Term paper on Harley-Davidson Inc., Thriving Through a Recession

Probably there is no man who hasn’t heard about the legendary American motorcycle Harley-Davidson. The range of motorcycles manufactured by Harley-Davidson Motor Co. Inc. (USA) is huge: big tourist motorcycles of Touring Series, dynamic and comfortable bikes Dyna, classic bikes Softail, maneuverable Sportsters and drag-cruiser VRSC. Harley-Davidson has been a motorcycle manufacturer for about a 109 years. The company Harley-Davidson was founded by two friends (William Harley and Arthur Davidson) in 1903. These 20-year-old guys at that moment gathered their first motorcycle in a wooden shed of 3×4 sq. meters. And on its door it was scratched by a nail “Harley Davidson Motor Company” – this is how the legend was born (Hopkins, 1999).

This bike of Harley and Davidson was bought by their friend and classmate, Henry Myers, and by the end of that year they’ve opened the first dealership shop (in Chicago), where there have been sold three more Harley-Davidson motorcycles.
In 1907 the Harley-Davidson Motor Company became incorporated. Couple years later it was acquired by AMF Inc, but it was mostly focused on short-term profits which certainly sent customers elsewhere. Only in 1981, Vaughn Beals lead a leveraged buyout to get Harley-Davidson from AMF (Hopkins, 1999).

But when, in the mid 80’s, U.S. market was flooded with the faster and cheaper Japanese motorcycles – Harley-Davidson was going through hard times and was nearly bankrupt. The company was saved from bankruptcy only due to the motorcycle “Harley-Davidson” which ceased to be “just a motorcycle” – “Harley” has been the personification of American freedom, youth and independence for a long time.

The new management has put the focus on production and customers, the company picked up the speed, and then in the early 1990s, they decided to invest in the Buell Motorcycle Company that provided their entry into the sport/ performance market for motorcycles. By the year 1996, the company decided to completely turn their attention to the motorcycle business – that meant elimination of vehicle segment, which was sold for about $105 million. In 1997 there happened significant internal changes and the initiate of new products using the help of an expert of intensive procurement Garry Berryman (Bloss, 2004). The name Harley-Davidson was found in such places as Forbes “Company of the Year”, in the Business Week ranking, Interbrand annual ranking of the Top 100 global brands and in the Fortune magazine list of “Most Admired Companies”.

After steady growth in the 1990s, sales slowed as baby boomers began to obsolete. Safety has become a problem when it was discovered that drivers over age 40 were accounted for 40% of all the deaths. It was the first time in recent history, when sales and profits declined in 2007-2008.

Net profit of the largest U.S. motorcycle manufacturer Harley-Davidson Inc. in 2008 fell by 30% to 654.7 million dollars, against 933.8 million dollars, earned a year earlier. This is stated in the published report of the corporation. Harley-Davidson’s revenue for the period decreased by 2.5% to 5.6 billion dollars. Operating profit decreased by 28% to 1.03 billion dollars.

In 2009 the company closed its 36 dealership. Harley-Davidson reduced the U.S. network of offices because sales have fallen sharply due to the economic crisis of recent years.

The company explains the decline in motorcycle sales with the unfavorable economic situation in the U.S.: the crisis in the credit market, a sharp decline in housing construction and the tense situation on the labor market makes the Americans to refrain from “unnecessary” purchases, such as high-quality motorcycles, which can cost more than $20 thousand. In 2011 Harley-Davidson has increased its motorcycles’ supply from 210.5 thousand units up to 221-228 thousand.

Harley-Davidson Inc. is the main producer of motorcycles in the United States of America, which owns the brand of the same name. The company also manufactures parts and accessories for motorcycles, and provides insurance services for motorcycles of their own production.

Harley-Davidson Motorcycles are now considered as a symbol of freedom and by buying them, people are buying not just means of transportation, but a whole way of life. Today, Harley-Davidson is following the strategy of global business expansion and can offer a wide range of motorcycle models for almost every taste. Nowadays, Harley-Davidson is a thriving company that produces annually more than 200,000 motorcycles. It owns nearly half of the U.S. market of motorcycles with an engine capacity over 650 cm3.

References

Bloss, R. (2004). Harley-Davidson buff saddlebags. Industrial Robot: An International Journal, 31(6), pp. 481-483.
Hopkins, H.D. (1999). Using History for Strategic Problem-Solving: The Harley-Davidson Effect. Business Horizons, 42(2), pp. 52-58.

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