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
In addition, Massey-Ferguson requires an additional investment of $500 million to $700 million over the next five years to consolidate its operations in Canada and attain profitability. Considering the depression-level demand and the prevalence of International Harvester and Deere in the North American market, however, recouping such an investment in the near future seems unlikely. Moreover, Massey-Ferguson has $968 million receivables in its balance sheet, a sum unlikely to be recovered in the depressed market, and another $989 million worth of inventories that will probably remain unsold, given the low demand circumstances. Given these reasons, therefore, it is highly unlikely that a merger offer would be available to Massey-Ferguson. b) Liquidation
While a potential alternative, liquidation is unattractive for a number of reasons. It would cause the shareholders to lose all their investment, since Massey-Ferguson’s share price has already depreciated by 69%, and an announcement of liquidation would make the price plummet further. Furthermore, Massey-Ferguson’s receivables are owed by customers ravaged by the recession-hit markets, who would have an incentive to renege on a contract with a firm that will not exist in the near future. In addition, with its assets spread over 31 countries with 150 lenders, Massey-Ferguson would face substantial liquidation costs, in addition to the losses