RUNNING HEAD: CASE PROJECT: HARLEY-DAVIDSON MOTORCYCLE COMPANY
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CASE PROJECT: HARLEY-DAVIDSON MOTORCYCLE COMPANY
Case Project: Harley-Davidson Motorcycle Company
Aron Thompson
Purdue University Global
Abstract
In this case study, we will explore the history, products, target market, and financials of the Harley-Davidson Motorcycle Company. As one of the top recreational vehicle companies in the United States, we can locate an appropriate amount of data to provide a detailed view of what it takes to maintain an organization of this type at this level based on budgeting and cost analysis. We will better understand how financial data is analyzed so that decisions can be effectively made to benefit the company and its future. The breakdown of the financial data will include financial metrics directly from the Harley-Davidson Motorcycle Company to create a cost volume profit (CVP) inquiry and create a balanced scorecard of the Harley-Davidson Motorcycle Company. To better understand Harley-Davidson Motorcycle Company’s strategy of operations, we will highlight all effects that contribute to the ongoing financial successes of Harley-Davidson Motorcycle Company. Companies like Harley-Davidson Motorcycle Company, within the manufacturing industry, need to effectively create and execute their budgets. This case study will elaborate on the processes and viewpoints of the Harley-Davidson Motorcycle Company.
Harley-Davidson Motorcycle Company
Harley-Davidson Motorcycle Company is a leading motorcycle manufacturer in the United States. An analysis of its operations and processes helps to ascertain its efficiency in terms of operational effectiveness. It is possible to ascertain the company’s competitive edge and predict its potential in the marketplace once key undertakings have been met to bolster its operational efficiency. This balanced scorecard is relevant as it offers the lens for analyzing Harley-Davidson Motorcycle Company’s internal processes. These results are contrasted to the external outcomes that ensure select organizational outcomes are attainable in alignment with the entity’s short-term and long-term goals. It is integral for companies to attain and sustain an operational edge that ensures their internal processes are uniquely designed to ensure they meet the expected external outcomes.
Part 1 – Harley-Davidson Motorcycle Company
Organization History
As earlier stated, Harley-Davidson Motorcycle Company is a motorcycle manufacturer (Yahoo, 2022). The company has its headquarters in Milwaukee, Wisconsin, United States. Harley-Davidson Motorcycle Company was founded in 1903 (Yahoo, 2022). Following the Great Depression, most motorcycle manufacturing pants collapsed. Nevertheless, this is one of the brands in the United States that has remained operational. As one of the globe’s largest motorcycle manufacturers, Harley-Davidson Motorcycle Company has undergone immense competition. The setbacks encountered by Harley-Davidson Motorcycle Company illustrate that many issues have marred it’s given sector. Nevertheless, with its wide portfolio, Harley-Davidson Motorcycle Company has managed to serve a broad market base.
Products
As earlier outlined, Harley-Davidson Motorcycle Company has a diverse product portfolio. The company offers multiple products, including motorcycles, clothing, and motorcycle parts (Yahoo, 2022). Primarily, the company engages in the design and assembly of motorcycles. In addition, Harley-Davidson Motorcycle Company issues different merchandise. These merchandises are motorcycle related. This implies that Harley-Davidson Motorcycle Company offers these products on a wholesale basis. In addition, there are insurance and financing programs that Harley-Davidson Motorcycle Company offers to its dealers and customers. Harley-Davidson Motorcycle Company has positioned itself as an iconic brand, and the products and services it offers are strongly related to this strong brand image.
Market
Harley-Davidson Motorcycle Company commands the largest market share compared to other motorcycle brands in the United States. As of 2022, the attached graph (Graph 1) illustrates that Harley-Davidson Motorcycle Company commands the largest market share in the United States at 21.1% (Statista, 2022). Other brands that command a significant market share include Honda and Yamaha. Therefore, it can be inferred that this United States-based company is not the dominant player in this sector in the United States.
Graph 1
Nonetheless, it cannot be overlooked that Harley-Davidson Motorcycle Company is the leading motorcycle manufacturer in the United States. Moreover, in the global and domestic market, Harley-Davidson Motorcycle Company is a trusted brand that has survived and remained highly operational and competitive over the years.
Customer Base/Niche
Harley-Davidson Motorcycle Company is currently not a niche brand. However, this has not always been the case, as the company’s customer base has evolved. In its formative years, Harley-Davidson Motorcycle Company enjoyed a niche market. However, the brand evolved with its market base consisting of hard-core bikers. Currently, Harley-Davidson Motorcycle Company’s customer base is expansive. It constitutes an affluent audience. This is the current niche that continues to be targeted since the 20th century. The shift has come about as the brand has always sought to distinguish itself from other players and secure its position and status as a highly sought after brand capable of meeting evolving consumer preferences and needs.
Part 2 – Significant Costs
Significant Costs
There are costs that Harley-Davidson Motorcycle Company incurs as it seeks to align its production and manufacturing processes to existing laws and policies. One of these laws includes the U.S. Environmental Protection Agency (EPA). The expenses incurred in adhering to these expenses include a $12 million civil penalty because of the sale of tuning devices that adversely affected the environment. In addition, the company also had to change its design and production processes for its tuners. The aim was to ensure that the emissions from these devices did not adversely affect the environment. Therefore, adhering to EPA guidelines is costly for Harley-Davidson Motorcycle Company.
Environmental Concerns
At Harley-Davidson Motorcycle Company, an inclusive stakeholder approach is adopted. The approach aims to ensure that Harley-Davidson Motorcycle Company attains sustainable ESG (which Beattie (2021) mention include pillars such as Environmental, Social, and Governance). This brand is committed to driving desirable and positive impacts on all stakeholders. The company also seeks to ensure that its entire structure embraces inclusivity in that its workforce is culturally broad. Furthermore, Harley-Davidson Motorcycle Company seeks to ensure that its activities and undertakings positively impact the environment. The company is also dedicated to ensuring that its designs are environmentally friendly in that they do not pollute the air through harmful emissions. Therefore, Harley-Davidson Motorcycle Company is striving to ensure that its production processes align with its processes.
Cost Behaviors
Harley-Davidson Motorcycle Company’s cost behavior offers the dimension through which this firm’s shift in cost will occur. Based on the cost behavior, it can be inferred that a change in organizational activity will impact Harley-Davidson Motorcycle Company. Variable and fixed costs include Harley-Davidson Motorcycle Company’s aspects that help assess cost behavior. For example, Harley-Davidson Motorcycle Company’s fixed costs include the expenses incurred while manufacturing the motorcycles. On the other hand, variable costs are additional expenses that could feature outlays for effective marketing. Based on these dynamics, variable and fixed costs impact the organization’s activity.
Prevention, appraisal, and detection costs
The prevention, appraisal, and detection costs relate to the expenses incurred by Harley-Davidson Motorcycle Company as it seeks to align its design and manufacturing processes and steps with the costly environmental costs. For instance, the appraisal costs might lead to the realization that some of the motorcycles that Harley-Davidson Motorcycle Company produces and manufactures are faulty. They might be faulty if they fail to meet product standards before they are released to the marketplace.
Basic calculations
The following are the calculations for the Net Present Value for the two alternatives for expansion for Harley-Davidson Motor Company.
Alternative 1: Brownfields Expansion
NPV = the present value of all cash flows over the life of a project, then the present value of cash flows subtracted from the investment’s initial investment
Net present value of all cash flows for 10 years = 1,477,143,008 (200,000 units per annum)
Initial investment = 100,000,000
1,477,143,008/100,000,000
NPV = 14.8%
Alternative 2: Greenfield Expansion
NPV = the present value of all cash flows over the life of a project, then the present value of cash flows subtracted from the investment’s initial investment
Net present value of all cash flows for 10 years = 1,450,468,678 (210,000 units per annum)
Initial investment = 180,000,000
1,450,468,678/180,000,000
NPV = 8.1%
Part 3 – CVP Analysis
CVP Analysis
Total
Per Unit
Total Units
Sales
4,472,679,000
22,374
213,939
Variable costs
3,257,798,000
16,197
Contribution margin
1,742,880,000
6,327
Fixed costs
2,199,087,000
Net Income
144,927,000
Contribution margin ratio
28.78%
70.87%
Variable expense ratio
Break-even point
188,121
Degree of operating leverage (DOL)
9.28
Management decision-making
The company must identify a means to mitigate its operational expenses. This is because of the considerably high variable costs. The high variable costs mean that many aspects need projection and consideration to ensure that profit margins and estimates are met. At the same time, the management should discern modes of sustaining revenue generation. Kimmel et al. (2022) outline that generating interest is integral as it highlights a company’s ability to align its sales and operating activities. In the case of Harley-Davidson Motorcycle Company, this results from the absence and presence of financial projections that are not an accurate indication of the company’s financial state.
Benefits to the company
The break-even point and the degree of operating leverage (DOL) illustrate that Harley-Davidson Motorcycle Company is performing positively in the marketplace. The positive performance illustrates the presence of high income from the generated sales. For instance, the DOL is at 9.28. In addition, the high operating leverage implies that income and revenue are also considerably high at this level. However, there is also a significant change in sales. This implies a need to stabilize Harley-Davidson Motorcycle Company’s sales and operational aspects.
Part 4 – Budgeting Considerations
Budgeting process
A series of key steps characterize Harley-Davidson Motorcycle Company’s budgeting process. Planning is one of the major steps in the planning process. Harley-Davidson Motorcycle Company needs to embark on planning as one of its key steps in the budget preparation process, considering that it is a relatively large conglomerate with many departments. Before the beginning of a financial year, the budget preparation process is initiated. The next stages include a series of phases that identify the departments’ needs and prioritize the key components for the successful operation of Harley-Davidson Motorcycle Company. Afterward, funds are allocated in the final stage.
Budget variances
There are discussions of variances at Harley-Davidson Motorcycle Company. These variances are established after a comparison of the revenue and budgetary expenses. If the possible budget allocations are higher than the revenue, Harley-Davidson Motorcycle Company undertakes a critical and comprehensive review of its processes and undertakings. The aim is to ensure that they establish and develop an understanding of the underlying factors that cause the anomalies identified. In addition, the budget variances are aimed at outlining and defining the baseline value. Thus, by discussing budget variances, Harley-Davidson Motorcycle Company can ascertain its baseline value in revenue and budgetary allocations.
Management decisions
The management decisions that Harley-Davidson Motorcycle Company undertakes relate to identifying the allocation modes of funds so that processes and activities can be extensively undertaken for positive results and outcomes. The management also considers the budget variances to identify whether deficits are significant and ascertain ways to reconcile budget allocations and generated revenue. The management might thus consider and evaluate the option of securing a loan. The role of the management is to ensure that all key processes and activities for Harley-Davidson Motorcycle Company to be operational are funded.
Part 5 – BSC
Balance scorecard – Financial
Harley-Davidson Motorcycle Company’s financial perspective relates to shareholder value and profit. It also depends on the growth level. Harley-Davidson Motorcycle Company is profitable, and its growth rate is immense. These dynamics imply that Harley-Davidson Motorcycle Company’s financial status is positive. Therefore, Harley-Davidson Motorcycle Company is financially healthy.
Balance scorecard – Customer
Harley-Davidson Motorcycle Company’s state as a highly effective and strategically positioned company can be assessed from customers’ perspectives. Harley-Davidson Motorcycle Company commands the largest market share in the United States. The company is thus highly valued. It commands high sales based on its ability to meet and sustain the preferences and needs of customers.
Balance scorecard – Internal Process
Harley-Davidson Motorcycle Company’s internal process help to showcase the effectiveness and efficiency of its processes. Harley-Davidson Motorcycle Company’s internal processes are dedicated to ensuring that the company is profitable in that its products meet its quality standards. In addition, Harley-Davidson Motorcycle Company seeks to ensure that its processes and operations represent its underlying mission and vision. The marketing team’s insight should inform the internal process, which helps align customer preferences and manufacturing processes and undertakings.
Balance scorecard – Learning/Growth
Harley-Davidson Motorcycle Company continually assesses its processes and manufacturing processes. The aim is to ascertain areas marred with issues and setbacks. Besides, Harley-Davidson Motorcycle Company seeks to enhance its innovativeness and bolster its production rate. The relevance of continued growth is to enhance efficiency and thus improve Harley-Davidson Motorcycle Company’s overall operational efficiency.
Part 6 – Corporate Sustainability and Responsibility
Corporate sustainability pillars
Some of Harley-Davidson Motorcycle Company’s key corporate social responsibility concepts are corporate citizenship and sustainability. Fernando (2022) mentions that one of the tenets of CSR includes environmental responsibility. Harley-Davidson Motorcycle Company seeks to ensure that it adheres to existing laws and policies on environmental protection. Thus, its products and programs are designed to align with the standards that dictate and define this industry’s dynamics. At the same time, Harley-Davidson Motorcycle Company embraces ethical values, which are considered integral to its workforce. At the same time, the employees and the consumers are considered in formulating the organizational culture that embraces and prioritizes values such as honesty and ethics.
Corporate responsibility
Harley-Davidson Motorcycle Company considers the impact of its operations, products, and programs on the community/society. By considering these dimensions, Harley-Davidson Motorcycle Company can ensure that it has a positive socioeconomic impact on the larger community (Harley-Davidson – Investor Relations, 2022). Harley-Davidson Motorcycle Company also considers community needs in its design process. Harley-Davidson Motorcycle Company seeks to ensure that the motorcycles it avails to the market benefits society. Harley-Davidson Motorcycle Company maintains high accountability standards for the community and the environment.
Implementing corporate sustainability and responsibility programs at Harley-Davidson Motorcycle Company
Harley-Davidson Motorcycle Company implements concepts of corporate sustainability by ensuring that the goal informs its operations and undertakings of establishing and sustaining long-term benefits to the community. In addition, Harley-Davidson Motorcycle Company is constantly engaging all stakeholders, including the community, to identify how it could impact socioeconomic progress and development (Harley-Davidson – Investor Relations, 2022). The design process also considers the intent and needs of customers to enhance the value proposition.
Benefits from furthering corporate sustainability and responsibility at Harley-Davidson Motorcycle Company
Harley-Davidson Motorcycle Company benefits from corporate sustainability and responsibility as there is a positive brand image. The positive brand image illustrates the company’s dedication to environmental protection and conservation. There is also a high level of commitment from employees. They learn of their positive impact on society, and this bolsters their morale and dedication to the Harley-Davidson Motorcycle Company. The level of performance increases immensely as a result.
Part 7 – Heuristics and Bias
Heuristics in managerial decision-making
The plethora of heuristics and biases collectively offer a strategy for problem-solving that considers the participants’ unique life experiences. Ruotsalainen et al. (2019) imply that heuristics is integral to the decision-making process. Before making any judgments, it is necessary to consider and weigh all of the available alternatives, which calls for the application of a variety of different methods. In the Harley-Davidson Motorcycle Company, these techniques are provided by both the heuristics and the resulting biases. When applied in the context of Harley-Davidson Motorcycle Company, heuristics give the impression of reducing the amount of effort necessary to store and retrieve information from memory. The final product is a method of decision-making that is more straightforward.
Heuristics bias in Harley-Davidson Motorcycle Company management decision-making related to identifying high costs, using CVP analysis, the BSC, and corporate sustainability/responsibility.
Zimmermann et al. (2022) noted that heuristics and biases are common within organizational settings. For example, Harley-Davidson Motorcycle Company develops its decision-making framework considering the dimension issued by the heuristic results. Managers at Harley-Davidson Motorcycle Company use these tools. The other key decision-makers also leverage these tools despite its shortcoming, such as bias.
Conclusion
To determine Harley-Davidson Motorcycle Company’s operational efficacy, an analysis of its activities and processes was helpful. Once several crucial tasks to increase the company’s operational efficiency have been completed, it is possible to determine its competitive advantage and forecast its potential in the market. This balancing scorecard is important because it provides a prism through which the internal operations of the Harley-Davidson Motorcycle Company can be examined. Moreover, these outcomes contrast with the external outcomes that guarantee that certain organizational outcomes are reachable and in line with the entity’s short- and long-term objectives. Therefore, businesses must achieve and maintain an operational edge that guarantees their internal procedures are specially created to guarantee they achieve the desired exterior results.
References
Harley-Davidson – investor relations. Placeholder Company. (n.d.). Retrieved November 1, 2022, from https://investor.harley-davidson.com/overview/default.aspx
Kimmel, P. D., Weygandt, J. J., & Mitchell, J. E. (2022). Accounting: Tools for business decision making. Wiley. https://www.just.edu.jo/~mqais/CIS252/CIS252_Syllabus.pdf
Ruotsalainen, R., R., Atanasiu, R., Vrije, & U. Amsterdam (2019, August 1). The role of managerial heuristics in organizational decision-making and beyond. Academy of Management Proceedings. Retrieved November 1, 2022, from https://journals.aom.org/doi/abs/10.5465/AMBPP.2019.11516abstract
Zimmermann, & Peter Gál & Miloš Mrva & Matej Meško. (1970, January 1). Heuristics, biases and traps in managerial decision making, by Peter G. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis. Retrieved November 1, 2022, from https://ideas.repec.org/a/mup/actaun/actaun_2013061072117.html
Statista. (2022). Market share of major motorcycle brands in the U.S. in 2022, based on unit sales. Retrieved November 1, 2022, from https://www.statista.com/statistics/252210/market-share-of-major-motorcycle-manufacturers-in-the-us/
Beattie, A. (2022, June 12). The 3 pillars of Corporate Sustainability. Investopedia. Retrieved November 1, 2022, from https://www.investopedia.com/articles/investing/100515/three-pillars-corporate-sustainability.asp
Fernando, J. (2022, October 31). Corporate Social Responsibility (CSR) is explained with examples. Investopedia. Retrieved November 1, 2022, from https://www.investopedia.com/terms/c/corp-social-responsibility.asp
Yahoo! (2022, November 1). Harley-Davidson, Inc. (hog) Company Profile & Facts. Yahoo! Finance. Retrieved November 1, 2022, from https://finance.yahoo.com/quote/HOG/profile?p=HOG
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