Agriculture Machinery Report

EIVIND AAS - JESPER GUNNERLING
CARINE TRUONG - KARL ERIK MORTHEN

BENEDIKT SCHMIDT - ARNAUD PINCET!
AGRICULTURE MACHINERY
INDUSTRY!
HOW TO MAINTAIN POSITION AS AN IMPORTANT GLOBAL PLAYER IN THE
AGRICULTURE MACHINERY INDUSTRY!
16.02.2015!
ICA-Agricultural Machinery!
1!
Executive summary!
The agriculture machinery industry

is a huge and stable industry. The
most profitable players are present
in many geographical areas and
with full- line and standardized
equipment. Emerging markets are
the most promising for future
growth. Sub-Saharan-Africa is
particularly interesting, mainly
because of unutilized arable land,
government support, low
mechanization level and increasing
global attention. !
16.02.2015!
The project group is suggesting

how a virtual firm, Field&Track Co,
should maintain their role as an
important global player in the
industry. Ultimately we will be giving
an entry strategy specifically
tailored for entering Kenya with the
intention of, in time, expanding to
other African countries.
!
2!
Agenda!
Part I: Global Scope!

1)!
2)!
Market & Industry

environment!
4)!
3)!
Competitive
analysis!
Industry analysis!
?
Scenario !
analysis!
Part II: Africa scope!

1)!
Where is the future!

Growth potential?!
16.02.2015!
2)!
3)!
Market & Industry

environment
in Kenya!
Industry Analysis
of Kenya!
4)!
Strategy for virtual

global player to
enter Kenya!
3!
MARKET & INDUSTRY

ENVIRONMENT
The food challenge!

Definition of Industry!
PESTEL Analysis!
Future Trends!
16.02.2015!
4!
The global food challenge!

The food Challenge!
Market & Industry Environment!
PESTEL Analysis!
Although the population growth rate decreases

in most developed countries, the rapid increase
in developing countries still causes rapid growth
worldwide. !
The demand for food increases with population
growth and higher average standard of living.!
Future Trends!
Higher standards of living imply higher demand

for proteins and thus meat. !
Huge increase in meat consumption in
developing countries!
Additional 1000 Mt of grain needs to be
produced in order to meet the demand in 2050!
On average, 5 tons of grain is needed to
produce 1 ton of meat!
Millionen!
Population evolution!
10000!
9000!
8000!
7000!
6000!
5000!
4000!
3000!
2000!
1000!
0!
1500!
Meat consumption worldwide, in Mt!
Chart Title!
+81%!
470
260
Years!
1700!
1900!
2100!
2010
2050
Rising population and changing diets causes scarcity of food !

Sources: VDMA, Freedonia, FAO, CIA World Fact Book, Oliver Whyman Analysis!
16.02.2015!
5!
Severe challenge solutions are known!
Severe challenge solutions are known - machinery is needed!
The food Challenge!

PESTEL Analysis!
Global food Challenge!
Increasing population and meat

consumption vastly raises the
demand of food production!
Solutions!
Increase yield!
High quality seeds and
fertilizers can
substantially increase
yield/ha !
Mechanization level in
developing countries is
very low. Mechanization
would increase yield!
Mechanization level
comparison!
(unit of tractor/1000
farmers)!
70-150%!
USA!
German
y!
Brazil!
2010
2050
Future Trends!
1586!
1018!
61!
Africa!
5!
China!
3!
Exploiting unutilized land!

~ 970 million has
available cropland world
wide!
As mechanization,
irrigation and quality of
seeds and fertilizers
improve it can increase
further!
Extensive demand for

agriculture machinery
to increase yield in
developing countries
in the future.
16.02.2015!
6!
Definition of Product Range!

The food Challenge!
PESTEL Analysis!
Equipment
type!
Harvesting
machines!
Haying
machinery!
Farm
tractors!
Planting &
fertilizing!
Future Trends!
Plow &
cultivating!
Others (incl.
spraying)!
Spare parts
&
attachments!
Example!
Size in $B
(2008)!
30
25
20
15
10
5
0
Farm Tractors
Harves3ng
Machinery
Plan3ng & Fer3lizing Haying Machinery Plowing & Cul3va3ng
Others
Spare Parts &

AEachments
For easier comparison: A prerequisite for being regarded as a competitor in the analysis is that the
firm at least offers either tractors, harvesting machines or both!
Tractors and Harvesting machines are core products for the largest agricultural machinery companies!
Companies that produce tractors and harvesting machines often have a similar product portfolio!
The two segments counts for almost 45% of the total market in terms of sales (2008)!
16.02.2015!
7!
Market size segmented by products and geographical areas!

The food Challenge!
PESTEL Analysis!
Size in $B, by product segments

and geographical areas (2008)!
Farm Tractors!
Harvesting Machinery!
Planting & Fertilizing!
Haying Machinery!
Plowing & Cultivating!
Others!
Future Trends!
Geographical regions!
60 % Established markets with CAGR 4 % (2009-2012)!
40 % Emerging markets with CAGR 8 % (2009-2012)!
The market size of harvesting machinery is a good indicator
of the level of mechanization!
20 % of total market in Established markets!
5 % of total market in China and India!
Global scope, with the market segmented in two very

different market segments in terms of industry environment,
customers, competition, growth potential.!
North Europe! Japan!

America!
China!
Established markets:
60%!
India!
CIS!
Latin
RoW!
America!
Emerging markets
and others: 40%!
Established markets!
Defined as US, Europe & Japan!
Emerging markets!
Defined as BRIC countries (Brazil, Russia, India and
China), Latin America & Africa!
16.02.2015!
8!
Impact of Industry Environment is huge!

The food Challenge!
PESTEL Drivers!
Farm Cash
Receipts!
Governmental
Support!
PESTEL Analysis!
Future Trends!
Impact on demand!
Established Markets!
Emerging Markets!
Price increase on farm commodities due to:!

Population growth!
Rising GDP levels!
Scarcity of fertile land!
Urbanization!
Reduced subsidies in the long term:!
Farmers need to finance investment
Increasing subsidies:!
Drives
investments in machinery!
by internal and/or debt financing!
Financial Services!
Developed financial services:!

No impact!
Development of banking systems:!

Machinery financing options for farmers!
Farm Size!
Farmers strive for cost-efficiency:!

Consolidation, which requires new
machinery!
Fragmented landscape:!
Consolidation still not observable!
Technology &
Environment!
Increasing demand for renewable energy:!

Partly driven by increased demand from pharmaceutical and petroleum industry!
Established markets will demand bigger and higher performance machinery!

Emerging markets will demand more machinery adapted to local needs!
16.02.2015!
9!
The Industry Environment impacts the future needs of farmers!

The food Challenge!
Trend!
PESTEL Analysis!
Established markets!
Farmers has yield pressure in order to make a
solid living. Precision farming important to

Demand for
precision farming! maximize yield.!
Larger and
specialized
equipment!
Huge farms allows for large and more specialized

machinery. Increasing monoculture will further
trigger the demand for specialized equipment!
Exhaust
emissions
legislation!
Higher requirements on engine technology.

Pressure on established players!
After sales
business!
Farmers loose money for each day they are unable

to use the equipment. High demand for fast and
great service. Emerging independent parts
resellers decreases the potential for the profitable
parts business!
Future Trends!
Emerging markets!
Not a major driver in the next decades. Customer
needs are very fragmented. Mass market demands
low-end affordable machinery. !
Markets are fragmented and thus the demand for
large and specialized machinery is low. Must
increase machinery level and consolidation before
this will become a future trend!
Still relatively low significance of emission
standards. !
Increasing yield pressure puts pressure on the
parts business. Important with reliable low-end
equipment.!
Consolidation & specialization!
Generally low yield, and fragmented

needs !
Bigger and higher performance

agriculture machines!
Mechanization needed, adapted to

local needs!
Sources: VDMA, Freedonia, FAO, CIA World Fact Book, Oliver Whyman Analysis (slide 16 report)!
16.02.2015!
10!
INDUSTRY ANALYSIS!
Overview of Players!
Porters five forces!
16.02.2015!
Intensity of Rivalry!
Bargaining power of buyers !
Bargaining power of suppliers!
Threat of new entrants and substitutes !
11!
The main players and their biggest brands!

Industry Analysis!
16.02.2015!
Intensity of rivalry!
Buyer Bargaining Power!
Supplier Bargaining Power!
Threat of new entrants!
Threat of substitutes!
12!
The Intensity of Global Rivalry!

Industry Analysis!
John Deere as major player globally with AGCO,

CNH and Kubota as competitors!
High concentration in established markets!
Top-6 players tractors sold in Europe > 85
% of total (2010)!
Economies of scale (together with high
transportation costs and tariffs) drives M&A
activities and strategic partnerships!
Technology, experience and size required
to offer high-end machinery!
The global leaders are in general full-liners!
Players want to leverage from economies
of scope (e.g. distribution, sales, service)!
The global industry growth is expected to be
roughly 7 % from 2012 to 2016!
Players will boost revenues as long as they
have unutilized resources and want to
reach a higher level of economies of scale!
There is a risk of being outcompeted in the
established markets if other global players
find revenue sources in emerging markets!
Sales revenues (2011)!
AGCO Corp!
CLAAS!
CNH Global!
Deere & Co!
Kubota Corp!
Mahindra & Mahindra!
SAME Deutz-Fahr!
Other!
Rivalry among competitors is moderate on a global level. !

Players grow mainly by market development rather than market penetration. !
Sources: Bloomberg, Google Finance, Annual reports of Deere, AGCO, CNH, CLAAS, Farmers Guardian 2008, Interview with Marco Sigg, AGCO Corp. !
16.02.2015!
13!
The Intensity of Rivalry in Local Emerging Markets!

Industry Analysis!
The global incumbents face competition from adaptive local players in many markets. !
Nevertheless, to which grade a global player is willing to adapt its products to local needs, is highly
dependent on how much that player is willing to give up economies of scale!
Local players!
Global incumbents!
Adaptation!
Proprietary technology!
Knowledge of specific
topologies and farming!
Superior service !
Low-end smaller machinery!
Financing options!
Customer knowledge!
Economies of scale!
A general rule: The smaller the machines, the more intense is the rivalry.!
16.02.2015!
14!
US-China Rivalry Comparison!

Industry Analysis!
USA!
China!
Well-established firms: Deere, Iseki, Kubota,
Yanmar, CNH, Mahindra & Mahindra!
Primary brand of tractors &

combines in the US Market!
John Deere
Case ICH
New Holland
Agco
Local firms: China Yituo Group (First tractors,

Shandong Shifeng, Shandong Foton, Jiansu
Yueda, Changzhou Dongfeng, Anhui Changiang!
The competition is fiercer in China!
Other
Customers strive for cost-efficiency by

consolidation and thus, are willing to pay for
global players high-end machinery!
John Deere has grown with the US market and
found itself in a very profitable situation!
US market: !
Oligopoly and moderate market growth!
Chinese market: !
Global incumbents compete with local
players!
Sources: Financial reports of all the agricultural machinery industries, Bloomberg, FAO!
16.02.2015!
15!
The buyer bargaining power differ among customers and markets!

Industry Analysis!
Dealer!
Many dealers!
The more low-end
machinery (less
differentiation), the
increased bargaining
power, due to easier
comparison!
No threat of vertical
integration!
Farmers in Established Markets!
Contractor!
Contractors demand both

high-performance tractors
and harvesting machinery!
Contractors value
efficiency, service and
quality !
Put pressure on players to
offer top-performance
technology on both
tractors and harvesters!
High quality, improved efficiency,

and service are needed and thus,
price sensitiveness is low!
Switching costs due to brand loyalty
(e.g. knowledge and experience of a
certain tractors brand)!
Farmers in Emerging markets!
Established markets: !
!Low/moderate bargaining power of buyers!
Emerging markets: !
!The financial constraints of farmers lead to
!moderate/high bargaining power of buyers!
Valuation of low price, financing

options and proximity to dealership. !
The buyer power is higher due to
financial constraints!
16.02.2015!
16!
Bargaining power of suppliers!

Industry Analysis!
Most of the suppliers have low bargaining power
Low differentiation in components and raw materials!

Backward integration possible for certain components!
Low concentration on supplier side (e.g. motors and standardized components)!
Most of the suppliers are required to communicate on their structure and on the way
they produce: John Deere has a supplier quality manual that demands high quality
level off their suppliers!
For the high-end segment and specific products, supplier power is high
The high-end machinery segment have components supplied by few high-technology

firms (e.g. GPS suppliers have high bargaining power)!
Boschs unique know-how on motor pumps are an example where players are price
takers!
The bargaining power of suppliers is very heterogeneous. !

General rule: The more high-end the segment, the higher bargaining power of suppliers, due to
technology differentiation. !
Sources: John Deere supplier quality manual, Inteview with Marco Sigg, AGCO Corp.!
16.02.2015!
17!

Industry Analysis!
Capital requirements are high!
Economies of scale!
Large investments needed due to heavy

machinery production and sales, R&D expenses
and factories: !
AGCO own 10 large factories worldwide!
Equipment and inventories account for 24%
of John Deere total assets!
John Deere invested 784M (4% of sales) in
R&D in 2010!
Estimations show that around 120 Sales
offices are required to cover the UK market!
High end segment is even more intensive as
long as it requires specific technologies (A/C
devices, touchscreen technologies)!
The well performing firms are either enjoying

economies of scale or are making an effort to
standardize production of multiple brands in
order to gain economies of scale:!
John Deere is today the top performing
firm, and through standardize production
of parts they have a profit margin of 14%!
Other high performing incumbents are
switching towards using standardized
parts in multiple brands to mover towards
the same level of economies of scale as
John Deere !
New entrant will find it difficult to meet the capital requirements needed to enter and will have
trouble differentiating themselves on price due to economies of scale !
16.02.2015!
18!

Industry Analysis!
Switching costs!
No!
38%!
Yes!
62%!
M&A activities!
Many farmers are emotionally attached to

the brands and will not consider purchasing
another brand!
Network effects may also occur if the market
share is large. A new high-end tractor bought
by a farmer might positively affect the brand
awareness from neighbor farms.!
Brand Loyalty in the US market
Would you consider yourself as brand loyal
when you purchase agricultural machinery?!
Many large players uses M&A activities as a

growth strategy. If a new player develops a
strong brand, the well performing players has
opportunity to buy the firm either to increase
their product portfolio or leverage the
technology into existing product offerings.
Recent M&A activities among the well
performing players:!
Kubota acquired Kverneland in 2012!
CLAAS acquired RENAULT agriculture in
2010!
AGCO acquired Valtra in 2004!
New entrants will also have trouble with capturing market share due to network effects and
customer loyalty. If a new entrant is well performing they face the threat of being acquired by the
large players in the industry!
16.02.2015!
19!
Industry Analysis!
Direct substitutes!
Human capital !
Agricultural tools!
Not relevant even if the cost
is lower: they are not efficient
compare to machinery
(increase from 60 to 70q/ha
in France from 1989 to 2005
through mechanization)!
Indirect substitutes!
Production of normal food by

other means that normal
agricultural production (3D
printing)!
Substitution of land: water, air!
Change in consumer behavior!
Might not affect the

agricultural industry: meat
production requires even
more cereals than when they
are directly consumed!
Robots!
Higher threats of classical
machinery, they are however
already integrated in some
AMCs!
Because the industry is related to food production, the threats of substitutes are very low!
16.02.2015!
20!
Takeaways from Porters Five Forces on the global industry!

Industry Analysis!
Threat of new entrants is low!

Capital intensive industry!
Differentiation and economies of scale highly crucial on a global scope!
Supplier power is
moderate!
Mostly low supplier power
due to a large number of
suppliers!
High-end products that
require engineering skills
has larger bargaining power
(Motor pumps, GPS etc.)!
Rivalry is
moderate!
Moderate in
established markets!
Moderate/High in
emerging markets!
Buyer power is low to

moderate!
Low in the established
markets, due to
differentiation in terms of
technology!
Moderate in emerging
markets due to farmers
financial constraints!
Threat of substitutes is very low!

Probability of a major disruptive technology in agricultural machinery is low!
16.02.2015!
21!
COMPETITIVE ANALYSIS!
Strategic groups!
Firms analysis: What do certain market leaders do good?!
Future key factors for competitive success for market leaders!
16.02.2015!
22!
What strategic dimensions are of relevance in this industry?!

Strategic groups!
Competitive Analysis!
What certain firms do good!
Key factors for success!
Hypotheses from the Porters Five

Forces!
Economies of Scale should yield a

correlation between EBIT margin and
Revenues!
If a player offers a wide product range,

revenues should be higher and
economies of scope should lead to
higher EBIT margin!
Measures to support/reject hypotheses!
Global coverage should yield higher

revenues!
High-end incumbents get a premium from
established market customer and thus,
EBIT margin for those players should be
higher!
16.02.2015!
EBIT margin & Revenues (including D&A

which is an important post due to high fixed
costs)!
Width of the product range (specialist, multiliner, full-liner)!
Continents present in (1-6)!
Quality aspect (Low-end, High-end)!
23!
Size is crucial!
Strategic groups!
16.00!
Deere & Co!
Revenue!
14.00!
Companies able
to ensure a large
geographic
coverage can
usually enjoy
better margins.!
12.00!
Profit margin!
Kubota Corp!
10.00!
Mahindra &!
Mahindra!
CLAAS!
8.00!
The Economies of
Scale holds
within the high
revenues interval,
but not in general.!
AGCO!
6.00!
CNH Global!
Escorts!
4.00!
2.00!
First Tractor Co
Ltd(YTO)!
Dae Dong Industrial

Co Ltd!
Iseki & Co Ltd!
0.00!
0!
1!
2!
3!
4!
5!
6!
Continents present in!

Sources: Annual reports, Google finance, Bloomberg, financials.morningstar.com!
16.02.2015!
24!
Size is crucial!
Strategic groups!
4.00!
Profit margin!
CLAAS
3.50!
Low / high end products!
Deere & Co
CNH Global
Companies able
to enter the high
end market can
usually enjoy
better margins.!
3.00!
AGCO Corp
2.50!
First Tractor Co
Ltd (YTO)
A wider product
range product
range usually
increases
margins, too.!
2.00!
Iseki & Co Ltd
1.50!
Kubota
Corp
Dae Dong
Industrial Co Ltd
Escorts
1.00!
Mahindra & Mahindra
0.50!
0.00!
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Width of product range!
Sources: Annual reports, Google finance, Bloomberg, financials.morningstar.com!
16.02.2015!
25!
Four defined strategic groups!

Strategic groups!
Market leaders
Low-end global players
Firms!
High revenues and
Deere & Co!
margins in general!
AGCO!
Great global coverage!
CNH Global!
Wide product range (i.e.
(SAME Deutz-Fahr)
full-liners)!
High-end machinery!
Firms!
Mahindra &
Mahindra!
Kubota!
Low-end local players
Specialists
Firms!
Iseki!
First Tractor
Company Ltd.!
Dae Dong Industrial
Escorts!
Lower global coverage!

Small product range!
Low-end smaller
machinery!
Firms!
Claas
Great global coverage!

Small product range!
Low-end machinery!
Lower global coverage!

Specialized products!
Extremely high-end
machinery !
To ensure that the market leaders outperform the other strategic groups in emerging markets, the
key factors for future competitive success within this group must be considered. This is done by
analysing what certain players within this group have done good. !
16.02.2015!
26!
What Deere & Co has done well!

Strategic groups!
Operating margin (in %)!
Enables platform production and thus

economies of scale in the manufacturing
process!
Standardized components lower the
bargaining power of suppliers (multiple
sourcing) and thus, Deere could lower the
purchasing costs!
Highest revenues, highest profit margin!

20!
15!
Deere!
10!
AGCO!
5!
CNH!
0!
-5!
2008!
Deere could live with their inefficient distribution

networks!
The Return on Invested Capital (ROIC) could be lower
than the other market leaders, but the Economic Value
Added (EVA) is still higher !
Financial Leverage (in X)!
Deere leverages from debt financing and

thus has lower weighted average cost of
capital (WACC)!
2010!
2011!
2012!
Financial leverage !
(Assets over Equity)!
High financial leverage!
2009!
10!
8!
6!
Deere!
4!
AGCO!
2!
CNH!
0!
2008!
2009!
2010!
2011!
2012!
Sources: Bloomberg, Google Finance, financials.morningstar.com, Annual reports of Deere!
16.02.2015!
27!
What AGCO has done well!

Strategic groups!
Inorganic growth through market

development!
Early positioning in growth regions!

Relatively adaptive due to wide product
range!
Entering strategic partnerships or acquiring
local players which speed up adaption and
keep assets as low as possible!
Working Capital (in M$)!

25000!
20000!
15000!
Access to new markets and fast adaption!

Synergies, e.g. Strategic Alliances, Marketing,
Sales!
Access to Technology, which is crucial to gain a
competitive advantage in multiple product segments!
CNH!
0!
2008!
2009!
2010!
2011!
2012!
Fixed Assets Turnover (in %)!

Fixed Assets Turnover (in %)!
Higher fixed assets turnover !

Lower working cap than Deere and CNH!
AGCO!
5000!
Strategic aspects of AGCOs acquisitions!

Centralization of distribution centers, sales, services
and thus more efficient distribution network !
Deere!
10000!
12!
10!
8!
Deere!
6!
AGCO!
4!
CNH!
2!
0!
2008!
2009!
2010!
2011!
2012!
Bloomberg, Google Finance, financials.morningstar.com, Annual reports of Deere!
16.02.2015!
28!
What are the key factors for market leaders to ensure competitive success
in the future? !
Strategic groups!
Increase Revenues!
Continue to position early in
future market growth regions
(e.g. emerging markets)!
Focus on adaption !
Consider the price sensitivity of
customers in those markets!
Offer financing options!
M&A activity or strategic
partnerships to speed up local
adaption!
Long-term cost reductions!

Reach higher level of
economies of scale and lower
bargaining power of suppliers
through:!
Revenues
16.02.2015!
Streamlining of product portfolio!

Standardization and
modularization of components!
Platform production!
Supplier segmentation to
leverage from knowledge or buy
cheaper!
Profit
Supplier of strategic components

-> Partnerships to leverage from
suppliers R&D and knowledge!
Suppliers of less strategic
relevant components
-> Opportunistic relationships or
consider outsourcing (e.g.
engines)!
Costs
Short-term cost reductions!

Capacity reduction to increase
ROIC, especially after M&A!
Increase financial leverage!
Debt cheaper than equity

-> Lowered WACC increases the
economic value added (EVA)!
(Secure Parts business)!

Parts leverages the profits
heavily and is therefore
important for future competitive
success!
Centralization of distribution
centers, sales and service
centers!
Elimination of duplicate support
activities (e.g. HR, Legal)!
Decrease working capital!
Contracts with dealers!

Patents!
29!
SCENARIO ANALYSIS!
Key factors for scenario analysis!

Impact-probability analysis!
16.02.2015!
30!
Possible threats to change the industry - Scenario Analysis!

Scenario Analysis!
Type!
Impact-Probability-Analysis!
Key factor!
Raw material price volatility!
Why important?!
Cost driver in machinery!
Fuel price volatility!
Cost driver for end customer!
Factors that New entrants from automobile, forestry, construction

could threaten or mining industry!
industry
profitability! Environmental factors that limit crop production /
reduce land fertility!
Potential of intensified rivalry!
Productivity decreases!
C02 emission taxes skyrocket!
Cost driver for end customer!
Substitutes such as chemical production / 3D printing

of food!
Key driver of demand for crops!
Factors that
could threaten
demand for the Diets switches from meat to seafood!
industry output !
Population growth not as expected!

We analyse what impact and probability these factors have to decide whether to investigate further!
http://www.pcmag.com/article2/0,2817,2419277,00.asp&utm_source=feedly!
http://moneymorning.com/2013/02/12/two-reasons-to-expect-greater-volatility-in-oil-prices/!
16.02.2015!
31!
Impact and probability analysis!

Scenario Analysis!
Impact-Probability-Analysis!
Impact-probability-plot!
Register of threats!
10
9
High
Threat 8
Threat 7
7
Impact
Profitability driver threats!

1. Raw material price volatility!
2. Fuel price volatility!
3. Increased competition through entrants from
automotive, forestry, construction or mining
industry!
4. Environmental factors that limit crop
production / reduce land fertility!
5. C02 emission taxes skyrocket!
Threat 5
5
4
Threat 4
Threat 1
Threat 6
Threat 2
2
Low
1
Threat 3
0
0
Low
2
4
5
6
Probability
High
8
9
10
Demand driver threats!

6. Substitutes such as chemical production / 3D
printing of food!
7. Diets switches to seafood!
8. Population growth much lower than expected!
No threat combines high impact with high probability, and we conclude that major changes in the
industry from external factors are unlikely. !
http://www.un.org/esa/population/publications/longrange2/WorldPop2300final.pdf!
http://moneymorning.com/2013/02/12/two-reasons-to-expect-greater-volatility-in-oil-prices/!
http://newsfeed.time.com/2013/01/11/overcrowding-nah-the-worlds-population-may-actually-be-declining/!
16.02.2015!
32!
Which emerging market is of highest attractiveness for market leaders? !
Part I: Global Scope!

1)!
2)!
Market & Industry

environment!
4)!
3)!
Competitive
analysis!
Industry analysis!
?
Scenario !
analysis!
Part 2: Growth Strategy !

5)!
Where is the future!

Growth potential?!
16.02.2015!
6)!
7)!
Market & Industry

environment
in Kenya!
8)!
Industry Analysis
of Kenya!
Strategy for !
entering Kenya!
33!
WHERE IS THE FUTURE GROWTH

POTENTIAL?!
Where
Comparison
of emerging
is the
futuremarkets!
growth
African comparison!
16.02.2015!
potential?!
34!
Overview of important factors in different emerging markets!

Comparison of emerging markets!
Future growth potential!
Indicator!
African comparison!
Brazil!
Russia!
India!
China!
SS Africa!
Agricultural
preconditions!
59 million ha of arable
land.!
land. Consolidated
Increasing consolidation!
agricultural sector!
161 million ha of arable 142 million ha of arable

land. Very fragmented
land. Fragmented
land. Very fragmented!
Productivity/
Mechanization!
Relatively high
Low productivity despite
productivity and
high mechanization level
mechanization level (61)!
(96)!
Relatively low
High productivity despite Very low mechanization
mechanization level (6)! lowest emerging market
level, high potential
Low productivity!
mechanization level (3)!
growth!
Very strong, due to

potential huge
agricultural growth
thanks to mechan.!
Emerging government
Moderate, as India has
Strong with focus on Mainly limited to national
Very strong focus on the initiatives, cooperation
Government support!
a current focus on
national players!
players!
with development
infrastructure!
programs!
Fully developed network
Developed network with No network of global
Developed network of
Local and global
of local suppliers, but
Emerging global
both local & global
suppliers and low quality
both global and local
suppliers!
limited number of global
suppliers, few local!
suppliers!
of national suppliers!
suppliers!
suppliers!
RANKING!
3!
4!
5!
2!
1!
Yield Pressure (needs

footnote)!
Medium due to
balanced ratio of
population to utilized
land!
Weak due to low

population!
Strong, due to
imbalance between
population and utilized
land!
Very strong, due to

imbalance between
population and arable
land!
Sub Saharan Africa seems to be the final frontier with huge arable land and low mechanization
level. The potential for an increase in mechanization might be large and are depending on external
factors. !
16.02.2015!
35!
Introducing the Sub-Saharan-African region!

African comparison!
Economic!
Huge potential growth rate (based
on potential growth for agricultural
goods of 50% to 68% by 2030)!
More than 50% of the population
work in agriculture manually !
Political!
Instability in some countries
Growing commitment for some
governments encouraged by
international development
programmes!
Technological!
Lack of technological knowledge !
Lack of infrastructure
(transportation, irrigation,
electricity)!
Social!
Fast growing population!
Education and training
needed for the use of new
technological material!
Small-scale farming!
Environmental!
Holds around 60% of the worlds
remaining uncultivated land.
Environmental circumstances
allows for two seasons of crop
per year. Global warming
increases yield pressure.!
Legal!
Problems with property rights,
Farmers usually rent land from the
government. In many countries
women are not allowed to own land.!
Sources: FAO, CIA World Fact Book, IMF reports (Regional Economic Outlook: Sub-Saharan Africa, Oct 2012)!
16.02.2015!
36!
Determining a region with the highest potential for mechanization!

African comparison!
75 % of the absolute increase in output is expected to occur in two clusters of countries !

Region II!
Sudan!
Region I!
Ghana!
Cte dIvoire!
Nigeria!
Cameroon!
Angola!
Ethiopia!
Kenya!
Tanzania!
Region II!
Higher political stability!
Vast investments from abroad in practically all
the countries during the last decade!
Higher increase in the Human Development
index the last couple of years!
Mozambique!
Madagascar!
Region II stands out as the most promising region. To decide which country to enter, we need
to compare agricultural demand drivers and PESTEL factors for the countries in region II!
Sources: Four lessons for transforming African agriculture, McKinsey Quarterly, April 2011, FAO Statistics 2012!
16.02.2015!
37!
Agricultural factors and credit ratings in region II !

African comparison!
Country!
Arable Land
(1000ha)!
# of
tractors!
Tractors/
arable land!
Fertilizer/
arable land!
Credit rating!
(Fitch)!
C. R. Outlook
(Fitch)!
Infrastructu
re inv.!
Mozambique!
2800!
9400!
3.35!
17.95!
CCC!
negative!
low!
Ethiopia!
13606!
3000!
0.22!
32.20!
CCC!
stable!
high!
Kenya!
5300!
14000!
2.64!
95.44!
B+!
stable!
high!
Madagascar!
37500!
30000!
0.8!
0.99!
BB-!
stable!
high!
Sudan!
20698!
22600!
1.09!
4.0!
CCC!
negative!
middle!
Tanzania!
9600!
6000!
0.625!
9.66!
CCC!
stable!
middle!
The promising countries differ very on each factor. Kenya has overall strong agricultural numbers
and strong credit rating !
Sources: faostat.fao.org, tradingeconomics.com, afdb.org!
16.02.2015!
38!
A selection of PESTEL factors for the region II countries!

African comparison!
Competitiveness comparison!
Tanzania
Ethiopia
Innova3on
Business
sophis3ca3on
Madagascar
Ins3tu3ons
5
4
3
2
Mozambique
Kenya *
Infrastructure
Macroeconomic
environment
1
Market size
Technological
readiness
Health and primary

educa3on
Financing and Infrastructure are the two main

factors that drives success in Africa for the
MAS1!
The competitiveness comparison shows that
Kenya has an overall higher ranking than
neighbouring countries. !
Kenya ranked first compared to the other 5
countries in terms of overall infrastructure2!
Also, Kenya is located in the middle of the
region, making it a geographically strategic
starting point.!
Higher educa3on and

training
Financial market
development
Goods market
eciency
Labor market
eciency
*No data on Sudan
By its central position in the region as well as its high ranking compared to neighbouring countries, !
Kenya is the most promising country to entry for an agricultural machinery company.!
Sources: 1US agri equipment giant AGCO explains why it will invest $100 m ion Africa
16.02.2015!
2The
Global Competitiveness report 2011-2012, World Economic Forum!
39!
Kenya as a favorable point of entry!

African comparison!
Strengths and opportunities!
Arable land!
Need for mechanization!
Yield pressure!
Mechanization readiness!
Foreign investments and
global attention!
Government commitment!
Global
16.02.2015!
Hindrances!
Lack of infrastructure
even though highest
among region II!
Mainly small farms!
Training of farmers
to use equipment is
required!
..Analysis..
..Kenya
Africa seems to be the

last continent that is
not dominated by the
market leaders.
Presence in this
continent is important
for future growth.
Without conducting an
industry analysis,
Kenya seems to be a
favourable entry point
in Africa for an
agricultural machinery
company. We now
need to look at the
industry environment
in Kenya to develop
and implement an
appropriate strategy
for entering the market!
40!
INDUSTRY ANALYSIS OF KENYA!

Porters five forces!
Competition!
Bargaining power of buyers and suppliers!
Threat of new entrants and substitutes!
16.02.2015!
41!
Existing players in the Kenyan market!

Competition!
Industry Analysis of Kenya!
Customer characteristics!
Bargaining powers!
CNH was first to move in to the Kenyan

market:!
Joint venture with CMC motors, located in
Kenya, Uganda and Tanzania!
Domestic assembly to avoid high import tariffs!
Increasing brand recognition through training
farmers in a model farm!
Putting huge efforts in making sales!
Late entry of other large competitors by joint
venture!
John Deere entered through Tata Kenya!
AGCO entered with Massey Ferguson
through Tractor Corner!
Kubota entered through Car & Company!
Threats!
Market share in terms of sales!
30%!
70%!
CNH!
Others!
The industry is very concentrated with CNH enjoying 70% of the market!
However, they are struggeling with sales due to the level of maturity in the market. !
The state of the market indicates that competition is not a major threat.!
Sources: CMC motors, kmi.co Kenya & John Deere, Tractorcorner, Capitalfm.co.ke!
16.02.2015!
42!
Customer characteristics Kenya!

Competition!
Endcustomer!
types!
Bargaining powers!
Hirers!
Farmers!
Some large and small scale farmers

are hirers. They predominantly rent
machines to their neighbouring
farmers. !
Number of medium to
large farms !
( < 3 ha ) !
Differences
and farmers
needs!
Number of small farms!

( 0,2 3 ha ) !
< 25%!
Farmers produce a wide range of products!

What are the
farmers
producing? !
Threats!
Food crops!
Cash crops!
Diary and
meat!
Cereals!
Pulses!
Roots and tubers!
Coffee, Tea, ! Cattle meat!

Sugar cane, Milk!
Cotton !
> 75%!
Tractors will increase
production efficiency of all
crops. !
Other machinery must be
quite specialized. !
There are some differences
but the small farmers (>
75%) have basic needs.!
What differences are there between

farmers!
What do the current farmers value !
Land holding!
Farm family labour!
Resources!
Types of animals!
Increase household food!

Income security!
Employment opportunity!
Life style enhancement!
Sources: FAO reports!
16.02.2015!
43!
Moderate buyer bargaining power suppliers are negligible!

Competition!
Bargaining powers!
Buyer bargaining power is low to moderate!

Buyer price sensitivity: !
Kenyan farmers are largely very price sensitive.!
Availability of substitute products: !
Most farmers are using animals. Choosing to keep
using animals, is indeed a possibility.!
Buyer concentration!
There is little cooperation between farmers by
now, and few manufacturers providing machinery. !
Buyer
price
sensitivity!
Availability of
substitute
products!
Buyer
concentration!
High!
Moderate!
Low!
Threats!
Supplier bargaining power!

Business
model in
Kenya!
Interaction
with
Kenyan
suppliers!
Bargaining
power of
buyers!
Moderate!
1.
Produce
2.
Assemble!
3.
Export!
Yes!
Little or
no !
No!
The likely models for a firm entering, is

either 2 or 3. !
Either way, there is little or no interaction
with Kenyan suppliers.!
The supplier power will therefore be
according to the Porters on the global
level. !
Sources: FAO reports!
16.02.2015!
44!
Threat of entry and threat of substitutes in Kenyan market!

Competition!
Bargaining powers!
Threat of new entries !

only from market leaders!
Threat of substitutes
1!
Entry
strategy!
Joint
venture!
Acquisitions!
Start from
scratch!
Deals !
with policy
makers and
NGOs!
Education !
and training!
for farmers
and!
local policy
makers!
Trust!
from the
com-!
munity to
increase
productivity!
An entry in Kenya demands a long term strategy

and large investments in order to capture a
substantial part of the market. The risk, and
possibly the return, is therefor high. The capital
investments needed in order to implement this long
term strategy is high, and the threat of entry is
only from the large players!
16.02.2015!
Threats!
Machinery resale!
Resale of second hand tractors!
enables farmers to get powerful and!
reliable machinery for about half the
price of a new machine !
2!
Manual labor!
Both prices and access to manual
labor is good. Farm animals can also
be a good substitute for Kenyas
many small-farm owners!
3!
Crop substitutes!
Farmers might shift their food crops
to crops that does not!
demand a high level of machinery!
45!
STRATEGY FOR FIELD&TRACK CO

TO ENTER KENYA!
Strategy outline!
Two phase model!
Product portfolio!
16.02.2015!
Entry strategy!
SWOT!
Issues and challenges!
46!
Strategic goals and the traditional strategy for market entry in Kenya!
Strategy outline!
F&Ts strategy!
The two phase model!
Strategic goals for market

entry!
Product portfolio!
Entry strategy!
Gap! !
Capture market share!

Strengthen brand image!
Unable of expanding the market

and increasing the machinery
readiness in Kenya.!
Maintain position as
market leader!
Traditional strategy for

market entry!
Joint venture with local
firm!
Expand market!
Kill competition!
SWOT!
Gap!!
Sales model!
Low end products!
Internal or external
financial solutions!
There is a gap between the goals and what the firm can achieve by entering with the same strategy as the
incumbents. How can F&T fill this gap? !
16.02.2015!
47!
Strategy outline!
Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
SWOT!
F&T will ensure a profitable business in Sub-Saharan-Africa by implementing a two-phase strategy with the
aim of gaining market share and making small and mid-size farmers use agriculture machinery.!
Phase I:!
Renting!
Phase II:!
Selling!
The first phase will make less

affluent farmers able to use
machinery and strengthen F&Ts
brand.!
The second phase will in turn

serve a large market and ensure
a profitable business.!
What is meant by the renting model, and is it feasible ? !
16.02.2015!
48!
Renting model !
Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
Strategy!
SWOT!
Support activity Demo Farm!
Renting easy-to-use machinery!
Educate farmers!
Joint venture with local firm to benefit from
Allow farmers to familiarize themselves with
existing distribution network.!
F&Ts products!
Resale of used tractors!
Demonstrate for policy makers that higher

mechanization increases yield!
The main reasons for entering with a renting

model is that it will:!
Boost the machinery readiness
development!
Enable F&T to defeat competition by
providing a cheaper alternative!
Give fast product feedback which is very
valuable when adapting to local needs!
But can the renting price be low enough? !
16.02.2015!
49!
Pricing example - Tractors !

Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
SWOT!
Engine
size!
(in HP)!
Unit price!
to buy ($)!
Fuel cost
+!
($/h)!
Maintenance +! Depreciation
($/h)!
+!
($/h)!
Overhead
=!
($/h)!
Total costs!
($/h)!
60!
26000!
10,45!
0,33!
3,47!
3,83!
18,08!
105!
80000!
18,30!
1,00!
10,67!
11,79!
41,75!
Based on!
Insurance & housing!
7%!
Nominal interest rate!
1%!
# years in use!
12!
Fuel consumption gallons/hp/hour!
0,044!
Price of diesel/gallon!
3,6!
Lubrication costs in % of fuel

consumption!
10%!
Salvage value!
36%!
Repair cost as % of machine price!
0,06!
Break even renting

price!
Renting model makes sense from a

financial point of view. The price of
renting tractors is low compared to
buying. !
This also makes the small farmers
likely to directly use the service
without a middle man (contractor) !
Sources: Lazarus, William F. "Machinery cost estimates." University of Minnesota Extension, St. Paul (2009)., http://www.farmdoc.illinois.edu/manage/machinery/machinery_tractors.html !
16.02.2015!
50!

Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
Evolving into selling model!
SWOT!
Possible evolution!
Higher mechanization readiness, increasing
(# of tractors rented or sold)!
Ren3ng
yield and income of farmers expands the market

willing to buy tractors!
Selling
The time it takes for the market to mature,

largely depends on external factors!
Recall: Filling the gap with a renting period!
Sales model is introduced when the market is

ready for it, gradually taking over for renting!
16.02.2015!
51!
Simulation of the sales over time!

Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
Evolution of the number of tractors!

60000
50000
40000
30000
20000
10000
0
Evolution of sales ($ Millions)!

200
180
160
140
120
100
80
60
40
20
0
1.50
1.00
0.50
-
2012
2014
2016
2018
2020
2022
2024
2026
2028
70000
SWOT!
Renting phase!
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040
The number of tractors is likely to increase steadily for the 15 years to

come. It is then expected to increase more rapidly, time around which the
selling phase can start.!
After farmers get used to machinery thanks to the renting schemes,
revenues up to $ 180 millions can be generated. !
Sources: FAO stats, Agriculture statistics on www. Nationmaster.com (data for Mexico), http://thepeople.co.ke/story.php?com=41&item=3059#.UYai_0o_iSo!
16.02.2015!
52!
Product Portfolio!
Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
SWOT!
Tractors
Harvesters
Add-ons
Spare parts and
ConservaHon add-ons
30 to 150hp!
Lower range for
small farms!
Higher range for
larger farms or
contractors!
Adapted to local
needs and to local
products!
Coffee!
Sugar cane!
Grain!
Corn!
++!
Seeders!
Ploughs!
Cultivators!
Harrows!
Tractors are the core of the portfolio. To increase efficiency in all steps of farming, !
harvesters, add-ons and conservation parts are included. !
Maintenance and service requires the supply of spare parts.!
16.02.2015!
53!
Why joint venture? !

Strategy outline!
F&Ts strategy!
Entry strategy!
Joint Venture!
M & A!
Pros!
Product portfolio!
Cons!
Pros !
Cons!
Possible to
locate suitable
company!
Work moral in
acquired
company!
Lowest risk!
Must agree on
final assembly!
Use existing
suppliers and
distribution
channels!
Capital
intensive!
Lowest capital
requirements!
Must agree on
Hilti-strategy!
Private
ownership!
Risky!
Problems
during merging
process!
SWOT!
Start from scratch!

Pros!
Cons!
Private
ownership!
Time
consuming!
Capital
intensive!
Easy access
to distribution
channels and
suppliers!
Build up
distribution
channels and
relations with
suppliers!
Many possible
partnering
companies!
Build up trust
with authorities
and end
customers!
Joint venture with an existing African firm is the most promising entry strategy. Efforts is needed to
find a suitable, multinational partnering company.!
16.02.2015!
54!
SWOT for F&T entering Kenya!
SWOT!
Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
Strengths!
Former adaptation to emerging markets!

Kenya has a central position in the market
expansion region!
Existing agricultural machinery supply chains!
Government commitment to development in
agriculture and infrastructure !
F&T is a global well-known player!
Relatively uncertain political evolution (although

trend towards improvements and democracy)!
Specific farm configuration (ethnic groups)!
Threats!
Possible market expansion to neighbouring

countries and to the whole continent!
Possible joint-ventures with Kenyan agricultural
machinery manufacturers or local players!
Possible partnerships with increasing number of
agricultural projects!
16.02.2015!
Weaknesses!
Opportunities!
SWOT!
Slow adaptation to new technological

machinery!
Slow creation of adequate infrastructure!
55!

Strategy outline!
F&Ts strategy!
Product portfolio!
Entry strategy!
SWOT!
Possible neutralizing initiatives!
High capital requirements!
Import used tractors from other markets to lower initial

investments.!
Reaching the farmers!
Joint Venture with local firm provides distribution channels!

High service level and low prices make renting attractive.!
Seasonal demand!
Seasonal renting prices with lower prices during heat

periods to encourage use outside season!
Need of marketing / sales force!
Outsource renting service and only supply machinery. !
Too small farms: !

No need or money for machinery?!
Encourage coalitions of farmers to afford tractors. Higher

utilization rate of machinery.!
Complete change in business model:

Manufacturer as service company?!
16.02.2015!
56!
Summary!
1) Market & Industry environment:!
After decades of growth still high growth rates!

Population growth and higher standards of living increase demand for crop!
Global players reach out to emerging markets!
2) Where is the future Growth potential?:!
Low yields and mechanization in African countries!

Much lowly unutilized arable land and ambitious governments!
Biggest potential in Kenya and adjacent countries!
3) Strategy for virtual global player to enter Kenya:!
16.02.2015!
Two phase strategy: First renting then selling!

1. Renting at affordable prices to expand market!
2. Selling to increase company profit!
Gaining market share and farmer loyalty!

Preferably in joint venture with local player!
Renting as tool for geographic growth!
57!
BACKUP SLIDES!
16.02.2015!
58!
Margins & growth rates!

16!
14!
12!
10!
Deere!
8!
AGCO!
Kubota!
6!
CNH!
4!
M&M!
2!
0!
-2!
2008!
2009!
2010!
2011!
2012!
Gross margin (in %)!

Gross margin (in %)!
60!
50!
40!
Deere!
30!
AGCO!
Kubota!
20!
CNH!
10!
M&M!
0!
2008!
16.02.2015!
2009!
2010!
2011!
2012!
59!
The growth is heavily affected by the economic crisis!
CAGR over 3 years (in %)!

40!
35!
CAGR over 3 years (in %)!
30!
25!
Deere!
20!
AGCO!
15!
Kubota!
CNH!
10!
M&M!
5!
0!
2008!
2009!
2010!
2011!
2012!
-5!
-10!
16.02.2015!
60!
PROFITABILITY RATIOS!
ROA (in %)!
ROIC (in %)!

20!
ROA (in %)!
8!
Deere!
6!
AGCO!
4!
Kubota!
CNH!
2!
M&M!
0!
-2!
2008!
2009!
2010!
2011!
2012!
ROIC (in %)!
10!
15!
Deere!
10!
AGCO!
Kubota!
5!
CNH!
M&M!
0!
-5!
2008!
2009!
2010!
2011!
2012!
ROE (in %)!

50!
ROE (in %)!
40!
Deere!
30!
AGCO!
20!
Kubota!
10!
CNH!
M&M!
0!
-10!
2008!
16.02.2015!
2009!
2010!
2011!
2012!
61!
Financial leverage !
(Assets over Equity)!
10!
8!
Deere!
6!
AGCO!
4!
Kubota!
2!
CNH!
0!
M&M!
2008!
16.02.2015!
2009!
2010!
2011!
2012!
Financial Leverage (in X)!
EFFICIENCY RATIOS!
25000!
20000!
Deere!
15000!
AGCO!
10000!
Kubota!
CNH!
5000!
M&M!
0!
2008!
2009!
2010!
2011!
2012!
62!
Working capital management by Mahindra & Mahindra!
Cash Conversion Cycle (in days)!

250!
200!
CCC (in days)!
150!
Deere!
AGCO!
100!
Kubota!
CNH!
M&M!
50!
0!
2008!
2009!
2010!
2011!
2012!
-50!
16.02.2015!
63!
TURNOVER!
Inventory turnover (in X)!
12!
10!
8!
Deere!
6!
AGCO!
4!
Kubota!
CNH!
2!
M&M!
0!
16.02.2015!
2008!
2009!
2010!
2011!
2012!
Inventory turnover (in X)!
Fixed Assets Turnover (in

X)!
Fixed Assets Turnover (in X)!

8!
6!
Deere!
4!
AGCO!
Kubota!
2!
CNH!
M&M!
0!
2008!
2009!
2010!
2011!
2012!
64!
Current raHo (in %)

3
Current raHo (in %)
2.5
2
Deere
AGCO
1.5
Kubota
CNH
M&M
0.5
0
2008
16.02.2015!
2009
2010
2011
2012
65!
Investment ratios!
CAPEX over Revenues (in %)!

12!
CAPEX over Revenues (in %)!
10!
8!
Deere!
AGCO!
6!
Kubota!
CNH!
4!
M&M!
2!
0!
2008!
16.02.2015!
2009!
2010!
2011!
2012!
66!
Strategy!
External factors!
TEMP: DELETED!
Farmers Investments in Africa!
79% of the population depends on

agriculture!
45% of the population (14.3 mios) work on
family farms, mainly womens!
The GNI/person of $820 and more than 45%
of the people living under the poverty line!
Land ownership is not clearly define!
If farmers cant develop more than a

family business, it is because they are
facing an investment trap!
Production!
Even if Kenya is a strong African

economy, it is facing extreme poverty
in the farming sector!
R!
R!
P!
Banks are risk adverse, they will not lend to

farmers. Even more because they cannot use
the land as a collateral!
O!
Source: Poor Economics, Abhijit Banerjee, Esther Duflo, PublicAffairs, 2011!

World development indicator, World Bank 2011!
www.ruralpovertyportal.org!
16.02.2015!
Q!
Capital Invested!
Farmers are not rich enough to start a

business at Q point, they start with nothing at
O, the origin.!
Starting at Q (machinery instead of manual
work) help farmers to go over the Marginal
Cost curve!
Thus, production will increase significantly!
67!
Financials Cost of renting!
16.02.2015!
68!

Agriculture Machinery Report

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Agriculture Machinery Report

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EIVIND AAS - JESPER GUNNERLING

CARINE TRUONG - KARL ERIK MORTHEN

The agriculture machinery industry

The project group is suggesting

Part I: Global Scope!

Market & Industry

Part II: Africa scope!

Where is the future!

Market & Industry

Strategy for virtual

MARKET & INDUSTRY

The food challenge!

The global food challenge!

Although the population growth rate decreases

Higher standards of living imply higher demand

Meat consumption worldwide, in Mt!

Rising population and changing diets causes scarcity of food !

Severe challenge solutions are known!

Severe challenge solutions are known - machinery is needed!

The food Challenge!

Global food Challenge!

Increasing population and meat

Exploiting unutilized land!

Extensive demand for

Definition of Product Range!

Plan3ng & Fer3lizing Haying Machinery Plowing & Cul3va3ng

Spare Parts &

Market size segmented by products and geographical areas!

Size in $B, by product segments

Global scope, with the market segmented in two very

North Europe! Japan!

Impact of Industry Environment is huge!

Price increase on farm commodities due to:!

Developed financial services:!

Development of banking systems:!

Farmers strive for cost-efficiency:!

Increasing demand for renewable energy:!

Established markets will demand bigger and higher performance machinery!

The Industry Environment impacts the future needs of farmers!

solid living. Precision farming important to

Huge farms allows for large and more specialized

Higher requirements on engine technology.

Farmers loose money for each day they are unable

Consolidation & specialization!

Generally low yield, and fragmented

Bigger and higher performance

Mechanization needed, adapted to

The main players and their biggest brands!

Buyer Bargaining Power!

Supplier Bargaining Power!

Threat of new entrants!

The Intensity of Global Rivalry!

Buyer Bargaining Power!

Supplier Bargaining Power!

John Deere as major player globally with AGCO,

Threat of new entrants!

Sales revenues (2011)!

Rivalry among competitors is moderate on a global level. !

The Intensity of Rivalry in Local Emerging Markets!

Buyer Bargaining Power!

Supplier Bargaining Power!

Threat of new entrants!

Low-end smaller machinery!