The SWOT analysis from DATAMONITOR shows that Harley-Davidson, Inc. has strengths in having a strong market position and brand image; they maintain a wide range of marketing and distribution networks, have kept a high inventory turnover ratio. Harley gets their strong market position from having the largest share of the US heavyweight motorcycle market since 1986. Their strong and unique image brand come from their products being marketed under multiple brands such as Harley, Blast and Riders Edge. This has enabled them to reach a wide range of people; from buyers to new investors.
This leads into their next strength of wide marketing and distribution networks. In the US, Harley-Davidson sells their products through a network made up of approximately 686 independently -owned full service Harley-Davidson dealerships. Out of that 686, 306 of them are combined Harley-Davidson and Buell dealerships. In Europe, they have 5 independent distributors and 383 independent dealerships. Of that 383, 56 are Harley-Davidson only dealerships, 323 of those dealerships are combination dealerships and 4 of them are Buell only dealerships. Harley even has distribution networks in the Asia/Pacific area and Latin America. This all has built a strong network base for Harley that helps them meet the demand for their products in multiple regions in a cost-efficient way.
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This all can factor into why they have such a high inventory turnover ratio. Because their turnover ratio is significantly higher than their competitors this reduces the exposure of the company to inventory obsolescence due to rapid technological changes occurring in the automotive industry. This all signifies the efficient management of the inventory by the company. Overall from these strengths I would say that they are lasting ones that have obviously been working for this company well and has allowed them to expand their reach across the world.
The DATAMONITOR SWOT analysis shows Harley-Davidson weaknesses being that they are weakening in financial performance and having unfunded employee post retirement benefits. In the fiscal year of 2008 it was recorded by Harley that the revenues of the company had declined at a CARC (compound annual rate of change) of 2% from $6,185.6 million in FY 2006 to $5,971.3 million in FY 2008. A 2.3% decline was found in all of the key business segments and 9.4 % decline in financial services. This situation has of course causes investors to consider pulling their support.
On top of this, it is mentioned that Harley-Davidson has a significant unfunded pension obligations. The unpredictability of financial market led to this decline in pension fund asset values. These obligations have forced the company to make regular cash contributions to bridge the gap between pension assets and liabilities. This causes pressure to be put on the liquidity position of the company. These weaknesses are factors that management needs rectify as soon as possible for if their financial performance does not start increase they could not only lose investors they could start losing what makes them strong such as their strong market position. However the fact that they are having to use cash to keep the employee retirement benefits is possibly just as critical for they are putting themselves in a position where a lot of their funds will be tied up and not easily liquidated if necessary. There should be something in the strategy to find a new source of funds for both issues.
The DATAMONITOR SWOT analysis shows Harley-Davidson opportunities are launching new models and growing global motorcycle market. Just in the past two years, Harley/Buell introduced nine motorcycles. In 2010, they plan to launch nine more models. Harley is releasing these models to stay with the ever changing market flow. The release could possibly increase Harley's product portfolio and revenues. This will be quite beneficial to any plans to grow the global motorcycle market. This particular market has shown significant growth recently. It has been forecasted that the performance of the market is going to accelerate which will drive the market value to a value of $122.4 billion by end of 2012. It can be said that expanding end market will likely drive demand for the company's products. This opportunity is one that Harley could capitalize on and expand its revenues and profits. These opportunities can possibly decrease the before mentioned weaknesses if not make them nonexistent. There is definitely a need for a strategy that would use these opportunities to the fullest.
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The DATAMONITOR SWOT analysis shows Harley-Davidson threats as being regulatory compliance, labor issues, and forecasted recession in North America and Europe. On the subject of regulatory compliance, because EPA (US Environmental Protection Agency) along with other entities started to enforce stricter regulations on applicable emissions and noise standards this is putting pressure on companies to adapt their product portfolio. These new rules will increase costs and obligations on the company's operations. Some other costs that have been steady increasing over time are labor costs across the world for Harley-Davidson. In the US, the costs come mostly from the increase in minimum wage. This increase has adversely affected the bottom-line in the US. In addition, union contracts will be expiring soon. With how things are progressing currently, there is no guarantee that the negotiations with these unions will go well for the Harley. If a new agreement is not settled on this could cause work stoppages or labor disruptions. This will then flow over to cause problem with customer relationships and general operations.
With a forecast of recessions in North America and in Europe, Harley is definitely in for a rough time this year. With most of their business here in the US and the profitability of automotive business is tied to the performance of the economy in which the company operates, the forecast isn't too surprising. To add on to this bad news, it is reported that the consumer confidence in the US is expected to decline. Once confidence starts to fall, spending will start to fall also. This then signals that there is a depression in the economy since consumer spending accounts for 2/3 of our GDP. Of course this all causes a challenge for Harley with the decrease in the demand for their products since people just aren't spending. With these threats, I can see how they affect all the other aspects of the analysis. Each part is interconnected. These threats of course need to be neutralized. But how to do that is of course always the question when it comes to making a strategy. I would suggest starting with the opportunities, then strengthen the weaknesses, maintain strengths and from there eliminating threats might be easier done.
2) The reason why a good understanding of the forces driving the industry is necessary is because strong knowledge of the five forces will help determine the profit potential in an industry by find out what influences the prices, costs, and required investments of businesses-the elements of return on investment. To identify the important structural features of your industry via the five forces, you conduct an industry analysis that answers the question, "What are the key factors for competitive success?"
When considering the bargaining power of suppliers one must ask questions such as how much power do the suppliers have, what affects their power and how to reduce their bargaining power? The end result of asking these questions should be to somehow form good partnership where both parties are ideally equal in power.
When looking at the bargaining power of the buyers one should consider, how much negotiating power the buyers have, how much power they have over the company, and what factors influence the buyer's power and reducing their bargaining power. When faced with this force, one must be aware of switching costs, who your buyers are and if there are many or few, and make sure that quality and quantity of information is good. Also with this force one must try to maintain a good relationship between the two. When concerned with the threat of new entrants, this will be reduced if entry into the field is high and there are strong unique barriers in place to keep competitive pressures good. The force of the threat of substitutes should be kept a close eye on because substitutes can come in many forms and they can affect the market by possibly causing price ceilings to be put in place. The last force to be considered is that of rivalry between competitors. It's never a bad idea to keep an eye on the competition. Knowing how intense your competition is and how intense the rivalry between others in your industry is a wise idea. This is all very important for an industry analysis.
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Purdue Extension. (n.d.). Industry Analysis: The Five Forces. Retrieved March 5, 2010, from http://www.ces.purdue.edu/extmedia/ec/ec-722.pdf
3) After graduation, I am considering following a strategy of differentiation. From these four years of college, I will use the knowledge and experiences I have gained here with any knowledge and experiences I have acquire over the 21 years of my life to make myself stand out in the sea of college graduates. I will use my experiences and know-how to climb above all the competition. My work and my skills along with my achievements will help make me be a worthy candidate for any type of position in my chosen field. Â I plan on being exactly what a book retail company like Borders would want in a manager. Which would be: passionate about the business as well as being a leader in delivering superior customer service.
4) Some factors that would indicate a manager is a strategic thinker are that they think factually. Putting it simply, they try to remove how they feel about a situation and use the facts to make decisions. They consider the consequences. They think about the range of possible consequences that may result from an action by listing them out. This type of manager weighs the risks and rewards without as much bias as possible when thinking ahead. They don't just assume that the face value issue is always the real problem; they try to discern what the real problem is. Also a strategic-thinking manager would be good at symptom-cause analysis. This is knowing the difference between what the cause of a situation is and what the symptom of the cause is. The biggest indicator of a strategic thinking manager is his/her decision making ability. If the manager is able to do all the before mentioned things, than the possibility of him/her making the best decision possible is more likely.