As the newly hired HR Director of Pioneer International, a Nebraska-based company specializing in farm equipment, I intend to impress my new employers at the company’s next annual managerial retreat. The company discusses strategic planning during such retreats, and being the first HR director to have ever been invited; I plan to demonstrate my knowledge of the subject. As such, I have developed the report below as part of my thoughts on Pioneer’s corporate strategy. The analysis is based on Deere & Company, one of United States’ major firms that manufacture and distribute farm equipment.
Industry Assessment using Porter’s Five Forces Model
A company needs to conduct an analysis of the competitive forces in its industry to establish the opportunities and threats associated with the industry and which it is likely to confront. Porter created a framework, the Five Forces Model, which aids companies in conducting this analysis. The five forces are discussed below to determine the intensity and attractiveness of competition in an industry (Boafo et al., 2018). Therefore, a high force is considered a threat since it will probably reduce profits, while a low force is regarded as an opportunity since it allows the firm to make profits.
Bargaining Power of Buyers
Buyers want to purchase the best products available by using the least possible amount. The buyers’ influence in an industry is related to their ability to forcefully lower prices, bargain for better quality or quantity of services, and pit competitors against one another (Wheelen et al., 2015). However, there are a few competitors in the industry in which Pioneer operates, leaving the buyers with limited options. The leverage of the buyers is, thus, weak, and it is difficult for them to shift.
Leverage of Suppliers
The effect of suppliers in an industry can be witnessed in their ability to increase prices or decrease the quality of goods and services purchased. A supplier is likely to possess a high bargaining power when only a few large suppliers dominate an industry and when it is costly to switch from one supplier to the next (Boafo et al., 2018). Also, the supplier’s bargaining power can be high if there is a likelihood of forward integration by the supplier to secure better prices and margins.
Firms specializing in agricultural equipment acquire their raw materials from several suppliers. The raw material is standardized and easily obtained, making it easy for the firms to change suppliers (Adamkasi, 2021). Therefore, the bargaining power of suppliers in the sector possesses a weak force. However, the suppliers are closely associated with the profit margin. In the case of Pioneer, the suppliers have a high bargaining power since the company is relatively small, and suppliers prefer to do business with big companies such as Deere & Company.
Threat of New Entrants
Scholars in the management landscape assert that the threat of new participants in an industry is probably the most formidable of the five forces. The argument is even more compelling when presented in the contemporary globalized world, in which obstacles to entering a new industry are almost negligible. The fewer the obstacles to entering an industry, the greater the threat posed by new entrants (Boafo et al., 2018). These new entrants exert pressure on established firms to lower prices, thus, reduced profitability. In the farm equipment industry, the threat of new entrants is comparatively low due to the high production costs associated with the industry (Goyal, 2020). If firms do not manufacture in bulk, the business is less profitable. The farm equipment industry is moving into the mature phase of its life cycle. It is unlikely for new companies to enter an industry where achieving economies of scale is challenging. Thus, Pioneer should not be worried about new entrants affecting its operations.
Threat of Substitutes
A substitute product often seems different even though it can fulfill the exact requirement of another product. Substitutes limit the projected returns of a market by putting a cap on the prices that the firms can profitably charge (Wheelen et al., 2015). There is a low threat of substitutes in the farm equipment industry as the customer lacks no alternative to heavy equipment. Since Pioneer operates in such a specialized market, its substitute would be manpower which is cheaper but less efficient (Adamkasi, 2021). However, the use of hand tools on the farm is ineffective for farmers as it requires a lot of time and energy. The threat of substitutes is insignificant and the company should not worry.
Rivalry among Existing Firms
There is a comparatively low competitive rivalry in the farm equipment industry in which Pioneer International operates. However, the competition is stronger for Pioneer since the company is small, with distribution sites only in Nebraska. The extent to which a rivalry lowers the profit potential of an industry is determined by the intensity and the basis on which firms compete (Goyal, 2020). Companies of the same strategic group often engage in strong and aggressive competition. A strategic group is a collection of companies in a market that use the same resources, strategy, and scope of operation (Meilich, 2019). The competition for Pioneer is, thus, intense since its competitors such as Deere & Company and AGCO Corporation, with whom it shares a strategic group, are big established companies with branches throughout the country.
Level of Corporate Citizenship
Corporate citizenship describes firms’ civic behavior and has emerged as a significant concept in the literature of management. Years of research on the social performance of companies has concluded that corporate citizenship is a reality; society expects it from the firms, and good firms make an effort to deliver through their performance (Jain & Rizvi, 2020). When a company exhibits the qualities of a good citizen, it exceeds the interests of both shareholders and stakeholders adjacent to the company by addressing society in general. Corporate citizenship has been compared to social responsibility, and the relationship between the two remains unclear (Kruggel et al., 2020). Still, some scholars have suggested that the two approaches are similar.
Empirical research now indicates that a good corporate citizen may experience a positive impact on its financial performance as compared to previous research, which revealed no significant relationship. According to scholars, there is insignificant proof of a negative relationship between a firm’s social performance and financial performance (Wheelen et al., 2015). Being regarded as a good corporate citizen may give a firm a competitive edge as it enables it to acquire social capital and the goodwill of significant stakeholders. Additionally, the activities of the corporate citizen that result in goodwill provide access to local communities and enhance the firm’s reputation among customers.
Pioneer needs to incorporate corporate citizenship activities into its corporate strategy to compete against its rivals successfully. Companies such as John Deere that Pioneer emulates and wishes to compete against soon have heavily invested in corporate citizenship directly. For instance, the company is maximizing diversity and is constantly reducing the amount of carbon dioxide its releases into the atmosphere (Deere & Company, 2020). It also relies on innovation to reduce the impacts of its machines on the environment. As COVID-19 hit, John Deere kept operating while taking action to safeguard the health of its employees (Deere & Company, 2020). Those not needed in factories worked remotely as the company utilized advanced technologies to enhance virtual connectivity.
Companies at the forefront of being environmentally friendly by undertaking activities such as recycling materials prevent confrontations with environmental groups. By being involved in matters relating to environmental conservation, Pioneer can also enjoy such a benefit and, in turn, avoid lawsuits that often lead to settlements and damage to the corporate image (Wheelen et al., 2015). Programs that minimize pollution can also reduce the amount of waste released by a company and maximize the productivity of resources.
Pioneer International can also reap other benefits that are associated with being a good corporate citizen. By being concerned about the environment, it can charge premium prices for its products and attract loyal customers (Wheelen et al., 2015). The firm builds trust through corporate citizenship activities, which may aid it in establishing long-lasting relationships with suppliers and distributors. As a result, the suppliers and distributors will not be required to spend substantial time and money policing contracts. The company will also lure exceptional talents who favor working for a socially responsible enterprise (Wheelen et al., 2015). Finally, foreign countries will be more welcoming to the company, especially in locations where the preservation of the environment is prioritized.
Direct and Indirect Competition
The improved capability of competitors is the single factor that primarily contributes to the increasing high-intensity competition in industries. Still, companies lacking competitive intelligence risk constantly guessing others’ strengths and weaknesses in an industry. Companies can possess a competitive edge just because their rivals have inaccurate information about them. Competitive intelligence is a formal program that involves collecting data of a firm’s competitors (Wheelen et al., 2015). It aids firms in adapting and coping with changes in the industry. Through the concept, a company can better understand the industry it operates and constantly learns from its competitors’ corporate and business strategies (Heras-Rosas & Herrera, 2021). Research indicates the existence of a strong relationship between competitive intelligence activities and firms’ performance. Companies that have integrated competitive intelligence as part of their corporate strategy have benefited.
Information concerning the condition of the industry and its competitors, government regulations, and recently introduced products can be purchased from websites such as Market Research.com and Finsbury Data Services. The profiles of companies and industries can be accessed from www.hoovers.com (Wheelen et al., 2015). Pioneer International can utilize such websites to analyze the strength and weaknesses of its competitors and have a better understanding of the farm equipment industry. Many companies have developed their in-house libraries and electronic information systems to handle the ever-increasing mass of available data (Wheelen et al., 2015). The internet has altered the ways that strategists scan industries. Information on any subject can be quickly obtained by the click of a button. However, this information is marred with many inaccuracies and utter nonsense since the internet lacks tight bibliographic regulation standards, unlike the print world (Wheelen et al., 2015). Therefore, Pioneer should prioritize using print information, and when using internet sources, it should be from reputable websites.
Pioneer International is a small company but is competing in an industry dominated by giants. As such, some of its competitors include Deere & Company and AGCO Corporation. These companies seek to enhance their base by providing competitive prices, better quality, increased scale of operation, and innovative technology (Mordor Intelligence, 2021). Their operations extend beyond the borders of the United States. AGCO Corporation, for instance, employs thousands of workers and produces heavy farm equipment and supplies to about 140 countries through a range of more than 3000 dealers (AGCO Corporation, 2021). In comparison, Pioneer only operates in Nebraska with only a few hundred employees.
On the other hand, Deere & Company is the behemoth in the agricultural equipment industry. Two-thirds of the company’s manufacturing facilities are distributed worldwide, while the rest are in the United States and Canada (Mordor Intelligence, 2021). The company is the most recognized farm equipment brand in the United States and possesses a loyal customer base. The two companies, Deere & Company and AGCO, are the main competitors because they specialize in the same products as Pioneer International.
Internal Strengths and Weaknesses
Resources are an asset of a company and are, therefore, its basic building blocks. The ability to integrate and coordinate functions at different levels to exploit these resources is called competency (Wheelen et al., 2015). On the other hand, core competency is a combination of competencies that exceeds the boundaries of the division, is spread throughout the corporation, and the corporation can do it exceptionally well. When a firm’s core competency is greater than those of its competition, it becomes a distinctive competency. VRIO framework is an analysis tool developed by Barney to evaluate the competencies of a firm (Wheelen et al., 2015). It involves four questions that determine the competitive advantages of a firm’s resources.
Value-Does the resource offer customer value and a competitive edge?
The resource possesses a high value if the company can monitor external environment shifts and evaluate the opportunities and threats to its growth. The resource’s value is also measured by its ability to learn, absorb, and employ new knowledge (Marichova, 2018). A resource that offers customer value and provides a competitive edge is regarded as a strength to a company. Pioneer needs to prioritize such a resource if it plans to get to the level of some of the established firms in the industry.
Rareness-Do no other competitors have it?
The resource is rare if other competitors are finding it difficult to possess it successfully. A unique resource establishes dynamic capabilities that aid the company in expansion, modification, and reconfiguration of its present functional competencies in new ones that offer a better response to changes in the industry (Marichova, 2018). The rare resource could already exist in the industry or it can be created by a firm. Therefore, Pioneer should design unique resources that others lack to achieve competitive advantage in the industry.
Imitability-Is it expensive for competitors to imitate?
The resource needs to be challenging to obtain or expensive to copy to gain a competitive advantage, such as brand awareness. The resource becomes difficult to imitate when the company conducts integration, coordination, and reconfiguration (Marichova, 2018). The method of integrating knowledge, skills and developing new skills is distinctive to every firm. A resource that is difficult to imitate discourages competitors who, in turn, resort to common and less profitable alternatives. Possessing such a resource needs to be a top priority for Pioneer International as part of its corporate strategy.
Organization-Is the company well organized to exploit the resource?
An enterprise must possess the ability to take advantage of its readily available resources. If the resources are valuable, rare, and inimitable, the company must be in a position to exploit them; otherwise, it is useless. The organization of the business enables it to use these resources by transforming them into the desired finished product (Marichova, 2018). A sustainable competitive edge is achieved by simultaneously executing the four features of a company’s resources. Through this action, the company’s objective of registering higher profitability than the industrial average is realized. For Pioneer to enjoy such benefits, it needs to be appropriately organized to exploit its resources fully.
It is crucial to assess the significance of a firm’s resources, capability, and competency to establish internal strengths and weaknesses. This will aid the firm in determining its future and can be done by comparing measures of the strengths and weaknesses with measures of the firm past performance, major competitors, and the general industry (Wheelen et al., 2015). If the capability or competency greatly differs from the firm’s past resource, its main competitors’, or the industry’s average, it is probably a strategic factor and should be incorporated in strategic planning.
External Opportunities and Threats
The TOWS matrix has been extensively used in analyzing external threats and opportunities in strategic management. It involves a systematic and comprehensive evaluation of external and internal factors to ascertain a firm’s present competitive position and potential for growth. The strategies are developed by adequately utilizing the strengths (S) and opportunities (O) and limiting the influence of weaknesses (W) and threats (T) (Dandage et al., 2019). The matrix forces strategists to conduct an analysis of their firm’s situation and devise strategies, tactics, and measures to effectively and efficiently realize its goals and mission. The strategies depend on the prevalence of the factors analyzed in the industry and within the firm.
A company’s strengths are its internal features, positive traits that differentiate it from its competitors in the industry. Strengths enable the company to adapt to changes in the conditions in the industry and are essential factors for success (Kulshrestha & Puri, 2017). Conversely, weaknesses are negative internal challenges that can prevent a company’s strategy from achieving success. Opportunities are the trends and occurrences in the industry that, if utilized properly, can enhance a company’s development and weaken the threats (Kulshrestha & Puri, 2017). The threats are the factors in the external environment that are regarded as obstacles to the company’s development. They are inconveniences that often result in additional costs of operation.
Pioneer International can employ TOWS analysis to enable it to match its internal strengths and external opportunities. This will lead to the development of strategies possessing the greatest potential for success. For instance, strengths such as high brand awareness or loyal customer base can be combined with the opportunity to launch a new farm product. Since the matrix also highlights a business’ vulnerability to threats by using its weaknesses, Pioneer can apply such an analysis to devise strategies that reduce the effects of the threats or avoid them altogether. For instance, the firm can develop strategic alliances within the industry.
Overall Evaluation of the Corporation’s Competitive Position
Pioneer is currently not in an excellent competitive position compared to its farm industry competitors based on the information provided above. The firm is competing in an environment that big established corporations already dominate. According to the VRIO framework, a company must possess a valuable, rare, inimitable resource to gain a competitive advantage. The company must also be properly organized to exploit the resource. The model, thus, posits that all the four criteria must be satisfied to gain a competitive edge (Rothaermel, 2018). At present, Pioneer’s competitors possess all the VRIO criteria such as assets, capabilities, and competencies and are better positioned to utilize them to gain an advantage.
The farm equipment industry assessment using Porter’s five forces model indicates that Pioneer operates in an environment with many opportunities. There exists a low threat of new entrants, buyers’ bargaining power, threat of substitutes and competitive rivalry among existing firms, and high leverage of suppliers. The company might still find it challenging to compete in its current state because of its small size. However, in the future, it can make a few changes to its organization and compete due to the opportunities in the industry.
Pioneer’s competitors are also better placed in terms of corporate citizenship. They are currently involved on a larger scale in environmental conservation, maximization of diversity, employee welfare, and uplifting farmers that use their machinery. Pioneer does not possess the resources to undertake such kinds of corporate citizenship activities. Unless there is a change, it will still be unable to compete with its competitors directly. Finally, the company’s strengths in TOWS analysis cannot be compared to those of its competitors. Other companies also possess strengths that they can use to create an advantage in the market further. Unless Pioneer develops strengths that are specific to the firm, competition with its rivals will remain difficult.
Recommendations for the Future Success of the Corporation
Even though the company is not in a great competitive position, it can make changes to improve this position and ensure it achieves success in the future. Utilizing the home field advantage is one such recommended activity for the firm’s future success (Harvard Business School Publishing, 2021). Pioneer can fine-tune its products in an industry characterized by aggressive competition. Instead of copying established firms such as Deere & Company, it can focus on customers that value the local touch and ignore those who prefer international brands.
Pioneer should rethink its model of business by either merging with another company or entering into a joint venture. In its current state, the company is too small to compete effectively. A merger or a joint venture provides better resources, spreads risks and costs of production, and increases the chances of success. Pioneer will also benefit from access to new markets and networks of distribution and new knowledge and expertise as employees of the two companies work together.
The company should consider using innovative methods of production. Developing something new that is not used by others in the industry could be a ground for success. It should, thus, invest in programs that encourage employees to be innovative. The business should also thoroughly enforce compliance, including obeying laws and regulations and actively participating in activities that contribute to society. This will go a long way in creating loyalty to the brand as consumers view it as socially responsible. Finally, Pioneer should seek to create a competitive edge within the firm rather than outside (Kumara et al., 2020). This will ensure the firm maintains an advantage over other companies in the market.
The report comprehensively captures my thoughts on Pioneer’s corporate strategy as the HR director. As part of the strategic planning of Pioneer, I believe that the company needs to incorporate corporate citizenship activities such as environmental friendliness and emphasizing diversity. This will win over customers and make the company more attractive. Pioneer also needs to conduct a TOWS analysis to determine its present competitive position and potential for growth. Competitive intelligence will enable the firm to learn more about its competitors in the industry and should be employed as a strategy. The company should utilize Porter’s five forces model to determine the opportunities and threats in the farm equipment industry that it can potentially encounter. Finally, Pioneer should make use of Barney’s VRIO framework to evaluate its competencies. Still, the company’s small nature will hinder its ability to compete against the industry’s giants. As such, various strategies are recommended to ensure it achieves success. It can be more innovative, utilize its home-field advantage, and enter a joint venture with another firm.
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