Management Case

The farm and construction machinery industry is made up of about 53 public companies. These companies range in all different sizes from a few million dollars to tens of billions. The major companies in this industry include Caterpillar, John Deere, Volvo, Kubota, and many others. These 53 companies are located throughout the world, the main markets are concentrated in North/South America, Europe, Middle East, a small part of Africa and Asia-Pacific. The product line in this industry is vast with many different products for any farm or construction job. Companies in this industry manufacture products such as tractors, forage equipment, combines, harvesters, planting equipment, mining equipment, cranes, excavators, bulldozers, rollers, heavy dump trucks, and many other industrial sized machinery for big/small construction jobs. This industry was hit very hard by the global recession in 2008/2009, but has since been able to progressively increase growth will the global economy on the upswing. Forecasts show this industry will continue to grow throughout the next few years, with a 40% growth increase by the year 2017.

Buyers in this global farm and construction machinery industry are fragmented with many medium and large businesses needing these products. There are also numerous individual buyers that purchase one piece of equipment at a time unlike the larger businesses who will purchase large quantities of products, usually through contracts and at a discount. The power of buyers in this industry is moderate due to the following reasons. Differentiation in this industry seems like it would be minimized because machinery products are all the same but companies do try to differentiate their products. Differentiation occurs through branding, unique specifications, color, etc. This will decrease the power of buyers. This industry also has very strong brand reputation and brand loyalty. These factors can influence buyers in the industry to purchase the products from the companies they are loyal to or have the best reputation. This will again decrease the power of buyers. Power of buyers will also decrease because there really aren't any substitutes. Since the substitutes are limited, buyers lose power because they can't switch to other products.

For now, let's focus on some very important factors that will influence consumers' buying decisions in this industry. There are many different factors that will influence a buyer's decisions which include income, buyer's preferences, advertising/promotion, changes in the prices of substitutes/products which are substitutes, and changes in the price of complements. Out of these five factors, I would have to say that the three most important ones are buyer's income, buyer's preferences, and advertising/promotion. Substitutes and complements are important in this industry as well, however, there really aren't any substitutes for products in the industry other than manual labor doing the work of these machines. In today's world, manual labor is not an option for these companies that need to get projects done by a particular due date. The same goes for changes in the price of complements. If the price changes in the complements it really won't influence buyers decisions because the price change would be for every product because they are all made from the same inputs.

First, let's look at buyer income and how it will affect demand and influence the buyer's decision of purchasing a product in this industry. Buyer's demand for any product will depend on their income because changes in income will influence a buyer to purchase/not purchase a product at any price. In this industry like