Last Updated 28 Jan 2021

Massey Ferguson

Category Finance, Investment
Words 510 (2 pages)
Views 255

1.Assess the product market strategy and the financial strategy Massey pursued through 1976. Where possible, compare Massey's strategy with those of its leading competitors. The company had three kinds of products, farm ; industrial machinery as well as diesel engines. For the farm and industrial machinery, North American and the United Kingdom were the largest markets accounting for 81.3% of capacity. For diesel engines, the UK accounted for 76.7%. For having success in this kind of business R;D investment was crucial, this to be able to offer new technologies as well a build up partnerships and also compete in developed countries.

The market and product strategy was very country oriented, due that a large part of this industry was heavily affected by the internal economies and fluctuations. However, historically, Massey’s strength has come from outside markets from NA ; Western Europe. Massey’s market strategy was to grow and they achieved the growth due to large amounts of debt for the ventures that sometimes fell outside the core of the company’s business. Within the product market, Massey faced a lot of currency fluctuations that made the operation complicated.

Also the lack of alignment between production sites made it very difficult to operate. While comparing vs two of the main competitors, Massey had the highest Debt to Capital ratio of 46.9% compared to 43.9% of Intl Harvester and 31.3% for Deere in 1976. This was aligned towards its market strategy, however with this kind of ratio it is very difficult to operate, since the interest will be very aggressive. In terms of market share in 1978, Massey had 33.9%, Intl Harvester 27.7% and 38.4% for Deere. Also in terms of OP/Sales, Massey had a ratio of 4.6%, while Intl Harvester had +8.6% and Deere +14% also in 1976, showing positive results. This started to reflect the negative trend of Massey in terms of high debt and not so a solid growth vs its competitors.

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2.What went wrong after 1976? How did Massey respond? How did its competitors respond? What were the consequences for Massey? One of the many factors that went wrong was the level of debt and structure kept increasing to reflect negative numbers in 1978, for example the OP/Sales ratio went to a negative 4.6% while the debt to capital increased 18 pps vs 1976. In addition to this, the financing partnerships started to have a lot of problems as the players feared that the debt was not guaranteed despite Massey keeping its assets to ensure payment. Also, something not usual is that used short term short to finance the business operations and was affected a lot by the interests.

The company wasn’t able to manage it easily as there were few choices, either the company would be restored or go deeper on default. While this happened, the government had to take part as well as Argus, however, for Massey this would imply a lot of set conditions including the satisfactory degree of cooperation and also the capability of dealing with the refinancing plan that would allow Massey to reach a point of self sufficient.

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