Company summary (history and primary business)
Harley-Davidson Motorcycle Company was started in 1903 in Milwaukee; U.S. The company launched its trade mark bike in 1909, which was the fastest in those days. Following increased demand of motorbikes during the World War I, Harley-Davidson business grew dramatically and the company became an innovative market leader. However, following the great depression, the industry started diminishing but Harley-Davidson sailed through because it received hefty orders from the police and military (Jeremy 2).
During World War II, Harley-Davidson continued to flourishing as a result of the military purchasing. When World War II ceased, the company unveiled recreational bikes, which included Duo-Glide (1958) and Sportster (1957). In 1969, Harley-Davidson started receiving stiff competition from the American Machine and Foundry (AMF), leading to its sale in 1970’s, following significant reduction in sales. However, the company was bought in 1981 by some members of its management team. Thereafter, the company continued performing poorly. Following the intensified competition from Japan, quality improvement became a key management issue; and as a result, Harley borrowed quality management principles from Japan. These included customer and supplier relationships, top management support, and employee involvement among others. The new principles coupled with increased import tariff helped the company to start regaining market (Jeremy 4).
Today, the company employs over four thousand workers, with more than 600 dealerships in the United States. Harley-Davidson adoption of Japanese continuous improvement principles led to its remarkable improvement and its rescue from the brink of collapse. The company’s two critical dealings include granting of credit to its customers to purchase Harleys and selling of Harleys. In particular, the company directly sells motorcycles and motorcycle accessories and parts. It also operates motorcycles dealership, sells general merchandise and motorcycle gear. Its motorcycle segment manufactures and designs motorcycles and sells them at wholesale. Its branded products focus on design simplicity, traditional styling, quality and durability. The touring segment deals with touring class of motorcycles such as the three wheeled motorcycles (Jeremy 6).
Ratio Analysis
Current ratio is the ratio that shows the capability of a company to pay its short-term obligations. A current ratio which is more than one show that the company is be able to pay its obligations as it falls due. Haley’s trend since 2008 is very health since it has been increasing. The ratio is computed as follows:
Debt to total asset ratio shows the percentage of the company’s assets that are financed by loans. This ratio is a good representation of the company’s general financial position, such as the ability to pay outstanding obligations. Haley’s ration is somewhat stable as it ranges between 0.5 and 0.62, meaning that the company is not over relying on loans to finance its operations (Harry-Davidson, inc. 16). The slight increase could however be attributed to global economic crisis that started in 2008. The ratio is computed as follows:
Debt to total asset ratio = debt / total assets
Debt to equity ratio is a gauge of an entity’s financial leverage, and shows the share of equity and debt that the entity uses to finance its assets. Although I higher ratio may portray growth aggressiveness, it may be counterproductive because it increases interest expense. The ratio increased drastically after 2008, but seems to stabilize afterwards (Harry-Davidson, inc. 16). The ratio is computed as follows:
Situation Analysis
Closure of Australian subsidiary
Harley-Davidson, Inc is contemplating stopping its operations in Australian subsidiary (New Castalloy), which manufactures motor cycle wheel hubs and wheels. Instead, the company is opting to contracts other suppliers for such items. This transition is expected to reach completion in mid 2013. Closure of this subsidiary is part of a wider strategy, which was started back in 2009 to improve the company’s manufacturing potential by consolidating and restructuring its activities for better efficiency, competitiveness and flexibility (Milwaukee 2).
Ideally, the company intends to give emphasis on motorcycels’ fuel tank metal fabrication, frames, paint, fenders and final assembly. As such, the company has been trying to outsource the supplier work in relation to areas that it cannot perform competitively on its own. This decision was reached after close review of New Castalloy’s business situation in connection with the company’s’ general strategy. The facility, which employs 212 workers, manufactures the cast wheels used to assemble Harley-Davidson motorcycles. The wheel producer was acquired in 2006 to ensure continuous flow of supplies. Beginning 2014, the new move is expected to generate an annual saving of approximately $9 million (Milwaukee 6).
Harley-Davidson Trends and Forces
The average age of Harley Davidson’s customers appears to increase every six months, for the past 6 years. Analysts argue that this is due to the fact that baby boomers’ children are no longer attracted by huge bikes, which are sold by Harley Davidson’s. The younger generation is reported to be attracted by Japanese bikes which are smaller and cheaper. To quash this trend, Harley Davidson’s acquired a fast bike manufacturer called Buell in 1998. In addition, unconventional V-Rod was introduced in 2002, and premium light-weight bikes producer, Italian MV Agusta company brought out in 2008. Interestingly, Harley-Davidson has relegated this strategy, claiming that it does not auger well with its brand image. As a result, Harley-Davidson decided to do away with Buell products and to divest MV Agusta in 2009. Essentially, Harley has found it very critical to maintain its long-term market share by attracting the younger generation, while at the same time retaining its core customers (Wikinvest 12).
The impact of strength of US Dollar on Harley Davidson
Apparently, Harley Davidson business involves a lot of international transactions, especially around Europe. Indeed, the percentage of sales that comes from international transactions increased from 18% in 2004 to 32.5% by 2010, which was partly as a result of declining value of dollar. Considering that Harley Davidson’s production costs is incurred in United States, weakening of the dollar against the Yen and Euro is a benefit to its operations. What happens is that people tend to purchase dollars in order to buy goods from U.S., or for hedging purposes. When the demand of dollars is high, the dollar appreciates, causing companies like Harley to incur losses (Wikinvest 12).
Works Cited
Harry-Davidson, inc. “State of Operations Data” 2010 Annual Reports. Harry- Davidson, inc., 2010. Web.
Jeremy, Low. “Harry Davidson’s history” Street directory.com. Singapore Guide, 2011. Web.
Milwaukee, Henry. Harley-Davidson to Exit Operation of New Castalloy Manufacturing Subsidiary.PR Newswire, 2011. Web.
Wikinvest. Harley Davidson’s wiki analysis. Wikinvest, 2012. Web.