HARLEY DAVIDSON CASE STUDY.

By
BHASKAR MITRA

ABSTRACT
Harley-Davidson is an American cultural and business icon on the level of Levi Strauss and Coca-
Cola. Often imitated, but never duplicated, Harley-Davidson has managed to survive, and has,
at times, thrived for many decades. Through depression, recessions, world wars, high
technology developments, Japanese competition, and increasing government regulation,
Harley-Davidson has maintained operations where over a dozen other U.S. motorcycle firms
have failed. Harley-Davidson has even survived over a decade as a subsidiary of a bowling alley
service firm. It has achieved this by essentially relying on designing, manufacturing, selling, and
servicing a rela- tively static product: two wheels, a 45° V-Twin engine, and a set of handlebars.

How has Harley-Davidson managed to survive through these and other hardships in a
motorcycle market that is dominated by leisure riders? How has it kept the doors open while its
historic U.S. rival, Indian Motorcycles, is currently in its fourth incarnation? How has it
maintained its attractiveness with outlaw bikers, investment bankers, and those who appear to
be expe- riencing a “mid-life crisis” and who sometimes turn to the firm’s products as a result?
More importantly, what is this firm selling that keeps it as the industry leader in full-size
motorcycles? The answer to these questions is not a 526-pound batch of steel with 250 feet of
wiring, but rather the fact that Harley-Davidson is selling the American dream of freedom.
How it is able to do this is a fascinating story.

KEYWORDS:- Harley Davidson, Motorcycles, Competition, Challenges faced, etc.

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 LITERATURE REVIEW
With over 6,000 employees, 1,400 franchises, and nine production facilities, Harley-Davidson
has managed to survive the economic downturn that was in full force in late 2007 and for the
next few years; but the firm is not out of the woods yet. In fact, Harley-Davidson is strug- gling
with three pivotal issues, the first of which is that the firm’s products are viewed as leisure
items. The other two issues are similar in nature in that they deal with the fact that managing
the firm’s target market is chal- lenging, particularly as demand for its products is chang- ing.
Individually and collectively these issues pose a real challenge to the company’s long-term
success. Without addressing these issues, Harley-Davidson may lose its ability to create value
for customers and to serve stake- holders’ needs as a result.

Second, Harley-Davidson is challenged to effectively specify its target market as a first step to
appropriately serving that market’s needs. Historically, the firm’s target market has been males
between the ages of 29 and 55. However, in the last decade, Harley-Davidson has pursued
younger riders and women as a means of expanding its target customer segments. But
expanding the segments the firm serves with its products is not a risk-free decision or choice for
the firm to make in that serving others might cause the firm to lose its ability to effectively
serve the specific needs of the 29- to 55-year- old male (again, the historical target customer).
This matter is considered more fully later in the case.

Third, demands and cost drivers for the motor- cycle market are ever changing. Overseas
competitors have shifted their focus from being the least expensive to being affordable and to
providing a wider variety of motorcycles to customers as options to purchase. This competitive
shift has put pressure on Harley-Davidson’s key markets and has forced the firm to respond.
With over 12 percent and 55 percent of the European and U.S. heavyweight motorcycle market
respectively, Harley- Davidson has a substantial territory to defend.

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 BASIC RESEARCH OBJECTIVE.
Harley Davidson was a big brand name in spite of that when they had to face the competition of
Kawasaki, Honda and Yamaha they ended up in bankruptcy.

The basic research objective of this case is to find out that how Harley Davidson managed to
overcome the Japanese threat & managed to regain its position in the motorcycle section.

With the growing global economy, companies are looking for ways to improve their market
share. Many excellent firms have learned how to beat their competitors through the
implementation of new management, marketing, and/or manufacturing techniques. Harley-
Davidson is one of those excellent companies whom has challenged traditional ideas. We
intend to show through this case study that any company can follow Harley-Davidson's
techniques and lead themselves to excellence.

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 BASIC TECHNOLOGY.
Harley Davidson, who is considered as a pioneer in the motorcycle sector uses various
technologies in order to keep their bikes well adapted to the change in technological
requirements in the modern era. They are listed below:-

Improved Display

Box GTS is glass from edge to edge and has the sleek, modern appearance of the latest tablet
devices and premium automotive displays. The Corning ® Gorilla® Glass touch-screen surface is
the same durable and scratch resistant cover glass used on billions of mobile devices
worldwide. It includes an advanced surface treatment designed to minimize reflection for
exceptional visibility in bright sunlight. The screen is optimized for use in wet or dry conditions,
even when used with riding gloves. The glass is optically bonded to a TFT display (thin-film-
transistor, a type of liquid-crystal display noted for high image quality and contrast) with 100
percent more resolution and a four-times higher contrast ratio than the 6.5GT display it
replaces, for a crisp and clean appearance even in bright sunlight.

Improved User Experience

Box GTS processes faster, has more memory and is more responsive than the Boom Box 6.5GT
infotainment system it replaces. Start-up time is reduced from 21 seconds to 10 seconds, and
route calculation time is reduced from 10 seconds to 2.5 seconds versus the 6.5GT system.

Like a smart phone, the navigation engine display responds to two-finger gestures: swipe,
pinch, and drag. The new home screen display is simplified to three key system buttons:
Navigation, Phone, and Music. A new Back button has been added to the right-hand control.
The Navigation, Phone and Music screens feature condensed information that’s easy to read
and navigate. The new Quick Jump feature allows easy access to Navigation, Audio and Vehicle
information (press and hold Home on left hand control for the pop-up menu). Background
colors and a high-contrast viewing mode are user-selectable. The entire GTS system can be
managed through the touch screen and with the thumb-operated five-way joysticks located on
the left- and right-hand controls.

Next-Level Technology

Box GTS is Apple CarPlay compatible (when the microphone is in use with optional Harley-
Davidson® Genuine Motor Accessories headsets) and can project phone functions to the screen,

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including streaming apps, weather, and traffic, so riders can enjoy and use familiar functions
installed on their phone.

A new navigation engine features a voice recognition enabled “one box search” function
(similar to a search engine) for added rider convenience. Using the Alternate Routes function,
the rider can choose a route based on Fastest, Shortest, Twisty and Scenic features. The Boom!
Box GTS navigation system features a new integration with the Harley-Davidson™ App for iOS
or Android. Leveraging this integration a rider can easily find a destination in the App and send
that point of interest or addresses to the navigation system. In addition, the integration with
the App eliminates the need to use a USB jump drive to import ride routes.

Traction Control (TCS)

Traction control system (TCS) is designed to prevent the rear wheels from excessive spinning
under acceleration, which could occur on wet or slippery road surfaces or when abrupt
acceleration is commanded by the rider. If the TCS detects that a rear wheel is losing traction
under acceleration it will apply brake pressure to limit wheel spin.

Drag-Torque Slip Control System (DSCS)

Drag-torque slip control system (DSCS) is designed to prevent excessive rear wheel slip under
deceleration, which typically occurs when the rider makes an abrupt down-shift gear change or
decelerates on wet or slippery road surfaces. When DSCS detects excessive rear wheel slip
under deceleration it will adjust engine torque delivery to better match rear-wheel speed to
road speed.

ABS

ABS is designed to prevent the wheels from locking up under braking, with the goal of
maximizing deceleration while maintaining straight-line stability when braking on wet or
slippery road surfaces or over-braking due to an unexpected hazard. The ABS detects if wheels
are approaching lock up under braking and if so, modulates the brake pressure to limit wheel
slip.

Linked Braking

The Reflex Linked Brake System electronically links braking through both the front brake hand
lever and the rear brake foot pedal. Linking will be active any time the brakes are applied and

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vehicle speed is above approximately 4.3 mph (7 kph mph). The brakes will remain linked as
long as the rider continues to apply a brake control.

When the front or rear brake is actuated above approximately 4.3 mph (7 kph mph) the system
applies a proportional amount of pressure to both brakes on the other axle. The amount of
brake pressure applied to the other axle depends upon many factors including how hard the
rider is applying the brake, the vehicle speed, and if the vehicle is turning. The amount of
pressure electronically applied to the other axle is less than what a rider could apply directly
with the linked axle’s lever or pedal.

The linked brakes are a rider aid, and do not replace proper braking techniques. The maximum
vehicle deceleration on most surfaces is still reached by the rider applying both the front and
rear brake controls.

Lean Angle Controlled Bank Lighting

The most-advanced headlamp system ever developed for a Harley-Davidson motorcycle utilizes
patented sensors and electronics integrated into the headlamp to determine lean angle of the
motorcycle and automatically projects additional light into corners to illuminate areas of the
road that may be unlit by traditional LED headlamps. Extensive engineering and testing was
completed on the lamp to ensure every part of the road in front of the rider is equally lit. The
adaptive light feature works in both the high- and low-beam functions.

The night-time beam pattern is focused on the road ahead and is engineered to reduce wasted
light that can impact oncoming traffic. The solid-state LEDs are designed for long life and low
energy draw, and installation of the shock and vibration-resistant lamp assembly is quick and
easy with a plug-in connection to the factory headlamp wiring.

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 BODY.
COMPANY HISTORY:-
In 1903, William S. Harley and Arthur Davidson founded Harley-Davidson Motor Company,
known by enthusiasts as “the Motor Company,” in order to fund their racing pursuits.
Accordingly, their first motorcycles were merely contemporary bicycles with small engines
retrofitted to the frame. It was Harley- Davidson’s early success in motorcycle racing that
fueled the demand for its early models, which were sold in dealerships as early as 1904.
Because these turn of the century races were as much about endurance as speed, Harley-
Davidson acquired invaluable knowledge perti- nent to practicality and robust design. After
significant success in road and endurance races, Harley-Davidson broke fresh ground with the
introduction of the V-Twin engine design. Superior to large single-cylinder engines, the lighter
V-Twin design allowed similar displacement in a lighter package with a shape that fit naturally
into the bicycle-inspired frames of the early 1900s. Few sus- pected that this design would
become so integral to modern motorcycles.

Having dedicated over a third of its production to the U.S. Army, Harley-Davidson sales
exploded during World War I. With the advent of motorized warfare, the motorcycle proved
itself to be far more than just a novel invention. In addition to proving itself to the Army,
Harley-Davidson also proved itself to soldiers. After the war, soldiers returned home and
became a loyal customer base for the young firm. Through the 1920s, Harley-Davidson
continued to focus on design improve- ment and racing. It spent much of this decade fighting
for market share with multiple medium and small com- petitors. During this time, firms
producing automobiles, airplanes, bicycles, and industrial machinery also tried their hand at
building motorcycles.

The 1930s were a unique time for the motorcycle industry. In the wake of the Great
Depression, the pub- lic was looking for inexpensive, simple transportation. At the same time,
unemployment and inflation shrank potential customers’ purchasing power. It was during this
time that many of the smaller motorcycle manufac turers dropped out of the industry. Most of
these firms were subsidiaries of companies in related industries. These failed motorcycle firms
had many of the capabilities needed to produce motorcycles, but lacked the corporate focus
and support to continue production during such a difficult economic time. It was during this
time that the U.S. domestic market shrank, with only Indian and Harley-Davidson remaining.
With the market divided between only two domestic producers, Harley- Davidson’s production
held steady.

With the onset of World War II, Harley-Davidson found itself to be a major supplier for the
Allied war effort. Again, war vaulted Harley-Davidson into a posi- tion of higher volume,
improved reputation, and deeper loyalty with owners and soldiers. As the war came to an end,
the United States was flooded with a surplus of Army WL45 motorcycles. Suddenly, this country
was full of prospective riders who understood Harley-Davidson’s product and appreciated how

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motorcycles could provide inexpensive, dependable transportation. At this point, only Indian
Motorcycles was a competitor for Harley- Davidson. But in 1956, at the height of an
economic recession, Indian Motorcycles declared bankruptcy and stopped producing
motorcycles altogether, leaving only Harley as a major producer and seller of motorcycles

As the sole U.S.-based motorcycle power, Harley- Davidson enjoyed great success.
Nevertheless, the lack of competition nearly became its undoing. This market condition allowed
Harley-Davidson to take more risk in the form of acquisitions, causing the firm to lose its tight
focus on a single market. It began branching out to other leisure and motorized products such
as off-road motorcycles, ski boats, and golf carts. At the same time, the bulk of Harley-
Davidson’s revenue stream was still coming from the sale of its heavy motorcycles. Many of the
acquisitions the firm completed in the latter part of the 1950s and the early 1960s, such as the
Tomahawk Boat Manufacturing Company in 1962, were in similar industries, but a poor fit with
Harley nonetheless. The acquired companies were often in deep trouble when Harley-Davidson
purchased them. In the end, Harley- Davidson was hobbled with losing ventures that diluted its
focus and did not fit well with its core competencies. In 1969, the American Machine and
Foundry Company (AMF – a longtime producer of leisure products such as tile bowling pins and
ball returns) purchased the financially distressed Harley-Davidson.

Most enthusiasts consider the AMF years as the “dark ages” of Harley-Davidson’s history. AMF
operated Harley-Davidson as a profit center, reducing allocations to the unit’s marketing and
research and development (R&D) functions as a result. For the next 13 years, Harley’s aging
product line remained essentially unchanged. In fact, its line was so static over the years that
many of the parts from a 1937 model fit on the 1969 design. Harley-Davidson had just two
motorcycles with differ- ent trim packages: the low-budget sportster, the sport bike of its day,
and a full-size motorcycle available in two different models. In light of Honda and Kawasaki’s
entrance into the U.S. market, Harley-Davidson’s stale product line was even more
disappointing. Many did not see these imports as a threat given the prestige and heritage of the
Harley-Davidson name. However, the Harley-Davidson image was deteriorating. Even with its
products in desperate need of a facelift, AMF relied on Harley-Davidson’s reputation to defend
its competi- tive position; AMF plastered Harley-Davidson’s name on products like snowmobiles
and golf carts. While trying to capitalize on the value of Harley-Davidson’s brand name quality
became a serious problem; customers would have to return new motorcycles to a dealership
multiple times to fix manufacturing problems. It was during this time that owners coined the
saying “a Harley always marks its spot,” a phrase referring to the machine’s nearly universal oil
leaks. This turned off many prospective customers, as they believed a Harley-Davidson would
require constant owner maintenance. All the while, Japanese motorcycle companies enticed
more and more riders looking for inexpensive, dependable transportation.

By 1981, Japanese motorcycles were established in the U.S. market not only as dependable
transportation, but also as performance machines. Harley-Davidson’s sales were in free-fall as
its tired designs appealed to a nar- rowing market segment. It was selling to customers who

8
liked classic style and dated functionality, and all for a high price. Finally, the employees and
management of Harley-Davidson led a managed buyout of the company from AMF. The new
owners immediately took stock of the firm’s strengths and vulnerabilities and increased its R&D
and marketing budgets significantly. Because negative effects of AMF’s past business decisions
still hampered the new management team, sales remained low. In 1985, Harley-Davidson’s top
management team struggled to restructure the firm and divested itself of most of its unrelated
assets. In 1987, Harley-Davidson became a publicly traded company, and none too soon as
Harley-Davidson had revamped its product line into four motorcycle styles that were united by
the introduc- tion of a new engine. This was the turning point for Harley-Davidson. From this
point forward, the firm’s quality control was exponentially more effective. In addition, Harley-
Davidson focused more on efforts to operate efficiently and effectively. Following the pre- cepts
of just-in-time techniques and enhancement to the logistics function were critical to the firm’s
attempts to enhance efficiency and effectiveness. At the same time, Harley shifted to three
major initiatives:-

 Improved manufacturing process, leveraging tech- nology, robotics, and

employee involvement
 Restructuring business management to a modern system
 Aggressive management of its brand name through dealership
management, patenting activities, and careful licensing of related
products

The modern day Harley Davidson has fought back from the brink several times, each time
seeming to evolve & adapt.What appears to be universal to each evolution of the company is
that quality, promotion, and market focus have always been a priority

Harley-Davidson, Inc. has been a publicly traded firm since 1987. It has two primary divi-
sions: Motorcycles and Related Products and Financial Services. The Financial Services Division
provides credit to motorcycle buyers and dealerships as well as risk man- agement and
insurance services for all parts of the firm. The Motorcycles and Related Products Division cur-
rently operates through eight primary segments:

 Parts & Accessories (17.5 percent of net revenue)

 General Merchandise (5.9 percent of net revenue)
 Licensing ($43.2 million of net revenue)
 Harley-Davidson Museum
 nternational Sales (32 percent of net motorcycle revenue)
 Patents and Trademarks
 Other Services
 Marketing

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Today Harley-Davidson Inc., an employer of 4,694 workers, consists of Harley-Davidson Motor
Company based in Milwaukee and Eagelmark Financial Services Inc. based in Chicago, Illinois. In
addition, there are nearly 600 dealerships throughout the United States.

HOW DOES HARLEY DO IT??

Harley-Davidson focuses on a subset of the motorcycle market featuring customers who value
heritage, style, reputation, durability, and adaptability. Until 2000, Harley-Davidson’s
motorcycles sold at nearly a 25 per- cent premium. In the last decade, that premium has
dropped to 5 to 10 percent, depending on the class of motorcycle. This is due to Japanese
motorcycle manu- facturers shifting to marketing and selling somewhat unique motorcycles for
a better than average price. In comparison, Harley-Davidson uses the Sportster line as an
introductory product, but most of its motorcycles sell for over $15,000, with the average sale
price of just over $16,893.7 Harley-Davidson motorcycles provide a unique product at a price
that its target customers deem acceptable or reasonable. While its competitors may have
attempted to cut costs, Harley-Davidson has continued to invest in its products in ways that
protect the qual- ity of its brand image. Harley-Davidson’s market focus is primarily males
between the ages of 29 and 55. However, this has been changing. Recently, it has targeted
female customers.

WHAT DOES IT DO BEST??

In its modern incarnation (1987 to present), Harley- Davidson achieved success by doing what
it does best. Granted, multiple firms make great motorcycles, and many of these firms have a
dedicated following. However, through the actions the firm has taken over the years, Harley-
Davidson has developed and maintained what is a unique position in the U.S. motorcycle mar-
ket. Effectively managing its brand name, production or manufacturing simplicity, and a
dedicated product following are the key sources of the firm’s competitive strength.

Harley-Davidson’s brand name is its most important asset. Cultivated through good times and
bad, its brand name is a powerful motivator for current and prospec- tive customers. For many
Americans, Harley-Davidson is the American motorcycle. This belief is no accident. After being
separated from AMF, Harley-Davidson’s top management team decided to significantly increase
the amount of resources being allocated to marketing and R&D. This appears to have been a
wise decision in that Harley-Davidson now holds 55 percent of the entire U.S. motorcycle
market, and an even higher share in the U.S. heavy motorcycle market. Strict protection of its
brand name permeates every decision the firm makes. Its motorcycles, while occasionally
deviating in style, gen- erally follow traditional themes. Harley-Davidson only makes a design
change after witnessing a strong market trend.For example, the custom portion of the motorcy-

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cle market has been designing machines with wide rear tires for nearly two decades; in 2007,
Harley-Davidson launched a single model with a wide rear tire.

Harley-Davidson is also very selective about its franchise (dealership) opportunities, another
method through which the firm protects its brand. Due to free-trade laws, Harley-Davidson is
no longer able to insist that its dealerships sell only Harley products. However, it utilizes price
incentives to encourage dealer- ships to stay “Pure-Harley.Harley-Davidson is espe- cially
protective of its name and logo when it comes to licensed products, most of which are sold in
its dealer- ships. If it is not the best quality, the product’s license is revoked. Retailers can sell
ladies’ shirts at a 100 per- cent premium because they are of excellent quality and cannot be
found anywhere. This aura of exclusivity is embedded in the very DNA of Harley-Davidson Inc.,
from the headquarters to the dealerships. This aspect of culture is an asset in that the notion of
wanting to be seen as providing products that are somewhat “exclusive” in nature permeates
the firm’s decision processes as it seeks to serve its target customers’ needs.

Harley-Davidson’s production process is another important firm-specific asset. The key

elements of the process are the melding of a JIT supply chain with team production
management and part interchange- ability. When combined, the elements of Harley’s
production process are unique. Japanese manufactur- ers have used the same JIT concept for
years, but have not stressed a limitation of key components. After 1987, Harley-Davidson
updated its production facilities and design process. Its production facilities in Kansas City,
Missouri and York, Pennsylvania are the best examples of modern robotics combined with team
enablement. Interchangeable parts are the most important compo- nent of this asset. This
concept simplifies all areas of the motorcycle production process; but it is perhaps most evident
in the production of Harley’s frames and engines. Harley-Davidson produces five unique frames
for each motorcycle family: Sportster, Dyna, Softail, V-Rod, and Touring. Even with 28 different
models and seem- ingly limitless options, Harley-Davidson produces only three engines. Internal
machining, displacement, and color coating are the only differences across the engines. The
Sportster line comes in two displacements: 883 and 1204 cubic inches. The Dyna, Softail, and
Touring lines all share the same Twincam engine, available in 96 and 103 cubic inches. The V-
Rod’s engine is only produced in one version. This production approach with respect
tointerchangeable parts appears to be a competitive advantage in that it allows Harley to
produce several models, subdividing its target market segments even further, while keeping
production costs lower than if it produced 28 different frames and engines.

Loyalty to the brand is another important asset for Harley-Davidson. While its brand name
protection applies primarily to prospective customers, its product following centers on existing
customers, many of whom are repeat buyers of the firm’s products. There are mul- tiple
examples of Harley’s dedicated following. At the extreme for example, consider the fact that
some private riding clubs only grant membership to those willing to tattoo the bar and shield
logo on multiple locations of their body. For others, remaining committed to the firm’s mantra
that owning a Harley “is a journey, not a desti- nation” and participating in company-sponsored
events with others sharing this belief accounts for their loyalty. Regardless of the reason for it,
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customer loyalty to the Harley brand appears to influence these individuals to purchase Harley
products other than motorcycles such as clothing and a wide range of product accessories.
Historically, loyalty to the brand has resulted in a large percentage of Harley customers
choosing to buy another Harley when it is time for a new motorcycle. However, the “graying” of
Harley’s customer base is potentially a problem as at some point, this group of customers will
no longer be purchasing new products.

KEEPING THINGS SIMPLE

In 2011, Harley-Davidson generated 88 percent of its revenues from a single business area
(Motorcycles and Related Products) and 12 percent from its second pri- mary segment
(Financial Services). This composition of sales revenue is consistent with previous years and sug-
gests that Harley may continue business as usual to help the firm reduce its idiosyncratic risk. It
will also try to expand its business in other countries with a primary focus on providing quality
product and services. Harley- Davidson has been able to earn positive returns while focusing on
just two businesses because it has developed strengths that allow it to create value for
customers. Moreover, there are fewer challenges in managing only two businesses. This
approach allows Harley-Davidson to not only gain economies of scale, but also use its resources
efficiently.
MARKETING
Historically, males between the ages of 29 and 55 have been Harley-Davidson’s target
customer. However, this is changing. Recently for example, the firm is also targeting female
customers with motorcycle models that have a lower seat height and pink, purple, and light
blue color schemes. Its marketing has also reflected an effort to attract more female riders. It
has even tailored its rid- ing classes (the Riders Edge Program) to have all-female sessions and
to make new women riders feel more com- fortable. A woman could walk into a Harley-
Davidson dealership having never sat on a motorcycle and within an hour purchase a
motorcycle for as little as $8,000. She could then join a riding class that would grant a motor-
cycle endorsement on her driver’s license.

Thus, Harley-Davidson is beginning to market to a multi-generational and multi-cultural

audience. In this regard, the firm is working to attract a more diversi- fied audience in terms of
age, gender, and ethnicity. Harley-Davidson is a market leader in the U.S. heavy- weight
segment. The average median household income of a Harley-Davidson purchaser is $89,000.
Harley- Davidson primarily uses advertising and promotional activities via television, print,
radio, direct mailings, electronic advertising, and social media to market its product. Moreover,
local marketing efforts in con- junction with dealers are highly encouraged. Harley- Davidson
uses its customers’ experience to continuously develop and introduce innovative products. The
market is flooded with high quality, low price Japanese bikes. However, Harley-Davidson does
not seek to imitate these bikes. Instead, it uses direct input from its customers to improve its
product. Harley-Davidson modifies its prod- uct based on input generated through customer

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surveys, interviews, and focus groups. Thus, some believe that “The real power of Harley-
Davidson is the power to market to consumers who love the product.”In 2010, the company
introduced “Creative Model” – a Web-based method for marketing its product. In this model,
passionate fans are enabled for the purpose of helping Harley develop creative approaches for
targeting new customers. Customer experience has traditionally been the main source of
Harley-Davidson’s marketing strategy. It all started in 1983, when the company intro- duced
Harley Owners Group (H.O.G), which has now grown to more than 1 million members
worldwide.

Harley-Davidson distributes its products through an independent dealer network that almost
exclusively sells Harley-Davidson motorcycles. These dealerships are licensed dealers and fully
authorized to sell and ser- vice new motorcycles They can have secondary loca- tions to
provide additional service to the customers. These non-traditional outlets are an extension of
the main dealership and consist of Alternate Retail Outlets (ARO) and Seasonal Retail Outlets
(SRO). AROs are generally located in high traffic areas such as airports, vacation destinations,
tourism spots, and malls and only sell parts, accessories, and general merchandise. SROs are
also located in high traffic areas, but operate only on a seasonal basis. AROs and SROs are not
allowed to sell new motorcycles. The parts and apparel orders from the dealer are not taken at
face value. Harley-Davidson’s for- ward-looking, market-driven allocation system restricts the
number of units a particular dealer is able to order. In Canada, the company sells its products
to one whole- sale dealer, Deeley Harley-Davidson Canada/Fred Deeley Imports Ltd., which in
turn sells to independent dealers.

The European, the Middle Eastern and African (EMEA) region is managed from regional
headquar- ters in Oxford, England. Harley-Davidson distributes its products through
subsidiaries located in Austria, Dubai, Czech Republic, France, Germany, and Italy. In the EMEA
region, Harley-Davidson distributes all prod- ucts sold to independent dealers through its
subsidiar- ies located in Austria, Czech Republic, United Arab Emirates, France, Germany, Italy,
South Africa, Spain, Switzerland, Netherlands, Russia, and United Kingdom.

A headquarters in Singapore manages the Asia Pacific regions with the company distributing
its product to independent dealers in China, India, Australia, and Japan. The rest of Asia
Pacific is managed through the
U.S. operations.

FINANCIAL SERVICES SEGMENT:-

Harley believes that its Harley-Davidson Financial Services unit (HDFS) provides sufficient
financing to independent distributors, dealers, and retail custom- ers. HDFS provides financing
to dealers and retail customers in the U.S. and Canada, but not in the EMEA, Asia-Pacific, and
Latin America regions, although these regions do have access to financing through other finan-
cial services companies.
MAJOR COMPETITORS.
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As is the case for many leisure and transportation indus- tries, the U.S. motorcycle market is
extremely competi- tive. Currently, Harley-Davidson competes with four classes of competitors
with each group competing in a different market and in different ways. The four compet- ing
groups are commonly classified as Metric Cruiser, Metric Sport, U.S. Cruisers, and Custom
Cruisers.

METRIC CRUISER COMPETITORS. The industry uses the term Metric Cruiser to denote
motorcycles made outside the United States with traditional styling. Traditional styling is
commonly reflected through an exposed engine and non-integrated body panels. Japanese
motorcycle makers such as Honda, Star (Yamaha), Suzuki, and Kawasaki dominate these models.
It is important to note that not all metric cruiser competitors are considered to be heavy
motorcycles (over 650 cubic centimeter displace- ment). These competitors compete with
Harley-Davidson on price, but also use the individual model’s unique fea- tures to garner a
competitive advantage. Honda intro- duced the Fury, a regular production chopper based on
the 1300 VTX power plant in 2009. In 2004, Kawasaki introduced the Vulcan2000with a 2,053
cubic centi- meter engine, the largest mass-produced V-Twin motor- cycle ever. Most of these
competitor models of similar size are comparable in features to Harley-Davidson mod- els. The
presence of smaller competitor models forces Harley-Davidson to keep entry-level models like
the 883 cubic centimeter Sportster. Smaller metric cruisers like the Suzuki Boulevard 40,
retailing at $2,600 less than Harley-Davidson’s least expensive model, keep downward pressure
on introductory model prices.

Metric Sport Competitors. Metric Sport motor- cycles are made outside the United States,
mostly in Japan, and are race-inspired, high performance motor- cycles with full body panels
and excellent aerodynamic characteristics. Motorcycles like the Suzuki Hayabusa and the
Kawasaki Ninja are examples of this competitor class. While these motorcycles do not directly
compete with most Harley-Davidson models, they do appeal to younger prospective customers
because of their breath- taking performance and relatively low prices. In general, metric sport
customers are not attracted to most Harley- Davidson models.

Harley-Davidson has taken two key actions to attract young, performance-oriented riders
from its sport motorcycle competitors. It introduced the V-Rod line in 2002 with a high
performance, liquid-cooled motor. Harley-Davidson also purchased Buell, a sport motorcycle
company using Harley-Davidson motors, in 1993. In 2003, Buell sport motorcycles became a
full subsidiary with its models being sold through Harley- Davidson dealerships. Neither of
these actions has resonated with the younger riders Harley sought to reach by taking them. As
a result, Harley-Davidson opted to discontinue Buell in 2009 after slumping sales. The V-Rod
still exists, but with a median price tag of $15,300 it has not done much to lower the age of the
average Harley-Davidson rider.

U.S. CRUISER COMPETITORS.:- Victory Motorcycles & Indian Motorcycle are the only US cruiser

14
style motorcycle manufacturers. Victory, a subsidiary of Polaris and a relative newcomer to the
motorcycle mar- ket, started production in 1998. Polaris is best known for its high quality all-
terrain vehicles and personal watercraft. In the last five years, Victory models have been
selling at prices more closely comparable with Harley-Davidson.
At the same time, Victory increased the number of models and styles; it even brought in
famous motorcycle customizers Arlen and Corey Ness to add style and street credibility to its
entire prod- uct line. In 2009, Indian Motorcycle began its fourth incarnation in an effort to
leverage its famous name and art-deco styling. After a shaky start, Indian was recently
purchased by Polaris. This move is likely part of a strategy to position Victory and Indian in
separate parts of the U.S. motorcycle market and to fulfill the needs of different types of
customers. This approach is similar to the strategy General Motors used for decades of offering
different products to different types of cus- tomers. The median price for an Indian
motorcycle is$28,000. Its current tag line is, “Your great grandfather would be proud. Jealous,
but proud. Indian is target- ing high-income earners with a love for classic motor- cycle styling.

CUSTOM CRUISER COMPETITORS. This class of com- petitors is comprised of small and medium
firms that build highly customized motorcycles with large displace- ment motors. Firms such as
Big Dog Motorcycles, Big Bear Choppers and American IronHorse are the domi- nant
competitors in this space. These competitors have become far less of an issue for Harley-
Davidson since the economic downturn of 2008. With their high levels of customization, these
competitors’ models come with a high price tag. As their target market shrunk in the recession,
these firms thinned significantly; an estimated 60 percent have gone out of business or changed
their core function to components production. Others, such as Darwin Motorcycles, now offer
custom motorcycles for as little as $18,600. These competitors will always pose a threat to
Harley-Davidson. They force Harley-Davidson to continually innovate and customize its product.
It is ironic that most of these motorcycle manufacturers use Harley-Davidson style or actual
Harley-Davidson com- ponents in their production.

THE BOARD OF DIRECTORS:- HARLEY DAVIDSON

Exhibit 1 BOARD OF DIRECTORS
Board Member Age Title Other Boards
Barry K. Allen 62 Senior Advisor to Providence Equity Partners Fiduciary Management
President, Allen Enterprises, LLC BCE Inc.
John Anderson 60 Former President and CEO, Levi Strauss &
Co.
Richard L. Beattie 71 Chairman of Simpson Thacher & Bartlett LLP Heidrick & Struggles International Inc.
Evercore Partners Inc.
Martha F. Brooks 51 Former President and COO, Novelis Inc. Bombardier Inc.
George H. Conrades 73 Chairman, Akamai Technologies, Inc. Akamai Technologies, Inc.
Oracle Corporation
Ironwood Pharmaceuticals, Inc.

15
Donald A. James 67 Co-founder, equity owner, Chairman and CEO
of Deeley Harley-Davidson Canada/Fred
Deeley Imports Ltd.
Sara L. Levinson 60 Former Non-Executive Chairman of ClubMom, Macy’s Inc.
Inc.
Thomas Linebarger 48 Chairman and CEO, Cummins Inc. Cummins Inc.
George L. Miles Jr. 69 Executive Chair, Chester Engineers, Inc. American International Group Inc.
EQT Corporation
HFF, Inc.
WESCO International Inc.
James A. Norling 69 Chairman of the Board, GlobalFoundries Inc.
Keith Wandell 60 Chairman, President and CEO, Harley-Davidson, Constellation Brands, Inc.
Inc. Dana Holding Corporation
Jochen Zeitz 48 Chairman of PUMA Puma AG
CEO of PPR Sport & Lifestyle Group and PPR
Chief Security Officer of PPR

INTERNATIONAL GROWTH
Any discussion of Harley-Davidson’s future would not be complete without examining its
expansion into India and China, the two BRIC economies with a strong history of motorcycle
ownership and enough income growthto ensure viable target markets. After all, moving from
Harley-Davidson’s current position of 32 percent of revenue from international sales to its
stated goal of 40 percent by 2014, will be challenging. Doing so will require a delicate balance
in order to maintain the ethos of Harley-Davidson while simultaneously adapting to local
customs and consumer preferences. Nevertheless, it could be argued that Harley-Davidson is
already well on its way in this regard.

For example, just four months after officially enter- ing the Indian market in July 2010, Harley
announced it would build an assembly plant in northern India in order to reduce import tariffs
by as much as 80 percent. Previously, high tariffs resulted in its models costing twice as much as
their U.S. equivalents. By only assem- bling the motorcycles in India, Harley-Davidson is able to
satisfy the desire of its customers in India to purchase an “American” motorcycle by sourcing all
the parts from the United States while significantly increasing its com- petitive position through
lower pricing.
Time will be required to see if Harley-Davidson’s approach in India will achieve the success the
firm seeks. Indeed, Harley-Davidson sold only about 1,000 bikes in India in its first 18 months of
operations. This level of sales should be considered though within the context of the fact that
Harley’s local assembly plant in India has only been operational for the past 12 months.

Accordingly, the Indian market has not been exposed to the lower pricing model for very long
and may need some time to overcome the stigma associated with previ- ously higher prices. For
example a mid-level bike used to cost $27,000, prior to tariff reduction; now, the cost of this
product is around $20,000.These prices, while still high by local standards, show that Harley-

16
Davidson is making a concerted effort to cater to the needs of cus- tomers located in
developing countries. Such a strategy is essential for long-term viability given global growth
trends and the inevitable shift of income away from Harley-Davidson’s more traditional western
markets. In response to such growth, it has even committed to open- ing dealerships in cities
like Jaipur and Kochi – cities outside the larger Indian metropolises. In this manner, Harley-
Davidson will be able to appeal to India’s rural landowners who would like to ride Harley-
Davidsons in the countryside.

CHALLENGES FACED BY HARLEY DAVIDSON:-

1. EXPANSION INTO CHINESE MARKETS:-
Unfortunately, Harley-Davidson’s venture into China, the world’s largest motorcycle market,
has been less smooth and illustrates what can happen when a company enters a foreign market
without sufficient background preparation. For example, China currently restricts the use of
motorcycles on elevated highways and major thoroughfares in about 100 cities. Import duties
can also add as much as 30 percent to the price of a Harley-Davidson, resulting in high-end
models cost- ing the equivalent of a luxury sedan such as the Audi A4. Perhaps more troubling
is the admission by most in China that motorcycles are associated with utilitarian tasks like
transportation to work, not leisure riding as is the case in developed economies such as the
United States. These realities increase the difficulty Harley- Davidson faces as the firm seeks to
establish the level of success in China that is similar to what the firm has been able to
accomplish in India.

2. THE JAPANESE NIGHTMARE:-

Setting: Late 1960s. After clocking impressive sales during World War II, iconic bikemaker
Harley Davidson started struggling.

What Happened: Tough competition from Japanese firms, high costs, poor quality and inferior
performance made things difficult for Harley. AMF, which bought the company in the late
1960s, tried to fix the problem but failed and the company soon went bankrupt. In 1981, the
company was again sold to a group of 13 investors.The new owners owners went back to the
drawing board for a strategic rethink.

3. STRICT INTERNATIONAL REGULATIONS:-

Safety must always be at the forefront of Harley- Davidson’s mind to avoid any unwanted
attention. For example, when taking Harley-Davidson’s “Rider’s Edge” operation courses, all
riders are required to wear protec- tive gear, including a helmet, that meets Department of

17
Transportation (DOT) regulations.54 Skeptics might say that Harley-Davidson is merely trying to
minimize its liability. However, most would agree that increased injury rates from not wearing
protective gear only serve to vilify motorcycle use. Indeed, Harley-Davidson even periodi- cally
issues communications to its customers encourag- ing riders to check the condition of their
helmets.55 Still, motorcycle riders in general have been affected by the recent loosening of
helmet laws throughout the United States. “Two decades ago, 47 states required helmets for all
riders.

Today, 20 do. Twenty-seven states require helmets only for younger riders. Three — Illinois,
Iowa and New Hampshire — don’t require helmets at all.” Another safety-related concern is the
fact that “in 1996, 5.6 motorcyclists were killed for every 10,000 registered motorcycles,”
according to DOT statistics. However, by 2006, the most recent data available, the rate had
risen to 7.3…”To be fair, such a study does not prove causality. Still, such studies can bring
unwanted negative attention to the motorcycle industry and reinforce cultural stereo- types
that motorcycle riders are risk-seeking freewheel- ers. To make its motorcycles appealing to a
broader tar- get market, Harley-Davidson must continue to espouse a culture of safety, even in
the face of decreasing safety regulations. New EPA emission regulations could also affect
Harley-Davidson’s growth. Still, the last revision of motorcycle emission standards in 2003 did
little to alter Harley-Davidson’s growth trajectory and prompted the following promise.

18
 ANALYSIS

Harley-Davidson is currently climbing its way out of what were likely the worst financial times
the company had faced since its inception in 1903. It peaked with nearly $6.2 billion in revenue
in 2006, and then wit- nessed its revenue fall nearly 30 percent between 2007 and 2009.
Harley-Davidson is in the recreation vehicles industry, making its products arguably among the
most expensive of consumer discretionary items. As noted earlier, individuals find it difficult to
justify purchases of these types of products when encounter- ing challenging economic
conditions. To compound the financial crisis in the United States between 2007 and 2010,
Harley-Davidson’s units-sold figures peaked at over 349,000 in 2006. Does the reduced number
of units sold since 2006 potentially suggest that the overall demand for Harley-Davidson’s
products is declining? Right now in its rebound, Harley-Davidson has managed to grow its
revenue over 11 percent from its 2009 lows and bring its operating margin back up to 16
percent from a disap- pointing 4 percent in 2009.

Going forward, work remains for Harley-Davidson to return to a strong financial position. To
start, Harley- Davidson is currently highly leveraged as suggested by the firm’s debt-to-equity
ratio of 1.6. Historically, it has operated with this ratio well below 0.5. Much of this new debt
resulted from a decision to create capital for the firm’s financing division. More specifically, this
capital was to be used as a way of helping customers purchase a Harley-Davidson motorcycle.
Because most of this debt is in the form of medium-term notes that do not require repayment
until after 2014, and because Harley-Davidson has the necessary current free cash flow to pay
its current liabilities, this debt is not a huge immediate concern. Even so, it is something the
firm’s leaders should monitor to make sure it does not get out of control.

Furthermore, Harley-Davidson will have to make a concerted effort to control costs to get back
to the 25+ percent operating margins it experienced during the boom years of 2004-2007. It is
the case that part of the difference between Harley’s current operating margin of 16 percent and
the highly desirable operating margin of 25 or more percent is a factor of its fixed costs being
allo- cated across fewer sales units. Nonetheless, keeping vari- able costs under control will be
crucial to the firm’s efforts to strengthen its operating margin until the number of units sold
increases. Detailed financial data concerning Harley-Davidson is shown in Exhibits 2 through 6.

19
Exhibit 2 HOG Income Statement
Consolidated Statements of Operations (USD $) 12 Months Ended
In Thousands, except Per Share data, unless otherwise specified Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009
Revenue:
Motorcycles and related products $4,662,264[ii] $4,176,627[ii] $4,287,130[ii]
Financial services 649,449 682,709 494,779
Total revenue 5,311,713 4,859,336 4,781,909
Costs and expenses:
Motorcycles and related products cost of goods sold 3,106,288 2,749,224 2,900,934
Financial services interest expense 229,492 272,484 283,634
Financial services provision for credit losses 17,031 93,118 169,206
Selling, administrative, and engineering expense 1,060,943 1,020,371 979,384
Restructuring expense and asset impairment 67,992 163,508 224,278
Goodwill impairment 28,387
Total costs and expenses 4,481,746 4,298,705 4,585,823
Operating income 829,967 560,631 196,086
Investment income 7,963 5,442 4,254
Interest expense 45,266 90,357 21,680
Loss on debt extinguishment 9,608 85,247
Income before provision for income taxes 792,664 390,469 178,660
Provision for income taxes 244,586 130,800 108,019
Income from continuing operations 548,078 259,669 70,641
Income (loss) from discontinued operations, net of tax 51,036 −113,124 −125,757
Net income (loss) $599,114 $146,545 ($55,116)
Earnings per common share from continuing operations:
Basic $ 2.35 $1.11 $0.30
Diluted $2.33 $1.11 $0.30
Earnings (loss) per common share from discontinued operations:
Basic $0.22 ($0.48) ($0.54)
Diluted $0.22 ($0.48) ($0.54)
Earnings (loss) per common share:
Basic $2.57 $0.63 ($0.24)
Diluted $2.55 $0.62 ($0.24)
Cash dividends per common share $0.48 $0.40 $0.40

20
 Exhibit 3 HOG Balance Sheet

Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009
Current assets:
Cash and cash equivalents $1,526,950 $1,021,933 $1,630,433
Marketable securities 153,380 140,118 39,685
Accounts receivable, net 219,039 262,382 269,371
Finance receivables, net 1,168,603 1,080,432 1,436,114
Variable interest entities’ restricted finance receivables, net 591,864 699,026
Inventories 418,006 326,446 323,029
Restricted cash held by variable interest entities 229,655 288,887
Deferred income taxes 132,331 146,411 179,685
Other current assets 102,378 100,991 282,421
Total current assets 4,542,206 4,066,626 4,341,949
Finance receivables, net 1,754,441 1,553,781 3,621,048
Variable interest entities’ restricted finance receivables, net 2,271,773 2,684,330
Property, plant and equipment, net 809,459 815,112 906,906
Goodwill 29,081 29,590 31,400
Deferred income taxes 202,439 213,989 177,504
Other long-term assets 64,765 67,312 76,711
TOTAL ASSETS 9,674,164 9,430,740 9,155,518
Current liabilities:
Accounts payable 255,713 225,346 162,515
Accrued liabilities 564,172 556,671 514,084
Short-term debt 838,486 480,472 189,999
Current portion of long-term debt 399,916 1,332,091
Variable interest entities’ current portion of long-term debt 640,331 751,293
Total current liabilities 2,698,618 2,013,782 2,268,224
Long-term debt 2,396,871 2,516,650 4,114,039
Long-term debt held by variable interest entities 1,447,015 2,003,941
Pension liability 302,483 282,085 245,332
Postretirement healthcare liability 268,582 254,762 264,472
Other long-term liabilities 140,339 152,654 155,333
TOTAL LIABILITIES
Shareholders’ equity:
Series A Junior participating preferred stock, none issued
Common stock, 339,107,230 and 338,260,456 shares issued in 2011 3,391 3,382 3,368
and 2010, respectively
Additional paid-in-capital 968,392 908,055 871,100
Retained earnings 6,824,180 6,336,077 6,324,268
Accumulated other comprehensive loss (476,733) (366,222) (417,898)
Stockholders equity before treasury stock 7,319,230 6,881,292 6,780,838
Less: Treasury stock (108,566,699 and 102,739,587 shares in 2011 and (4,898,974) (4,674,426) (4,672,720)
2010, respectively), at cost
Total shareholders’ equity 2,420,256 2,206,866 2,108,118
Total liabilities and shareholders’ equity $9,674,164 $9,430,740 $9,155,518

Exhibit 4 HOG Statement of Cash Flows

21
 Consolidated Statements of Cash Flows (USD $) 12 Months Ended
In Thousands, unless otherwise specified Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009
Consolidated Statements Of Cash Flows [Abstract]
Net cash provided by operating activities of continuing operations $885,291 $1,163,418 $609,010
(Note 2)
Cash flows from investing activities of continuing operations:
Capital expenditures (189,035) (170,845) (116,748)
Origination of finance receivables (2,622,024) (2,252,532) (1,378,226)
Collections on finance receivables 2,760,049 2,668,962 607,168
Collection of retained securitization interests 61,170
Purchases of marketable securities (142,653) (184,365) (39,685)
Sales and redemptions of marketable securities 130,121 84,217
Other, net 2,834
Net cash provided/used by inv. activities of cont. oper. (63,542) 145,437 (863,487)
Cash flows from financing activities of continuing operations:
Proceeds from issuance of medium term notes 447,076 496,514
Repayment of medium term notes (59,211) (200,000)
Proceeds from issuance of senior unsecured notes 595,026
Repayment of senior unsecured notes (380,757)
Proceeds from securitization debt 1,082,599 598,187 2,413,192
Repayments of securitization debt (1,754,568) (1,896,665) (263,083)
Net +/− in credit facilities & unsecured commercial paper 237,827 30,575 (1,083,331)
Net repayments in asset-backed commercial paper (483) (845) (513,168)
Net change in restricted cash 59,232 77,654 (167,667)
Dividends (111,011) (94,145) (93,807)
Purchase of common stock for treasury, net of issuances (224,548) (1,706) (1,920)
Excess tax benefits from share-based payments 6,303 3,767 170
Issued common stock under employee stock option plans 7,840 7,845 11
Net cash provided/used by fin. activities of continuing oper. (308,944) (1,856,090) 1,381,937
Exchange rate effect on cash/cash equiv. of continuing oper. (7,788) 4,940 6,789
Net increase/decrease in cash/cash equiv of continuing oper. 505,017 (542,295) 1,134,249
Cash flows from discontinued operations:
Cash flows from operating activities of disc. oper. (71,073) (71,298)
Cash flows from investing activities of disc. oper. (18,805)
Exchange rate effect on cash/cash equiv. of discont. oper. (1,195) (1,208)
Net cash used by discontinued operations, total (72,268) (91,311)
Net increase/decrease in cash/cash equivalents 505,017 (614,563) 1,042,938
Cash and cash equivalents:
Cash and cash equivalents - beginning of period 1,021,933 1,630,433 568,894
Cash and cash equivalents of disc. oper. - period start 6,063 24,664
Net increase (decrease) in cash and cash equivalents 505,017 (614,563) 1,042,938
Less: Cash and cash equivalents of disc. oper. - period end (6,063)
Cash and cash equivalents - end of period $1,526,950 $1,021,933 $1,630,433

Exhibit 5 HOG Statement of Stockholder’s Equity

Consolidated Statements Of Shareholders’ Equity Common Addition Retaine Accumulate Treasury Total
(USD $) Stock al Paid-In d d Other Balance

22
In Thousands, except Share data, unless otherwise [Member] Capital Earning Comp. [Member]
specified [Member] s Income
[Membe (Loss)
r] [Member]
Beginning Balance 12/31/08 $3,357 $846,796 $6,458,778 ($522,526) ($4,670,802) $2,115,603
Beg. Share Bal. 12/31/08 335,653,57
7
Comprehensive income:
Net income (loss) (55,116) (55,116)
Other comprehensive income/loss:
Foreign currency translation adjustment 30,932 30,932
Amortization of net prior service cost, net of taxes 2,679 2,679
Amortization of actuarial loss, net of taxes 11,761 11,761
Pension & post-retirement plan funded status adj., net of 29,111 29,111
taxes
Pension & post-retirement plan settlement & curtailment, net 32,197 32,197
of taxes
Change in net unrealized gains (losses):
Investment in retained securitization interests, net of taxes 13,600 13,600
Derivative financial instruments, net of tax benefit (1,239) (1,239)
Comprehensive income 63,925
Adj. to apply measurement date provisions of FSP 115–2, net of 14,413 (14,413)
taxes
Dividends (93,807) (93,807)
Repurchase of common stock (1,920) (1,920)
Share-based comp. & 401(k) match made with Treasury 27,363 2 27,365
shares
Issued nonvested stock (in shares) 1,147,393
Issuance of nonvested stock 11 (11)
Tax benefit of stock options & nonvested stock (3,048) (3,048)
Ending Balance at 12/31/09 3,368 871,100 6,324,268 (417,898) (4,672,720) 2,108,118
Ending Share Balance 12/31/09 336,800,97
0
Comprehensive income:
Net income (loss) 146,545 146,545

Exhibit 5 HOG Statement of Stockholder’s Equity (contd)

23
 Consolidated Statements Of Shareholders’ Equity Common Addition Retaine Accumulate Treasury Total
(USD $) Stock al Paid- d d Other Balance
In Thousands, except Share data, unless otherwise [Member] In Earnin Comp. [Member]
specified Capital gs Income
[Member [Membe (Loss)
] r] [Member]

24
 Beginning Balance 12/31/08 $3,357 $846,796 $6,458,778 ($522,526) ($4,670,802) $2,115,603
Beg. Share Bal. 12/31/08 335,653,57
7
Comprehensive income:
Net income (loss) (55,116) (55,116)
Other comprehensive income/loss:
Foreign currency translation adjustment 30,932 30,932
Amortization of net prior service cost, net of taxes 2,679 2,679
Amortization of actuarial loss, net of taxes 11,761 11,761
Pension & post-retirement plan funded status adj., net of 29,111 29,111
taxes
Pension & post-retirement plan settlement & curtailment, net 32,197 32,197
of taxes
Change in net unrealized gains (losses):
Investment in retained securitization interests, net of taxes 13,600 13,600
Derivative financial instruments, net of tax benefit (1,239) (1,239)
Comprehensive income 63,925
Adj. to apply measurement date provisions of FSP 115–2, net 14,413 (14,413)
of taxes
Dividends (93,807) (93,807)
Repurchase of common stock (1,920) (1,920)
Share-based comp. & 401(k) match made with Treasury 27,363 2 27,365
shares
Issued nonvested stock (in shares) 1,147,393
Issuance of nonvested stock 11 (11)
Tax benefit of stock options & nonvested stock (3,048) (3,048)
Ending Balance at 12/31/09 3,368 871,100 6,324,268 (417,898) (4,672,720) 2,108,118
Ending Share Balance 12/31/09 336,800,97
0
Comprehensive income:
Net income (loss) 146,545 146,545

Exhibit 5 HOG Statement of Stockholder’s Equity (contd)

Other comprehensive income (loss):

Foreign currency translation adj. (5,616) (5,616)
Net prior service cost amortization, net of taxes (564) (564)
Actuarial loss amort., net of taxes 23,584 23,584
Pension & post-retirement plan funded status adj., net of (146,768) (146,768)
taxes

25
 Pension & post-retirement plan settlement & curtailment, net 174 174
taxes
Change in net unrealized gains (losses):
Derivative financial instruments, net of tax benefit 18,219 18,219
Marketable securities, net of tax benefit 460 460
Comprehensive income 488,603
Dividends (111,011) (111,011)
Repurchase of common stock (224,551) (224,551)
Share-based comp. & 401(k) match made with Treasury 49,993 3 49,996
shares
Issued nonvested stock (in shares) 473,240
Issuance of nonvested stock 5 (5)
Exercise of stock options 4 7,836 7,840
Exercise of stock options (in shares) 373,534 374,000
Tax benefit of stock options & nonvested stock 2,513 2,513
Ending Balance at 12/31/11 $3,391 $968,392 $6,824,180 ($476,733) ($4,898,974) $2,420,256
Ending Balance, shares at 12/31/11 339,107,23
0

INFERENCE & CONCLUSION

At the end of the day, Harley-Davidson cannot depend on its strong brand name to carry it through the twenty-
first century. Between expanding its target consumer base beyond the stereotypical biker with his “old lady” sitting
behind him, to successfully breaking free of the red tape and increased costs associated with interna- tional
expansion, Harley-Davidson is potentially facing a challenging future. However, as one of the few motor- cycle
manufacturers focused exclusively on building motorcycles and without having to worry about cars, scooters, or
snowmobiles, it stands to reason it should be able to lead the pack.

26
Instead of trying to match the Japanese machines, the company decided to focus on Harley’s
“retro” look. To cut costs, parts such as carburetors, forks, shocks, brakes, etc, were sourced
from foreign companies. In 1983, the company got a boost when a 45% duty on imported bikes
with 700 cc-plus engines was imposed in the US. Buyers returned and sales picked up.

What It Means: It is important for a company to look inside, realise its core value and have the
confidence to build on that rather than get carried away by what the competition is doing.

Good relationships, continuous improvement, employee and management involvement, team

building or employee training and empowerment are not just words out of a management book
for Harley-Davidson. Only by adopting those management techniques and building a solid base
between the management and the Unions/employees made it possible for Harley-Davidson to
improve its management processes. While management's responsibility is to build relationships
with the employees, marketing's responsibility is to build relationship with the potential and
existing customers. The realization of the importance of customer feedback led Harley to
develop new marketing techniques. But, marketing strategies would not be enough if quality
and reliability did not improve.

REFERENCES
 www.wikipedia.com

 https://www.ukessays.com/essays/marketing/case-study-on-harley-davidson-marketing-
essay.

 http://buad306murphy.weebly.com/uploads/1/6/1/4/16142892/harleydavidsoncasestudy

27
 https://economictimes.indiatimes.com/how-harley-davidson-survived-
competition/articleshow/17442639.cms

 https://www.harley-davidson.com/us/en/about-us/hd-news/2018/h-d-advanced-
technology-elevates-the-motorcycling-experience.html

 Harley Davidson:- “Strategic Competitiveness that Spans Decades” by Kent

Grayson, Professor of Marketing, Northwestern University.

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