Essay About Harley Davidsons Growth And Company History

Harley Davidson Strategic Report
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Strategic Report for
Harley Davidson
Mark Melief
Tycen Bundgaard
Jordan Hathaway
April 4, 2006
Table of Contents
Five Forces Analysis
Executive Summary
Harley Davidson remains a financially strong and stable company. During 2005 the
company reported the 19th consecutive year of record revenues and record earnings.
While Harley Davidsons growth has slowed over the past several years the decline in
growth rates are primarily attributable to a maturing market, which results in lower
growth rates for all member of the motorcycle sub-industry. During 2006 Standard and
Poors predicts that the motorcycle sub-industry will grow between 1% and 3%, a much
slower rate than the double digit annual gains the sector saw throughout the 90s and
late 80s.
Despite the companys strong financial outlook the stock price has not been performing
well over the past year. The stock price fell dramatically in April 2005 when Harley
Davidson management lowered guidance of new motorcycle shipments to the network
of independent dealers. Wall Street analysts proceeded to predict doom for the
company as it appeared that it would be unable to continue its trend of strong growth.
Although the company actually produced results that were in the upper bound of its
guidance and within the guidance from before April the stock price has yet to recover to
its earlier levels. It seems that Harley Davidson managements strategy of underpromising
and over-delivering has backfired, especially because analysts remain wary
of the companys prospects despite Harley exceeding their expectations.
Another reason for analysts pessimism about Harley Davidson is that recently the
company seems to be resting on its laurels, content with its current market position and
doing little to attract new, younger customers or to offer new motorcycle designs to
appeal to previous customers. One sign of this is that Harley Davidsons dollar amount
spent on advertising and research and development has actually been decreasing over
the past couple of years. To some it might seem that management is sacrificing the
future of the company by not attracting new riders in order to boost financial
performance today.
Company History
In 1903 William Harley and Arthur Davidson made the first Harley-Davidson
motorcycle available to the public. It was built in a small wooden shed with the words
“Harley-Davidson Motor Company” scrawled on the door. The next year, in 1904, C.H.
Lang opened the first Harley-Davidson dealership in Chicago, selling one of the first 3
Harleys ever made. In 1906 the company opened a new factory, measuring only 28×80
feet in Milwaukee, Wisconsin. The next year, in 1907 the company doubled its factory
space. Also in 1907 the Harley Davidson Motor Company was incorporated, with the
stock being split between the 4 owners, including William and Walter Davidson
(Arthurs brothers). By 1920 Harley Davidson is recognized as the largest motorcycle
manufacturer in the world, supported by over 2,000 dealers in 67 countries. In 1953,
one of Harley Davidsons competitors, Hendee Manufacturing (makers of the Indian
motorcycle line), goes out of business. For the next 46 years Harley Davidson is the
only American manufacturer of heavyweight motorcycles.
In 1912 Harley Davidson built a six story building on Juneau Avenue in downtown
Milwaukee, Wisconsin. This building would become the main offices and factory for
Harley Davidson. In 1947, to supplement existing manufacturing facilities Harley
Davidson purchased the old A.O. Propeller plant, which the company subsequent
converted from wartime manufacturing into a large machine shop. In 1962, in response
to a growing trend of including fiberglass in motorcycle production Harley Davidson
purchases