Polaris 2004 Annual Report Download - page 7

2004 Annual Report 3
Product innovation
Product innovation is in the blood at Polaris — for 50 years it has always been at the core of our success. Our growth and
success has always come from developing new products. But we are convinced we can get even better. Here is how:
Building strength in existing strong businesses. We will focus on core competitive competencies and markets
where we’ve already demonstrated leadership — and where we aspire to be the best in the world: ATVs, snowmobiles
and utility vehicles. Our mindset is to attack, not defend, and to innovate, not follow. This path will require investments
in technology, people and distribution to drive consistent growth. While there will be risk, we believe these
investments will provide outstanding returns to Polaris shareholders, as they have for many years.
Over the past several years, we have evaluated every new product introduction to learn more about why some
were home runs and others didn’t work out as well. Through better market research, a more careful initial selection
of projects, and by following a more disciplined product development process, I am convinced we can do an even
better job with our core strength. Customers saw the first inkling of the results in the 2005 model year product
introductions. It was the first of a continuing wave of new products that will grow stronger each year.
Building powertrain capability. The engine and transmission are the heart of every vehicle we make. Because
emission regulations and competitive forces are rapidly driving improvements in engines and transmissions,
it’s essential that we stay at the forefront of new developments — by controlling new technology or partnering with
those who do. Engines have a long development cycle and require substantial investments, but in our business,
there’s no greater payoff when you bet right.
Expanding parts garments & accessories (PG&A) and financial services. The lower investment and higher return
businesses, PG&A and financial services, diversify our portfolio and also make Polaris products more appealing to
riders and more profitable for dealers. We will continue to develop products with integrated solutions like Pure
Polaris packages and the Lock & Ride family of accessories, which is cutting dealer installation labor by a factor of
six or more. We have invested considerable effort over the last five years to integrate these two important, profitable
parts of our business into the core offering, and that has worked well. We will continue to differentiate ourselves by
the quality of our total product and service offering, including PG&A and financial services.
Growth initiatives
While innovation has been at our core for 50 years, over the next five years, the following areas represent new
areas of emphasis or investment. Just like six years ago, when our strategy was to focus people and investments
on PG&A, International, and Financial Services, these are the areas where, over the next few years, we will devote
incremental resources:
Dealer network. The powersports industry’s distribution model was largely built on small, family-owned businesses in
virtually every town in North America. But retailing is growing much more sophisticated, and as we push the quality and
the rate of new product introductions, we need dedicated powersports dealers with the capacity and merchandising
skills to sell and service these products. Through concerted recruitment, dealer management, and marketing and
investment programs that underscore our shared destiny, the Polaris North American dealer network will evolve over
the next five years. We expect there to be fewer dealers, and the dealers that remain will have a stronger, more
profitable relationship with Polaris.
Victory. We have spent the last several years building a motorcycle company from scratch. It has been a long, hard
job. But as we approach $100 million in sales, the signs are clear that Victory has earned a place in the heavyweight
cruiser category. The next five years should be fun as we continue to build the brand, expand the product offering and
strengthen the distribution. One new model at a time, we will target new market segments and broaden the brand’s
appeal to riders who want new technology, adventurous styling and superior value. By the end of this decade, Victory
should be a $250 million business.
Global expansion. The Company is evolving to a significantly more global mindset. By the end of the decade we
expect Polaris will have a significant brand presence and around 15 percent of sales, or $450 million, in markets
outside North America. We will concentrate first on Europe, where the ATV market is growing at very strong double
digit rates and we already have local Polaris teams in place. As we develop specific, unique products and build
distribution for international markets, we will also make investments on the ground. Globally transferring the Polaris