Businessmodel of AGCO

Customer Segments

AGCO has a niche market business model, with a specialized customer segment. The company targets its offerings at firms in the agricultural industry that need equipment and parts.

Value Proposition

AGCO offers three primary value propositions: accessibility, innovation, and brand/status.

The company creates accessibility by providing a wide variety of options. It has acquired numerous firms since its founding, enabling it to add many different types of product lines. These include tractors, combine harvesters, self-propelled sprayers, hay and forage equipment, seeding and tillage implements, grain storage and protein production systems, and related replacement parts.

The company has embraced innovation throughout its history. Its groundbreaking products include:

• The first rubber-tired tractor
• The “All-Crop” harvester, which replaced the grain binder and threshing machine
• The bandsaw, which replaced the circular saw in several milling applications, revolutionizing the logging industry AGCO has introduced many of its cutting-edge offerings through its renowned product development process, called the AGCO Major Product Introduction Procedure (AMPIP).

The company has established a powerful brand due to its success. It is the largest manufacturer of machinery and equipment focused solely on the agricultural industry. It sells its offerings in over 140 countries and generated revenues of $7.5 billion in 2015. It offers many prominent and popular brands, including Challenger, Fendt, GSI, Massey Ferguson, and Valtra. Lastly, it has won a number of honors, including the following:

• The 2016 “Internet of Things in Manufacturing Leadership” Award by Frost & Sullivan
• The “Secure Supply Chain” benchmark certificate by the Association Materials Management, Purchasing and Logistics (BME), Europe’s top supply chain association
• The Excellence in eSolutions 2015 Award from the German Association of Materials Management, Purchasing and Logistics e.V. (BME)
• The “New Economy 2014 Clean Tech“ Award for Best Agribusiness and Agricultural Solution in recognition of its Fuse and sustainability initiatives ### Channels

AGCO’s main channels are its network of 3,000 independent dealers and distributors that operate in over 140 countries. The company promotes its offering through its website and social media pages.

Customer Relationships

AGCO’s customer relationship is primarily of a self-service nature. The company’s website features a section called “AGCO Technical Publications and Manuals“, described as a “one-stop source“ for operator-user manuals, technical service manuals,  and parts books for farm equipment, utility, and light industrial products. AGCO also develops mobile apps that provide useful features for customers, including brand-related product and service information and AgCommand, a component that enables customers to monitor their entire fleet from anywhere, anytime.

Despite this orientation, there is a personal assistance component in the form of technicians that assist customers in diagnosing and solving technical problems with their equipment.

Key Activities

AGCO’s business model entails designing, developing, and manufacturing its products for customers.

Key Partners

AGCO’s key partners are the third-party suppliers that provide it with much of its machinery and many of the components and replacement parts used in its products. The company also depends heavily on its global network of independent dealers and distributors to sell its products.

They are given access to training and support programs that focus on sales, business and inventory management, marketing, and servicing and warranty matters. They are also offered demonstration programs and volume sales incentives.

Key Resources

AGCO’s main resources are the engineers who design, develop, and manufacture its agricultural machinery products. It maintains important physical resources in the form of the manufacturing facilities it operates in 39 locations throughout the world.

Cost Structure

AGCO has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is cost of goods sold, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

AGCO has one revenue stream:  revenues generated from sales of its equipment and related parts to customers.