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The Strategic Management Process

The Strategic
Management Process
The Harley Davidson Pub, Singapore Pte.
Ltd.

Harley-Davidson, Inc. is a global leader in fulfilling


dreams and providing extraordinary customer
experiences through mutually beneficial relationships
with our stakeholders.

Lim Yew Cheong Larry


The Strategic Management Process

The Harley Davidson Pub, Singapore Pte. Ltd.

Larry Lim, ERC Institute of Singapore

www.harley-davidson.com

A road-scripted old man sat down at the counter of a one-horse-town coffee shop. His Harley
was parked outside.

“Nice bike,” said the short order.

“Thanks.”

“Where ya headed?”

“Everywhere. No-where.”

His coffee cup filled, the old man pointed to the Blue Plate Special and nodded his head.

“Where ya been?” Simple question. Difficult answer.

Without saying a word, the old man took off his jacket, revealing a right arm tattooed with every
place he’d ever been. From Frankfurt to Copenhagen, Tokyo to Thailand, Quebec to Key West
and on to Caracas. He’d even been to Bora Bora.

The awesome display was followed by an awkward silence, broken when the short-order asked
the old man where he called home.

He then rolled up his sleeve, where an ancient Harley-Davidson tattoo remained uncluttered.
“Show me to the nearest Harley dealer. And I’ll show you home.”

(www.harley-davidson.com)

When was the last time you felt this strongly about anything? How many company names do
you have tattooed on your body? The Harley-Davidson name is worn like a badge of honor.
These lifelong customers have a passionate commitment to the experience of riding a Harley-
Davidson. For motorcycle enthusiasts, even those without the tattoos, Harley-Davidson is
engraved in their lifestyle. This loyalty has helped Harley to survive against fierce international
competition and maintain strong financial performance.

Harley-Davidson has delivered double-digit growth in both revenue and earnings for more than
a decade. As shown in Exhibit 1, Harley Davidson’s revenue totaled $5,971.3 million, making it
$5.9 billion in 2008, a 2.7% decrease over 2007 due to the global economy crisis. Net income
was $654,7 million, down 29.8% from 2007, and diluted earnings per share for 2008 was $2.79,
down 25.4%. The price of the company’s shares increased 74% during 1998 in which its annual
growth rate in the stock market compounded over 40% since going public in 1986. Harley’s
2008 balance sheet is provided in Exhibit 2.
The Strategic Management Process

EXHIBIT 1 Harley-Davidson Annual Income Statement

Period Ending FY2008 FY2007 FY2006 FY2005 FY2004


Net Sales/Revenues 5.97 B 6.14 B 6.19 B 5.67 B 5.32 B
Cost of Goods Sold (Excluding Depreciation) 3.42 B 3.41 B 3.35 B 3.10 B 2.90 B
242.28 204.17 213.77 205.70 214.11
Depreciation, Depletion and Amortization
M M M M M
Gross Income 2.31 B 2.53 B 2.62 B 2.37 B 2.20 B
984.56 900.71 841.05 762.11 726.64
Selling, General & Admin Expenses
M M M M M
157.40 122.55 114.41 103.84
Other Operating Expense
M M M M 93.94 M
324.05 148.82 149.91 108.75 109.16
Operating Expenses - Total
M M M M M
Operating Income 1.17 B 1.51 B 1.66 B 1.51 B 1.38 B
Extraordinary Credit - Pretax 0 0 0 0 0
Extraordinary Charge - Pretax 0 0 0 0 0
Non-operating Interest Income 9.50 M 22.26 M 27.09 M 22.80 M 23.10 M
Reserves Inc (Dec) 0 0 0 0 0
Pretax Equity in Earnings 0 0 0 0 0
Other Income/Expenses - Net 0 0 -5.37 M -5.05 M -5.11 M
Earnings Before Interest & Taxes (EBIT) 1.18 B 1.53 B 1.68 B 1.52 B 1.40 B
141.34
Interest Expenses On Debt
M 81.48 M 59.76 M 36.15 M 22.72 M
Interest Capitalized 0 0 0 0 0
Pretax Income 1.03 B 1.45 B 1.62 B 1.49 B 1.38 B
379.26 513.98 581.09 528.16 489.72
Income Taxes
M M M M M
395.52 537.38 606.60 469.36 528.46
Current Domestic Income Tax
M M M M M
Current Foreign Income Tax 29.06 M 35.23 M 15.11 M 10.50 M 2.78 M
-38.59 -56.99 -43.04 -43.59
Deferred Domestic Income Tax
M M M 52.30 M M
Deferred Foreign Income Tax -6.74 M -1.64 M 2.43 M -4.01 M 2.08 M
Income Tax Credits — — — — —
Minority Interest 0 0 0 0 0
Equity in Earnings 0 0 0 0 0
After Tax Income Expense 0 0 0 0 0
Discontinued Operations 0 0 0 0 0
654.72 933.84 959.60 889.77
Net Income Before Extra Items/Preferred Div 1.04 B
M M M M
Extra Items & Gain (Loss) Sale of Assets 0 0 0 0 0
654.72 933.84 959.60 889.77
Net Income Before Preferred Dividends 1.04 B
M M M M
Preferred Dividend Requirements 0 0 0 0 0
Net Income Available to Common 654.72 933.84 1.04 B 959.60 889.77
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M M M M

HISTORY
“Harley-Davidson began in a shed, went to war, became the symbol of American individualism
and ended up ‘king of the road,’ all in 106 years…..” (2008 Annual Report) in the Davidson
Family’s backyard in the 1903 what was to become the legendary motorcycle company was
formed. The Davidson Brothers – Williams D., Walter, Arthur – and William S. Harley made their
first motorcycle there. In 1909, Harley-Davidson introduced its first V-Twin engine, which is the
company standard to this day.

1903 First Factory

Model 5-D (V-Twin)

During World War I, Harley-Davidson supplied the military with 20,000 motorcycles. After the
war, there were major advancements made in the design of the motorcycles, and Harley was
The Strategic Management Process

the leader. Soon after the war, the Great Depression devastated the motorcycle industry. Only
Harley and Indian survived through the 1930s.

1917 - Army personnel with bike

In 1941, World War II called, and Harley answered with more than 90,000 motorcycles.
After the war, demand for the motorcycles exploded, and Harley added additional facilities in
Milwaukee in 1947. After Indian closed in 1953, Harley was the “King of the Road”. Harley
ended family ownership in 1965 with a public offering. Only four years later, the company
merged with the American Machine and foundry Company (AMF).

By the early 1970s, the Japanese were importing huge numbers of lower-priced
motorcycles into the United States. Japanese firms were able to capture a large portion of
Harley’s market share. Harley was also having quality problems as a result of expanding
production rapidly. In 1981, 13 managers purchased the business from AMF. The company
convinced President Ronald Reagan, Upon recommendation from the International Trade
Commission (ITC), to impose additional tariffs on imported heavy-weight Japanese motorcycles
for five years. Then in 1986, Harley-Davidson, Inc., became publicly held. That same year,
Harley regained its place at the top of the U.S. superheavyweight market, beating out Honda.
The next year, the company asked the ITC to remove the tariffs one year early. Harley’s U.S.
market share continued to grow. After being praised by President Reagan as an “American
success story,” Harley has continued to improve all parts of its operations. Worldwide demand
for the company’s products continues to grow.

EXHIBIT 2 Harley-Davidson Annual Balance Sheet

Period Ending Q4 Q3 Q2 Q1 Q4
The Strategic Management Process

FY08 FY08 FY08 FY08 FY07


Assets          
593.56 504.91 803.92 333.16 405.33
Cash and Short Term Investments
M M M M M
Net Receivables 2.74 B 3.69 B 3.15 B 2.62 B 1.76 B
400.91 401.28 341.40 441.20 349.70
Total Inventories
M M M M M
Progress Payments & Others — — — — —
187.44 46.81
Prepaid Expenses — — —
M M
222.89 206.62 187.44 955.79
Other Current Assets 1.64 B
M M M M
Current Assets Total 5.38 B 4.82 B 4.51 B 3.59 B 3.47 B
Long Term Receivables — — — — —
Investment in Unconsolidated Subsidiaries 0 0 0 0 0
Other Investments — — — — —
Property, Plant & Equipment Net 1.09 B 1.09 B 1.06 B 1.06 B 1.06 B
Property, Plant & Equipment Gross 3.03 B 2.76 B 2.53 B 2.33 B 2.19 B
Accumulated Depreciation 1.94 B 1.70 B 1.51 B 1.32 B 1.17 B
Other Assets 1.07 B 1.29 B 1.22 B 1.22 B 1.07 B
Deferred Charges — — — — —
Tangible Other Assets — — — — —
138.58 144.68 63.10 63.20 61.40
Intangible Other Assets
M M M M M
Total Assets 7.54 B 7.20 B 6.78 B 5.86 B 5.60 B
Liabilities          
927.93
Short Term Debt & Current Portion of Long Term Debt 1.74 B 1.14 B 1.11 B 1.12 B
M
Accrued Payroll — — — — —
27.16 19.50 49.67 58.08 53.55
Income Taxes Payable
M M M M M
Dividends Payable — — — — —
514.21 635.48 518.81 579.21 465.44
Other Current Liabilities
M M M M M
Current Liabilities Total 2.60 B 2.21 B 1.77 B 2.04 B 1.91 B
980.00 980.00 980.00
Long Term Debt 2.18 B 2.05 B
M M M
Provision for Risks & Charges — — — — —
-288.24 51.43
Deferred Taxes 0.00 0 0
M M
Deferred Income — — — — —
Deferred Tax Liability in Untaxed Reserves — — — — —
933.03 456.63 431.72 416.92 396.04
Other Liabilities
M M M M M
Total Liabilities 5.42 B 4.70 B 4.25 B 2.17 B 3.23 B
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Shareholders Equity          
Non-Equity Reserves 0 0 0 0 0
Minority Interest 0 0 0 0 0
Preferred Stock 0 0 0 0 0
Common Equity 2.12 B 2.50 B 2.53 B 2.43 B 2.38 B
Common Stock 3.36 M 3.35 M 3.34 M 3.31 M 3.30 M
846.80 812.22 766.38 596.24 533.07
Capital Surplus
M M M M M
Revaluation Reserves — — — — —
-193.28
Other Appropriated Reserves — — — —
M
Unappropriated (Free) Reserves — — — — —
Retained Earnings 6.46 B 6.12 B 5.46 B 4.63 B 3.84 B
Equity in Untaxed Reserves — — — — —
ESOP Guarantees — — — — —
59.18 28.43 24.29 13.11
Unrealized Foreign Exchange Gain (Loss) 7.47 M
M M M M
20.50 36.32 36.91
Unrealized Gain (Loss) on Marketable Securities -2.67 M -3.17 M
M M M
Treasury Stock 4.67 B 4.42 B 3.27 B 2.20 B 1.15 B
Total Liabilities & Shareholders’ Equity 7.54 B 7.20 B 6.78 B 5.86 B 5.60 B
232.76 232.82 235.33 236.56 238.49
Common Shares Outstanding
M M M M M
           

CORPORATE MISSION STATEMENT

Harley’s mission statement as provided in their 2008 Annual Report is as follows:

We inspire and fulfill dreams around the world through Harley-Davidson motorcycling
experiences.

CORPORATE VISION STATEMENT

Harley’s vision statement as provided in the 2008 Annual Report is as follows:

Harley-Davidson, Inc. is a global leader in fulfilling dreams and providing extraordinary


customer experiences through mutually beneficial relationships with our stakeholders.

PUBS – THE HEART OF THE COMMUNITY

Pubs are right at the heart of every community in every country. They are a much loved part of
our national culture, celebrated at home and abroad, and attract many visitors worldwide.
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Today's pub is as much about food as drink. More than 80 per cent of pubs serve food, catering
for every taste. That's over 1.1 billion meals per year.

In the turn of a wink, the world is now facing one of the worst ever crisis to hit the
business highway. Singapore has not been spared either. The employment rate has slowed
down to 8.1%, lower than the increase of 234,900 or 9.4 percent in 2007. The number of pub-
goers and employments may dip in the wake of the global crisis.

For the Harley-Davidson’s pub, it not only will bring in revenues to accommodate the
losses of Harley’s net sales, it may also bring in employments for job-seekers. Furthermore, this
is also the first Harley-Davidson’s pub in Singapore and maybe, worldwide. Competitions may
be stiff, but as long as there’s a business plan / strategy, chances of being crowd pullers are
there to be seen. The SWOT Analysis diagram in Exhibit 3 shows the strategic planning of the
pub for long term future. The SWOT matrix is a useful tool for strategic planning and achieving
goals, individually or with a team.

Here is the Action Plan after the SWOT Analysis of the Harley-Davidson Pub
Singapore:-

 Strength – By maintaining a good location for the pub to get tourists attractions and earn
more incomes with the interest of locals too.
 Weakness – In order for the pub’s decorations to run smoothly, a good PR with the
landlord is essential as well as to maintain quality services (meeting the standards of the
Singapore Quality Award [SQA]).
 Opportunities – By enhancing the development of the pub as well as its quality services.
 Threats - Build a reputation with residents in the area to create better communications
as well as to pay well for contractors to fully repair the pubs to gain their trust.

COMPETITION

There are many Pubs in Singapore, from small time owner to bigger establishment. Pub can be
found in the City area, Jalan Sultan, Tanjong Pagar (Duxton Road), Boat Quay, Clark Quay etc.
In the past decade, bars and nightclubs have blossomed in a big way in the Lion City. Long
labeled as over-protected nannies state where its well-behaved inhabitants just don't know how
to have fun, partying the night away has become a norm.

Many of the bars and clubs have taken on a unique Singapore or Southeast Asian character;
you'll find restored Chinese go downs pumping out rap or retro, trendy bars of glass-and-steel
exteriors and Buddhist temple-style interiors, historic drinking dens that will you bring back to
the days of the Raj.

EXHIBIT 3 SWOT ANALYSIS DIAGRAM

SWOT Analysis Template

State what you are assessing here _____Harley-Davidson Pub


Singapore________________________________________________________________________
The Strategic Management Process

Strengths Weaknesses
Good location in the centre of the heartlands. Poor state of decoration in the pub
High level of disposable income locally Car park too small
ignificant interest from the local community Unwelcoming and rude landlord
ttracts interest from the tourism board Over priced food
st into the Singapore pubs industry Poor quality beer and wine
ocal demand for eating out? Lau Pa Sat, in the next vicinity, is alwaysSlow
full. service
Dirty facilities

pportunities Threats
nderused building on the end of the pub Roof potentially needs repair
ost office closing due to retirement of postmaster Owner may try to get planning for residential conversion
ar park could be extended into grounds Cannot change the poor image of the pub locally
Investment
ew friendly landlord will welcome customers; serve good food cannot be raised
with a smile!

As this will be the first time Harley-Davidson is having a pub in Singapore, the competition will
be stiff in this business-oriented city. Harley faces a major competitor, Harry’s. Harry’s Bar at
Boat Quay famous for being one of the pioneers of the Boat Quay strip and one of the original
The Strategic Management Process

Heineken Star bars. For 17 years this famous nightspot has been revered as the home of
Singapore’s jazz scene.

Nestled in the shadows of the towering Raffles Place skyline, this famous watering hole is a
favorite of Singapore’s power brokers and bankers. Harry’s occupies a prime location on the
Boat Quay strip facing out over the Singapore river, where bumboats can be seen sailing
leisurely along the waterfront.

Founded in 1992, the bar occupies a renovated shop house dating back to the early 1900’s.

PLAN 2012

For the past years, Harley-Davidson has been the mainstay of the motorcycle revolution. With
more than half-a-million members worldwide (88% male; 12% female), Harley has 2 pubs
stationed in Slovakia and Republic of Ireland for entertainment and leisure for all Harley-
Davidson members and friends. Harley-Davidson Pub Singapore plans to increase its
memberships vie the pub’s registration system as well as to increase its quality service in its
other areas (food, drinks, hospitality etc) to be qualified under the Singapore Quality Award
(SQA) to be able to sustain profitable income and comfort for Harley-Davidson’s members and
friends.

THE FUTURE

Harley-Davidson redefined the motorcycle industry as it roared through 16 years of growth. But
as its customers aged--and the stock market slides--the ride could get uneasy. With the global
economic crisis in mind, give Harley credit for not burying its head in the sand, as the Japanese
did when they were atop the market in the early 1980s. They wrote off a near-bankrupt Harley,
failed to respond to its resurgence, and then ceded to it the boomers and cruisers. That won't
happen at Harley, vows retired CEO Jeffrey Bleustein. His message to a national meeting of
650 dealers in July: "The only thing that can stop us is if we get complacent. Even though we've
been successful, we can't stand still."

As part of the Harley-Davidson’s pub management, other than increasing the annual income for
the pub, the management may liaise with the other 2 pubs and Harley Owners Group (H.O.G.)
to form the group called Harley Owners Pubs Group (H.O.P.G.) and bring members of Harley-
Davidson worldwide together with respect to the values of the company:-

 Tell the Truth.


 Be Fair.
 Keep Your Promises.
 Respect the Individual.
 Encourage Intellectual Curiosity.

REFERENCES
The Strategic Management Process

FRED R.DAVID. 2001. “Strategic Management.” Eight Edition. Harley-Davidson, Inc. – 2000.
Pages 238 – 246.

ERC INSTITUTE. 2009. “Entrepreneurship and Intrapreneur.” Strategic Management Process


Steps 1-9. Pages 1-19.

HARLEY-DAVIDSON USA. 2009. “H-D Student Center.” http://www.harley-


davidson.com/wcm/Content/Pages/Student_Center/student_center.jsp?locale=en_US

SINGAPORE NIGHTLIFE. 2009. “Nightlife Hot Spots.” http://www-singapore.com/nightlife/

2008 PUB IS THE HUB. 2008. “Example SWOT Analysis.”


http://www.pubisthehub.org.uk/pithlive/res/publications/swot/

AOL MONEY & FINANCE. APRIL 2009. “HOG: HARLEY DAVIDSON INC Balance Sheet.”
http://finance.aol.com/financials/harley-davidson-inc/hog/nys/balance-sheet

AOL MONEY & FINANCE. APRIL 2009. “HOG: HARLEY DAVIDSON INC Income Statement.”
http://finance.aol.com/financials/harley-davidson-inc/hog/nys/income-statement

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