Massey-Ferguson, 1980
Case Study Solution
Q1) Assess the product-market strategy and financial strategy Massey pursued through 1976. Where possible, compare Massey’s strategy with those of its leading competitors.
Market strategy
Massey is a multinational company and has a series of products. It produces farm and industrial machinery and diesel engines, which contributes to 80% and 20% of sales respectively. The farm and industrial machinery has two product lines: the farm machinery line and industrial machinery line. The former produces tractors, combine harvesters, balers, forage harvesters, cane harvesters, agricultural implements, farmstead equipment and other equipment for agricultural purpose, while the latter produces different types of loaders.
Massey had been a large provider of the agricultural equipment because it was holding 17% market shares for tractors, 14% market shares for combines and 13% market for machinery worldwide in the year 1980. Although accounting for 20% of sales, the diesel engines are products promising for future growth. However, the engines were produced by Perkins Engine Group in England, where the currency was strong and margins became low.
In terms of market distribution, the company’s main focus moved to less-developed places such as Peru, Pakistan and Egypt. The shift to overseas market in less-developed countries made the company lag behind in research and development to make high-tech products to attract customers in the North American market.
Financial strategy
Since the 1960s, Massey had been engaged in aggressive operation expansion and asset acquisition. The leverage was increasing since the new investment was mainly financed with short term debt. From Exhibit 4, we learn that Net Property, plant and equipment rose from $168 million in 1971 to $519 million in 1976, more than tripled. During the same years, the LTD