PESTEL Analysis
Political
Regulation was changed in Canadian agriculture industry. Canada Wheat Board regulations enabled farmers to market their product directly which means a wholesaler was eliminated in the supply chain.

Economical
The global agricultural machinery market would grow. It would reach over $ 102 billion by 2016 with CAGR of 10.7%. In addition, interest rates were low so that a large portion of farmers were willing to acquire new equipment using loans ore leases. Leasing drove farms to have ability to turn over equipment more often so sales were increased. Furthermore, China and India were important markets in the global construction and equipment market.

Social
World population was forecasted to increase 23% by 2025, but arable farmland would remain. At the same time, global food production increased by 50%. Additionally, younger farmers, who had bigger farms and more business mindset, preferred to buy new equipment frequently in order to enhance farming technology.

Technological
Revolution in farming techniques and technology would increasingly important since it enhance productivity as well as efficiency.

Environmental
The weather affects the agriculture industry greatly. Since Alberta and Saskatchewan are water-rich areas, both of them were not influenced by drought.

Legal
A high demand for corn acreage was drove by the legislated requirement for higher levels of bio-fuel in gasoline.

Conclusion
The global agricultural machinery market is a growth industry. China and India could provide opportunities of expansion. Enhancing farming techniques and technology plays an important role within the industry.

Five Forces
Degree of rivalry
There are two major competitors within the industry: Rocky Mountain Equipment (REM) and Titan Machinery (Titan). RME had high brand awareness in the world and its revenue was more than $1 billion in western Canada. However, its market valuation and margins were lower than Cervus equipment. Another competitor Titan had many dealerships in North American as well as Europe but Titan did not have a plan to enter the Canadian’s market. In addition, the inventory turn ratios were low. Thus, rivalry is high within industry.

Supplier Power
Supplier power is not very strong. Since Cervus Equipment had a partnership between the OEM, the dealer network of Cervus Equipment over suppliers. Therefore, Cervus Equipment had too much bargaining power in Canada.

Buyer Power
Due to a knowledgeable and strong brand name, the OEM had more bargaining power. Cervus Equipment heavily relied on opportunities for potential acquisitions and dealership network from the OEM.

Threat of new entrants
The entry barrier is very strong due to high requirement of capital as well as the complex dealership network. Therefore, the industry would attract large farms rather than small farms.

The Threat of substitutes
The threat of substitutes in the industry is low as the equipment is highly specialized.

Conclusion
The industry is profitable but difficult to enter due to large dealership network and high capital cost. Also, fierce competition requires improvement of technology as well as international expansion. Finally, the dealership network is critical within industry.

Supplier Power Supplier power is not very strong. Since Cervus Equipment had a partnership between the OEM, the dealer network of Cervus Equipment over suppliers. Therefore, Cervus Equipment had too much bargaining power in Canada.

Buyer Power Due to a knowledgeable and strong brand name, the OEM had more bargaining power. Cervus Equipment heavily relied on opportunities for potential acquisitions and dealership network from the OEM.

Threat of new entrants The entry barrier to this industry is very strong due to the high requirements for capital as well as the complex dealership network in place. Therefore, the threat of new entrants is low for Cervus Equipment.

The Threat of substitutes The threat of substitutes in the industry is low as the equipment is highly specialized. Therefore, the threat of substitutes is low for Cervus Equipment.