GENERAL Harley-Davidson Essay Example

to concentrate its financial and human resources on its core motorcycle business. The Company does not anticipate a loss on the discontinuance of the Transportation Vehicles segment. The results of the Transportation Vehicles segment have been reported separately as
discontinued operations for each year presented. On November 14, 1995, the Company acquired substantially all of the common stock and common stock equivalents of Eaglemark Financial Services, Inc. that it did not already own. The purchase price was approximately $45 million, which was paid from internally generated funds and short-term borrowings. The Company has included the results of operations of
the Financial Services segment ($3.6 million) in its statement of operations for the year ended December 31, 1995 as though it had been acquired at the beginning of the year and deducted the preacquisition earnings as part of non-operating expense. The Company increased its quarterly dividend in September from $.04 per share to $.05 per share which resulted in a total year pay out of $.18 per share.

Units Shipped and Net Sales

The Motorcycles and Related Products (Motorcycles) segment's net sales increased 16.5% over 1994 due primarily to
a 9,293 unit (9.7%) increase in motorcycle shipments, as well as a 14.0% increase in its Parts and Accessories business. The increase in motorcycle shipments is the result of ongoing implementation of the Company's manufacturing strategy and efforts to satisfy demand. The manufacturing strategy is designed to increase capacity, adjust to changes in the market place and further improve product quality while reducing costs. Sales of Buell motorcycles (which are distributed through select Harley-Davidson dealers) increased to $14 million in 1995 as compared to $6 million in 1994.

The Company began 1995 at

a scheduled motorcycle production rate of 395 units per day. As the implementation of the manufacturing strategy continued, the rate increased to 470 units per day by the end of the year. The Company exceeded its production goal of 100,000 units in 1995 and anticipates 1996 production will reach at least 115,000 units.

The Company is currently reviewing alternative sites for the construction of a new manufacturing facility to enable it to achieve its long-term goal of doubling motorcycle production by 2003. Year-end data indicates that the domestic (United States) motorcycle market continued to grow throughout 1995.

Compared to 1994, industry registrations of domestic heavyweight (engine displacements in excess of 751cc) motorcycles were up 11.3% . The Company ended 1995 with a domestic market share of 55.8% compared to 56.1% in 1994. This decrease is a reflection of the Company's constrained production capacity in a growing heavyweight motorcycle market. Demand for the Company's motorcycles continues to exceed supply with nearly all of the Company's independent domestic dealers reporting retail orders on all of their remaining 1996 model year motorcycles allocations (production through June, 1996). Export revenues totaled $394.8 million during 1995, an increase of approximately $63.6 million (19.2%) over 1994. The Company has exported approximately 30% of its motorcycle unit shipments since 1990 and expects to maintain approximately the same percentage during 1996. The Company distributes approximately one-half of its exported units through its wholly owned subsidiaries in Germany, Japan and the United Kingdom, which allows the Company flexibility in responding to changing economic conditions in a variety of foreign markets. While definitive market share information (engine displacements in excess of 751cc) is not available in many

foreign countries, the Company believes it holds an approximate 11% market share in the European markets in which it competes and a 22% market share in the Pacific

Rim.

During 1995, the Parts and Accessories business generated $292.3 millionin revenues, an increase of 14.0% over 1994. The rate of increase is lowerthan experienced in recent years, however, management believes the 1995 increaseis more indicative of the long-term growth potential of the Parts and Accessoriesbusiness. The Motorclothes business, which accounted for approximately $100million of Parts and Accessories sales in 1995, is expected to remain stablein 1996, while the Motor Parts and Motor Accessories businesses are expected
to increase. The Parts and Accessories business is expected to grow at an annualrate similar to the annual growth rate in motorcycle shipments.

MARKETING PLAN OBJECTIVES

Harley-Davidson, Inc. is an action-oriented, international company-a leader in its commitment to continuously improve the
quality of mutually beneficial relationships with stakeholders (customers, dealers, employees, suppliers, investors, governments
and society). Harley-Davidson believes the key to success is to balance stakeholders' interests through the empowerment of all employees to focus on value-added activities. This value added mentality helps us to improve our product quality. It important to us to offer the highest quality product possible.

In addition to quality we have also been focusing on service. Many of our dealers are continuing to make major investments in the future growth of their businesses-such as converting their dealerships into world-class retail sales establishments through our Designer Store program, building larger dealerships, expanding their existing service areas or opening alternate 'satellite" stores in high traffic areas.

Both we and our dealers are investing in training and education, to better serve the motorcycling community. We will also

be focusing more strongly than ever before on new product development. With worldwide motorcycle market growth expected to continue, we're dedicated to maintaining leadership in our traditional motorcycle segments and gaining further penetration into the performance market through our joint venture with Buell. We want to ensure that while our competitors are busy copying our past work, we're re-defining the market with exciting new products. Our new Product Development Center, expected to be completed by year-end '96 in Milwaukee, should give our staff the room and tools they need to maintain our market leadership.

MARKETING STRATEGY

The Americas Our top priority in the United States is to grow primarily through our existing dealers.

Plans for 1996 include analysis of dealer five-year plans and local market variables to establish priorities for implementation of dealership improvements and additions. We'll also begin to bring more consistency to our dealer network by helping dealers improve their businesses based on a "best practice" model that incorporates local market data and customer input with characteristics of our most successful dealerships. Our second priority is to grow through new dealers on an as-needed basis, while adding new "satellite" outlets where
necessary to increase customer convenience and satisfaction. These outlets, typically located in high traffic areas, are smaller, dealer-owned motorcycle service facilities or stores carrying mostly MotorClothes, Genuine Motor Accessories and Genuine Motor Parts. Although still in the developmental stages, we're allocating more resources to future growth of South and Central America, Mexico and the Caribbean. In 1995, new dealerships opened in the major market cities of Bogota, Colombia and Lima, Peru. We are currently considering new markets in which to open additional dealerships in 1996 and

beyond.

MARKETING MIX

The sportster, First introduced in 1957, the Sportster is Harley-Davidson in its purest form. It is an uncompromising exercise in getting power to pavement. As it turns forty, the Sportster certainly isn't experiencing a mid-life crisis.

Racing In his first year of superbike racing, Chris Carr won rookie-of-the-year honors and finished twelfth in overall points, while still winning dirt-track races.

This year, he is committed full- time to road racing and his poll position at Laguna Seca proved it. This year, he is joined on the VR 1000 racing team by Thomas Wilson, fresh from tremendous success in the 600 and 750 Supersport classes. On the dirt track, Scott Parker, coming off his record sixth AMA Grand National Championship, continues to dominate aboard his XR 750. Other Segments Eaglemark Eaglemark began in 1993 as an independent company with Harley-Davidson holding a minority stake. Following Eaglemark's success in achieving our initial goals, Harley-Davidson acquired essentially full ownership in November of 1995 to fully benefit from future growth and value creation.
Eaglemark was established to better meet the financial needs of Harley dealers and owners, while producing attractive returns. We use the name Harley Credit and Insurance, rather than Eaglemark, to build on the loyalty customers have for the Harley-Davidson brand. Consistent with the brand's image, our services aim to provide real value to customers through one-stop shopping, fast personal service, competitive terms and a thorough knowledge of the products we finance and insure.

As successful as our P;A business has been over the last several years, we took some major steps in 1995-including repositioning replacement parts and mechanical accessories lines-to re-energize our approach and maintain our market leadership. To

address dealer and customer dissatisfaction with backorders on popular items, we're establishing closer ties with our suppliers, to ensure they have adequate capacity to handle demand. And the new P&A distribution enter, when it comes on stream, will help speed the flow of parts to dealers.

BUDGETS CONTROL AND ACCOUNTABILITY

Standards should be specified in terms of sales, and production. Costs should be identified and target cost levels specified to facilitate their control. Standards should be established in terms of consumer's attitudes. Attitude standards, in terms of perceptions, and desires should be specified. Controls should be implemented and monitored by appropriate administrators. The president, vice-president, administrators, and other individuals should be responsible for controlling the marketing mix implemented.