Cervus Equipment’s General Strategies

Cervus Equipment’s general strategies

Cervus Equipment’s existing strategies are divided into two, a corporate strategies focused on the aggressive consolidation- based growth and business level strategies. Their corporate strategy is based on growth through acquisition of more dealerships with growth potential. Over the last ten years, Cervus has witnessed a cumulative growth. Their strategy also includes maintaining the strong partnership with Original Equipment Manufacturers (OEM)

The business level strategy used by Cervus includes the decentralized decision- making model, diversification growth strategy and acquisition methods.

Using their decentralized management model, Cervus was able to build the organization around an employee- and customer- centric model, allowing them to keep key decisions as close to customers as possible. This model was also used to build positive change through integration of new acquisitions. Cervus uses the “Principles over policy “approach to empower their employees to make critical decisions about customer needs and requirements.

Cervus is also focused on diversifying its growth strategy by purchasing and operating a number of construction and materials handling equipment dealerships, selling globally reputable brands. However, knowing that this sector can be affected by economic downturns.

Cervus also expanded their business into the transportation industry, which seems to have a remarkable impact on their growth. Low commodity prices and low Canadian dollar can be beneficial for transportation industry.  Thus, integrating into this sector would be beneficial for Cervus Equipment (low costs, more partnerships…)

The third business strategy is their methodical approach in terms of choosing which dealerships to acquire. Cervus only purchases dealerships that were underperforming and not able to reach their market potential and/or located in a strong regional growth market. This strategy shows that Cervus conducts research and analyzes the market carefully before acquiring any dealerships.

North American Agriculture Equipment Industry External Analysis

PESTLE Analysis

First we will look into the political aspects of the industry. The growth of agricultural machinery market in Europe (12.1%) is attractive and presents a potential for growth.  Especially now that Europe is considered to be the largest regional market. If North American companies join the European market, there will be more consolidation if formal institutions, which can decrease the barriers companies might face when deciding to go international. North American companies are also exposed to a more stable political system, mainly under democracy. This political system will ensure companies in this industry to achieve set goals in terms of sales and profits, compared to other companies that are under totalitarian regimes.

The economic factors affecting the external environment are the low interest rates, that represented very attractive investment opportunities that are important to a large number of farmers who preferred to purchase new equipment through loans or leases. However, interest rates are expected to rise over the next five years, which will result in a disadvantage for farmers requiring short-term working capital requirements. The recent drop in commodity prices also seems to have a huge impact on the agricultural machinery industry. Revenues are expected to decline significantly (-2.1% decline in the United States for 2015).

The social aspects affecting the North American Equipment Industry are the forecasted growth of the population, resulting in a significant increase in demand for crop yields. Another major aspect is the varying global market growth rates. Foremost, Europe and Asia- Pacific are growing at an annual rate of 12.1%, and following the Americas at 8.7%.
There is also the growing trend of young farmers, who have a more business mindset, which resulted in a decrease of 10% in the number of farms but increased the average size farms by 7%. This trend represents a disadvantage to smaller farms, known as the “death of the small farmer”, which requires small farmers to leave the market because of the scale and advanced technology that larger farms control.

Technological aspects have various impacts on this industry. Technological advancement has significantly improved the efficiency of farm equipment in order to meet the increasing demand of crop yields. To better manage farm resources, precision farming system makes use of technologies useful for agriculture such as Global Positioning Systems (GPS), geographic information systems, yield monitoring devices. These innovative technologies promise a tremendous increase in crop yields, which is vital given the increase in consumer demand.

Technological advancements also allow companies to change business strategies. By offering systems that are more efficient and effective, companies now focus more on capital investments, human resources rather than spending time on fields and manage traditional sales and services.

        The last external analysis concerns the environmental aspects, including the availability of arable land. The amount of arable land available is relatively constant, allowing a potential for increase in output given the advancement of technology available. Another environmental factor is related to the high levels of drought in the United States and other parts of North America. This aspect of environment is uncontrollable but is very important at determining profitability of agricultural companies.

Cervus Equipment Opportunities and Threats

Opportunities

One major potential opportunity for Cervus equipment is technological innovation. Cervus Equipment has the ability to invest in

Another opportunity is their strong tie with OEMs, which is considered as their major growth factor.

Threats

Cervus’ main threats are their competitors, mainly Rocky Mountain Equipment (RME) in Western Canada and Titan Machinery in the United States. These competitors both have strong relationship with the OEM Case Construction. Another threat for Cervus is the risks that the company may face if want to expand outside North America.