Change in production methods New Processes

New Behavior

New relationships IMPROVEDPERFORMANCE

LESSONSFROMHARLEYDAVIDSON
ComplacencyKills ApoliticalupperhandisatemporaryarrangementApassingphaseatthe most! Empoweryouremployees TheyknowalittlemoreabouttheProduct&managementthanyougive themcreditfor StrengthenyourDistributionChannels Theyareatthereceivingend&knowyourcustomersbest! Movingtointernationalmarketsdoesnotmakeyouanylesspatriotic Ofcoursethebrandingcampaignswouldhavetobesignificantlydifferent PerseverancePays! Ifnotforthis,Harleywouldneverhavecelebratedits100thBirthday

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