1. Strategic Management: Group 8 MOD-E12014
Siyabonga Titi
Pieter Taljaard
Werner Petrick
Roxanne Stegen
Afsana Nundeekasen

2. EXECUTIVE SUMMARY
MACRO
COMPETITORS
CUSTOMER
INTERNAL -
COMPANY
SWOT
INDUSTRY
BUSINESS MODEL
FRAMEWORK
STRATEGIC PERSPECTIVE
CONCLUSIONS AND
RECOMMENDATIONS

3. MACRO EXTERNAL ANALYSIS

4. MACRO EXTERNAL ANALYSIS: SUSTAINABLE
DEVELOPMENT GOALS
Achieve gender
equality and empower
all women and girls
Ensure access to
affordable, reliable,
sustainable and
modern energy for all.
Build resilient
infrastructure, promote
inclusive and sustainable
industrialisation, and
foster innovation
Take urgent action to combat
climate change and its
impacts (taking note of
agreements made by the
UNFCCC forum)

5. MACRO EXTERNAL ANALYSIS: EMERGING TECHNOLOGY
Emerging
Technologies
Disruption
Watch
Plateau
reached
in #
Years What does it mean
Autonomous vehicles 5-10 Driverless car, self-driving car, robotic car
Wearable user
interfaces 5-10 How a system represents itself to its user, usually via graphics, text and sound.
Machine-to-machine
communications 5-10 direct communication between devices using any communications channel, wired and wireless.
Biometrics
authentication
methods 5-10 unique biological characteristics of individuals to verify for secure access to electronic systems.
Location intelligence 2-5 BI tool capability that relates geographic contexts to business data.
Speech recognition 2-5 Inter-disciplinary sub-field of computational linguistics

6. MACRO EXTERNAL ANALYSIS: PESTEL ANALYSIS
Social-
Cultural
• Lifestyle changes
towards greener and
more environmentally
friendly solutions
• Consumer activism
towards greener
solutions
• Age distribution of
population of HD
owners
Technological
•Energy supply
•Industry spend on R&D
•New products
•Hot trends in technology
Political-Legal
•Introduction of new tax laws, specifically
carbon taxes and carbon trading
•Increased political will to resolve
sustainability and environmental issues
•Desire to be less dependent on the use
of oil as source of energy Economical
•Increasing energy and
fuel costs, highly volatile
due to oil prices and
increasing being taxed
•Externalities, pollution
costs not paid by end
user
•Long term increase in oil
prices
•Buyers shift towards
cleaner lower emissions
motor cycles
Ecological
• Regulation on emission
levels
• Pollution
• Increasing green and
sustainability awareness
amongst more affluent
population

7. MACRO EXTERNAL ANALYSIS: STAKEHOLDER ANALYSIS
Key stakeholders Core expectations Primary interaction mechanism Strategic implications
Customers
Unique patented experience, provided in an ethical and
professional manner, whilst complying with health and
safety, and other regulations.
Deliver on promise to “fulfil dreams of personal
freedom”
HD successfully interacts with
owners through HOGs club at rallies,
through dealers during sales and
service touchpoints.
Highly loyal customer base - become
part of the HD family. More than just a
customer.
Suppliers/Sub-contractors
Transparency, limit bull whip effect. Ethical business
processes. Long term supply agreements. Limited
number of qualified suppliers. Procurement channels and deliveries
Assist suppliers in improving their
supply chain by sharing information on
HD demand to limit bull-whip effect
and thus increasing supplier's internal
efficiencies and profitability.
Employees
Promotion of employee development, internal codes of
conduct, standard operating procedures, health and
safety in the workplace. Internal web based long
distance learning programs, employee bursary and
sponsorship to the HD mechanic clinic.
Daily personal interaction, social
media, training events, clear and
communication ie new letters.
Invest in highly qualified people as
they are the drivers behind success.
HD operates mega factories that are
heavily automated and specialised.
Environment
Elimination of waste, noise reduction, water
sustainability, reduction in energy intensity,
environmental leadership.
Management of the HVAC systems in factories
News, social media, community
events
Corporate Social environment
Contribute to the environment
Community
Market share growth, sustainable earnings growth,
improving financial metrics, share price growth, deliver
on expectations. Example “Renew the Ride” program.
Annual reports, annual general
meetings, market presentations and
donations to their MDA and social
programs. Drive financial growth
Shareholder
Market share growth, sustainable earnings growth,
improving financial metrics, share price growth, deliver
on expectations
Annual reports, annual general
meetings, market presentations Drive financial growth
Government Compliance with regulations
Various interactions, health
inspections, tax payment Understand changes in regulations

8. INDUSTRY ANALYSIS

9. $-2,000.00
$-
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
-1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
AverageCostperBike
Forecast All Bikes
CAGR 2014-2019
Asia Pacific N/America Europe
Size of bubble indicates
overall market value
`
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
HD
Marketshare%
Heavy Bike Sales
CAGR 2012-2014
Asia Pacific Europe USA
Size of bubble indicates number
of heavyweight bikes sold in 2014
Industry Size HD Market Share
Key Insights
•Opportunity: Heavy bike sales market share is small in the fast growing Asia-Pacific market and HD has a 25% market share. The volume of
heavy bike sales should increase as the middle class emerges in this market which is anticipated to create substantial additional volumes.
•Opportunity: HD has a very small market share in the substantial European market for heavy bikes. An aggressive marketing strategy could
yield additional market share from its current low level of 12%.
•Threat: HD has over 50% market share in the US heavy bike segment making them dominant and a target for competitors
INDUSTRY ANALYSIS: INDUSTRY SIZE & MARKET SHARE

10. INDUSTRY ANALYSIS: INDUSTRY DRIVING FORCES
Industry Driving Forces Motorcycle Industry Implications for Harley-Davidson Demand Competition Profitability
Changes in an industry
long-term growth rates
Long term growth of
industry to be at 2% and
growth in heavyweight
bikes to be flat. Aging
target market.
HD's main product range is heavyweight bike and the
slow forecasted growth will influence sales volumes
Changes in who buys the
product and how they use
it
Main growth expected in
light and moped bikes in
developing markets, used
as main mode of transport
HD's products lean more towards the leisure segment and not
used as a main mode of transport which means that they will
be excluded from the forecasted growth in this segment.
Growing buyer
preference for
differentiated products
instead of a commodity
product .
Apart from industry
segments where the
motorcycle is the primary
mode of transport there
seem to be a growing
demand for differentiated
products.
HD offer a differentiated product range which speaks well
to a growing number of consumers that prefer unique
products and have the means to pay a premium to get
such products.
Regulatory influences and
government policy
changes
Increasing trend of
regulatory restrictions on
carbon emissions and
noise pollution.
HD's marketing focuses on the experience and includes noise
levels and high performance both which will face increased
regulation and could diminish the uniqueness of the HD
experience.
Changing societal
concerns, attitudes and
lifestyles
Increasing trend of societal
awareness of pollution.
Increasing global middle-
class population that can
afford leisure activities like
motorcycling
Increased societal awareness around the environment
will have the same negative impact on HD as increased
regulation. Increasing middle-class looking for leisure
activities creates an opportunity for HD to increase
volumes

11. INDUSTRY ANALYSIS: PORTERS 5 FORCES
MODERATE
MODERATE
Bargaining Power
of Buyers
Buyer power in
this market is
weakened by a
high level of
product
differentiation and
customer loyalty
with respect to
dominating brands
Threat of New Entrants
For new entrants to the market,
setting up a production facility
involves large capital outlay thus
constituting a significant entry
barrier and high fixed cost.
High
Low
Low
Industry Attractiveness
Overall the motorcycle industry seems to be
relatively attractive with a good profit potential.
It is highly concentrated which possibly indicates
a healthy degree of rivalry but the industry enjoys
significantly high barriers to entry.
Most of the main manufacturers have been able
to create strong brands and differentiated
products, thus creating high customer loyalty.
HD is well positioned in this Industry.
HD has created a very strong brand and markets
its HD experience as unique. It is this
differentiated products/service which
distinguishes them apart from their main rivals,
and a clear differentiator.
They have economy of scale, technical abilities
and financial muscle to maintain and grow their
brand presence in this industry.

12. INDUSTRY ANALYSIS: INDUSTRY VALUE CHAIN
Product
Development
Supply Chain Manufacturing
Sales and
Marketing
After Sales
Service
Limited Involement
Market research
R&D
Prototyping
Component suppliers
Energy Suppliers
Assembly
Customization
Quality and Control
Distribution dealerships
Inventory
Financing
Advertising
Social Media Communication
Warranties
Maintenance
Spares
Reuse/Recycle
Key Insights
Product development is key in this industry. Consumer preferences and regulations are dynamic and Industry Players need the ability
develop products that meet the needs of their target markets. HD has a good product development record and the R&D resources to
keep up with changes in consumer preferences.
The heavyweight market segment values quality and service in their buying decision, which makes it important for these Industry Players to
build close relationships with dealers to ensure this market requirement is fulfilled. HD prides itself for excellent quality and supports
their product globally through their dealer networks

13. INDUSTRY ANALYSIS: KEY INDUSTRY SUCCESS FACTORS
Companies must build a strong brand reputation and
image in order to create brand loyalty. This must be
backed up by expected product warrantees and
guarantees to establish trust in the brand.
Companies must be able to manage an
extended supply chain in order to
effectively deliver and support the various
product offerings globally.
Clever financing arrangements
gives more customers access to
a companies’ products.
Major industry players require
ongoing investment in production
technology to achieve scale
economies as well as the required
production capacity to meet
demand.
Companies must have the ability to design
new products to cater for emerging
consumer trends. They must be able to
protect their IP and unique features of
product offerings through application of
patents and copyrights
Companies must offer sufficient product line
breadth in order to give consumers a range of
options. Industry players must be able to offer
a differentiated product range to attract new
customers and keep existing ones.
Global and Regional footprint of dealerships are
required to reach target markets. This must be
backed up by effective after-sales service which
include the maintenance of bikes and a full range
of spares at dealerships.
Key Insight:
HD performs well in each of the industry KSFs

14. COMPETITOR & CUSTOMER ANALYSIS

15. COMPETITOR ANALYSIS: RELATIVE EVALUATION
Critical Success Factors Weight Rating Weighted Score Rating Weighted Score Rating Weighted Score
Research and Development 0.2 2 0.1 2 0.4 4 0.8
Price 0.1 5 0.5 3 0.3 2 0.2
Product diversity 0.15 4 0.6 2 0.3 2 0.3
Design and Quality 0.05 3 0.15 2 0.1 3 0.15
Customer loyalty 0.2 4 0.6 3 0.6 3 0.6
Financial Position 0.05 2 0.1 3 0.15 3 0.15
Brand 0.1 2 0.2 4 0.4 4 0.4
Market Share 0.15 2 0.3 2 0.3 3 0.45
1 2.85 2.55 3.05

16. COMPETITOR ANALYSIS: STRATEGIC GROUP MAP
Low
High
High
LowPrice
Innovation

17. CUSTOMER NEEDS ANALYSIS: EVOLUTION
Commodities
Generic biking
wear
Goods
Biking accessories
Services
Online retailing platform
Customers centric
Focus on the quality
Experience
Render Authenticity
Apparel Shopping Experience
Engagement on social media
HOG membership
HD Rider clubs
Travel and Tourism packages
Personalization
FAKE
REAL
FAKE
FAKE
REAL
FAKE
REAL
REAL

18. INTERNAL ANALYSIS: FINANCIAL RATIOS
Year 2015 2014 2013 2012
Ratio
Gross Profit Margin 44% 43% 42% 42%
Operating Profit Margin 19% 21% 20% 18%
Net Profit Margin 13% 14% 12% 11%
Return on Asset 8% 9% 8% 7%
Return on Equity 41% 29% 24% 24%
Current ratio 1.45 1.65 1.59 2.70
Acid Test 1.23 1.46 1.42 2.43
Debt to Asset 0.82 0.69 0.68 0.72
Debt to Equity 4.43 2.28 2.13 2.59
Long - term Debt to Equity 2.63 1.29 1.14 1.71
Times Interest earned 95.38 307.78 25.49 21.73
Average collection period 36.39 29.28 27.14 23.95

19. INTERNAL ANALYSIS: CAPABILITY ASSESMENT
Processes Systems
Staff
All the systems, procedures and
processes, formal and informal, that
help the organisation function:
• Training systems
• Accounting procedures
• Budgeting systems
• Point of sales systems
• Information systems to ensure
smooth production
• Human resource systems to
ensure training and development
The company’s crucial
processes:
- Planning of manufacturing to
ensure short lead-times
- Supply of components
- Sales targets
- Well established distribution
centres to allow for short lead-
times
HD provides employees with bursaries for external studies
as well as in-house distant learning.

20. INTERNAL ANALYSIS: RISK ANALYSIS
Market RiskReputational
Risk
Credit Risk
Liquidity Risk
The risk of incurring
financial losses due to
counterparts (suppliers)
failing to meet their
obligations.
Impact: Not severe as
mainly financed through
banks
Probability: low
Mitigation: Maintain
current business model
Arises from inadequate
employees or systems.
Impact: Loss in reputation,
quality, increase in cost, loss
in market share
Probability: low
Mitigation: Maintain strong
corporate culture, training
development, incentives
Regulatory Risk
Probability that HD does not meet its financial
obligations
Impact: Loss of customers and brand image
tarnished. Difficult to recover.
Probability: Low
Mitigation: Good balance sheet
Possible government intervention and increase in
gas emissions.
Probability: Med
Mitigation: Reduce gas emission and increase R&D.
Adhere to legislation globally through sustainably
report.
Possible high exposure of
independent dealership and
customers not meeting financial
commitments of HD credit offered.
Impact: Not severe as mainly
financed through banks
Probability: low
Mitigation: Review business
High Reliance on independent dealer
networks to create demand.
Probability: Medium
Mitigation: Relationship with all dealerships.
Operational Risk

21. INTERNAL ANALYSIS: HD SWOT
• Diversification
• Product Portfolio
• Brand Strength
• Market Share in
USA
•Excellent supplier
relationship
•Well positioned in
the customers
mind - “freedom
and strength.”
STRENGTHS
•Aging Target
Market
• Seasonality
• High input costs
•High cost per
finished unit
•Poor marketing
techniques
•Stigmatism of
Hells Angels
•.
WEAKNESSES
•Penetrate
Emerging Markets
•International
opportunities
• Penetrating
Generation Y
New models &
differentiation
•New Marketing
Campaigns
OPPORTUNITIES
•Competition
•Japanese models
lower pricing
•Loss of market
share in EU
• Legislation
Increased emission
Standards
•Poor Economic
Performance
THREATS
S
W
O
T!

22. BUSINESS MODEL

23. BUSINESS MODEL: PARTICIPATION STRATEGY
Customer
Selection
Product/
Service
Channel/
Delivery
Geography
Participation Strategy
Men (35+)
Women (recent)
Young Adults (recent)
Age: from 45
Upper Income
Seek change / freedom
Socially aware
Status image
“Mean machines”- Range
of motorbikes
Customisation
Parts and Accessories
Division
HOG’S membership –
uniqueness
HD Financial services –
finance subsidiary of HD
Selective dealerships
internationally
Showrooms
Strategic
manufacturing
regions, i.e. India,
Brazil and USA.
Dominant presence in
USA
6400 employees
worldwide
Increased growth in
China, Brazil, Singapore,
Russia, Dubai, Czech
Republic, Vietnam,
Philippines and South
Africa

24. BUSINESS MODEL: RESOURCE STRATEGY
Strategic Processes
Promotion – HD does not generalise itself, rather only promotes the image and products through unique and exclusive channels.
Processes – HD is product and process focused.
Partners – HD has key specific partners which they have aligned themselves with strategically, 2,500 parts that are supplied by 700 direct
suppliers of which around 200 are key suppliers. There is a fair amount of complexity within the supply chain.
Employees – HD employs a diverse workforce and focuses on equality for all.
Organisation – HD strategic asst is the brand and the customer loyalty entrenched within the HD brand image.
Promotion
Process
Partners
People
Organisation
-Key partners; subtle
advertising in movies
-Dealerships displays
-Rallies - displays
-Lifestyle – not transport
-Low traditional
marketing
• Efficient supply chain
• Lean inventory
management
• Skilled personnel
• High costs low equipment
utilization
• High Degree of flexibility
• Product flow variable,
planning and scheduling
are difficult.
-Catalyst
-National Society of
Black Engineers
-National society of
woman engineers
-Employees
-Suppliers
On the job training
Web based learning
Scholarships
HD Repair Training
School
HD corporate
headquarters
are in Milwaukee,
Wis. The worldwide
dealer and
distributor network
is a strategic assets
and value
networks.
Core competencies Strategic assetsResource Strategy
StrategicAssets
Corecompetencies
Competitive
advantage

25. BUSINESS MODEL: PROFIT STRATEGY
Efficiency
ratiotrends
Costdrivers
Costof
capital
Income
streams
Pricing
approachper
targetmarket
Profit Strategy
Sustainable
sourcing of raw
materials and
components.
Up skilling of
labor force to
improve
productivity and
efficiency.
•Accessories
and Apparel
•Motorcycles
•Dealerships
•Peripherals
from Rallys
Target market is
middle to upper
LSM.
Traditionally
been male and
age 45+. Latest
market approach
to include
females and
younger
generations.
Low cost of
capital,
operating in a
low inflation
environment
within USA.
Hire seasonal workers to match
seasonal demand and consolidate
manufacturing tasks.
HD has a current Inventory turnover
of 8 times annually. They have
experienced a positive trend in their
Accounts receivable turnover over
the past 4 years.

26. BUSINESS MODEL: COMPETITIVE STRATEGY
Overall low
cost provider
strategy
Focused
differentiation
strategy
Focussed low
cost strategy
Broad
differentiation
strategy
Best cost
provider
strategy
MarketTarget
Broa
d
Narr
ow
Competitive
Advantage
Low
Cost
Differentia
tion
Harley-Davidson adopts a
focused-differentiation
strategy whereby their
focus is on the luxury
heavyweight motor cycles,
where the product and
service is a lifestyle.
This lifestyle sells an
identify which HD drivers
can identify with and be
part of an elite group.
A strategic control point is
that HD owns the Harley
Experience that they
promise to their customers
and leveraging on this
helps lock in customers.
KEY INSIGHTS:

27. STRATEGIC PERSPECTIVE

28. STRATEGIC PERSPECTIVE: R LOOP
Key Insight:
HD has a well established
and integrated R-Loop
that should enable their
continued growth.

29. STRATEGIC PERSPECTIVE: BLUE OCEAN ERRC GRID
0
1
2
3
4
5
6
Custom HD Touring BMW Performance
Standard Electric (To Be)
Use HD’s R&D, innovation and manufacturing strengths to develop an E-bike range that speak to the growing number of
environmentally conscious consumers. HD can piggyback on the battery and performance technology that Tesla has
successfully brought to market already. The E-bikes can also use the Tesla charging stations that are widely available in North
America, Western Europe and China. This range would incorporate the latest technology trends with the objective of creating
an E-bike range that is kind to the environment but at the same time high-tech, comfortable, high performance and safer than
rival offers.
Value
Creation
Reduce
Create
Raise
Eliminate
• Cost
• Operating cost
• Complexity
• Environmental
Impact
• Maintenance
• Electric
• Solar
• Greener
technologies
• Reliability
• Efficiency
• Technological
advances
• Carbon Emissions

30. CONCLUSIONS AND RECOMMENDATIONS

31. • Focused differentiation strategy
• Iconic brand and following
• Innovation and technology
• Efficient production
• High quality products
Conclusions

32. Recommendations – Focus Pillars
Growth :
Expansion into
new regions and
motorcycle
classes. I.e. new
Lightweights
Continuous
Improvement
Invest in R&D
facilities.
Leadership :
• Engaged employees
• Success
• Live values
• empowerment &
creativity
Sustainability
•Product
Development
•Optimizing
business
process