Strategic Audit for Harley Davidson (1981)

Strategic Audit for Harley Davidson (1981)

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Strategic Audit for Harley Davidson (1981)

I. CURRENT SITUATION

A. Current Performance

Losing money, market share, and relevance in a changing industry with new foreign competitors.
• Stiff foreign competitors introducing new designs
• HD was too slow in development and unpredictable in reacting
• Outmoded technologies
• Poor quality and shoddy workmanship
B. Strategic Posture
I. Mission –"We fulfill dreams through the experiences of
motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments (Harley-Davidson website, p.2)."
2. Objectives
a) "We deliver experiences"
b) Developing relationships with all stakeholders—customers, employees, investors, suppliers, governments, and society.
c) Provide a good quality cycle
d) Employees are both enthusiasts and customers
3. Strategies
a) 1981 13 H-D executives, including William Davidson
(grandson of founder Arthur Davidson), conducted a
leveraged buyout of AMF to reacquire H-D and ward
off bankruptcy of the company.
b) Implemented Total Quality Management
c) Implemented Just-In-Time inventory
d) Lobbied Washington for tariffs on imports
e) Direct marketing to the loyal customer base
f) Sponsored the Harley Owners' Group (HOG)
g) Launched SuperRide to attract a new customer base
h) Offered customers a free one-year membership to groups, publications, receptions, etc.
4. Policies
a) Short-term profits more important than R&D and
retooling
b) Stiff foreign competition ignored
c) Employees has little or no input in the company
d) Very slow R&D; very slow in reacting to more advanced technological changes

II. Strategic Managers
A. Board of Directors
1. Nine members, seven are outsiders
2. Respected Americans, four have been affiliated with HD since
the early 1970s
3. Three have specialized marketing experience; four have
international backgrounds
B. Top Management
1. Thirteen top executives who conducted the leveraged buyout
2. All have worked for or been affiliated with HD since early 1970s
3. Goal was to reacquire and restructure the company to stave off bankruptcy.

III. External Environment (EFAS)
A. Societal Environment
1. Economic
a) Stagflation, or "bottle-neck" inflation, since early 1970s

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coupled with the OPEC oil embargo created a huge market
for smaller vehicles and excellent gas mileage—spurred the
motorcycle market
b) Japanese manufacturers Honda, Kawasaki, and Yamaha
take the top spot which HD had held for years—there were no tariffs on imports
2. Technological
a) HD is extremely slow in developing new designs for its
bikes
b) Technologies are outdated
c) Foreign economies are becoming more interconnected to the world market
3. Political-Legal
a) No tariffs on imported goods
b) Very stiff competition
c) Environmental laws reflects changes in attitudes on fuel consumption and exhaust emissions
4. Sociocultural
a) New Japanese designs create a huge following in the U.S.
b) Baby Boomers want sleek new designs along with good gas mileage
c) Women are now moving into the motorcycle market
d) Fuel shortage gives rise to cheap means of transportation
B. Task environment
1. American market becomes extremely competitive—economic
savvy consumers want new styles, good quality, and at a good
price.
2. Global industry sagging just as the American industry
3. Japanese sleek new designs are very popular with the younger
crowd and more technologically advanced
4. Rivalry among Motorcycle Manufacturers: Very high.
Honda, Kawasaki, and Yamaha have taken the American
market by storm
5. Bargaining Power of Buyers: Moderate. HD is slow in
responding to technological advances and retooling
6. Power of the Stakeholders: Low. Lost revenues and market
shares have resulted in loss of relevance in the changing
industry.
7. Bargaining Power of Supplying Distributors: Low. HD
became too unpredictable. Relationships with supplying
distributors suffered.
8. Threat of Substitutes: Very High. Honda's Gold Wing
replaces HD in the large touring cycle segment for the first time and is $2K cheaper
9. Threat of New Entrants: Very High. Suzuki and Yamaha
dominates the heavy weight custom market for the first time with HD look-alikes

SWOT ANALYSIS (EFAS)
Strengths
• Solid loyal customer base
• Repeat customer base
• Engineering the cycle experience
• Long history of quality product
• Known worldwide for the experience that only a Harley can give
• Direct delivery capability
• Can serve from existing sites Weaknesses
• Slow design and development processes
• Outmoded technologies
• No quality management
• Huge inventory
• Lack of good marketing strategies
• Need to reconnect with suppliers and distributors
• Need to construct good international communication base
Opportunities
• Good R&D Department
• Develop new designs and products
• Reconnect with the loyal customer base
• Expand global market base
• New specialty lines
• Regain trend-setting pace began by HD
• Create a community that values the experience of riding a Harley more than the product itself Threats
• No tariffs at all on imports
• New entries into a growing market
• New environmental legislation enacted
• New environmental laws enacted the use of unleaded gasoline for reduced emissions
• Fast changing industry
• Retention of key staff critical
• Possible negative publicity
• Vulnerable to reactive attacks by major competitors

IV. Internal Environment (IFAS)
A. Corporate Culture
1. Two main divisions: motorcycles and related products
2. AMF made decisions; the leveraged buyout produces a fresh outlook for the company and its employees

B. Corporate Culture
1. AMF's quality key ingredient—short-term profits shared only by AMF
2. AMF had no idea on how to restore profitability to HD
3. AMF ignored the stiff foreign competitors
C. Corporate Resources
1. Marketing
a) Purchase of CAD system to allow changes to entire product
line and still maintain traditional styling
b) zeroed in on the truly loyal customers and the loyal repeat
customers first
d) Invite customers to test drive a HD in the SuperRide
promotion
e) Give the customers a chance to become a part of the HD
Legacy
2. Finance
a) MAN inventory system reduces inventory and stabilized the
production schedule, greatly reducing costs
b) Implementation of TQM to produce the quality products HD
is known for to generate sales
c) No more room for debt
3. R&D
a) New designs and styles
b) Becoming a technology follower, taking too long to get new
innovations to market
4. Operations
a) Motors and related products main core competency.
Continual improvements will keep it dominant in the U.S.
market for many years to come.
b) Quality is first and foremost. This is what HD is known for.
5. Human Resources
a) Employees disgusted with AMF. No say in operations, no
interest.
b) Most employees are HD enthusiasts as well as consumers.
c) Give them the opportunity to input on new designs and
models.
d) Evaluate pay scale and make it commensurate with the job
performed by each employee.
6. Information Systems
Computerizing businesses as a whole at this time is limited due to enormous expense. CAD is implemented with what is available. Most information is delivered via telephone, memos, and word of mouth. HD needs to be willing to commit the resources needed to stay competitive.

SWOT ANALYSIS (IFAS)
Strengths
• The look, the sound, the feel of a Harley
• Employee input on designs and products
• Debts in line
• JIT or MAN inventory
• Stable production schedule
• The motor itself
• The related products
• The quality that is legendary
• The durability
• Employees are enthusiasts as well as customers Weaknesses
• R&D capabilities to stay competitive
• Needs to expand product line in a global market
• Needs to get new innovations to market faster to compete
• Supply chain robustness?
• Finances in line?
• Core activities, distractions?
• Morale of employees and their commitment
• Need to upgrade systems and add computer enhancements to stay competitive
Opportunities
• New technology
• New innovations
• New marketing focus
• Broader global base
• Industry and lifestyle trends
• Target Markets?
• Tactics – surprise, major contracts, etc.
• Business and product development
• Information and research
• Volumes, production, economies? Threats
• Competitor copycats
• Legislative and environmental effects
• Competitor intentions
• Market demand
• Newer technologies, services, ideas
• Vital contracts
• Sustaining internal capabilities
• Sustaining financial backing
• Economy at home and abroad

V. Analysis of Strategic Factors
A. Situational Analysis
ISF Weight Rating Weighted Score Comments
Strengths:
HD Quality .20.
5.0 1.0 Need to reinstill what the company is known for
Experienced Top Management .20 5.0 1.0 Former executives and affiliates leverage a buyout
Employee Relations .20 3.0 .60 Must rebuild their confidence
Weaknesses:
Process-oriented R&D .20 3.0 .60 Need to put new innovations on market
Distribution channels .20
1.0 3.0
3.8 .60
3.8 Force them to upgrade their quality
ESF
Strengths:
Solid loyal customer base .20 4.0 .80 Focus on this group before any other
Engineering the cycle experience .20 4.0 .80 Draw on the total experience HD is known for
Repeat customer base .20 3.5 .70 This base gives drive for the others
Weaknesses:
Slow design and development processes .20 3.0 .60 R&D must pick up to remain competitive
Outmoded technologies .20
1.0 3.0
3.5 .60
3.5 Must upgrade to remain competitive
B. Review of Current Mission and Objectives
1. Current mission is appropriate
2. Some of the objectives are really goals and need to be given time horizons.

VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
1. Growth through concentric diversification: Acquire a smaller competitor.
a) [Pros] Product and market synergy created by integration
of the two.
b) [Cons] HD must have the financial resources to accomplish
this.
2. Pause strategy: Consolidate areas that are weaker with the
stronger ones and strongly encourage design and innovations among the units.
a) [Pros] HD must make sure it has a solid financial
foundation and administrative control.
b) [Cons] Unless HD can keep a solid financial backing and
continue with being privately held, it could go under
to its demise.
B. Recommended Strategy
1. Recommend the pause strategy for the first year or two, so HD
can get a grip on its financial house and maintain administrative control.
2. HD quality must be maintained, and investments into R&D must be made in order to remain competitive and make a profit.
3. By internal restructuring and implementation of new tools, HD should be able to recoup any extra investments in a reasonable period of time.
VII. Implementation
A. The only way to increase profitability in the U.S. is to install a TQM,
JIT inventory practice, upgrade R&D, keep production schedules timely, force the distributors to remain quality conscious, and expand product lines worldwide.
B. Board members with solid international backgrounds should be
focused on the future, especially with expertise in Europe, Asia, Latin America, and Canada.
C. R&D needs upgrading with latest technologies, as does marketing,
to get new products to the consumer quickly.
VIIl. Evaluation and Control
A. The primary promotional tool is the HOG. Ads and commercials
contain female images, since 93% of bikers are male.
B. Most dealerships gain strong promotions through the use of cafes,
located inside the dealerships.
C. HD is truly an American made product. Owning one brings pride to
the owner.
D. The true evaluation is through its creed: "Harley-Davidson's
dealer's are the company's life-line to our customers, with a wide variety of product offerings, dealer's provide knowledge, service, and information to riders out on the road (HD's Marketing Strategy…p.2)."

Reference:
Chapman, Alan. (2006). Swot analysis method and examples, with free SWOT
template. swot analysis. Retrieved from http://www.businessballs.com.
How Harley-Davidson's Marketing Strategy has Overcome Fierce Competition
from Foreign Companies. (2005, June 26). eCheat.com.
Harley-Davidson Motor Company. (2006). http://www.harleydavidson.com.
What's in the Harley NEWS? (2005, August 3). Harley-Davidson.com. Retrieved
from the website http://www.angelfire.com.
Wheelen, T.L., Hunger, J.D. Strategic Management and Business Policy. New
Jersey: Pearson Prentice Hall, 2006.
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