"The naked pursuit of scale — and bets that manufacturing-cost savings would come through bigger buying power has been at the root of some of the ... gravest stumbles in recent generations."

This “naked pursuit of scale” and quest for market share sounds familiar. Farm machinery manufacturers and their dealers have dealt with this push-pull reality for decades (at least since I started covering the industry in 2004). The subsequent demands that a market share obsession puts on the distribution chain — thousands of miles away from the factory — is real pressure for the local dealer.

The quote above appeared in the May 1, 2023 Wall Street Journal in an article by Tim Higgins on Elon Musk’s latest move to grow Tesla at the expense of profitability – because the subscription business will allow the revenue to “come over time” to whomever gets their first.

The examples in the article were all automotive, but you’ll get the point. The obsession can lead to doomed marriages, reported WSJ, including Chrysler Corp. and Daimler-Benz AG in 2007 and the “awkward pairing” of Renault and Nissan. 

And then Volkswagen AG’s “dieselgate” scandal that WSJ said was borne of a mission to become the world’s best selling automaker. Today, as WSJ notes, global sales leader Toyota faced struggles with quality and safety recalls after setting an ambitious goal a decade and a half ago to become the first automaker to reach 10 million auto deliveries per year. 

“The naked pursuit of scale — and bets that manufacturing-cost savings would come through bigger buying power — has been at the root of some of the … gravest stumbles in recent generations…”

The overproduction of units, and then using heavy discounts to stoke sales, would ultimately result in GM yielding its position to Toyota and also net a government bailout. “At one point, 25 years ago, GM executives placed such a collective emphasis on market share that they took to wearing lapel pins that read ‘29,’” writes Higgins. “The number symbolized their goal of holding U.S. market share to 29%, after watching it fall from a peak of more than 50%.”

Back to the farm machinery business … After years of dealers’ hand wringing over the major-line’s market share obsessions (and the levers that the singular-focused metric allowed to be “pulled” on them), we started to hear Ag OEM heads modifying their language to talk about “profitable market share gains.” Sensed that a change of language meant something…

Whether it was real or not, they “seemed” to start to understand that buying market share was a pyrrhic victory. I remembered visiting a very large “bleeds-green” farmer who’d just abandoned Deere and its dealer (where the pain was really felt). That dealer, as I learned, never got the chance to enjoy the covenant of high-margin parts/labor hours (what absorption promises to deliver for the low-margin wholegoods) before the tractors and combines left town.

In a new world in which the margin makers for tomorrow’s farm machinery sale are promoted to be in the subscription dollars vs. the added-value iron, are we facing a “deja-vu all over again?” 

If so, this iteration looks to be more confounding.

Are you ready for Market Share Version 2.0?