Harley Davidson "The Big Picture"

Capitalism in its truest and furthest extent is the idea of globalization. This idea requires companies to reevaluate what and who they think their competitors are. Many industries and sectors of business are realizing the fact that their competition is not only the guy down the street or the guy on the other coast, but may very well be the guy across the ocean. Free trade enables corporations from all countries to compete and participate in the market. One company that has welcomed, mastered, and will succeed in the idea of globalization is Harley Davidson Inc. This company understands the big picture and how they must adapt to the global market to not only stay competitive, but to stay profitable. Harley Davidson has successfully maintained dominance in the American market and the world market. Their strategies within the both the American and foreign markets and their commitment to keeping costs low will help Harley Davidson Inc. continue to be a strong and viable company well into the future.

Harley Davidson’s strategies have helped it to be a strong company within the American market. Harley has enjoyed 16 consecutive years of record revenue and earnings.[i] Even through the recession in the beginning of the 90’s and the downturn of 2001, Harley has still maintained its ability to sell its products. This is due in part to their emphasis on producing a quality product, being a good employer, and the commitment to giving back to the community. These strategies have kept Harley at the pinnacle of success.

Harley has a firm goal on making motorcycles that are reliable, cost efficient, and sturdy. This commitment comes from their “Enterprise Quality Plan” that has been their policy in all their factories, dealerships, and repair shops.[ii] This plan ensures that all products out of the factory are of the highest quality and have been inspected on their craftsmanship. Dealerships are supposed to make a commitment to making sure that the customer is satisfied with their purchase and that all safety and insurance precautions have been taken. Repair shops are suppose to make sure that they fix any problems that may rise with the product in a timely manner, using high grade parts and great service. However, just having a great product and servicing it well does not guarantee success in the American market.

Harley is also a great place to work at. Harley has been named 2001 “Company of the Year”, one of the “Most Admired Companies”, and was just been recently awarded the “Top 100 Companies to Work for” for the fourth time in five years.[iii] This is because Harley’s leadership is not made up of top level managers, but incorporates the whole company in its decision process. Harley’s Leadership and Strategy Council that determines policy for the company not only welcomes the CEO, CFO, and the Presidents from each of the different divisions of Harley Davidson Inc, but also invites elected representatives from career level and other senior management members to the council.[iv] This allows for new management and the experienced to make decisions based upon all walks of life and areas of the business. This incorporation of employees into the decision making has allowed Harley to work well with the Unions. Their relationships with Paper Allied-Industrial Chemical & Energy Workers International Union (PACE) and the International Association of Machines & Aerospace Workers (IAM) have helped Harley boast 5 -7 year contracts with its workers.[v] However, once again, just because America can see that you are a good company to your employees will not totally convince people to invest and trust in your company.

Harley has not only tried to give support to its employees and customers, but Harley has given to the community. Harley has given numerous donations to worthy causes. Harley gave $1 million to New York and Washington DC and sent 35 new bikes to the NYPD after the events of Sept. 11^th.[vi] However, Harley has not just started giving because of Sept 11^th. Harley has always tried to make a difference in America. Harley gave $100,000 to the Vietnam and WWII memorial funds.[vii] Since 1980, Harley has helped raise $38 million for Muscular Dystrophy Association.[viii] Also, Harley gave $1 million to the Harry Bradley Technology and Trade School in Milwaukee to help educate America’s young people.[ix] All these examples prove that Harley is committed to things higher than just turning a profit, but they are interested in America and its welfare.

These strategies have helped maintain the good public relations for Harley. By providing a good quality product, taking care of their employees, and reaching out to the community, Harley has invested much in making sure the American market is trustworthy of any product that bears the name “Harley Davidson”.

However, in the foreign market how does a company separate itself from the competition but still maintain a trust in the company? Once again, Harley has mastered this globalization into other markets. Their strategies of providing innovative products and many advertising mediums have helped Harley Davidson be the #1 selling heavyweight motorcycle in many countries.

Just recently, Harley made the headlines for a new product that is sweeping the motorcycle world. In November 2001, Harley unveiled a new line of motorcycle called the V-Rod that is powered by a liquid cooled “Revolution” engine that puts out 115 horses and 74 foot-pounds of torque at 70000 RPMs.[x] Already the V-Rod has won many awards by the international community. It has won the Motorcycle Design Association Open Class Trophy, Popular Mechanics Magazine’s Design & Engineering Award, Popular Science Magazine’s “Best of What’s New Award”, and “Bike of the Year” by both Motor Cycle News and UK’s Two Wheels Only magazine.[xi] This innovation is what keeps Harley on top in the foreign markets.

In addition, Harley has an exhaustive supply of advertising mediums it uses to spread the word and influence of the Harley Davidson products. “Harley Davidson is one of those brands that become some kind of strange religion for motorcycle lovers.” says one Brazilian commentator.[xii] This religion is embodied in H.O.G., the leather wearing Harley Owners Group. H.O.G. is a paid membership club for Harley enthusiasts. It numbers over 600,000 members and is the largest motorcycle enthusiasts club in the world.[xiii] H.O.G. is the backbone to many motorcycle events across the globe such as Daytona Bike Week, Sturgis, and AMA.[xiv] Also, Harley prides itself on owning The Enthusiasts the oldest continuously published motorcycling magazine in existence and has a circulation of almost 900,000 worldwide.[xv] Lastly for a little charm on the side, one of the members of the European Advisory Board for Harley is William Roedy which is the President of MTV Networks International.[xvi] This influence can easily help the marketing to the younger “MTV” generation. All these different mediums of advertising help Harley’s marketing strategy succeed in making and owning a motorcycle almost a “religion”.

Innovation and successful marketing campaigns have helped Harley Davidson maintain its strong position in the heavyweight motorcycle sector. These strategies have made Harley the number 1 selling heavyweight motorcycle in Japan two years running.[xvii] This is an amazing success, because for the past couple years, Japan’s economy has been under shaky ground, but still Harley is able to derive income from that global market. This just proves the point that Harley thrives in the global market.

One concern of many is the effect of rising costs will have on the profitability of Harley. On many fronts, Harley is experiencing production costs that will affect its profitability. Harley must deal with internal price increases, oil price increases, health care and insurance rises, and even steel price jumps.

Harley has many costs internally that are rising if not controlled. Harley recently has negotiated a settlement with the U.S. Navy regarding soil and ground water that added another cost of production to the company.[xviii] In addition, the EPA put the York, PA facility under remediation which will cost the company $5 million.[xix] Also another $10 million will be spent over the next year in waste clean up and purchasing machines that produce less waste.[xx] All these internal costs have to be attacked and absorbed with the income that is coming into the company. However, Harley in its Annual Report stated that they have already accounted for these costs in its budget and that this cost will not affect their profitability.

Also, many experts are speculating that this summer, due to the events in the Middle East and Venezuela, oil prices will be increasing. Experts believe that oil prices will rise this summer to a record 3^rd highest ever.[xxi] This will have a negative non-price determinate to the demand of motorcycles. This extra cost that will be indirectly added to the motorcycles therefore could be a deciding factor to consumers looking to purchase a product that requires oil. On the other hand, motorcycles are known for their gas efficiency. So, one could speculate that the rise in oil prices will actually encourage consumers looking to save money on gas prices to purchase a motorcycle to conserve energy.

In addition, President Bush recently raised steel tariffs by as much as 30%.[xxii] This would mean that steel coming into America would cost more. However, the steel parts that are used in Harley Davidson motorcycles are made in America. The parts are then assembled in America. So ignoring maybe a small rise in price due to greedy American steel produces seeing an opportunity to make a little more profit due to higher prices of the competitors, Harley should be unaffected by the tariffs that were raised.

All internal and external costs associated with Harley have once again been managed or have strategically no affect on the company due to its superior leadership. This leadership has led this company in a very successful and profitable venture. Harley Davidson’s actions in the big picture have warranted it over 16 consecutive years of record revenue and income. This has led many to believe that this company will be viable and healthy well into the future. “While motorcycle sales are susceptible to cyclical economic trends, we believe Harley’s supply/demand imbalance provides recession imbalance, which should enable the company to continue to weather a moderate economic downturn.”, says Carole Buyers of RBC Capital Markets.[xxiii] This opinion is reflected in the earnings it has accumulated in the past five years. Earnings Growth for Harley has risen 24.5% over the past 5 years compared to 2.8% within the leisure and recreation industry and -33.4% within the consumer discretionary sector.[xxiv] In addition, the Average Estimated 5 Year Earnings Growth potential is rated at 18.1% while the industry is only at 15.4% and the S&P 500 being 12.5%.[xxv] Finally, just recently this week, Harley released 1sts Quarter earnings for 2002 and net income rose 30% which led Harley to increase production for this year from the previously stated 258,000 units to 261,000.[xxvi] This substantial evidence of Harley’s success should compel investors to realize the viability of Harley within the big picture of the economy for years to come.

Harley Davidson Inc. has many strategies that they are using in the big picture. For now those strategies have proven to work over the years and point to continued success within the big picture. From quality products, good service, innovative ideas, consumer loyalty groups, and cost management, Harley is assured future success in business for many years within the global market.

[i] “Harley Davidson Inc. 2001 Annual Report” Harley Davidson USA. [cited 12 April 2002]; available <http://www.harley-davidson.com/company/investor/ar/2001/index.htm> : 6.

[ii] Ibid, 13.

[iii] Ibid. 5 & 7.

[iv] Ibid, 14.

[v] Ibid, 15.

[vi] Ibid, 8.

[vii] Ibid.

[viii] Ibid, 21.

[ix] Ibid.

[x] Ibid, 34.

[xi] Ibid.

[xii] “Ad Age Global Staff Picks, “ Ad Age Global, September 2001, 32.

[xiii] “Harley Davidson Inc. 2001 Annual Report” Harley Davidson USA. [cited 12 April 2002]; available <http://www.harley-davidson.com/company/investor/ar/2001/index.htm> : 29.

[xiv] Ibid.

[xv] Ibid, 28.

[xvi] Ibid, 47.

[xvii] Diana Rosenberg, Dow Jones Newswire, 16 April 2002.

[xviii] “Harley Davidson Inc. 2001 Annual Report” Harley Davidson USA. [cited 12 April 2002]; available <http://www.harley-davidson.com/company/investor/ar/2001/index.htm> : 50.

[xix] Ibid.

[xx] Ibid.

[xxi] “Summer gas prices may be third-highest” CNN Online. 9 April 2002 [cited 17 April 2002]; available

<http://www.cnn.com/2002/TRAVEL/NEWS/04/08/summer.gasoline.usa.reut/index.html>.

[xxii] “Bush Backs Steel Tariffs” CNN Online. 5 March 2002 [cited 17 April 2002]; available

<http://europe.cnn.com/2002/BUSINESS/03/05/steel/index.html>.

[xxiii] “RBC Capital Markets Announces Investment Opinion on Harley Davidson Inc.,” Business Wire, 13

Apr 2002.

[xxiv] “Analysts Ratings” Quicken Online. [cited 17 Apr 2002];

<http://www.quicken.com/investments/estimates/?symbol=HDI>.

[xxv] Ibid.

[xxvi] Diana Rosenberg, Dow Jones Newswire, 16 April 2002.

“Bush Backs Steel Tariffs” CNN Online. 5 March 2002 [cited 17 April 2002]; available

“Harley Davidson Inc. 2001 Annual Report” Harley Davidson USA. [cited 12 April

“Summer gas prices may be third-highest” CNN Online. 9 April 2002 [cited 17 April

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