Strategic Management Process

The Strategic Management Process The Harley Davidson Pub, Singapore Pte. Ltd.

Harley-Davidson, Inc. is a global leader in fulfilling dreams and providing extraordinary customer experiences through mutually beneficial relationships with our stakeholders.

Lim Yew Cheong Larry4/7/2009

The Harley Davidson Pub, Singapore Pte. Ltd.

Larry Lim, ERC Institute of Singapore

www.harley-davidson.com

A road-scripted old man sat down at the counter of a one-horse-town coffee shop. His Harley was parked outside.

“Nice bike,” said the short order.

“Thanks.”

“Where ya headed?”

“Everywhere. No-where.”

His coffee cup filled, the old man pointed to the Blue Plate Special and nodded his head.

“Where ya been?” Simple question. Difficult answer.

Without saying a word, the old man took off his jacket, revealing a right arm tattooed with every place he’d ever been. From Frankfurt to Copenhagen, Tokyo to Thailand, Quebec to Key West and on to Caracas. He’d even been to Bora Bora.

The awesome display was followed by an awkward silence, broken when the short-order asked the old man where he called home.

He then rolled up his sleeve, where an ancient Harley-Davidson tattoo remained uncluttered. “Show me to the nearest Harley dealer. And I’ll show you home.”

(www.harley-davidson.com)

When was the last time you felt this strongly about anything? How many company names do you have tattooed on your body? The Harley-Davidson name is worn like a badge of honor. These lifelong customers have a passionate commitment to the experience of riding a Harley-Davidson. For motorcycle enthusiasts, even those without the tattoos, Harley-Davidson is engraved in their lifestyle. This loyalty has helped Harley to survive against fierce international competition and maintain strong financial performance.

Harley-Davidson has delivered double-digit growth in both revenue and earnings for more than a decade. As shown in Exhibit 1, Harley Davidson’s revenue totaled $5,971.3 million, making it $5.9 billion in 2008, a 2.7% decrease over 2007 due to the global economy crisis. Net income was $654,7 million, down 29.8% from 2007, and diluted earnings per share for 2008 was $2.79, down 25.4%. The price of the company’s shares increased 74% during 1998 in which its annual growth rate in the stock market compounded over 40% since going public in 1986. Harley’s 2008 balance sheet is provided in Exhibit 2.

EXHIBIT 1 Harley-Davidson Annual Income Statement

Period Ending FY2008 FY2007 FY2006 FY2005 FY2004Net Sales/Revenues 5.97 B 6.14 B 6.19 B 5.67 B 5.32 BCost of Goods Sold (Excluding Depreciation) 3.42 B 3.41 B 3.35 B 3.10 B 2.90 B

Depreciation, Depletion and Amortization242.28

M204.17

M213.77

M205.70

M214.11

MGross Income 2.31 B 2.53 B 2.62 B 2.37 B 2.20 B

Selling, General & Admin Expenses 984.56 M

900.71 M

841.05 M

762.11 M

726.64 M

Other Operating Expense 157.40 M

122.55 M

114.41 M

103.84 M 93.94 M

Operating Expenses - Total324.05

M148.82

M149.91

M108.75

M109.16

MOperating Income 1.17 B 1.51 B 1.66 B 1.51 B 1.38 BExtraordinary Credit - Pretax 0 0 0 0 0Extraordinary Charge - Pretax 0 0 0 0 0Non-operating Interest Income 9.50 M 22.26 M 27.09 M 22.80 M 23.10 MReserves Inc (Dec) 0 0 0 0 0Pretax Equity in Earnings 0 0 0 0 0Other Income/Expenses - Net 0 0 -5.37 M -5.05 M -5.11 MEarnings Before Interest & Taxes (EBIT) 1.18 B 1.53 B 1.68 B 1.52 B 1.40 B

Interest Expenses On Debt 141.34 M 81.48 M 59.76 M 36.15 M 22.72 M

Interest Capitalized 0 0 0 0 0Pretax Income 1.03 B 1.45 B 1.62 B 1.49 B 1.38 B

Income Taxes 379.26 M

513.98 M

581.09 M

528.16 M

489.72 M

Current Domestic Income Tax 395.52 M

537.38 M

606.60 M

469.36 M

528.46 M

Current Foreign Income Tax 29.06 M 35.23 M 15.11 M 10.50 M 2.78 M

Deferred Domestic Income Tax -38.59 M

-56.99 M

-43.04 M 52.30 M

-43.59 M

Deferred Foreign Income Tax -6.74 M -1.64 M 2.43 M -4.01 M 2.08 MIncome Tax Credits — — — — —Minority Interest 0 0 0 0 0Equity in Earnings 0 0 0 0 0After Tax Income Expense 0 0 0 0 0Discontinued Operations 0 0 0 0 0

Net Income Before Extra Items/Preferred Div 654.72 M

933.84 M

1.04 B 959.60 M

889.77 M

Extra Items & Gain (Loss) Sale of Assets 0 0 0 0 0

Net Income Before Preferred Dividends 654.72 M

933.84 M

1.04 B 959.60 M

889.77 M

Preferred Dividend Requirements 0 0 0 0 0Net Income Available to Common 654.72 933.84 1.04 B 959.60 889.77

M M M M

HISTORY

“Harley-Davidson began in a shed, went to war, became the symbol of American individualism and ended up ‘king of the road,’ all in 106 years…..” (2008 Annual Report) in the Davidson Family’s backyard in the 1903 what was to become the legendary motorcycle company was formed. The Davidson Brothers – Williams D., Walter, Arthur – and William S. Harley made their first motorcycle there. In 1909, Harley-Davidson introduced its first V-Twin engine, which is the company standard to this day.

1903 First Factory

Model 5-D (V-Twin)

During World War I, Harley-Davidson supplied the military with 20,000 motorcycles. After the war, there were major advancements made in the design of the motorcycles, and Harley was

the leader. Soon after the war, the Great Depression devastated the motorcycle industry. Only Harley and Indian survived through the 1930s.

1917 - Army personnel with bike

In 1941, World War II called, and Harley answered with more than 90,000 motorcycles. After the war, demand for the motorcycles exploded, and Harley added additional facilities in Milwaukee in 1947. After Indian closed in 1953, Harley was the “King of the Road”. Harley ended family ownership in 1965 with a public offering. Only four years later, the company merged with the American Machine and foundry Company (AMF).

By the early 1970s, the Japanese were importing huge numbers of lower-priced motorcycles into the United States. Japanese firms were able to capture a large portion of Harley’s market share. Harley was also having quality problems as a result of expanding production rapidly. In 1981, 13 managers purchased the business from AMF. The company convinced President Ronald Reagan, Upon recommendation from the International Trade Commission (ITC), to impose additional tariffs on imported heavy-weight Japanese motorcycles for five years. Then in 1986, Harley-Davidson, Inc., became publicly held. That same year, Harley regained its place at the top of the U.S. superheavyweight market, beating out Honda. The next year, the company asked the ITC to remove the tariffs one year early. Harley’s U.S. market share continued to grow. After being praised by President Reagan as an “American success story,” Harley has continued to improve all parts of its operations. Worldwide demand for the company’s products continues to grow.

EXHIBIT 2 Harley-Davidson Annual Balance Sheet

Period Ending Q4 Q3 Q2 Q1 Q4

FY08 FY08 FY08 FY08 FY07Assets

Cash and Short Term Investments593.56

M504.91

M803.92

M333.16

M405.33

MNet Receivables 2.74 B 3.69 B 3.15 B 2.62 B 1.76 B

Total Inventories 400.91 M

401.28 M

341.40 M

441.20 M

349.70 M

Progress Payments & Others — — — — —

Prepaid Expenses187.44

M46.81

M— — —

Other Current Assets 1.64 B 222.89 M

206.62 M

187.44 M

955.79 M

Current Assets Total 5.38 B 4.82 B 4.51 B 3.59 B 3.47 BLong Term Receivables — — — — —Investment in Unconsolidated Subsidiaries 0 0 0 0 0Other Investments — — — — —Property, Plant & Equipment Net 1.09 B 1.09 B 1.06 B 1.06 B 1.06 BProperty, Plant & Equipment Gross 3.03 B 2.76 B 2.53 B 2.33 B 2.19 BAccumulated Depreciation 1.94 B 1.70 B 1.51 B 1.32 B 1.17 BOther Assets 1.07 B 1.29 B 1.22 B 1.22 B 1.07 BDeferred Charges — — — — —Tangible Other Assets — — — — —

Intangible Other Assets138.58

M144.68

M63.10

M63.20

M61.40

MTotal Assets 7.54 B 7.20 B 6.78 B 5.86 B 5.60 BLiabilities

Short Term Debt & Current Portion of Long Term Debt 1.74 B 1.14 B 927.93 M

1.11 B 1.12 B

Accrued Payroll — — — — —

Income Taxes Payable27.16

M19.50

M49.67

M58.08

M53.55

MDividends Payable — — — — —

Other Current Liabilities514.21

M635.48

M518.81

M579.21

M465.44

MCurrent Liabilities Total 2.60 B 2.21 B 1.77 B 2.04 B 1.91 B

Long Term Debt 2.18 B 980.00 M

2.05 B 980.00 M

980.00 M

Provision for Risks & Charges — — — — —

Deferred Taxes-288.24

M0.00 0 0 51.43

MDeferred Income — — — — —Deferred Tax Liability in Untaxed Reserves — — — — —

Other Liabilities933.03

M456.63

M431.72

M416.92

M396.04

MTotal Liabilities 5.42 B 4.70 B 4.25 B 2.17 B 3.23 B

Shareholders Equity Non-Equity Reserves 0 0 0 0 0Minority Interest 0 0 0 0 0Preferred Stock 0 0 0 0 0Common Equity 2.12 B 2.50 B 2.53 B 2.43 B 2.38 BCommon Stock 3.36 M 3.35 M 3.34 M 3.31 M 3.30 M

Capital Surplus846.80

M812.22

M766.38

M596.24

M533.07

MRevaluation Reserves — — — — —

Other Appropriated Reserves — -193.28 M

— — —

Unappropriated (Free) Reserves — — — — —Retained Earnings 6.46 B 6.12 B 5.46 B 4.63 B 3.84 BEquity in Untaxed Reserves — — — — —ESOP Guarantees — — — — —

Unrealized Foreign Exchange Gain (Loss) 7.47 M 59.18 M

28.43 M

24.29 M

13.11 M

Unrealized Gain (Loss) on Marketable Securities -2.67 M -3.17 M 20.50 M

36.32 M

36.91 M

Treasury Stock 4.67 B 4.42 B 3.27 B 2.20 B 1.15 BTotal Liabilities & Shareholders’ Equity 7.54 B 7.20 B 6.78 B 5.86 B 5.60 B

Common Shares Outstanding232.76

M232.82

M235.33

M236.56

M238.49

M

CORPORATE MISSION STATEMENT

Harley’s mission statement as provided in their 2008 Annual Report is as follows:

We inspire and fulfill dreams around the world through Harley-Davidson motorcycling experiences.

CORPORATE VISION STATEMENT

Harley’s vision statement as provided in the 2008 Annual Report is as follows:

Harley-Davidson, Inc. is a global leader in fulfilling dreams and providing extraordinary customer experiences through mutually beneficial relationships with our stakeholders.

PUBS – THE HEART OF THE COMMUNITY

Pubs are right at the heart of every community in every country. They are a much loved part of our national culture, celebrated at home and abroad, and attract many visitors worldwide.

Today's pub is as much about food as drink. More than 80 per cent of pubs serve food, catering for every taste. That's over 1.1 billion meals per year.

In the turn of a wink, the world is now facing one of the worst ever crisis to hit the business highway. Singapore has not been spared either. The employment rate has slowed down to 8.1%, lower than the increase of 234,900 or 9.4 percent in 2007. The number of pub-goers and employments may dip in the wake of the global crisis.

For the Harley-Davidson’s pub, it not only will bring in revenues to accommodate the losses of Harley’s net sales, it may also bring in employments for job-seekers. Furthermore, this is also the first Harley-Davidson’s pub in Singapore and maybe, worldwide. Competitions may be stiff, but as long as there’s a business plan / strategy, chances of being crowd pullers are there to be seen. The SWOT Analysis diagram in Exhibit 3 shows the strategic planning of the pub for long term future. The SWOT matrix is a useful tool for strategic planning and achieving goals, individually or with a team.

Here is the Action Plan after the SWOT Analysis of the Harley-Davidson Pub Singapore:-

Strength – By maintaining a good location for the pub to get tourists attractions and earn more incomes with the interest of locals too.

Weakness – In order for the pub’s decorations to run smoothly, a good PR with the landlord is essential as well as to maintain quality services (meeting the standards of the Singapore Quality Award [SQA]).

Opportunities – By enhancing the development of the pub as well as its quality services. Threats - Build a reputation with residents in the area to create better communications

as well as to pay well for contractors to fully repair the pubs to gain their trust.

COMPETITION

There are many Pubs in Singapore, from small time owner to bigger establishment. Pub can be found in the City area, Jalan Sultan, Tanjong Pagar (Duxton Road), Boat Quay, Clark Quay etc. In the past decade, bars and nightclubs have blossomed in a big way in the Lion City. Long labeled as over-protected nannies state where its well-behaved inhabitants just don't know how to have fun, partying the night away has become a norm.

Many of the bars and clubs have taken on a unique Singapore or Southeast Asian character; you'll find restored Chinese go downs pumping out rap or retro, trendy bars of glass-and-steel exteriors and Buddhist temple-style interiors, historic drinking dens that will you bring back to the days of the Raj.

EXHIBIT 3 SWOT ANALYSIS DIAGRAM

SWOT Analysis Template

State what you are assessing here _____Harley-Davidson Pub Singapore________________________________________________________________________

StrengthsGood location in the centre of the heartlands.High level of disposable income locallySignificant interest from the local communityAttracts interest from the tourism board1st into the Singapore pubs industryLocal demand for eating out? Lau Pa Sat, in the next vicinity, is always full.

WeaknessesPoor state of decoration in the pubCar park too smallUnwelcoming and rude landlordOver priced foodPoor quality beer and wineSlow serviceDirty facilities

OpportunitiesUnderused building on the end of the pubPost office closing due to retirement of postmasterCar park could be extended into groundsNew friendly landlord will welcome customers; serve good food with a smile!

ThreatsRoof potentially needs repairOwner may try to get planning for residential conversionCannot change the poor image of the pub locallyInvestment cannot be raised

As this will be the first time Harley-Davidson is having a pub in Singapore, the competition will be stiff in this business-oriented city. Harley faces a major competitor, Harry’s. Harry’s Bar at Boat Quay famous for being one of the pioneers of the Boat Quay strip and one of the original

Heineken Star bars. For 17 years this famous nightspot has been revered as the home of Singapore’s jazz scene.

Nestled in the shadows of the towering Raffles Place skyline, this famous watering hole is a favorite of Singapore’s power brokers and bankers. Harry’s occupies a prime location on the Boat Quay strip facing out over the Singapore river, where bumboats can be seen sailing leisurely along the waterfront.

Founded in 1992, the bar occupies a renovated shop house dating back to the early 1900’s.

PLAN 2012

For the past years, Harley-Davidson has been the mainstay of the motorcycle revolution. With more than half-a-million members worldwide (88% male; 12% female), Harley has 2 pubs stationed in Slovakia and Republic of Ireland for entertainment and leisure for all Harley-Davidson members and friends. Harley-Davidson Pub Singapore plans to increase its memberships vie the pub’s registration system as well as to increase its quality service in its other areas (food, drinks, hospitality etc) to be qualified under the Singapore Quality Award (SQA) to be able to sustain profitable income and comfort for Harley-Davidson’s members and friends.

THE FUTURE

Harley-Davidson redefined the motorcycle industry as it roared through 16 years of growth. But as its customers aged--and the stock market slides--the ride could get uneasy. With the global economic crisis in mind, give Harley credit for not burying its head in the sand, as the Japanese did when they were atop the market in the early 1980s. They wrote off a near-bankrupt Harley, failed to respond to its resurgence, and then ceded to it the boomers and cruisers. That won't happen at Harley, vows retired CEO Jeffrey Bleustein. His message to a national meeting of 650 dealers in July: "The only thing that can stop us is if we get complacent. Even though we've been successful, we can't stand still."

As part of the Harley-Davidson’s pub management, other than increasing the annual income for the pub, the management may liaise with the other 2 pubs and Harley Owners Group (H.O.G.) to form the group called Harley Owners Pubs Group (H.O.P.G.) and bring members of Harley-Davidson worldwide together with respect to the values of the company:-

Tell the Truth. Be Fair. Keep Your Promises. Respect the Individual. Encourage Intellectual Curiosity.

REFERENCES

FRED R.DAVID. 2001. “Strategic Management.” Eight Edition. Harley-Davidson, Inc. – 2000. Pages 238 – 246.

ERC INSTITUTE. 2009. “Entrepreneurship and Intrapreneur.” Strategic Management Process Steps 1-9. Pages 1-19.

HARLEY-DAVIDSON USA. 2009. “H-D Student Center.” http://www.harley-davidson.com/wcm/Content/Pages/Student_Center/student_center.jsp?locale=en_US

SINGAPORE NIGHTLIFE. 2009. “Nightlife Hot Spots.” http://www-singapore.com/nightlife/

2008 PUB IS THE HUB. 2008. “Example SWOT Analysis.” http://www.pubisthehub.org.uk/pithlive/res/publications/swot/

AOL MONEY & FINANCE. APRIL 2009. “HOG: HARLEY DAVIDSON INC Balance Sheet.” http://finance.aol.com/financials/harley-davidson-inc/hog/nys/balance-sheet

AOL MONEY & FINANCE. APRIL 2009. “HOG: HARLEY DAVIDSON INC Income Statement.” http://finance.aol.com/financials/harley-davidson-inc/hog/nys/income-statement