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Cervus Equipment’s General Strategies

Autor:   •  January 3, 2019  •  2,001 Words (9 Pages)  •  49 Views

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Porter’s Five Forces

- The threat of entry to the North American Agriculture Equipment Industry is generally high due to the number of major companies that already have a strong position in the market. Most companies have strong ties with OEMs so they can easily achieve economies of scale and already have differentiated products that are hard to match for new entrants. As a result, unless new entrants come up with strategies related to cost savings or better technologies, it would be hard for them to have a competitive advantage in the market.

- The threat of rivalry in the industry is high. As mentioned earlier, all of the firms that operate in this agricultural equipment industry already have top notched strategies and inimitable products and reputable international brands, and diversification strategy mixes.

- The threat of substitution is low in this industry. There might be less to no alternative products or services offered to consumers that would allow them to be more productive and obtain more crop yields. In addition, if consumers want to maximize their production, using technological- featured equipment would be the best alternative for them. Furthermore, there are not many companies out there that offer state of the art equipment that can substitute those owned by large companies.

- Supplier power is very high. The existence of large suppliers such as John Deere, Bobcat, JCB … represents a significant power because they offer unique products, they control the prices. In addition, OEMs were uncomfortable that only one organization has such a huge influence over the dealers’ network, that it gives them too much bargaining power.

- The buyer power is quite moderate because the products and services offered by the agricultural equipment firms are significant. Even though the equipment are offered at premium prices, farmers do not really have other alternatives that will help them maximize their crop yields.

Based on the above analysis, we can see that most threats are high. As a result, firms operating in this industry can expect normal profits.

Cervus equipment has a sustainable competitive advantage in this industry given their strong partnership with suppliers and also because they are already considered to be among the top.

VRIO Analysis

Resources & Capabilities

Valuable?

Rare?

Inimitable?

Exploited by the organization?

Acquisition integration model

Yes

Yes

Yes

Yes

Premium Brand

Yes

Yes

Yes

Yes

Cervus Leadership University

Yes

Yes

No

Yes

Given Cervus Equipment’s strong capabilities to possess a highly effective acquisition model, it is easier for the company to expand globally. Their resource provides a major competitive advantage especially knowing that 80% of acquisitions fail. Furthermore, Cervus uses a management system focused on decentralized structures that value Principle -over- policy and keep decision making as close to customers as possible.

By using this system, Cervus has a major advantage to successfully consolidate the business through the integration of new acquisitions.

Cervus Equipment has formed connections with OEMs such as John Deere, Bobcat, and Peterbilt trucks. These brand names have upheld to have a strong impact for Cervus Equipment in the domestic agricultural equipment industries. Thanks to the reputation of these brands, Cervus does not have to make any marketing efforts. The brands are already well known by consumers and prices do not really affect the industry as long as the equipment are proved to help consumers be more efficient and maximize outputs.

Cervus Equipment has also established Cervus Leadership University (CLU), an internal leadership development program aimed at building a solution to the leadership gaps that currently occur within the company. However, implementing this new system has little to no impact in the short run which led the leadership team to be in very cautious about seeking out new acquisitions. On the other hand, if Cervus chooses to expand internationally, CLU will provide extensive benefits and it will make this resource very hard to replicate.

The resources explained above have strong impacts on Cervus Equipment’s performance and must be looked at thoroughly before considering whether the company should enter into global markets. Moving into global markets will be a challenge, as was the case when Cervus entered the New Zealand market.

Strategic Alternatives for Cervus Equipment

The first alternative is to integrate into acquiring new dealerships and invest in more innovative technologies. On one hand, by focusing on those, there is potential for growth and expansion that will allow Cervus to sustain its competitive advantage. International acquisitions can also allow Cervus to enter those markets in other location, to broaden their target market, and too have a larger market share. On the other hand, acquisitions should meet Cervus’ standards in terms of business model. Transitioning into international markets might also be challenging in a way that not all dealership can be managed only using the main strategy that the company is currently using for its operations in North America.

The second alternative is to expand into potential markets such as Australia and Brazil. This will allow Cervus Equipment to have more recognition on an international level as well as maintaining competitive advantage. However, it might take time and costly to enter international markets. Cervus also has to research any economic, political, social aspects of the location. Cervus should also ensure that all activities by the company are in compliance with the regulations in the other countries.

The third alternative is to expand the development of

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