Harley Davidson Inc. Harley Davidson

Harley Davidson Inc.

Harley Davidson is one of the oldest American motorcycle companies. In fact for many years it was the only motorcycle manufacturer that was entirely American, with the exception of Harley-Davidson partnering with Asian and European companies that utilized different brand development. The company's roots began in 1901 with a completed design, from William S. Harley, for an engine that could be attached to a bicycle. In 1903 Harley partnered with Arthur Davidson to bring their first completed bikes to the public. The company had early success in the racing circuit and was also able to expand, with evolving motorcycle designs and a larger headquarters. The business slump that occurred in the private markets during WWI were countered by significant sales to the U.S. military. In 1920 Harley-Davidson is the largest motorcycle manufacturer in the world. Again in WWII there is a suspension of private production but the years of development of engines and motorcycles by Harley-Davidson gives them a market edge for selling bikes to the military. H-D success has largely been associated with success in racing, partnerships with motorcycle enthusiast organizations as well as the building of an inclusive system where the company sponsors enthusiast publications and organizations, such as H.O.G. (Harley Owners Group) a Harley enthusiast club that by the year 2000 boasted 500,000 members and currently boasts over a million members worldwide, as well as with the development of enthusiasm through military personnel exposure during war years. In 1987 H-D went public with a listing on the New York Stock Exchange. (Harley-Davidson Website "History") Harley-Davidson Inc. is a parent company of several acquired and built organizations including Buell Motorcycle Company, Harley-Davidson Financial Services, Harley-Davidson Motor Company. The company produces a wide range of products including motorcycles, parts, accessories, apparel and other general merchandise as well as financial support for retailers and consumers. (Harley-Davidson Investor Relations "Facts Sheet")(Harley-Davidson "Annual Report 2006")

The industry in general is one that has been growing steadily with new innovations and the development of a niche market for recreational vehicles of every type and size. H-D competes mostly with offshore industry leaders such as Kawasaki, Honda and Suzuki but provides a specific type of bike that is different than the rest and has 100+ years of brand recognition to bolster their accessory and clothing line sales. H-D produces 37 heavy duty bikes and 8 light duty bikes (under the Buell motorcycle division), offering something for every level of rider. (Harley-Davidson Investor Relations "Facts Sheet")

Harley-Davidson Investor Relations "Facts Sheet")

The growth of the industry in general is essential to the growth of H-D and its strength in the market, additionally the fact that it is the only large scale U.S. based manufacturer of motorcycles aides its sales and the enthusiasm of the consumer. The companies standing in the industry bolsters sales significantly and its inclusive financial program also helps aide those who have interest in franchise attainment or simply in purchasing high end motorcycles. It has also adapted well to the specialization and individualization trends in the market, where other industry leaders have lagged behind, offering only stock models and colors, where H-D offers customization for a large retail purchase. Financing sales offers customers more options and ability to not be priced out of the competitive market. Some concerns that will likely impact this company are fluctuation in sales based on relatively high priced goods that are considered luxury items, as a result of overall market declines in luxury sales.

One ethical situation that will likely be faced by the company in the next few years is the growing emphasis on reduction of environmental impact caused by combustion engines, as many of its higher end products are reflective of concerns for power over the environment. One way that the company could contend with this ethical dilemma is to respond with marketing that emphasizes the efficiency of current marketed bikes and demonstrates any alternative technologies that are in the works with this issue in mind.

Journal Entries:

Flexible Budget for 2007 fiscal Year

Beginning with a 240 million budget, (reflected by historical capital expenditures) the company should divide the budget based upon existing liabilities and historical expenditures, while bolstering expenditures in the general merchandise areas and apparel productions to offset any reduction in sales due to an overall reduction in the purchases of luxury items in the economy. The company should also reallocate funds in production of less expansive bikes and the Buell line of lighter weight vehicles to match consumer desire. Marketing should pay careful attention to history of the company as a large employer in the U.S. As well as earth friendly options for more efficient engines that offer equivalent power and with the emphasis on quality growth in this area. (Harley-Davidson "Annual Report 2006")

The increase of sales, which has been nominally improving over the years will likely increase in the immediate future, and especially in overall sales of general merchandise and apparel, as a result of possible nominal decreases in sales of larger items. Many individuals seek out smaller items to reflect their love of the brand, prior to their ability to purchase larger items, and existing H-D owners also frequently add accessories and purchase general merchandise and apparel to compliment earlier purchases. Pricing may need to be adjusted, within reason for larger items as production and acquisition of materials continue to improve. (Moore, Baldwin, Camm & Cook, 2002, p. 32) the market potential of the company, regardless of recent fluctuations, such as the market dives occurring in 2002, 2003 and 2005 will continue to have long-term investment positives, with increasing revenue based on brand recognition and development additionally, regardless of fluctuation the recovery seen in 2006, and early 2007 will likely leave those who stayed in the market, rather than selling with a good overall outcome. ("Wall Street Wrong Again," 2005, p. D6)

20-year comparison of year-end value of $100 invested Dec. 31, 1986. Assumes for both Harley-Davidson and S&P that all dividends are http://investor.harley-davidson.com/images/spacer.gif http://investor.harley-davidson.com/images/rule.gif

(H-D Investor Relations "20-year Comparison")