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Growth …Analysis of Harley-Davidson
Being aware of one’s market strategy, competition, customer preferences and overall
market orientation, Webster (2000) studied the relationships between brands, consumers and
retailers. Webster (2000) found that there is a definite tradeoff in brand pricing strategies, where
consumers may relate lowering prices to lower value, however in some cases, Webster (2000)
found that a “...higher price may actually provide higher utility for the consumer” (p. 17).
Taking into consideration the implications and convolutions of the overall economic
environment, growth modeling, market orientation, and the relationships between one’s product
and one’s consumers, companies must develop relationships with their consumers that will
maximize perceived value. Value in this respect may not always equate to value in pricing alone;
but the overall “value” provided by the manufacturer and retailer working as partners.
Lastly, when a product’s value is determined by the above criteria, driving a competitive
market with higher pricing strategies, while gaining market share, is a competitive advantage that
cannot be easily replicated by competitors.
BACKGROUND TO RESEARCH PROBLEM
Harley-Davidson began in 1903 in a small shack that still stands within the grounds of the main
plant. Through the years, Harley-Davidson has had its share of ups and downs however, over the
past 10 years the company has enjoyed increasing returns and record profits.
Harley-Davidson, in a recent magazine review stated that, given the significant and
unexpected increases in sales over the last few quarters, they plan to ship 200,000 motorcycles in
the year 2003.
RESEARCH PROBLEM
Given the unexpected increases in profits recently, in spite of market-share increases, can Harley-
Davidson, in fact, achieve the stated goal based on Van Horne’s (1998) steady-state SGR model?
METHODS
The data that will be utilized is the Harley-Davidson 1998 Annual Report and the 1999 Quarterly
Income Statement and Balance Sheets which were downloaded from the Harley-Davidson
website.
FORMULA AND CALCULATION
From the Harley-Davidson financial reports, the researcher will apply Van Horne’s (1998)
steady-state SGR model to the relevant variables to provide an answer the research question.
VARIABLES. The first four variables that are used in Van Horne’s (1998, p. 744) model
are termed “target variables” (p. 744). Target variables are considered to be the financial ratios
that, when calculated, provide a snapshot of a company’s financial situation. However, they are
industry specific and care must be taken not to compare apples and oranges. The sustained growth
model employs the following variables:
1. A/S = the total assets-to-sales ratio
2. NP/S = net profit margin (net sales divided by sales)
3. b = retention rate earnings (1-b is divided by the dividend-payout ratio)
4. D/Eq. = debt-to-equity ratio
5. So = most recent annual sales (beginning sales)
6. ∆S = absolute change in sales from the most recent annual sales
Given the above variables, the formula that will be applied appears as:
ASBBS E-Journal, Volume 4, No.1, 2008 173