Q1. How would you characterize HD’s core challenge as of the end of 2005? Is there decision criteria?

Harley Davidson core challenge relates to an aging customer group, a strong association with boomers making the brand harder to sell to the younger generation. In general the stronger the brand is with the older generation, the weaker it is with the younger generation. Harley will need to take measure to reach its younger customers while maintaining growth in its traditional segments. As a result sales forecast has been adjusted and stock price declined 17% despite the quarterly increase of sales and profits.

Q2. Deconstruct HD’s world with PEST, PORTER and CRACK. Quantitatively how healthy is Harley Davidson? (3%)

SOCIETY TRENDS PEST

1. Technological – Newer more fuel efficient and environmental friendly engines technology is available. However Harley’s unique patented V-engine configuration with a unique sound is what the conventional generation customer wants. Noise pollution and emissions however might not be up to standard for European market. Harley Davidson has access to innovative engine technology through Buell.

2. Political – US People are considering Harley-Davidson as an American icon. Opportunities are emerging in India and China, however these are uncertain operating circumstances. Europe is also a growing market opportunity for Harley with only an 11% market share in 2004. Environmental concerns are rising and becoming more and more a political issue.

3. Economy – Confidence in economy is directly proportional to the purchasing of consumer items. Repeat business is strong as 42% of customers have owned a Harley previously. The industry is highly competitive with Japanese brands like Kawasaki, Honda and Yamaha. Interest rates are at an all-time low and fuel prices are moderately affordable. 31% of the Harley customers owned a