Harley-davidson internal and external analysis free essay sample

Gather the financial information necessary to do a complete ratio analysis and the BSC key metrics information. If you were going to create a BSC, what would be the key metrics you would measure in each of the four BSC areas: †¢Financial †¢Customer †¢Internal Business Process †¢Learning and Growth Perform a ratio analysis using H-Ds five-year financial performance. Interpret the meaning of the ratios and financial performance. Summarize and support your findings in a 2—3 page Word document entitled The Analysis of H-Ds Current Strategy: Two Views. Be sure to include the ratio analysis. You may also include other graphics to support your narrative. Competitors Based on your analysis, you must decide which two competitors present the biggest competitive threat to H-D. Perform a financial ratio analysis for the competitor after looking at trends in financial performance over five years, and compare the trends to industry averages. Be sure you have a clear ranking of the industries competitors Lateresa Blackwell March 12, 2014 Business Policy Strategic Solutions | BUS499 R01 Faculty: Boris Mendez While analyzing Harley-Davidson and their effectiveness with handling obligations of current ratios of 1. 9 and the quick ration of 1. 47 when it should be on average approximately near 2 and quick ratio near 1 within the motor-cycle industry on averages are consistent with those numbers. In the case of Harleys current ratio it shows to be slightly below the industry average while the quick ratio is above it, with that being said, these numbers indicate Harley-Davidson should have no issues paying its obligations. They have proven to show consistency with their numbers over the past few years, even with them showing a slight decrease in the ratios from 2008. According to the 2009 report Harley-Davidson’s ratios indicate they have a strong financial position to cover their obligations. With Harley showing a decline in revenues in 2009 they have been put in a position to borrow on a higher percentage of its financing than most of the companies in the industry due to a slowing in the economy may have contributed to the debt percentage being slightly higher. When looking at the overall number of the industry, Harley-Davidson’s profits are struggling because of their ratios; they are not showing the ability to generate a profit they are receiving from their shareholders, from their assets or its sales according to the report. Looking at the revenue from their motorcycles and related parts segments, it appears Harley has shown a steady decline which says they are in a deeper issue than just the slow economy. In their annual report they continue to show a decline in their income since 2007 (2009 Harley-Davidson Annual Report). However, Harley is showing effectiveness in its collecting receivables, as evidenced by its day’s sales in receivables. While the industry average was high with averages around 55, Harley had a collection period averaging 20 days. A chart of Harley-Davidsons financial information and industry averages (Harley-Davidson, 2010). Harley-Davidson, Inc. Financial Ratios 2009 2008 2007 HOG Quartile Ind. Avg. HOG Quartile Ind. Avg. HOG Quartile Ind. Avg. Solvency Ratios: Current 1. 91 MED 2. 1 2. 1 MED 2. 2 1. 82 MED 1. 9 Quick 1. 47 MED-UQ 1. 1 1. 8 UQ 1. 2 1. 54 MED-LQ 0. 9 Current Liabilities to Net Worth 107 MED-LQ 67 124 LQ 64. 6 80. 2 MED 69. 5 Current Liabilities to Inventory 702 LQ 252. 8 649 LQ 336. 4 545 LQ 256. 5 Total Liabilities to Net Worth 334 LQ 100. 7 176 LQ 95. 1 138 LQ 89. 4 Fixed Assets to Net Worth 46. 7 LQ 21. 5 53. 7 LQ 20. 6 47. 9 LQ 16. 1 Leverage Ratios: Leverage 0. 77 N/A 0. 47 0. 47 N/A 0. 61 0. 58 N/A 0. 61 Debt to Equity 3. 34 N/A 0. 88 1. 76 N/A 1. 55 1. 38 N/A 1. 6 Profitability Ratios: Return on Sales (Profit Margin) -1. 15 MED-LQ 2. 4 11 UQ 3. 6 15. 2 UQ 1. 5 Return on Assets -0. 6 MED-LQ 2. 8 8. 36 MED 5 16. 5 UQ 3. 7 Return on Net Worth (Return on Equity) -2. 6 LQ 7. 2 30. 9 UQ 16. 7 39. 3 UQ 6. 5 Efficiency Ratios: Inventory Turnover (Sales to Inventory) 14. 8 UQ 9. 2 15. 7 MED 13. 2 17. 6 MED-UQ 10. 8 Collection Period 20. 6 UQ 56. 6 9. 02 UQ 52. 2 43. 1 Asset to Sales 191. 5 LQ 99. 5 131. 5 LQ 82. 7 92. 1 LQ 63. 5 Sales to NWC 2. 3 LQ-MED 3. 2 2. 05 LQ-MED 3. 5 3. 9 LQ 5. 3 Accounts Payable to Sales 3. 4 UQ 5. 9 5. 1 UQ-MED 6. 5 5. 3 MED-UQ 8. 3 What are the internal strengths and weaknesses of Harley-Davidson? They are looking at a very strong future when looking internally which is essential to the future success of the company. Their customer base and the strength of their brand are most important, and has been their foundation for a numbers of years. This could actually help in this current economy state because the consumer will shop for a brand because consumers are creatures of habit, and with Harley-Davidson’s brand being around for years it has earned a reputation of stability ir-regardless of its numbers as a whole, the customer is familiar with the brand and trust the company. Harley has recently begun branching out to market other consumers like women and younger riders, because they have always been known for the middle aged white males, but the clientele is expanded to women, younger riders, African Americans, and Hispanic riders are on the rise as well. Harley-Davidson is dedicated to continuing the success achieved, by offering quality of their products and a great experience with providing their customers with every great experience for riding and caring for their bikes. They have even implementing a University for engineers who can service Harley bikes alone. With every organization Harley-Davidson has weaknesses that can be minimized in order to continue growing in their industry for the future. They have in the year past targeted to a limited market more towards middle-aged men but recently they have changed their strategy by advertising to women and younger riders to increase their market base. Their bikes are also expensive which they believe they stand on their brand which is strong within itself (2009 Harley-Davidson Report 10-K). While this may be true, HD will need to look at keeping their prices competitive in order for them to attract more customers. It would be for the better of the company to take advantage of their strength yet overcome their weakness by making a few internal adjustments (Lenz, 2010). By looking at the SWOT analysis, One of Harley’s greatest strengths are the strong brand image and its loyal customer base. Although a strength, these factors need to have both short and long-term goals to keep them in strong and profitable to Harley throughout the years. However there are of course weaknesses that Harley must minimize in order to maintain growth of past marketing efforts towards middle-aged men. They have been making every effort in recent years to advertise towards a new market and must continue to do so effortlessly to achieve and maintain their growth. They will also need to be conscious about minimizing their falling sales and the decline in liquidity ratio. If they can get a handle on this weakness they can resolve their fall and can look forward to positive long-term effects on the company’s growth. One of the areas of opportunities that Harley has started to focus in on is the advantage of the market towards women and young riders which are showing a large interest in riding, this is a market that is sure to keep the company growing for the better. It will be imperative for Harley to continue these marketing efforts to achieve growth in these demographics. Another area of opportunity for the company is their overseas market for Harley motorcycles. The company is planning to establish between 100 and 150 dealerships overseas through the year 2014 with the goal of international sales composing 40% of total sales (2009 Harley-Davidson Report 10-K). According to the report, Harley must look at the threat of the motorcycles which are a luxury commodity and with the recent recession, many customers do not have the income to purchase seasonal vehicles. For their aging market is an imminent threat since the current customer base is made up of middle-aged men. However, since Harley is beginning to make more marketing efforts to target other groups, this could minimize the threat (Lenz, 2010). Harley-Davidson is looking at the opportunity to adopt a strategy of growth in a horizontal approach which would be most beneficial which would allow Harley to expand more into their overseas markets. They could use a licensing method to begin overseas production and sales of motorcycles to penetrate this growing market. Obtaining a license would allow Harley to break into the markets with a minimal investment. Especially if the demand increases with time, Harley could possibly look into the opportunity to build a plant in this market and begin permanent production. This is an awesome opportunity for the company, but building overseas can be risky, especially with patent its brand, so it would be imperative for Harley to make sure to legally protect their copyright, patents and other intellectual rights. The licensing would need to be thoroughly writing and looked over by their attorney. Although the growth strategy may seem appealing to Harley, it would be beneficial for Harley to follow a very strategic stability for expanding their market overseas because to the different laws and government structures in other countries along with the currency rates, all these things will need to be carefully looked at before increasing this market. This opportunity of course will increase overseas but it will not resolve the issues of the declining growth of revenue here abroad they may need to take an approach to slow down a little to evaluate then proceed with caution with a strategy to determine the direction for the company’s future. It will be imperative for Harley to review its marketing strategies to make sure they are on the right path to being effective and successful. With the company moving forward slow but steady they can do some thorough research to fully understand why they have plummeted in revenue and how they can turn this around. Once they have stabilized their domestic position they can then evaluate their resources for expanding internationally with a solid financial foundation and strategy here in the U. S. (Lenz, 2010).