Harvard Case - Cervus Equipment Corporation: Diversified Growth in Trucking
"Cervus Equipment Corporation: Diversified Growth in Trucking" Harvard business case study is written by Daniel Doiron, Davis Schryer. It deals with the challenges in the field of General Management. The case study is 14 page(s) long and it was first published on : Dec 23, 2016
At Fern Fort University, we recommend Cervus Equipment Corporation pursue a strategic diversification strategy focusing on growth in emerging markets and expanding into complementary product and service offerings. This strategy leverages Cervus's strong brand, established dealer network, and expertise in heavy equipment to capitalize on the global growth in trucking and infrastructure development.
2. Background
Cervus Equipment Corporation is a Canadian company specializing in the sale, service, and rental of heavy equipment, primarily focused on the trucking industry. Faced with a mature domestic market and increasing competition, Cervus seeks to expand its business and secure long-term growth. The case study highlights the company's strong financial position, established dealer network, and brand recognition, but also points to challenges in navigating a complex global market.
The main protagonists of the case study are:
- Doug Dobie: CEO of Cervus Equipment Corporation, tasked with leading the company's diversification strategy.
- The Board of Directors: Responsible for overseeing the company's strategic direction and approving major decisions.
- The Management Team: Responsible for implementing the chosen strategy and managing the company's operations.
3. Analysis of the Case Study
Strategic Framework: To analyze Cervus's situation, we utilize Porter's Five Forces, SWOT analysis, and a Balanced Scorecard framework.
Porter's Five Forces:
- Threat of New Entrants: Moderate - Entry barriers are relatively low, but Cervus's established brand and dealer network present a significant challenge.
- Bargaining Power of Buyers: Moderate - Large trucking companies have some negotiating power, but Cervus's strong service and product offerings provide a competitive advantage.
- Bargaining Power of Suppliers: Low - Cervus has a diverse supplier base, reducing supplier leverage.
- Threat of Substitute Products: Moderate - Alternative transportation methods (rail, air) exist, but the trucking industry remains dominant for certain goods.
- Competitive Rivalry: High - The heavy equipment market is highly competitive, with both domestic and international players vying for market share.
SWOT Analysis:
Strengths:
- Strong brand recognition and reputation
- Established dealer network with strong customer relationships
- Expertise in heavy equipment sales, service, and rental
- Strong financial position with access to capital
- Experienced management team
Weaknesses:
- Limited international presence
- Dependence on a mature domestic market
- Potential for increased competition from emerging markets
- Limited product and service offerings
Opportunities:
- Growth in emerging markets with increasing infrastructure development
- Expansion into complementary product and service offerings (e.g., telematics, fleet management)
- Technological advancements in heavy equipment and automation
- Partnerships with other companies to expand reach and expertise
Threats:
- Economic downturn impacting the trucking industry
- Increasing regulatory pressures on the transportation sector
- Competition from established and emerging players
- Fluctuations in commodity prices and exchange rates
Balanced Scorecard:
- Financial Perspective: Increase revenue and profitability through international expansion and new product offerings.
- Customer Perspective: Enhance customer satisfaction through improved service, innovative products, and a wider range of offerings.
- Internal Processes Perspective: Optimize operations through efficient logistics, improved supply chain management, and technology adoption.
- Learning and Growth Perspective: Develop employee skills, foster innovation, and enhance organizational agility to adapt to changing market conditions.
4. Recommendations
1. Strategic Diversification:
- Focus on Emerging Markets: Cervus should prioritize expansion into high-growth emerging markets with strong infrastructure development needs. This includes countries in Asia, Africa, and Latin America.
- Develop a Tailored Approach: Each target market requires a customized strategy considering local regulations, cultural differences, and competitive landscape.
- Partnerships and Acquisitions: Explore strategic partnerships with local distributors or consider acquisitions of established businesses in key markets.
2. Product and Service Expansion:
- Complementary Offerings: Diversify beyond traditional equipment sales by offering complementary services like telematics, fleet management, and maintenance contracts.
- Innovation and Technology: Invest in research and development to develop innovative products and services that enhance efficiency, safety, and sustainability.
- Value-Added Services: Offer customized solutions and value-added services tailored to specific customer needs, such as training programs and technical support.
3. Organizational Change:
- Global Talent Acquisition: Attract and retain skilled professionals with international experience and knowledge of emerging markets.
- Cross-Cultural Training: Provide training to employees on cultural sensitivity, communication skills, and best practices for working in diverse environments.
- Organizational Structure: Adapt the organizational structure to support international expansion and new product offerings.
4. Marketing and Branding:
- Global Brand Strategy: Develop a consistent brand message and marketing strategy that resonates with international customers.
- Digital Marketing: Leverage digital marketing channels to reach a wider audience and build brand awareness in emerging markets.
- Targeted Marketing: Implement targeted marketing campaigns tailored to specific customer segments and market needs.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Leveraging existing expertise in heavy equipment and expanding into complementary offerings aligns with Cervus's core competencies and mission to provide comprehensive solutions for the trucking industry.
- External customers and internal clients: The recommendations address the needs of both existing and potential customers in both domestic and international markets.
- Competitors: The proposed strategy aims to differentiate Cervus from competitors by offering a wider range of products and services and expanding into new markets.
- Attractiveness ' quantitative measures: The potential for growth in emerging markets and the increasing demand for complementary services suggest a strong return on investment.
- Assumptions: The recommendations assume continued growth in the global trucking industry, favorable economic conditions, and the ability to successfully navigate cultural and regulatory differences in emerging markets.
6. Conclusion
By pursuing a strategic diversification strategy focused on emerging markets and expanding into complementary product and service offerings, Cervus Equipment Corporation can achieve sustainable growth and solidify its position as a leading player in the global heavy equipment industry. This strategy leverages the company's strengths, addresses its weaknesses, and capitalizes on existing and emerging opportunities.
7. Discussion
Alternatives:
- Focusing solely on the domestic market: This option would limit growth potential and expose Cervus to increased competition and market saturation.
- Acquiring a competitor in the domestic market: This option could provide immediate market share gains but may face regulatory hurdles and integration challenges.
Risks:
- Political instability and economic volatility in emerging markets: This could disrupt operations and impact profitability.
- Cultural and regulatory challenges: Navigating diverse cultures and regulatory environments can be complex and costly.
- Competition from established and emerging players: Cervus needs to differentiate itself and build strong relationships with customers to compete effectively.
Key Assumptions:
- Continued growth in the global trucking industry
- Favorable economic conditions in emerging markets
- Successful implementation of the diversification strategy
8. Next Steps
- Market Research: Conduct thorough market research to identify promising emerging markets and potential partners.
- Strategic Planning: Develop a detailed strategic plan outlining the implementation of the diversification strategy, including timelines, budgets, and key performance indicators.
- Talent Acquisition: Recruit and train skilled professionals with international experience and expertise in emerging markets.
- Marketing and Branding: Develop a global brand strategy and implement targeted marketing campaigns to reach new customers.
- Monitoring and Evaluation: Regularly monitor the progress of the diversification strategy and make adjustments as needed.
By taking these steps, Cervus Equipment Corporation can successfully navigate the challenges and opportunities of a globalized market and achieve sustainable growth in the years to come.
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Case Description
Cervus Equipment Corporation, the major Canadian dealer group for John Deere and Peterbilt Motors Company equipment, had grown from CA$56 million in 2004 to close to $1 billion in 2014. It had achieved these results through an aggressive acquisition and growth-oriented strategy, by purchasing heavy-equipment dealerships representing John Deere, Bobcat, and other high-end original equipment manufacturers (OEMs). The company's move into the long-haul trucking industry, beginning with the acquisition of 16 Peterbilt truck dealerships in 2013, was timely, as the agricultural and construction sectors entered what many believed would be a prolonged downturn in its base in western Canada. However, these acquisitions and this move into the trucking industry presented significant challenges related to integration, leadership and management skills at the dealer level, OEM partner control, and the presence of established competitors that served the major vocational and fleet markets. The bottom line: Cervus Equipment required its transport division to drive profitable growth in 2016 and beyond.
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