Team 7Gabriella Kawilarang, MinJae Park, Kripa Shroff, Leanne Tremblay

Background

• Founded in Milwaukee in 1901

• NYSE: HOG• Manufacturer of high

end motorcycles• Vision: “Fulfilling dreams

of personal freedom”Source: Harley Davidson Twitter

Mission

• Create superior value for shareholders • 52 week range from $49.15 to $74.13• Four pillars: Continuous improvement,

leadership development, sustainability, and growth

Source: Yahoo Finance

Business Segments

• Motorcycles and Related Products: 89% of Total Revenue

• Financial Services: 11% of Total Revenue

Source: ThompsonOne

Industry

• Leading in the motorcycle, bike and parts manufacturing industry

Direct Motorcycle Competitors

2013 Revenue from US Market (Millions)

• Harley: USD 4,189• BMW: USD 2,092• Honda: USD 1,099• Yamaha: USD 491• Polaris: USD 220

Major Target Market

Caucasian Male 35+

Source: Harley Davidson Twitter

International Markets

• 2013: 29% of revenues from International Sales

• Europe: 13%• “Others”: 4%• Canada and Japan:

4%• Australia: 3%

Source: ThompsonOne

How to Win in this Industry

• Create the RIGHT EXPERIENCE• Older Caucasian Males

– Membership in an exclusive club– Feeling roaring engine– High Quality Bike– Exclusive Look– Psychologically benefiting from premium brand status

Create the … right experience for the target market

Financial StructureRevenue Growth Rate is Declining

Source: Bloomberg

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Projected)Revenue 5320.5 5673.8 6185.6 6143 5955.4 4781.9 4859.3 5311.7 5580.5 5899.9 6054.7Cogs 3232.3 3441.7 3742 3816.8 3784 3184.6 3114.8 3352.8 3440.6 3621.4 3748.2Operating Income 1361.5 2232.1 1597.2 1425.6 1071.6 448.8 724.1 898 1028.7 1151.6 1211.2Net Income 889.8 959.6 1043.2 933.8 654.7 -55.1 146.5 599.1 623.9 734 775.8Rev g 8.50% 6.64% 9.02% -0.69% -3.05% -19.70% 1.62% 9.31% 5.06% 5.72% 2.62%Cog g 5.28% 6.48% 8.73% 2.00% -0.86% -15.84% -2.19% 7.64% 2.62% 5.25% 3.50%OI g 18.46% 63.94% -28.44% -10.74% -24.83% -58.12% 61.34% 24.02% 14.55% 11.95% 5.18%NI g 16.94% 7.84% 8.71% -10.49% -29.89% -108.42% -365.88% 308.94% 4.14% 17.65% 5.69%cog/rev 60.75% 60.66% 60.50% 62.13% 63.54% 66.60% 64.10% 63.12% 61.65% 61.38% 61.91%ni/rev 16.72% 16.91% 16.86% 15.20% 10.99% -1.15% 3.01% 11.28% 11.18% 12.44% 12.81%OI/rev 25.59% 39.34% 25.82% 23.21% 17.99% 9.39% 14.90% 16.91% 18.43% 19.52% 20.00%

Possible Explanations

• Strong competition from BMW• Harley’s focus on psychological

experience• BMW’s focus on products with

cutting edge design• Sleeker & smaller• Faster in acceleration

• Competitor’s marketing budgets are larger• Harley spends only 15% of its

revenue on marketing expenses

Source: BMW Motorcycle Website

Core Complication

Shrinking target market: AGING BABY BOOMERS GENERATION

Complications of Aging Baby Boomers

• Baby Boomer Generation is much larger in comparison to subsequent generations

• No obvious replacement segment

Population Size

• 60+• Impede them from riding and buying bikes

Health Issues

• Brand image: “Freedom and Independence”

• Less attractive

Change of Perception

Expanding Customer Base

Younger Generations Women

International Markets

Failed Attempts

Younger Generations

Failed Attempts to Target Younger Generations

• Harley STOPPED reporting the average age of their riders

• The average age of a Harley rider rose from 43.4 years old in 1999 to 49.5 years old in 2014.

Source: Harley-Davidson Website

Qualitative Quantitative

Dark Custom Lineup

• Customizable Small Bikes• Example: Iron 883

– Small & Customizable– $8000 - 50% Cheaper than

traditional bikes– Attracted young riders and was

the best selling model

Source: Google search of Iron 883

• Weak Value Proposition– Lost to BMW Sport Bikes due to

performance• Weak Execution

– Advertisement features an older, Caucasian men

Marketing Strategy

• Music Festivals– Musicians Lynyrd Skynyrd &

Dropkick Murphys

• Social Media– Facebook: 6.1 Million Likes– Twitter: 203K Followers– Instagram: 170K Followers

• Older Management StaffSource: Google search of Harley 110th Anniversary Party

Failed Attempts

Female Market

Harley’s Female Market Growth

• Decade long strategy

• 10% of sales mix• 62.8% market

share in 2013• 13.1% (2.62%/yr)

market share growth

• 8.2% (1.64%/yr) market share acquired

• 5% (1%/yr) market growth

833 Low Bike

Slimmer - Smaller Handle Bars - Lighter Weight

Poor Brand Perception

YIKES…

Reality of Customer Acquisition

Most women who own a Harley have a significant other who also owns a Harley…

Female Market Growth

According to the Motorcycle Industry Council, from 2009-2012…

Female motorcycle OPERATORS grew about

30% (10%/yr)

Female motorcycle OWNERS grew 20%(6.6%/yr)

OPERATORS THAT ARE NOT OWNERS ACCOUNT FOR 3.4% POTENTIAL GROWTH!

Create the Right Experience

Luxury Accessories

for Men

Luxury Accessories for Woman

TRANSLATED

Woman, biologically and culturally, do not desire the same psychological benefits from luxury goods as men.

The Right Experience By Gender

“Dreams of Personal Freedom”

MEN

WO

MENStrong

Macho

Independent

Sexy

Confident

Empowered

Failed Attempts

International Market

Potential Growth in Emerging Markets

• 60% of world population is in the emerging markets

• Booming economy• Growing number of

HNIs (High Net Worth Individuals)

Source: marketsmedia

Difficulties in International Market

• is complex and costly in ChinaConflicting Market Demand

• 27M motorcycles• 99% are small bikes

(*Small bikes: Engines below 600cc (Harley: 800-1600cc)) Source: motor-bikes.com

Regulations • Vehicle Registration• Out of 1.74M applicants, only 240,000 accepted• Now decreasing the number to 150,000

• Compulsory Scrap Policy• All bikes must be scrapped after 11 years

• Driving Restriction• Motorcycles restricted on freeways and downtown core

• complex and costly in China

Difficulties in China

Difficulties in India

• Small Market Share• In India, Harley’s market share is 0.08%

• Large Import Tariffs• The country is imposing large import tariffs

that nearly double the original price

• complex and costly in China

Core Question

How can Harley Davidson improve their customer base expansion strategies in order to ensure sustainable revenue

growth?

Solution

Younger Generations

Possible Solutions

• Steady as She Goes• Expand their “Used

Bike Market”• Enter the Dirt Bike ATV

market• Partner with General

Motors

Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-boomer-demographics/

Our Optimal Solution

• Manufacture and Introduce customizable, affordable and superior performance bikes.

• Sponsor music bands and festivals that younger generations listen to. For example: One Republic

• Sponsor movies instead of fighting championships

• Transform website to better incorporate social media

Source: Google search of music festival

Implementation

Costs: Increase spending on R&D & Minimal increase in marketing budget

2016Motorcycle Usage Growth Rate 3.16%Number of Motorcycle users in 2009 (Million) 10.4No of Motorcycle users (Million) 12.53Generation X and Y users to Baby Boomers (2:1) 0.33Generation XY users (Million) 4New Motorcycle Purchase Rate 46%New Motorcycle Purchases (Million) 2Harley Davidson Market Share Growth Rate 3%% of Population purchasing Futuristic Sports Bikes 30%Harley Davidson capturing competitors market 2%Harley Davidson Market Share 58%Total number of people buying Harley (Million) 1.12Lower price of Harley 8,000$ Revenues (Millions) 8,939$

Solution

Female Market

Possible Solutions for Women

Macho

Independent

Sexy

Empowered

• Steady as She Goes

• License the Harley Davidson Brand

• Sell a Line of Woman Bikes under a Different Brand Name

• Bring the Leather Jacket Back

• Celebrity Endorsements for the Bike

• Partnership with Fashion Retailers

• Update Advertising Strategy

• Equalize Gender Bias in Human Capital

Optimal Solutions

Macho

Independent

Sexy

Empowered

• Partnership with Fashion Retailers

• Update Advertising Strategy

• Equalize Gender Bias in Human Capital

Partnership with MK

Macho

Independent Empowered

• Incorporate their leather and metallic goods in the Harley Davidson bikes and accessories

• Complimentary business relationship

• Leverage loyal customers• “Luxury accessory” brand

association• Valued MK customers receive

“Free Riding Lesson” pass

Update Advertising Strategy

Macho

Independent

Sexy

Empowered

A New American Legend Is Born…

It’s time to ride

Video that depicts a woman riding her Harley through the “glass ceiling” with the catch phrase “It’s time to ride.”

Equalize Gender Bias in Human Capital

Macho

Independent

Sexy

Empowered

Recruit women who will be able to connect with their target market

Implementation

We believe the successful creation of “the right experience” for women riders’ “dreams of personal freedom” will increase their market share and revenues

Forecasted Market Share

2013 2014 2015 20160.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

62.8000%67.8400%

72.8800%77.9200%

37.20%32.20%

27.12%22.08%

Female Motorcycle Market

Harley Others

Forecasted Sales Revenue

2013 2014 2015 2016 $380,000,000

$400,000,000

$420,000,000

$440,000,000

$460,000,000

$480,000,000

$500,000,000

$418,900,000

$440,012,560

$462,189,193

$485,483,528

HD Female Motorcycle Revenue

Solution

International Market

Possible Solutions

• Steady as She Goes• Pull Out- Harley could stop focusing

on International Markets and should start focusing on the domestic market.

• License- Harley Davidson’s brand to be used by experts in these markets.

• Expand the Product Line of Associated Goods- Expand the product line for leather jackets, boots, and other associated riding goods.

Optimal Solution

• International division/second headquarter • Harley Davidson should start to centralize the

operations in international markets and focus on issues that are region specific.

• Partnerships with local players • Will not only give Harley a better chance to

increase their market share, but also help them to better understand the market.

• Expand the sales of used-bikes –• Will attract more customers as people in the

International market are more price-sensitive. Source: entrepreneur.com

Implementation

Estimated Implementation Results• Small bikes• 29M bikes * $500 = $13.8B• 5% market share = $690M

• Used bikes• 37.27M *.54 *2000 = $40B• 5% market share = $2B54% of people who get motorcycles get used bikes

Competitors

China• Baotian• Lifan• Qingqi• Zongshen• Znen

India• Hero• Moto Corp• Bajaj Auto• TVS Motor• Triumph

Cumulative Results

2013 2014 2015 20160

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Total Revenue Forecast

Younger Female International Traditional

Thank You

We will be taking questions at this time

Possible Solutions

• Steady as She Goes– Target population

would not reach its age until 2035

– Revenues will not increase in the near future

Source: http://www.forbes.com/sites/moneybuilder/2013/11/13/harley-davidsons-downfall-baby-boomer-demographics/

Possible Solutions

• Expand their “Used Bike Market”– Buy Back Used Harley’s,

service them and sell them– Accompanied Service

Packages– Lower Margins in Service Packages

and Used Bikes

Source: https://answers.yahoo.com/question/index?qid=20120517141007AAorbzJ

-Yahoo Comment

Possible Solutions

Source: Google search of dirt bike ATV wall paper

• Enter the Dirt Bike ATV market– Similar image– Attracts younger generation– A new source of revenue– Attract more customers to the

store-cross sell– Fiscal 2013 Cash on Hand: 378

days– Already Saturated Market – Loss of focus from their

current product

Possible Solutions

Source: General Motors Partner

• Partner with General Motors– Attract more customers to the

store-cross sell– American multinational

cooperation– Same brand image of

“freedom”– Harley senior employees are

ex-GM employees– Loss of individual brand image– Possible Conflicts in

workspace