Harley Davidson Word

ATLANTA — Across the country, motorcycle makers are seeing an uptick in female owners, but Harley-Davidson’s cultlike following gives it potential with baby boomers who have money to burn. Harley prices start at $6,500 and can top $30,000 with all the trimmings. Harley-Davidson has built a two-wheeled empire out of tapping the full-throttle urges shared by factory workers and physicians alike. Until recently, women mostly rode along as accessories. “Women are moving from the back of the bike to the front,” said Jenifer Freda, general manager of Killer Creek Harley-Davidson, near Atlanta. “They’re tired of riding behind their boyfriends or husbands . . . They want control. Plus, it’s a lot of fun.” Growing demand for heavyweight bikes, a surge in patriotism and a thundering marketing campaign tied to Harley-Davidson’s recent 100th birthday have all pumped new life into the American-made motorcycle brand. Harley-Davidson recently said that shipments, sales and earnings are hitting record levels this year. That’s on top of two decades of soaring sales, nearing $5 billion annually. Dealerships across the country are expanding. As good as business is for Harley-Davidson, though, the Milwaukee-based icon faces some challenges on the horizon.

WOMEN: ON THE FRONT SEAT • Harley-Davidson says shipments, sales

More than half of Harley-Davidson buyers are age 46 and older and earnings are hitting record levels • More than half of the company’s buyers — compared with a median age of 38 for other motorcycle are age 46 and older buyers — and those baby boomers are eventually going to be too • 10% of new two-wheeler buyers are women, up from about 5% 10 years ago old for two wheels.

• Nearly 29,000 people have taken HarleyDavidson’s rider classes

• About 40% of the students are women Untapped market Going after younger riders is one option, but they tend to like the speedy Japanese bikes made by Honda, Suzuki, Kawasaki and Yahama. Harley-Davidson’s sportbike line, the Buell brand, contributes only 2 percent of the company’s revenue.

Women, however, are a huge untapped market. Only 10 per cent of new Harley-Davidson buyers are women, but that’s up from about 5 per cent 10 years ago. Overall, more than 4 million women operate motorcycles, according to the Motorcycle Industry Council. The number of women buying their own bikes is small by comparison — 635,000 — yet the number of owners has surged by nearly 40 per cent in the past five years, the council said. Even though women have always played a role in buying decisions and the riding habits of Hogwild males, Harley-Davidson has only recently started to actively target them. About 10 years ago, Harley-Davidson dealerships started sprucing up the scruffy, oil-soaked bike shop of the past into a boutiquelike setting with bright, open showrooms and squeaky-clean floors.

The company was trying to attract affluent first-time buyers, but a side consequence was that the less-intimidating atmosphere brought in droves of women, too. “We’ve seen a big change in the consumer market,” said Pete Anziano, sales representative for Stone Mountain Harley-Davidson, near Atlanta. “It has gone from the roughneck, bearded guys with tattoos to guys in suits and women. ... I see single women coming in about three times a week.” With a goal to “sell the experience,” as General Manager Cameron Ayer puts it, part of the Harley experience has changed from, say, bringing in strippers on the weekend to holding classes geared toward safety and road skills. Nearly 29,000 people have taken Harley-Davidson’s rider classes since they launched four years ago, and about 40 percent of the students are women, according to the company. (Women on Wheels members said they noted a similar ratio of women at Honda’s rider classes.) The classes are good for business: 70 per cent of students buy a bike within a year, HarleyDavidson says. The Killer Creek dealership doesn’t offer rider classes, but it holds Girls’ Night Out events, including seminars on such things as basic mechanics and how to pack a saddlebag for a long trip. Also, makers of jackets, pants and protective clothing are waking up to the fact that women aren’t just ornaments,noted Freda of Killer Creek. “Clothing has really changed,” Freda said. “It used to be ‘Hey, I look cute,’ and then you get out there and freeze. ... Now, it’s not just for a Barbie girl. The clothing comes in extended sizes. ... It’s still cute, but it’s functional, too.” Biker Judy Mecham saw so much potential for women’s riding gear that she opened She-Rides Active Wear four years ago in the North Georgia town of Dahlonega. “I was trying to find riding apparel for myself and realized that it’s extremely hard to find,” said Mecham, who zips around on a Suzuki sportbike. Tucked next to Toosy’s Way Station, a popular motorcycle pit stop in the foothills of the North Georgia mountains, She-Rides has already expanded the space and is getting franchise inquiries as far away as California, Mecham said. “Women are ecstatic to have a place to shop,” she said. “Each year I add one or two lines of apparel ... and the business has doubled or tripled every year.” String of changes As far as the bikes themselves, Harley-Davidson made a string of unprecedented changes to its entry-level Sportster model, in part to reach out to women. The seat was lowered, and a new rubber engine mount reduces vibration. As a special bonus for those spreading boomer bottoms, the rear tire is fatter. “We made a lot of ergonomic changes that were designed to make the Sportster a good fit for a wide variety of riders,” said HarleyDavidson corporate spokesman Bob Klein. “But they’re also women-friendly as well. We don’t make a ‘woman’s bike’ because we don’t think women would buy it.”

Martin, Ga., resident Robin Dahlman, 39, planned to blow right by the Sportster this month and check out the bigger Softail Deuce as she shops for her first Hog. The Hart County social worker had no clue she was born to be wild until her husband, Todd, got a Harley-Davidson last summer. After a few spins in the back seat, Dahlman was ready for her own pipes. She graduated from Harley’s rider class this month with the “most likely to wear leather” award, plus a “You rock!” from her 17-year-old daughter. Dahlman said the first big road trip will likely be in her neighborhood, though. “I want to get some good seat time around the house, where I’ll only have to worry about the deer and the squirrels.” Harley-Davidson, Inc.: History and General Situation Arthur’s brothers, William Harley and Walter, started Harley-Davidson Motor Company in 1903. They first started the business in the Davidson family’s backyard in Milwaukee, Wisconsin. In 1904, the company then moved into an office. The company was acquired by AMF Inc, which favored short-term profits instead of investing in research and development and retooling. Harley focused solely on sales, while competitors were continuously improving the quality of their motorcycles. This resulted in a downturn of the company with weak profits. In 1981, a new management team joins to buyout the company. Harley-Davidson Inc. acquired the Buell Motorcycle Company during 1993. This investment offers Harley-Davidson the possibility of gradual entry into the sport and performance motorcycles market. In 1995, the company acquired Eaglemark. As a financial service company, Eaglemark provides financial services to leisure product manufacturers and their dealers and customers in the United States and Canada. At the same time, Eaglemark provides motorcycle floor planning to participate North American dealers of the Motor Company because it is a majority-owned subsidiary. They also offer retail-financing to the Motor Company’s domestic customers, and provide insurance for motorcycles as well as service contracts extensions. Eaglemark works complementary for the Motor Company. Harley-Davidson Inc. operates in two business segments: Motorcycles and Related Products and Financial Services. These two segments offer different products and services, and they are managed separately. However, the financial service works as a complementary for the Motor Company. Industry Essentials The motorcycle industry is a consolidated industry. The U.S. and international heavyweight motorcycle markets are highly competitive. The major players, such as Yamaha, Suzuki, and Honda, generally have financial and marketing resources that are substantially greater than the non-major players. Competitions in the heavyweight motorcycle market are based on several factors; price, quality, reliability, styling, product features, customer preference, and warranties. Harley’s first segment is the motorcycle and related products business. It included designing, manufacturing, and selling primarily heavyweight touring and custom motorcycles and offering a broad range of related products that included motorcycle parts and accessories and riding apparel. The custom products charge a higher price because of its features, styling, and high resale value. Their target market is mainly in US. By the end of 1997, they have an approximate 48.3% share in the US market, 6.1% share in European, and 16.5% share in Asia/Pacific. New competitors have entered the marketplace because demand for the motorcycles has exceeded production. The demand is prospected to grow in the future, and the switching cost is low. Their customers are mainly male, middle age, married, and have some degree of education. Most buyers hold a

motorcycle for recreational purposes rather than for transportation purpose. These buyers are mostly experienced motorcycle riders. They are loyalty toward brand, quality, and style. Since the consumer switching cost is not high, so the consumer has medium to high power to choose the product and the supplier has medium to low power. The power of a threat of substitute products is medium since there are other products, such as bicycle and recreation car, that serve the similar customer needs. Since most Harley’s motorcycles are buying for recreational purposes, all other recreational entertainments are possible substitutions. Every country has various environmental control requirements relating to air, water, and noise pollution. This affected the business and operations of the business. The company has to ensure that the facilities and products comply with all applicable environmental regulations and standards. Certain levels of cost are required for the company to deal with this issue. SWOT analysis First, The Motor Company established a long-term mutually beneficial relationship with its suppliers. Through these relationships the Motor Company is able to gain access to technical and commercial resources for application directly to product design, development, and manufacturing initiatives. This strategy resulted in improved product technical integrity, application of new features and innovations, reduced lead-time for product development, and faster new vehicle introductions. Excellent relationships with suppliers enable them to ask for cost reducing and quality improvement. Second, since the company discontinued the operation of the Transportation Vehicles segment and sold the related division, which lead to $100 million cash for the company, the company can pay back their debt and have more cash available. Third, the company developed a long-lasting relationship with employees to ensure continued success, and joined in community affairs to enhance the company’s image. For example, they raised funds for the fight against neuromuscular disease, and the employees were encouraged to volunteer and become involved in charitable organizations. As the largest motorcycle club in the world, Harley Owner Group offers their customers organized opportunities to ride. By doing so, they strengthen the relationships among members, dealers, and employees. Fourth, the company licensed the production and sale of a broad range of consumer items, which not only generated revenue for the company, but also enhanced the company’s image. Even though the company has much strength, some weaknesses drive them down. They have poor marketing strategies over the foreign market. According to Figure 1, they were only able to establish a limited market shares in Europe and Asia Pacific market comparing to North America. Moreover, as commented by CEO, many buyers have high repurchase intentions; but they seem weak on generating new customers. President and CEO’s Comments Criticize The president and CEO of Harley-Davidson Inc. are sometimes too confident and overly stated on their comments. They believe that their motorcycles are among the most admired in the world. The word ¡¥world¡¦ is quite controversial. As of 1997, Harley has generated 48.3% market shares of the US market, which is almost half of the motorcycle industry (Fig 1). These data shown that the company did exceptionally good in targeting the US market. However, the company did relatively poor on managing foreign sales. In the Europe industry, they can only obtain 6.1% market share of the 250.3 thousand units in total. This figure is extremely low compare to the US market. Furthermore, the company could only acquired about 1/6 of the total Asia/Pacific market. With these insignificant foreign market shares, Harley-Davidson cannot claim to have a big share of the ¡§world¡¨ market. They did prove that they have success in the US, but not the oversea market. They are proud of the sixth consecutive year of continued growth for the worldwide heavyweight motorcycle market. Although they had generated profit year by year, these profits are growing relatively slow (Fig. 2). When European motorcycle industry was growing rapidly, Harley’s sales were not. This slight growth may be great improvement for some smaller companies, but not for such a large

corporation. They also believe their image creates brand loyalty and led to high repurchase intent of the customers. Maintaining a high repurchase intention is essential; but they should also attract more new customers. Figure 3 shows that the buyers of Harley-Davidson’s motorcycle were getting older and older. There were less male buyers and more female buyers, they are mostly married and have 3 or more children. There seems to be a trend that most buyers are re-purchasers. As the average age of the buyers are getting older, we can suggest that these buyers belong to the same group from the 60s; they are getting married and ride Harley motorcycle with their partners/spouses. The fact is what if these re-purchasers eventually die and the company is not generating new customers. Recommendation The international heavyweight market is growing and is significantly larger than the U.S. heavyweight market. As of 1997, Europe has the largest motorcycle industry (Fig 1), even larger than US. There is high potential in expanding business in Europe. However, the company holds a smaller market shares in the European market. Therefore, continuing to develop the European market should be a major issue for the company over the next few years. The following recommendations could be used in the European market. Not only should they target heavyweight motorcycles market, they can also target sport motorcycles market. The reason is that the European sport/performance market is four times larger than U.S., and is expecting to grow even more in the future. The company could distribute the Buell Motorcycle Company’s product to the European market in order to establish a sporty image and able to directly complete with other competitors. Also, the company can build a motorcycle plant in the European by using strategy alliance or joint venture. Building the plant in the European can reduce the transportation cost and increase the company’s international experience. Strategy alliances is suitable in this case since the company can create value from transferring competencies or sharing resources between diversified businesses in order to realize economies of scope. They could improve their foreign marketing strategy. Over the years, Harley built up a strong heavyweight image over the American buyers, but this image could be unfit to the Europe or Pacific market. When the company first started up the business, the heavyweight idea was developed according to American’s taste. They actually did successfully in the US market. However, when they expand to globalize the company, they did not do as successful as they did in the US market. They should do more research on people’s preference and tastes in the targeted countries. Space could also be one of the reasons. Cities in Europe and Asia has very high density compare to US. For example Hong Kong is a tremendously high-density city. High-rise buildings are everywhere. Streets and roads are usually one to two lanes. Thus, people in Hong Kong would rather choose to buy a transportation vehicle than a motorcycle since pollution levels are very high. Moreover, traffic density in Hong Kong is also very high, and traffic jams happen everyday. If people want to buy a motorcycle, they would rather buy a small and light one, as it is more convenience to wander around small and narrow streets. Prices could be another reason why they fail in the oversea market. Harley’s motorcycles are priced slightly higher than competitors. In the U.S. market, since the customers are brand, quality, and style loyalty. Instead of focusing on the price leadership strategy, they should focus on differentiate strategy. Therefore, under the current financial availability, they should be able to generate certain funds to run the Product Development Center, which bring together employees and suppliers to design the fashion products. At the same time, the company should focus on product development and product proliferation strategy. They should concentrate on creating new products or improving existing products in order to attract existing and new customers. The company should continue to build their enterprise. Since the industry does not have significant economies of scale, growth-via-acquisition strategy could be used. Harley-Davidson can merge or acquire weaker rival or smaller players. Taking over the weaker and smaller players will increase the entry barriers.

Opportunities 1.The international heavy weight market is growing and is now larger than the U. S. heavyweight

market 2.The European demand for Harley Davidson is the highest in the international market and represents the single largest motorcycle market in the world. 3.Interest rates are at historical lows. 4.Women and younger riders are increasing becoming interested in bikes. 5.Alliances with Ford Motor Company or other automobile manufacturers are possible. 6.Industry registrations of domestic heavyweight motorcycles are increasing. 7.Market share increasing in Europe and Asia for the last two years. 8.Increasing demand in US markets for bikes. 9.Customers value quality parts. Threats 1.Harley’s ongoing capacity restraints caused a shortage supply and a loss in domestic market share in recent years. 2.Harley’s average buying age is 42 years old and increasing. 3.The European Union’s motorcycles noise standards are more stringent than those of Environmental Protection Agencies in the U.S and increased environmental stand. 4.Some competitors of Harley Davidson have larger financial and marketing resources and they are more diversified. 5.Environmental protection laws. 6.Shifts in buyers needs and tastes. 7.Customer loyalty in European and Asian Countries. 8.Costs could become expensive from international importing. 9,The Buell division needs to continue to produce a quality motorcycle under Harley’s brand name.

Harley-Davidson's Marketing Strategy Overcame Competition Uploaded by Let's Go ALL The Way on Jun 26, 2005

How Harley-Davidson's Marketing strategy has Overcome Fierce Competition from Foreign Companies As many enthusiasts may describe it, the pride of owning a Harley-Davidson is the pride of owning an 'American Icon'. Harley-Davidson's (HD) positioning strategy can best be defined by its mission statement: "We fulfill dreams through the experience of motorcycling- by providing to motorcyclists and to the general public an expanding line of motorcycles, and branded products and services in selected market segments." Now in its 100th year, however, the ideal of owning an 'American Icon' has slowly dwindled out of the public's mind, due mostly to the competition from Japanese manufacturers like Honda and Yamaha. HD's strength's of its powerful brand image, maintaining good customer relationships, strong financial position, and superiority of technology and design are hindered by its weaknesses related to product capacity and unfulfilled demand for their products2. Strategic Direction and Marketing Objectives HD has chosen the strategic direction of targeting a younger market that is technologically conscious in order to increase its share in the performance cruiser market space. With the introduction of the new V-Rod motorcycle, HD is in a position of attaining a sizeable share in the performance cruiser marketplace. To target the younger market with the new product line, the company has adopted the following marketing objectives: to expand its current market (market expansion), diversify its product line (product diversification), and modify its marketing mix to target a younger demographic.

During the 1970's, HD was facing a decline in market share due to increased competition with Japanese companies. By phasing out weak models, becoming more selective, and limiting sales and promotions, HD was able to carve out a niche in the marketplace which it enjoys today3. Now again faced with a period of decline, HD is relying on its newly adopted marketing objectives. First, HD needs to expand its potential customer base to include enthusiasts and non-enthusiasts males in the 35-44 age group. (INSERT MEDIAMARK DATA HERE) This is accomplished through the introduction of the V-Rod and positioning it in the market to a younger demographic. Secondly, HD needs to position the V-Rod to also appeal to first time buyers of motorcycles. HD's strong brand identity can help pull in new clients. Third, HD has to set an appropriate marketing mix that will help attract a younger consumer base. By using the low-end approach, which involves attracting a young audience to a brand name product with a low price tag (similar to what Jaguar and BMW have done), HD can expand its popularity to the domestic and international market. Marketing Mix Elements For Harley-Davidson's marketing objectives to be successful, the company has to implement the four elements of a marketing mix for the V-Rod. These four elements are strategies that involve the product, pricing, promotion, and distribution. The product strategy is any decision that helps the company continue to develop new products around its signature American image and positions the company in the market as such. The main reason for the introduction of the V-Rod was the need to create a bike that would appeal to a younger demographic and attain a greater market share for the company. By using the low-end targeting method (as discussed previously) with the introduction of the V-Rod, this can be considered HD's first step toward implementing its strategic and marketing objectives. As for the pricing strategy, HD must be careful to implement a pricing decision based on the low-end targeting method. Priced at $17,000 MSRP, HD's V-Rod has the second highest price tag in the performance cruiser market. Although HD does have a 22% share of the total market, HD's pricing strategy has three main factors that have influenced how it has priced the V-Rod: 1) the used motorcycle market, 2) lower priced motorcycles, and 3) HD's inability to keep up with demand4. In order for HD to attain a greater market share, the company must examine how these three factors will continually play a role in pricing and adjust accordingly. The Harley-Davidson Corporation has found multiple ways to implement its promotion strategy. HD's primary promotional tool since 1983 has been the HOG. The company's advertisements and commercials are focused around female images. Since 93% of bikers are males, the HOG advertising campaign has been successful for decades5. HD also uses another strong promotional campaign through its cafes, located in most dealerships. HD has also developed an interactive website (www.harley-davidson.com). The website gives the company the chance to expand its operations online. Finally, HD's most important promotional tool is the brand image of a truly American product. Such a tool appeals to the domestic market, and owning a Harley-Davidson bike fits well into supporting the national feelings of pride for America. HD's distribution strategy can best be described by its creed found on its website: "Harley-Davidson's dealer's are the company's life-line to our customers, with a wide variety of product offerings, dealer's provide knowledge, service, and information to riders out on the road." The networks of dealers established by HD are placed in areas that provide access to the largest concentration of potential customers. These dealerships are used to distribute products, accessories, and merchandise. HD also promotes its motorcycles through dealerships with marketing programs, shows, and public relation programs. Demo bikes are also made available at events like Daytona and Sturgis. HD also has a non-dealer network of mid to high-end department stores like Costco's and BJ's. These outlets are meant to appeal to the non-enthusiast. Timing, Cost, Return, and Feedback of the Marketing Plan Before the marketing plan and strategy for HD can be introduced, an analysis of the timing at which the plan is to be implemented, the cost and return of the plan and the feedback involved in continually improving the product must be done. The most strategic timing for the plan is at peak buying seasons such as around bike demo events and seasonal shopping. It is at these times that people are most interested in new products like the V-Rod and more likely to have the assets to purchase the product. The cost of implementing the marketing plan is going to be related to the assets involved in the development and research, as well as the production of the V-Rod and the

promotion/advertising involved in making the V-Rod known to motorcyclists and non-enthusiasts. The optimal return that is desired from the implementation of the marketing plan is a sizeable and profitable share in the performance cruiser market. A substantial share in the market would be attributed to HD's strategic plan of attracting new 'low-end' buyers. This group of buyers is a younger demographic compared to HD's traditional consumer base. Attaining such a group would most certainly guarantee HD future business by attempting to gain brand loyalty. The most important aspect of understanding the functionality of the marketing plan is the feedback involved from the consumer. To comprehend why or why not a certain aspect of the marketing mix is working, consumers of the product must be allowed to give their input. Continual and efficient uptake of data from the customer, whether through surveys or questionnaires or any other technique is critical in order to see whether the marketing plan implemented is working accordingly as planned With half the US market and a third of the global one, Harley-Davidson is the largest manufacturer of heavyweight motorcycles in the world by market share, capturing half the US market and a third of the global market. The company markets products under the Harley-Davidson, Buell, and MV Augusta brands. As a luxury good, Harley competes primarily on design and quality, rather than price, which keeps margins high; gross margin during 2008 was 34.5%.[1] Harley's past growth and continued success is closely tied to its customers brand loyalty; Harley is arguably the only company whose customers have been known to regularly tattoo its trademark on their bodies. Despite this rebellious image, the average Harley customer is an upper-class 47-year-old white male, and has been getting older at a rate of 6 months every year for the last 20 years. Because Harley's primary value is in its brand, investors would be well advised to monitor the growth or decline of Harley culture. Despite brand loyalty, the company had to shut down and consolidate factories in 2009 due to the effects of the recession and the fall of the U.S. Housing Market. About 15% of Harley's business used to be writing loans to its motorcycle buyers. The company's finance arm has since collapsed and has shown no signs of stabilizing as of Q2 2009.

Business Financials[edit] Tough Times in 08 and 09[edit] Harley Davidson’s 2009 second quarter earnings declined 91% from the same quarter in 2008. Revenues declined 26%. Harley Davidson’s credit facility has been seeing rising defaults, which led to a write down accounting for 35% of Harley’s total losses. Another 14% of the losses were due to an impairment of the company’s goodwill due to prevailing negative economic conditions. The rest was simply because the company could not sell as many motorcycles. [2] This serious hit to earnings is forcing Harley Davidson to ship 25% fewer motorcycles in 2009, and to fire about 2,500 of its employees (2200 hourly positions, and 300 salaried positions). This accounts for about 25% of its total workforce. It is shutting down, or consolidating numerous manufacturing facilities to accommodate the drastically reduced capacity. Because it is actually shutting down factories, Harley will be able to produce fewer motorcycles for years to come. [2]

Operating Segments[edit] Harley has two main businesses: selling Harleys, and giving people credit to buy Harleys. Traditionally, the financing arm generates about 15% (+/-3%) of Harley's income, while the motorcycle branch generates about 85%. 2008-2009 have been atypical because the financing arm has actually lost money.[3] Specifically, Harley Davidson sells motorcycles directly, sells motorcycle parts and accessories, operates retail motorcycle dealerships, sells motorcycle gear and general merchandise, and offers loans to buyers. The following graph shows how badly each of these sectors performed in 2009 versus 2008. The 3 month comparison deals with Q2 2009 and Q2 2008. The 6 month deals with Q1 and Q2 of both years.[2]

The graph shows not only that every single sector of Harley Davidson has declined since last year, but also indicates that every sector is declining at an accelerating rate (with the exception of the gear and clothing sector).

International Sales[edit] Harley Davidson generates 70% of its sales in the United States, and 30% internationally. Europe accounts for about 50% of international sales. Canada accounts for about 15%, while Japan accounts for 13%. [2]

Demand in Japan and the rest of Asia declined only about 7% in the past year, whereas Canada saw a decline of 36.7%. This could be due to Canada’s exposure to the United States Market, which saw a 26% decline. Overall, world sales have not been affected nearly as much as North American either due to premium brand recognition (in the case of Asia) or the depreciation of the US Dollar (Europe). [4]

Contents 

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1 Business Financials

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1.1 Tough Times in 08 and 09

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1.2 Operating Segments

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1.3 International Sales

2 Trends and Forces

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2.1 An aging customer base

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2.2 The strength of the US Dollar versus the Euro and the Yen

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2.3 The "American-made" premium

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2.4 The housing market

3 Comparison to Competitors

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3.1 Major Competitors

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3.2 Financial Resources

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3.3 Difference in Product Lines

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4 History

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5 Notes

Trends and Forces[edit] An aging customer base[edit] Harley Davidson’s average customer has been getting 6 months older for the past 20 years, and is now 47 years old. The children of Baby Boomers generally do not want huge bikes that drive most of Harley's sales. Younger generations have a taste that errs towards smaller, cheaper Japanese bikes. To address this, Harley bought out Buell, a fast bike producer, in 1998, introduced the unconventional V-Rod in 2002, and bought out the Italian MV Agusta company which makes premium light-weight bikes. These acquisitions of fast bike companies have not yet slowed the aging of the Harley customer base. [4] While Harley’s faster smaller bike segments have been growing steadily since 2004, they still account for less than 20% of Harley’s total sales. [5] Harley will need to attract younger buyers to maintain its long-term market share, while not alienating its core customer too much.

The strength of the US Dollar versus the Euro and the Yen[edit] Harley Davidson is increasingly reliant on international sales, especially in Europe. In 2004, only 18% of the company’s sales were international. This figure had moved to 32% by 2008, helped by a heavily weakening dollar. [5] Because Harley incurs its production costs in the United States, it benefits when the dollar weakens against the Euro and the Yen. People tend to buy dollars to buy US goods, or to hedge against the fluctuation of global currency (the US Dollar is the world's most trusted currency). When people buy dollars, the dollar goes up, and Harley gets hurt.

The "American-made" premium[edit]

Some say the collapse of General Motors (GMGMQ) was the end of an era for American manufacturers. GM did not just collapse because of high pension obligations. Its cars did not sell well. Asian competitors were making cheaper cars that broke less, took less gas, and went faster. [6] As an increasing number of American factories go overseas to reduce expenses and do not see a decline in quality. Even Harley imports some Japanese parts due to their higher quality. The "American-made" premium is more nostalgic at this point than anything else. Honda and Kawasakis compete head-to-head with Harleys on technical specifications.[7] Harley is able to charge premium prices for their motorcycles primarily because of their brand image. The question is: can a brand built on an increasingly distant past survive the future? Harley faces two threats with its reliance on its brand image. First of all, cool retro-"Easy-Rider" culture could fade out of style along with corresponding demand for Harley's. Secondly, custom American chopper producers such as Big Dog Motorcycles and American IronHorse actually deliver the promise of an All-American bike that is more powerful and customized than almost anything out there.[8]

The housing market[edit] Homes serve as the traditional collateral for credit. Harley Davidson has frequently been called a banking stock in drag due to its own extensive financing branch. Depressed housing prices mean a higher percentage probability of loan default due to moral hazard (“Go ahead and take my house, but good luck selling it.”). Higher loan defaults mean greater losses, neccesitating higher rates, which encourages further defaults and so on. June 2009 housing data beat expectations, but renting is cheaper than owning in many parts of the country. [9] Harley’s financing arm, which is hemorrhaging cash needs the housing market to recover. If the housing market does not recover in the immediate future, Harley will have difficulty selling motorcycles.

Comparison to Competitors[edit] Major Competitors[edit] Harley-Davidson maintains a large margin in its dominance in the US Heavyweight Motorcycle market as compared to its major competitors. 2003 - 2007 US Heavyweight US Market Share New Registrations Share[10]

2007

2006

2005

2004

2003

49.4%

50%

49.6%

50.2%

50.3%

Honda

14.2

15.1

16.6

18.7

18.4

Suzuki

12.5

12.9

12.4

10.2

9.8

Yamaha

9.2

8.6

8.9

8.7

8.5

Kawasaki

7.2

6.8

6.5

6.4

6.7

Harley-Davidson

While the United States is HOG's most important market, the company sells motorcycles in many other markets worldwide. The two most important are Europe, where the company has grown market share from 9.8% in 2005 to 10.7% in 2007, and Canada where HOG had a 39.0% market share for 2007, up from 32.7% in 2005.[11] Worldwide, Harley has a dominant worldwide market share of 33% in what is a growing industry.

Financial Resources[edit] While the company’s competitors, notably Honda Motor Company (HMC) and Suzuki, do not have as dominant a market position, they often have greater financial resources. This is largely because companies like Honda have more diverse product lines (like cars), and are greater in size than Harley-Davidson, a far more specialized company. For example, motorcycle sales at the company’s largest competitor, Honda, hover around 12% of total revenue.

Difference in Product Lines[edit] Harley-Davidson is the premier manufacturer of heavyweight motorcycles. As compared to lightweight motorcycles, the products typically appeal to very different cross sections of the population, with the lightweight market catering more to younger buyers seeking speed, agility, and affordability in a motorcycle and the heavyweight market to older buyers seeking style, quality, and, sometimes, status. Because heavyweight bikes are perceived as a luxury good, they offer greater margins for the manufacturer.[12] Thus, Harley’s true competitors are other heavyweight manufacturers, though the company competes to some degree with any motorcycle manufacturer. Heavyweight motorcycles accounted for 54% of the U.S. motorcycle market in 2007.[13]

History[edit] With the first Harley (or, as a Harley bike is often known, “Hog”) produced in 1903, the company began a storied history extending over a century. In just a few decades, the company emerged as the largest motorcycle manufacturer in the world, before stumbling like most companies through the Depression. Harley nonetheless survived, and soon supplied products to the U.S. Army during World War II. Harley-Davidson was sold to investors for $80 million in 1981, before it was taken public in 1986. It has since enjoyed a period of tremendous growth, achieving annualized gains of over 30% for investors since its IPO. Through the long history of the company, the HarleyDavidson brand name has been extraordinarily well-recognized within the industry.

NEW YORK 19 December 2007 - If you're the $6 billion-a-year HarleyDavidson company, the thing you want most this Christmas is to prop up the illusion that you market a vehicle for an edgy, outlaw lifestyle. The new holiday commercial features a death-skull-faced Santa dressed all in

black from his head to his toes, with a sleigh pulled by eight Harleys spewing fire in their wake. The Harley-Davidson Motor Company (NYSE: HDI) is an American manufacturer of motorcycles based in Milwaukee, Wisconsin, United States. It is one of the two remaining American mass-producers of motorcycles (along with Victory Motorcycles). The company emphasizes heavy bikes designed for cruising and known for their distinctive exhaust noise.

Harley-Davidson motorcycles (popularly referred to as "Harleys") are distinctive in design and attract a loyal following, and hold their resale value very well compared to other vehicles. A well maintained vehicle might never drop in value at all, although regular maintenance is expected. The company supplies many domestic police forces with their motorcycle fleets. Harleys are especially noted for the tradition of heavy customization that gave rise to the chopper-style of motorcycle. It also licenses its logo, which is a profitable side business ($41 million of revenue in 2004, or almost 5% of net income). Since 1998 Harley-Davidson has also owned Buell Motorcycle Company.

The Harley-Davidson V-twin engine

The classic Harley-Davidson engines are two-cylinder, V-twin engines with the pistons placed at a 45 degree angle. The crankshaft has a single pin, and both pistons are connected to this pin through their connecting rods. This design causes the pistons to fire at uneven intervals. On the V-twin, the sequence is as follows: 1. the first piston fires (this is the 0° position) 2. the other piston fires at 315° into the stroke 3. there is a 405° gap (as both cylinders go through their exhaust stroke) until the first piston fires again This design, which is covered under several United States patents, gives the Harley-Davidson V-twin its unique "potato-potato" sound. On 1 February 1994, the company filed a trademark application for the distinctive sound of a Harley-Davidson motorcycle engine: "The mark consists of the exhaust sound of applicant's motorcycles, produced by Vtwin, common crankpin motorcycle engines when the goods are in use". Nine of Harley-Davidson's competitors filed comments opposing the application, arguing that cruiser-style motorcycles of various brands use a single-crankpin V-twin engine which produce a similar sound. These objections were followed by litigation. After six years, Harley-Davidson withdrew their trademark application.

Harley-Davidson 45° V-twin, Evo Sportster

History

Company founding The company considers 1903 to be its year of founding, though the Harley-Davidson enterprise could be considered to have started in 1901 when William S. Harley, age 21, drew up plans for a small engine that displaced 7.07 cubic inches (116 cc) and had four-inch flywheels. The engine was designed for use in a regular pedal-bicycle frame. Over the next two years Harley and his boyhood friend Arthur Davidson labored on their motor-bicycle using the northside machine shop of their friend Henry Melk. It was finished in 1903 with the help of Arthur's brother, Walter Davidson. Upon completion the boys found their powercycle unable to conquer Milwaukee's modest hills without pedal assistance. Will Harley and the Davidsons quickly wrote off their first motor-bicycle as a valuable learning experiment. Work was immediately begun on a new and improved machine. This first "real" Harley-Davidson motorcycle had a bigger engine of 24.74 cubic inches (405 cc) with 9-3/4 inch flywheels weighing 28 pounds. The machine's advanced loop-frame was similar to the 1903 Milwaukee Merkel motorcycle. They also got help with their new engine from outboard motor pioneer Ole Evinrude. Elder brother William A. Davidson also lent a hand. The prototype of the new improved loop-frame model was assembled in a 10 by 15 foot (3 by 5 meter) shed in the Davidson family backyard. The machine was functional by 8 September 1904 when it was entered in a Milwaukee motorcycle race, the first known appearance of a HarleyDavidson motorcycle. In January 1905 small advertisements were placed in the "Automobile and Cycle Trade Journal" that offered bare Harley-Davidson engines to the doit-yourself trade. By April, complete motorcycles were in production on a very limited basis. In 1905 no more than a dozen machines were built in the backyard shed. (Some years later the original shed was taken to the Juneau Avenue factory where it would stand for many decades as a tribute to the Motor Company's humble origins. Unfortunately, the first shed was "accidentally" destroyed by contractors in the early 1970s during a cleanup of the factory yard.) In 1906 Harley and the Davidsons built their first factory on Chestnut Street (later Juneau Avenue). This location remains the Motor Company's corporate headquarters today. The first Juneau Avenue plant was a modest 40 by 60 foot single-story wooden structure. That year around 50 motorcycles were produced. In 1907 William S. Harley graduated from the University of Wisconsin at Madison with a degree in mechanical engineering. That year additional factory expansion came with a second floor and later with facings and additions of Milwaukee pale yellow ("cream") brick. With the new facilities production increased to 150 motorcycles in 1907. That September a milestone was reached when the fledgling company was officially

incorporated. They also began selling their motorcycles to police departments around this time, a tradition that continues today.

Ralph Hepburn races his Harley in this 1919

Production in 1905 and 1906 were all single-cylinder models with 26.84 cubic inch (440 cc) engines but as early as February of 1907 a prototype model with a 45-degree V-Twin engine was displayed at the Chicago Automobile Show. Although shown and advertised, very few dual cylinder V-Twin models were built between 1907 and 1910. These first V-Twins displaced 53.68 cubic inches (880 cc) and produced about 7 horsepower (5 kW). This gave about double the hill-climbing power of the first singles. Top speed was about 60 mph (97 km/h). Production jumped from 450 motorcycles in 1908 to 1,149 machines in 1909. The success of Harley-Davidson (along with Indian's success) had attracted many imitators. By 1911 some 150 makes of motorcycles had already been built in the United States -- although just a handful would survive the 1910s. In 1911 an improved V-Twin model with mechanically operated intake valves was introduced. (Earlier V-Twins had used "automatic" intake

valves that opened by engine vacuum). Displacing 49.48 cubic inches (810 cc), the 1911 V-Twin was actually smaller than earlier twins, but gave better performance. After 1913 the majority of bikes produced by Harley-Davidson would be V-Twin models. By 1913 the yellow brick factory had been demolished and on the site a new 5-storey structure of reinforced concrete and red brick had been built. Begun in 1910, the red brick factory with its many additions would take up two blocks along Juneau Avenue and around the corner on 38th Street. Despite the competition, Harley-Davidson was already pulling ahead of Indian and would dominate motorcycle racing after 1914. Production that year swelled to 16,284 machines.

World War I In 1917, the United States was drawn into World War I and the military demanded motorcycles for the war effort. Harleys had already been used by the military in border skirmishes with Pancho Villa but World War I was the first time the motorcycle had been adopted for combat service. Harley-Davidson provided over 20,000 machines to the military forces during World War I. By 1920, Harley-Davidson was the largest motorcycle manufacturer in the world. Their motorcycles were sold by dealers in 67 countries. Production was 28,189 machines. In 1921, a milestone was reached in motorcycle racing. A Harley-Davidson machine was the very first to win a race at an average speed of over 100 mph (160 km/h). During the 1920s, several improvements were put in place, such as a new 74 cubic inch (1.2 L) V-Twin, introduced in 1922, and the gas tank still seen today, called a "Teardrop" tank, in 1925. A front brake was added in 1928.

Harley copied the BMW to produce its XA model

World War II One of only two American cycle manufacturers to survive the Great Depression, Harley-Davidson again produced large numbers of motorcycles for the US Army in World War II and resumed civilian production afterwards, producing a range of large V-twin motorcycles that were successful both on racetracks and for private buyers. During World War II, the U.S. Army asked Harley-Davidson to produce a motorcycle as good as BMW's side-valve R71. So Harley copied the BMW, simply converting metric measurements to inches, and produced the shaft-drive 750 cc 1942 Harley-Davidson XA. Due to the superior cooling of an opposed twin, Harley's XA cylinder heads ran 100° cooler than its V-twins'. The XA, though a wonderful motorcycle, was eclipsed by the Jeep. Only 1,000 were made and the XA never went into full production. As part of war reparations, Harley-Davidson acquired the design of a small German motorcycle, the DKW RT125 which they adapted and marketed as the "Hummer" from 1948 to 1966 (in in the UK, BSA took the same design as the foundation of their BSA Bantam).

Tarnished reputation In 1952, following their application to the US Tariff Commission for a 40% tax on imported motorcylces, Harley-Davidson is charged with restrictive practices. In 1969, American Machinery and Foundry (AMF) bought the company, streamlined production, and slashed the workforce. This tactic resulted in a labor strike and a lower quality of bikes. The company also ceased to be an innovator in the motorcycle industry, with a design that remained basically unchanged for many years. The bikes were expensive and inferior in performance, handling, and quality to Japanese motorcycles. Sales declined, quality plummeted, and the company almost went bankrupt. The venerable name of "Harley-Davidson" was mocked as "Hardly Ableson", and the nickname "Hog" became pejorative.

Tarnished reputation

AMF H-D Electra Glide

In 1952, following their application to the US Tariff Commission for a 40% tax on imported motorcycles, Harley-Davidson was charged with restrictive practices.[35] Hollywood also damaged Harley's image with many outlaw biker gang films produced from the 1950s through the 1970s, following the Hollister, CA biker riot on July 4, 1947. "Harley-Davidson" for a long time was synonymous with the Hells Angels and other outlaw motorcyclists.[citation needed] In 1969, American Machinery and Foundry (AMF) bought the company, streamlined production, and slashed the workforce. This tactic resulted in a labor strike and a lower quality of bikes. The bikes were expensive and inferior in performance, handling, and quality to Japanese motorcycles. Sales declined, quality plummeted, and the company almost went bankrupt.[36] The "Harley-Davidson" name was mocked as "Hardly Ableson", "Hardly Driveable," and "Hogly Ferguson",[37][38] and the nickname "Hog" became pejorative.[citation needed] In 1977, Harley-Davidson produced what has become one of its most controversial models, the Confederate Edition. The bike was essentially a stock Harley with Confederate-specific paint and details.[39]

[edit] Restructuring and revival In 1981, AMF sold the company to a group of thirteen investors led by Vaughn Beals and Willie G. Davidson for $80 million.[40] Inventory was strictly controlled using the just-in-time system. In the early eighties, Harley-Davidson claimed that Japanese manufacturers were importing motorcycles into the US in such volume as to harm or threaten to harm domestic producers. After an investigation by the US International Trade Commission, President Reagan imposed in 1983 a 45% tariff on imported bikes and bikes over 700 cc engine capacity. Harley Davidson subsequently rejected offers of assistance from Japanese motorcycle makers.[41][42] Rather than trying to match the Japanese, the new management deliberately exploited the "retro" appeal of the machines, building motorcycles that deliberately adopted the look and feel of their earlier machines and the subsequent customizations of owners of that era. Many components such as brakes, forks, shocks, carburetors, electrics and wheels were outsourced from foreign manufacturers and quality increased, technical improvements were made, and buyers slowly returned. To remain profitable Harley continues to increase the amount of overseas-made parts it uses, while being careful not to harm its valuable "American Made" image.

Ford F-150 Super Crew Harley-Davidson edition

The "Sturgis" model, boasting a dual belt-drive, was introduced. By 1990, with the introduction of the "Fat Boy", Harley once again became the sales leader in the heavyweight (over 750 cc) market. At the time of the Fat Boy model introduction a story rapidly spread that its silver paint job and other features were inspired by the World War II American B-29 bomber; and that the Fat Boy name was a combination of the names of the atom bombs (Fat Man and Little Boy) that were dropped on Nagasaki and Hiroshima respectively. However, the Urban Legend Reference Pages lists this story as an urban legend.[43][44] 1993 saw the replacement of the FXR frame with the Dyna, though it was revived briefly in 1999 and 2000 for special limited editions (FXR2,FXR3 & FXR4). In 2000, Ford Motor Company added a Harley-Davidson edition to the Ford F-Series F-150 line, complete with the Harley-Davidson logo. This truck was a Super Cab for model year 2000. In 2001, Ford changed the truck to a Super Crew and in 2002 added a super-charged engine (5.4 L) which continued until 2003. In 2004, the Ford/Harley was changed to a Super-Duty, which

continues through 2009. Ford again produced a Harley-Davidson Edition F-150 for their 2006 model-year, as well. Building started on $75 million 130,000 square-foot (12,000 m2) Harley-Davidson Museum in the Menomonee River Valley on June 1, 2006. It opened in 2008 and houses the company's vast collection of historic motorcycles and corporate archives, along with a restaurant, café and meeting space.[45]

Captain America" replica bike from the film Easy Rider

Leadership regained

In 1981, AMF sold the company to a group of thirteen investors led by Vaughn Beals and Willie G. Davidson. They introduced the "Sturgis" model boasting a dual belt-drive. Inventory was strictly controlled using the Just In Time system. As a result, quality and buyers slowly returned. The motor company increased sales. Rather than trying to match the Japanese, this new management deliberately exploited the "retro" appeal of the machines, building motorcycles that deliberately adopted the look and feel of their earlier machines and the subsequent customizations of owners of that era. Quality increased, and technical improvements were made. By 1990, with the introduction of the "Fat Boy", Harley once again became the sales leader in the heavyweight (over 750 cc) market. There was a controversy that the Fat Boy model was allegedly inspired by the name of the bombs (Fat Man and Little Boy) that were dropped on Nagasaki and Hiroshima. The company vehemently denies this and claims it is coincidence. In 1999, Ford Motor Company added a Harley-Davidson edition to the Ford F-Series F-150 line, complete with the Harley-Davidson logo. This truck was an extended-cab for model year 1999. In 2000, Ford changed the truck to a crew cab and in 2002 added a super-charged engine (5.4L) which continued until 2003. In 2004, the Ford/Harley was changed to a Super-Duty, which continues through 2006. Ford will again produced a Harley-Davidson Edition F-150 for their 2006 model-year, as well. Building started on $75 million 130,000 square-foot (12,000 m2) HarleyDavidson Museum in the Menomonee Valley on June 1, 2006. It is expected to open in 2008 and will house the company's vast collection of historic motorcycles and corporate archives, along with a restaurant, café and meeting space.

Origin of Hog nickname Beginning in 1920 a team that consistently won races had a hog, a pig, as their mascot. Following a win, they would put the pig (a real one) on the back of their Harley and take a victory lap A photo of the pig is also on their website. In 1983, an organization was formed, taking advantage of the long-standing nickname by turning "hog" into the acronym H.O.G., for Harley Owners Group. Harley-Davidson attempted to trademark "hog," but in 1999 ultimately lost the case, with the appellate panel ruling that "hog" had become a generic term for large motorcycles, and is therefore unprotectable as a trademark

Events

In 2003, Harley-Davidson Company celebrated its 100th birthday. On Labor Day weekend the city of Milwaukee hosted the largest HarleyDavidson event, and possibly the largest motorcycle event, in history. Other motorcycle events: • Sturgis Motorcycle Rally - held at the beginning of August each year in Sturgis, South Dakota, 514,951 attended in 2004. • Laconia Motorcycle Week - held since the first Loudon classic race started 1923. Located in Laconia, New Hampshire. • Daytona Beach Bike Week - held since 1937 in Daytona Beach, Florida. • Republic of Texas Biker Rally - a popular event in Austin, Texas held every June. • Myrtle Beach Bike Week - a Spring and Fall rally in Myrtle Beach, South Carolina Click on link here. • Rolling Thunder - an annual rally in Washington, D.C. to raise awareness of veteran issues (specifically POW/MIA soldiers). Harley Owners Group Harley-Davidson established the Harley Owners Group (H.O.G.) in 1983 in response to a growing desire by Harley riders for an organized way to share their passion and show their pride. By 1985, 49 local chapters existed, with a membership of 60,000. Rapid growth continued into the 1990s, and in 1991 H.O.G. officially went international, with the first official European H.O.G. Rally in Cheltenham, England. Worldwide membership numbered 151,600, with 685 local chapters. As the 90s continued, H.O.G. spread into Asia, including new chapters in Singapore and Kuala Lumpur, Malaysia. By 1999, worldwide membership had reached half a million, and the number of local chapters totaled 1,157. Today, more than one million members make H.O.G. the largest factory-sponsored motorcycle organization in the world. H.O.G. benefits include organized group rides, exclusive products and product discounts, insurance premium discounts, and the Hog Tales newsletter. Famous owners of Harley-Davidsons include singer Elvis Presley, comedian Jay Leno and professional wrestler The Undertaker.

Marketing techniques The sponsorship of a "Harley Owners' Group" has been one of the most creative and innovative strategies that has helped create the experience of this product. Without realizing it, Harley executives had pioneered a new paradigm that would be increasingly embraced by other industries in their quest to increase profitability by converting their product into an experience. The company started to organize rallies to strengthen the relationship between its members, dealers, and employees, while also promoting the Harley experience to potential customers. The Harley Owners' Groups became immensely popular; it allowed motorcycle owners to feel as if they belonged to one big family. In 1987, there were 73,000 registered members, and Harley now boasts to have no less than 450,000 members. In 1983, the company launched a marketing campaign called SuperRide, which authorized over 600 dealerships to invite people to test-drive Harleys. Over 40,000 potential new customers accepted the invitation, and from then on, many customers were not just buying a motorcycle when they bought a Harley; instead, they were buying "the Harley Experience." Harley-Davidson offered its customers a free one-year membership to a local riding group, motorcycle publications, private receptions at motorcycle events, insurance, emergency roadside service, rental arrangements on vacation, and a host of other member benefits. Branding the experience, not just the product, has allowed the company to expand how it captures value, including a line of clothing, a parts and accessories business, and Harley-Davidson Visa card. Out of that decision came a number of key concepts that determined Harley's fate: Back To The Future: Harley made a clear choice to stay with its traditional styling, a classic 1940's and 50's design that aficionados believe motorcycles were meant to have. In Willie G. Davidson, the grandson of one of the founders, the company had a vital link to its design heritage. Dressed in black leather and beret, Mr. Davidson, now the 64-year-old head of the design department, took to the road and met with Harley customers, listening to their comments. Voicing disdain for the slick Japanese machines, they expressed nostalgia for old Harley models and the outlaw touches that had turned Harleys into "choppers." Willie G. designed new lines like the Softtail to mimic the beauty and elegance of 40's classics like the Hydra Glide.

"We experimented with radical designs inside," Mr. Fessler said. "But every time we did that, we found out the customers didn't want it and we had to fall back." Build A Community: In 1983, at the urging of Mr. Beals, Mr. Fessler set out to create a company-sponsored club for Harley riders. The Harley Owners Group, or H.O.G., was started as an organization that would sponsor rallies, offer special promotions and keep Harley owners in close contact with the company and each other. For as long as anyone could remember, Harleys had been called hogs, but the connotation was a negative one, of outlaw bikers like Hell's Angels. "My thought was to turn a negative into a positive," Mr. Fessler said. For many Americans, the sight and sound of an entourage of Harleys roaring into town meant a nasty motorcycle gang had arrived. So Mr. Fessler pushed hard to get H.O.G. associated with the Muscular Dystrophy Foundation. Under the club's banner, groups would ride for charity. Slowly, the perception began to change. Today, H.O.G. members constitute the fourth-largest contributing group to the Jerry Lewis Telethon each September. Give Them A Reason To Belong: At the first H.O.G. rally in 1984 in California, 28 people showed up. Today, H.O.G. has 365,000 members in 940 chapters throughout the world. The organization sponsors hundreds of rallies around the country each year, including massive gatherings in Daytona Beach, Fla., and Sturgis, S.D. With the Fly and Ride program, H.O.G. members who are on vacation or traveling on business can call ahead and rent Harleys through local chapters. And every five years, the company and H.O.G. sponsor anniversary reunions in Milwaukee. More than 100,000 riders are scheduled to converge next year to mark the company's 95th birthday. Already, there are no hotel rooms available for that weekend within 100 miles of Milwaukee. Extend The Brand: Mr. Fessler realized that leather jackets and black T-shirts also hurt the Unfortunately, that is what the company sold them. Harley-Davidson Motorclothes, which offered shirts baby clothes and bright-colored fashion items for

legions of Harley riders in black company's image. So in 1986, he launched with collars, denim blue jeans, women.

At the same time, Harley began to license its popular shield-and-bars logo for hundreds of products, from train sets to Christmas ornaments to the special edition Barbie. In Europe, L'Oreal licensed the name for a line of cologne. Mr. Fessler insisted that the merchandise had to be durable and high quality. The logo was licensed to a Zippo lighter, for example, rather than a Bic disposable. Each decision to go upscale in ancillary products led to another. Realizing that most of its dealers were ill-equipped to sell fashion items, Harley began to require them to remodel their stores (at their own expense) to showcase the merchandise. Despite grumbling from a few of the 600 domestic dealers, the clothes operation has become a big success, helping to boost sales of Harley parts and accessories, which now account for $210 million a year in revenues. Meanwhile, the Harley-licensed restaurant in Manhattan, modeled after the Hard Rock Cafe, will soon be joined by another, in Las Vegas. And Harley-Davidson stores selling clothes and other paraphernalia have become familiar tenants in malls around the country. Mr. Fessler acknowledged some bad decisions -- like licensing the Harley name to a line of cigarettes -- and the company's licensing department now has strict operating guidelines. The idea is to give people access to the Harley experience, whether they own a bike or not. "We always ask, 'Does it somehow lead back to the motorcycle?' " said Ms. Bischmann, the marketing vice president. She added that Harley toys, built by the likes of Mattel and Kenner, are an excellent way to extend the passion for Harleys to a younger audience, and with an aging customer base, this is a key marketing challenge. "What better way is there to get a 3-year-old to feel the Harley motorcycle experience?" Ms. Bischmann asked. Critics suggest that Harley is "selling out" and diluting its brand by putting its logo on so many products. But Harvard's Professor Shapiro disagreed. "As long as they don't get distracted from their core business, this helps build the mystique," he said. "If you don't continually change and extend the brand, you die. If you change too much, you also die. But I don't believe Harley has come close to burning out."

Extend The Enterprise: Even through its bleakest period, Harley has maintained close ties to its dealers. Of the 600 domestic dealers, most have been with Harley for decades; many dealerships have been in the same family's hands for three generations, with one family tracing its ownership back to 1914. The company holds quarterly meetings with an elected 10-member dealer advisory council. In July, every senior Harley manager is expected to attend the annual dealer meeting, where new models are previewed and problems get aired. Six years ago, the company opened Harley-Davidson University, where dealers can take three-day courses in such topics as "How to Manage Your Business" or "How to Create a Succession Plan." Harley, said Mr. Hart, the consultant, is cognizant of the fact that it was the dealers who came to the rescue as the company went through its rebirth during the mid1980's. During the first years following the management buyout, "the quality of the bikes was terrible and Harley counted on the dealers to fix them," Mr. Hart said. "They went through the war together and the dealers didn't charge the company back for any of this." Of course, the dealers make more money from service and the sales of parts and accessories than from sales of the motorcycles, so few are complaining. The relationships are long, deep and symbiotic. Harley understands that the dealer is the customer's conduit to the company. Indeed, for many Harley owners, the local dealership is a second home, a gathering place. "I can set my watch by certain people coming in every day," said Mr. O'Neil of Cycle-Craft. Add Value: Like Mercedes and Porsche, a Harley holds its value to an astonishing degree, and the company has taken advantage of that fact. In the late 1980's, Mr. Fessler created a marketing campaign called Ride Free, designed to move owners up to bigger, more expensive motorcycles. The company promised owners who bought new Harley Sportsters, the entry-level bike which sold at the time for $3,395, that they could trade them in a year later for a bigger Harley and get the full $3,395 credited toward the price of the new bike. There is also a huge aftermarket for Harley parts and customizing kits, which Harley shares with legions of independent third-party "chop shops." Personalizing a Harley by innovative paint jobs, scads of new chrome and pricey saddlebags has become its own time-honored Harley tradition. In fact, industry watchers agree with Mr. Conrades that Harley could get a big boost in sales by focusing on this market more than it does. Not surprisingly, as production shortfalls over the past six or seven years have led to waits of up to two years for new bikes, the value of used Harleys has skyrocketed and owners can often sell their machines for more than they originally paid. Sometimes they don't have to wait very long at all to make a profit. John Atwood, owner of Cycle-Craft, recalled the day, some four years ago, when he sold a new Harley Road King to a customer who then walked out the door and resold it to someone else in the parking lot for $2,000 more. "He didn't even have the decency to leave my lot," Mr. Atwood said. "I felt like I had a big 'stupid' sticker on my forehead."