John Deere focuses on small tractors

It has long been etched in our minds that when we think of tractors, we think green and yellow.  This has been the staple colors of John Deere since 1910.  It is now doubt that John Deere has captured a majority of the North American market (primarily US and Canada) and have done this with quality products that clearly defines their brand image.  With US sales of tractors becoming stagnat, John Deer is looking to global economies, mainly developing countries, to provide the growth that the company needs and the growth its shareholders expect.  In taking a look at the trends of developing countries and finding out what their needs are, John Deere has realized that they cannot look to grow their business by using the traditional US model in which they have excelled.  The reason being John Deere has market to large growth farmers who have thousands of acres of land that need to be harvested.  When they were looking at their test market, India, they realized the average farm size was about 3 acres.   Also in doing interviews with local Indian farmers, they were happy to see that many of them knew about John Deere, but did not purchase their tractors due to their large size and high cost.  It did not make sense to Pichandi, a local farmer who just purchased his third Mahindras tractor, a smaller more adapt tractor for his small farm, in 4 years. Samuel Allen, CEO of John Deere, is eying India as an opportunity that his company can capitalize on.   Mr. Allen had a couple of ways he could have entered into the India market, and he choose to invest in a $100 million dollar factory dedicated to building small tractors for the local market and export market.

This goes back to what we discussed in class about different ways to enter foreign markets.  He decided instead of building them in the US he would set up a local plant to be able respond quickly to the local market.  John Deere would also save in transportation cost because they are not only planning on selling to India but surrounding East Asian countries like China.  However, there are some drawbacks to his branding in India.  If it doesn’t work out not only will he loose the market, but also the $100 million dollar plant investment.  If he exported the small tractors out of an existing plant Allen would save on set-up costs.  Also investment companies don’t know if his plan will work out due to the low profit margins on small tractors, which is expected limit John Deere profits.

Despite concerns Allen believes this is the best way to grow the company and capitalize on foreign markets.  John Deere has captured the US market and will continue its stronghold for years to come, but with pressures to keep growing the company different action has to be taken.  Will this pay off? Only time will tell.

Best Buy UK

Reading through the news today I discovered this little article about the Best Buys in UK.

http://www.bbc.co.uk/news/business-15616445

It seems that the global brand of Best Buy isn’t doing so well.  First they closed all their stores in China earlier this year and now Best Buy is closing all 11 stores in UK.  I’m sure a lot of it has to do with the economic downturn that started in 2008 but it makes me wonder what it is that they’re not doing right.  Maybe they did the same thing they did in China by using the dual-brand strategy.  Maybe the dual-brand strategy wasn’t effective because of the fierce competition over in the UK.  I’ve personally never been to the UK so I’m not sure how the cultural climate is like over there and I’m not sure how their purchasing habits are when it comes to consumer electronics.  It’s highly possible that they prefer a more intimate shopping experience with sales people who are highly specialized in the products.  Whatever it is, I don’t think Best Buy UK is adapting well enough to it.

 

Best Buy China

After reading the case study for next week’s class I went searching online for Best Buys in China.  I was curious to see whatever happened with the dual-branding strategy that they were talking about.  The first article that showed up was an article in February of 2011 on Best Buy closing down all their stores in China.  Here’s the link.

http://www.bloomberg.com/news/2011-02-22/best-buy-s-china-stores-shut-as-retailer-focuses-on-more-profitable-brand.html

I can tell from the article that Best Buy definitely went ahead with the dual-brand strategy and wasn’t quite as successful as they were in Canada.  Their decision was to close down all the existing Best Buys in China and to focus on expanding the Five Star retail stores.  I think that the Best Buys didn’t do as well in China compared to Canada because there were already a few strong competitors in China in the CE category.  The case study mentioned that the Chinese has a lot of pride in their country and has a tendency to stick to local brands.  This might be another reason why Best Buy failed in China. Not only are they a foreign brand that people in China has never heard of before, they do not have a working relationship with vendors in China.  As we’ve learned in last week’s class, the Chinese put a lot of weight on relationships with the people they do business with.  They are buying the people, not necessarily the product.

I believe that the dual-brand strategy worked well in Canada for Best Buy because there was only one other major competitor and both their core competencies were different.  They offered 2 different buying experiences for customers so they can co-exist and not cannibalize each other too much.  I think Best Buy might have been able to succeed in China if they had a competitive edge over the other 3 major competitors; Gome, Suning and Five Star.  Their distinction from the other 3 competitors was probably not big enough for Chinese customers to break loyalty from their usual brand.  All in all, I think it’s probably wise for them to focus on building the Five Star brand and expand from there to gain more market share.

Hollywood fighting for China

With box office receipts growing expentially in China (up to 1.6 billion annually, a 64% increase from last year) Hollywood production companies are revamping their strategies to make their movies more suitable for a Chinese audience.  With foreign film import regulations strict in China, limited to 20 films per year, Hollywood production companies are re-branding themselves as co-producers with Chinese production companies to by-pass this restriction.  In order to be considered as a co-producer, Chinese companies have say in the Hollywood film’s finances, film site, and must have a percentage of Chinese stars in the cast.  Yes, that’s right, Hollywood is being told what to do.  Due to these restrictions and growing interest in American movies, Hollywood is starting to re-brand itself on some movie productions, to be able to get their movies into the Chinese market.  For example, “Looper” a action movie staring Bruce Willis, wanted to open in China as well, so they re-tooled their production so it would fit into the guidelines set up by China including changing the production site, and recasting roles to include Chinese stars.  Is this a trend that we will see with many other popular movies?  In my opinion, yes.  It would be foolish to not capitalize on this growing market, but Hollywood also has to understand that a majority of their revenues will still be coming from US box office sales and it is important to approach this opportunity with some perspective.  In the meantime, the race is on in China and expect many production companies to take part in this race.

 

Yellow Tail Wine

Yellow Tail Wine Go-To Brand

This commercial was release just a few months ago.  It’s a commercial for Yellow Tail wine.  As we’ve read in one of our in class cases on wine, we know that Yellow Tail has a reputation of being cheap and cheerful.  This commercial, though keeping with the cheerful aspect of their reputation, seems to me like an attempt to attract the more sophisticated wine drinkers in their late twenties to early thirties.  When I took a look at their recent selling prices, I noticed that their prices had gone up by one to two dollars.   They’re trying to set their brand up as the go-to brand of wine for more sophisticated gatherings and trying to get away from their reputation of being an inexpensive wine and in so doing charge more for their product.  The use of bright colors and upbeat instrumental music in the background was interesting and really grabbed my attention.  I believe this is a good start to an attempt to change their reputation.