A company is always started by one or more people with the same goal. From the moment a company springs up, it faces constant challenges in its day to day management. An organization thus has to have countermeasures to manage these challenges effectively (Zsidisin & Ritchie, 2009). This is by implementing its risk management strategies. Harley-Davidson Company is an American motorcycle manufacturer founded in Wisconsin in 1903. The company has been through a lot of challenges such as poor economic health, poor product quality and intense competition globally (Harley-Davidson Inc., 2018). These challenges are as a result of ownership changes and subsidiary arrangements. However, the motorcycle company has managed all the hardship periods and has established itself to be one of the greatest companies in the world. It also sponsors a range of events and also owns clubs all over the world.
Harley-Davidson has outsourced some of its services such as the supply of raw materials for the manufacture of motorcycles. This opens them up to various challenges like unfavorable pricing, poor quality of materials and increased lead time. If the company relies on a single supplier of a specific part of the manufacturing process, it could halt the entire production process in cases of delayed delivery (Zsidisin & Ritchie, 2009). Delayed production processes may eventually lead to loss of sales where customers shift to readily available products.
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Over-reliance on a single supplier may also lead to increased prices of materials which will also lead to increased prices of the final product. This could reduce the amount of sales made as customers will opt for cheaper products. Outsourcing may cause the company to obtain low-quality materials and services since most of these firms are primarily focused on making huge profits, and this could also lower the quality of the final product (Doherty, 2009). The company should construct warehouses where key raw materials could be stored to ensure uninterrupted production process due to stock-outs and long lead times. It can also decide to produce crucial raw material in-house where the cost involved is lower compared to outsourcing. This will ensure that the cost of production is minimized and the right quality is obtained.
Expanding the business to international markets is every business’ strategic long-term goal. However, expansion of the company may be faced with major challenges in the new international market. Every country has its laws and regulations, and in a new market, Harley-Davidson is expected to meet these requirements. Some of the regulations include business and motorcycle licensing where the cost of obtaining licenses in new markets is more expensive compared to a company originally located in that country (Doherty, 2009). The laws also make it difficult for such firms to obtain licenses by complicating and lengthening the procedures to be followed. In the new market, coping with new operational laws is difficult.
The company is also bound to be faced by lawsuits in case of breach of operation which would increase its expenses through hiring lawyers and payment of fines. Harley-Davidson can deal with this risk by ensuring that they understand all the laws of the new market before investing. It can opt to invest in countries whose laws on new investors are more lenient or set aside funds in case it is faced with lawsuits.
The company is faced with substantial costs including employee health care benefits and pension scheme payment. It is required by law to make these payments for the good of both the active and retired employees. However, not all organizations are faced with such additional costs and pressures thus the company could be disadvantaged financially compared to its competitors. There are also costs that accrue from Patient Protection and Affordable Care Act. These payments mean that a company has to have a high liquidity ratio which could push it to obtain financing through loans as can be seen from Harley-Davidson Company where their borrowings for the year 2015 were $750 million (Harley-Davidson Inc., 2018). These kinds of liabilities cripple smooth running of the business. The Harley-Davidson Company can outsource this part of its operations in order to focus on the core activities of the business. It can also channel portions of its retained profits to these programs.
The company relies majorly on external sources of financing to fund its operations, which is very risky to business as it increases its gearing ratio. The firm’s operations may be affected where it is not able to raise capital both in the long-run and in the short-run capital markets. The effects of such scenarios include higher costs of capital, reduced funds and dilution of available share value where alternative sources of capital are used. The solution to this problem could involve the company exhausting on its internal sources of funds such as the sale of both preference and ordinary shares and retained earnings since they are cheaper compared to external sources of funds.
In conclusion, Harley-Davidson Company should identify possible risks that it may face in its growth process and devise measures to counter them. This will help keep the company ready in case of any risk occurrence, hence, perform better compared to its competitors.
References
Doherty, N. (2009). Integrated risk management: Techniques and strategies for managing corporate risk . McGraw Hill Professional.
Harley-Davidson Inc. (2018). SEC Filings . Retrieved from http://investor.harley- davidson.com/financials/sec-filings?items_per_page=10&page=2
Zsidisin, G. A., & Ritchie, B. (2009). Supply chain risk management–developments, issues and challenges. In Supply Chain Risk (pp. 1-12). Springer, Boston, MA.
