Motorcycle and financial services Essay

Abstract The strength of Harley-Davidsons grime and dominant grocery position give the tighten a wide moat, in our opinion. However, weaker consumer pass and tight consultation markets are presenting the tight with some meaning(a) near-term challenges. In addition, we deal the loyal must conservatively run the appeal of its brand to estim subject its long-term success. Harley-Davidson is a furor brand that resonates round the world. at that place are more than 1 one million million members of the Harley Owners Group, and e precise year several(prenominal) hundred thousand Harley fans attend biking events at Daytona, Fla. , and Sturgis, S. D.Its no oppugn that oer 50% of Harleys revenues are generated from repeat gross revenue and these sales are at premium prices to separate ride brands. In addition, with close a 50% share of the U. S. market, Harley in like manner achieves economies of scale greater than virtually of its competitors. A Harley is not just a bi ke it is an investment. brand loyalty, its economies of scale, and its profit of mostly exclusive dealers have created world-shattering barriers to entry, and as a result, Harley has achieved historical operating margins of over 20% and returns on invested capital of over 40%, excluding the financial service segment.JIT Principles JIT is an operational dodge which helps in making inventory levels lean. An organisation which goes for synchronous manufacturing incorporates JIT to have abase inventory levels. Synchronous manufacturing encompasses techniques of JIT to achieve the target. Organisations which have implemented JIT and are victimization synchronous manufacturing have a very lean system. It has minimum wastage and the highest practicable quality. These organisations are cost effective and generally have higher margins than their competitors.This results in higher level of efficiency in the organisation and a intermit work environment. BPI helps in focus of inventory a nd related operations. It is very crucial that organisation understand the importance of new methods and reengineer their processes in railroad with the requirements. The minimum level of inventory which is required as WIP is determined by the organization and then control efforts are put in so that there is always the minimum level available and it would never surmount the maximum level.This is done because one cannot hold high levels of inventory because it diminishs at a very high cost and is an occupational and can be a operation hazard. The strength of Harley-Davidsons brand and dominant market position give the star sign a wide moat, in our opinion. However, weaker consumer spending and tight belief markets are presenting the sign of the zodiac with some significant challenges and we conceptualise the firm must carefully expand the appeal of its brand to secure its long term success.Harley-Davidson is a cult brand that resonates around the world. There are more than 1 million members of the Harley Owners Group, and every year several hundred thousand Harley fans attend biking events at Daytona, Fla. , and Sturgis, S. D. Its no wonder that over 50% of Harleys revenues are generated from repeat sales and these sales are at premium prices to other motorcycle brands. In addition, with almost a 50% share of the U. S. market, Harley in like manner achieves economies of scale greater than most of its competitors.The intensity of the firms brand loyalty, its economies of scale, and its network of mostly exclusive dealers have created significant barriers to entry, and as a result, Harley has achieved historical operating margins of over 20% and returns on invested capital of over 40%, excluding the financial work segment. Despite its wholesome brand, sagging consumer spending on high-ticket items is in all probability to continue to depress volumes in the near term, and we look for the economical tearturn to prolong the period of failing sales th rough 2010/11. The firm has already cut production in an commence to trim costs in line with faling demand.in addition, just over half of Harleys motorcycle revenues are derived from retail sales made on credit. We telephone that the neediness of available funds on the sell markets and the shrinking of the number of laissez passer customers will make it difficult for the companys financial services division to continue to support retail sales by providing credit to customers. Harley must address some long-term challenges. The firm has been pore on a narrow demographic group (around 89% of customers are male) and the median value age of Harleys customers has been on a long-term upward trend.We believe that the firm must comment ways to broaden the appeal of its brand with tabu alienating its aggregate customer base. Harley has grown in recent long time in the international market , and revenues generated abroad have risen to 25% of amount of money revenues in 2007 from 19% i n 2004. Although the firm has recently introduced a performance motorcycle for the European market, I deem that it may name it difficult to deliver customized products for overseas markets while supporting its brand franchise. adventureHarleys revenues could be severely hurt by a go on weakening of the global economy and plusd reductions in consumer spending on high-ticket discretionary items, and the firm may not be able to securitize its receivables if the asset-backed security market is slow to recover. Harleys sales are focused on a thin demographic segment 35- to 54-year-old males. In our opinion, the firm must broaden its appeal in order to secure its long-term profitability, but any missteps in marketing its products to other demographic segments could impose on _or_ oppress the brand.Harley-Davidsons brand resonates around the world, and it has particular strength in its headstone target market of 35- to 54-year-olds. Historically, Harley has generated free cash flow at around 15% of revenues, allowing the firm to develop a strong track phonograph magnetic disc of returning cash to shareholders through dividends and stock repurchases. Through the downturn, Harleys management has been careful to maintain spending on research and development and marketing, important steps in maintaining the strength of the brand, in our opinion.The firm has worked successfully with its network of dealers to significantly center dealer inventory over the get going 12 months. Harleys core demographic, the baby boomer generation, is aging, and thats likely to reduce demand for Harleys products in the future. In order to mitigate the prohibit impact on revenues, the firm must improve its penetration in other segments. * Harley is likely to continue to face some severe short-run head winds, with anemic consumer spending likely to hurt revenues through 2010.The big inventory of used Harley motorcycles is likely to contribute to Harleys near-term challenges, as a greater number of under-pressure consumers may opt for a cheaper used shape in the secondary market. The turmoil in the credit markets is likely to conjure the cost of the short-term capital required to fund HDFS. Despite rise the retail rate on its loans, I expect the operating margins of HDFS to come under severe pressure through 2009. HDFS may also find it difficult to raise pay for retail credit in the wholesale markets.This could restrict the number of loans the firm can make to customers and thwart the firms attempts to support retail sales volumes. Inventory anxiety in Harley Davidson Growth Historically, the strong spending power of the baby boomers, Harleys core demographic, has been favourable for the motorbike manufacturing demarcation. As the baby boomers age, however, I expect retardant domestic revenue growth to be only partially rationalize by international expansion. Profile Harley-Davidson is the worlds leading manufacturer of heavyweight motorcycles, parts , and accessories.It sells the Softail, Sportster, Dyna, Touring, and VRSC models under the Harley-Davidson name, and it also manufactures the Buell brand. Harley-Davidson Financial Services provides wholesale financing to dealers and retail financing and insurance brokerage services to customers. Strategy Harley leverages its strong brand to sell a broad range of motorcycling-related products. The firm is attempting to broaden its appeal to more demographic groups by expanding its product line-up.It is also focused on international expansion, and it has introduced a new performance-based bike in an attempt to increase its share in overseas markets. Management I think the quality of corporate governance at Harley-Davidson is above average. I approve the firm for splitting the chairman and CEO roles between two individuals, although I am concerned that the relationship between the two individuals serving in these roles may weaken the chairmans ability to provide fencesitter oversig ht. CEO James Ziemers career at Harley blossomed under the lead of former CEO and current Chairman Jeffrey L.Bluestein. In addition, although nine of the firms 12 directors meet the NYSE definition of independent, a total of six of them have served on the board for over a decade, and I believe that their long-term relationships with management, together with some related-party transactions, may further compromise their independence. Having said that, the Harley-Davidson board does contain a solid range of legal, accounting, and decision maker experience. Management compensation is skewed to long-term incentive components, and I think that this aligns the interests of the management team with those of shareholders.The firm has a strong track record of returning cash to shareholders, both through dividend disbursements and share buyback programs. Harley Reports cut 3Q Earnings I am leaving our dependable value reckon for Harley-Davidson in place following the release of third-qua rter earnings, which were in line with our expectations. tax income fell 8% year over year, to $1. 42 billion, as the economic downturn hurt retail sales volume, which declined 14%. The bright moorage was international sales, but only a small part of the 11.3% rise in international revenues was attributable to volume increases most of the increase was caused by favourable currency movements. At Harley-Davidson Financial Services, the customer pay division, third-quarter earnings fell 28% from the same period last year, to $35. 6 million, because of lower securitization income and the lay aside-down of some pay receivables held for sale. I was pleased to agate line that the firm is being proactive in securing alternative sources of funding for the finance division, in the event that it cannot raise funds in the unsecured debt market.However, we expect that Harleys funding requirements would be met comfortably by its bank credit facility, if required. Supply side & Economic Scen ario Given the continued macroeconomic fall and tightness in credit markets, I am raising our fair value uncertainty rating for Harley-Davidson. The companys growth has decelerated during the last three years, and year-over-year shipments were down 15% last quarter. In addition, we see significant downside risks to the contribution from Harley-Davidson Financial Services.Last quarter, financial services income was down 43% because of a $20 million reduction in securitization gains. Financial income was also affected by a $6 million write-down in retained securitization interests. Since that time credit markets have seized up, and its likely the firm will report increasing charge-offs on consumer loans in the coming quarters. summary Business process re engine room is very critical for companies and industries which survive on innovation. sometimes there are cases when old processes in the company are anxious(p) and their is a pressing need to rejuvenate then.This process of is kno wn as business process reengineering. A company that does not innovate dies out in the market. Old operations over time die down and new process needs to be rebuilt into the system. This is where the concept of business processes engineering is very critical. The objective of the paper is to critically evaluate symptoms which suggests organisation to go for business process reengineering & then come up with one of those symptoms and write a detailed analysis of it.References http//www. emeraldinsight. com. / Gao, F, Li, M.& Clarke, S. (2008). 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