Deere and Company
Deereand Company
ExecutiveSummary
Deereand Company has been recognised internationally due to its largescale production, distribution, and financing of equipment used inconstruction, agriculture, forestry and commercial application. Eversince its establishment, the company`s performance in 2013 wasoutstanding. The firm’s sales and earnings were valued at $31.8billion and $3.5 billion respectively. Some of the company`s marketsthat significantly contributed to its revenues in 2013 includedChina, Russia, and Brazil. To boost its results, the company came upwith various construction and agronomic products. Deere`sestablishment of new plants in other countries apart from the US wasa clear indication of the company`s recognition of internationaldevelopment as a strategy to prepare for the increase in demand forfood. In 2013, it established operations in Brazil, China, andGermany. In addition, more factories were set up in Brazil to produceconstruction equipment in 2014. The weakening of the agriculturalsector in 2015 was a major challenge for the company. It led to a 5%reduction of the firm`s agricultural sales. Consequently, the firmneeds a new strategy since its sustainability and performance isthreatened. This study will investigate Deere`s strengths andweakness, both form an internal and an external point of view. Themost workable strategy that has been recommended is the reviewing ofthe equipment prices.
Keywords:Deere & Company, investigate, external, internal.
SituationAnalysis
Deere& Company established its manufacturing and marketing operationsin 1837 after a blacksmith John Deere decided to replace the steelplows with those that were mule-drawn. In the late 1800s, the firmproduced wheeled sulky plows, cultivators and a machine that was usedto plant corn. Deere created the Waterloo Boy in 1918, a motorizedtractor producer that triggered changes in the firm`s business modeland operations. However, competition from the Ford Motor Companycompelled the company to change its strategies. In 1921, the companywas able to sell only 79 tractors. The company launched the firsttractor, the Model D in 1923. The model was able to remain in thefirm`s product line for 30 years due to its high popularity. The GP,Model D, Model 1 and two models that were developed in the late 1920sled to a consistent rise in the company`s revenues until 1932 whenthey fell to $8.7 million due to the Great Depression. Deere &Company started to expand internationally when it started itsoperations in 1956 in New Mexico. Further expansion of the firmoccurred when the business established a tractor-manufacturingfactory in Argentina in 1958 and a plant in 1961 in France. In 1962,Deere acquired a cultivator manufacturer, and by 1963, the companywas the largest international producer of farm equipment. Moreover,it was able to maintain the status until 2015. The firm’s globalheadquarters are based in Moline, Illinois.
Statementof the Problem
Deere& Company is among the largest producers of construction and farmequipment in the world. It also provides professional advice to itscustomers. It has been successful due to its strategy of producinghigh quality products. However, there was a reduction in its salesand revenue in 2015 due to the weakening of the economy. Thereduction, together with increased level of competition havepresented a significant threat to the company. Therefore, Deere &Company needs to review its price policies and strategies in order tohave a competitive advantage over its competitors.
AnExternal and Internal Analysis
Theprimary objective of Deere & Company`s product lines of thefarming equipment was to offer professional support to consumers whohad purchased Deere equipment and also to convince farmers who boughtequipment from other firms to buy from Deere. Since a limit could beset for harvesting windows, farming emerged as the mosttime-sensitive industry. Production of reliable and high-qualityequipment was a strategy that led to the outstanding performance in2013. The firm`s strategic resolution was to achieve $50 billionsales by 2018. In addition, it aimed at making profits that were ashigh as 12% in 2015.
Expansionof operations and complementary business enhancement were also partof Deere`s Strategy. Consequently, the firm believed that the majorcomponents of its Critical Business Factors were, sufficientunderstanding of the customers, value delivery, well-developeddistribution system and employment of well-skilled associates. Theprediction of the CBFs was based on building on the groundwork thatwas already set. The foundation was composed of the business`soutstanding performance, aligned high performing and a shareholdervalue-added growth that was the superlative. Deere assessed itsperformance to find out whether adjustments were needed. Eventually,the company`s goal was to ‘display` its integrity and commitmentthrough its high-quality products.
Thecompany`s management team believed that there existed opportunitiessuch as technological advancement and segmentation of the customers.However, the team understood that challenges would occur. Deere wasmainly interested in capturing more buyers from different countriesand meeting their various needs. At that time, the firm was rankedsecond regarding market share. To increases, its performance thecompany had to direct more focus on technological improvement andprovidence of better services to the consumers. In 2015, the companywas divided into three distinct businesses including the FinancialServices, Construction and Forestry equipment and Turf andAgriculture Equipment. The strategies for the businesses was to getmore information from the consumers and to eventually come up withproducts whose value was superior to those form competing companies.The largest division was the Agriculture and Turf business. It wasmainly involved in the development of new-fangled products. The lowdemand for the equipment did not affect The Construction and ForestryDivision since it maintained its high-profit levels. The Financialservices business achieved $565 billion income. Another strategy thatthe company used was the maintenance of healthy relationships withall its dealers. Deere recognized the need for efficientdistribution. It increased the number of deals by 50% in the2011-2013 timeframe. Moreover, there was an addition of distributioncenters in South Africa and Argentina, and it also planned to startoperations in India.
Deere& Company improved the assistance it provided to the customers byfocusing on the use of technology. Through the implementation Deerepolicy, the firm was able to transmit data over a wireless network.The information was then collected and analyzed to determine theperformance of Deere and to help customers. To achieve its goals, thefirm came up with more product lines. In 2013, Deere produced nineequipment models, viable mowers, flex-fuel tractors and the company`sfirst ever hybrid-electric construction equipment. Deere focused onthe reduction of harmful gas emissions meeting of power and fuelefficiency needs of the buyers. Since 1996, the firm has reduced thelevel of emission from its equipment by around 99%.
Competitor’sAnalysis
AlthoughDeere & Company was the largest producer of farming equipment in2013, it was subjected to competition from CNH Industrial N.V, AGCOCorporation, the manufacturer of Massey and Ferguson brands andCaterpillar Inc. The market share of CNH Industrial, whoseheadquarters are in the United Kingdom, was 11.7%. The businessproduced 12 equipment brands. Its manufacturing brands were 62. Inaddition, CNH Industrial had 48 research centres and 6000 dealers.AGCO Corporation whose headquarters are in Duluth, Georgia had amarket share of around 4% in 2013. It had dominated emerging marketssuch Latin America and Brazil. AGCO had 3,100 dealers from North andSouth America, the Middle East, Europe and the Asia-Pacific region.Caterpillar Inc. recorded sales of $19.4 billion in 2014. Itsstrategies were primarily involved with after-sale services andproduction of quality equipment. Its management was also focused onmaintenance of good relationships with its 177 dealers in the world.
TheMacro-environment (PESTEL)
Theglobal population was projected to grow to more than 9.5 millionwithin the 2014-2050-time frame. Moreover, the middle-classpopulation was expected to increase in developing economies such asLatin America, India, and China. Consequently, the agriculturalproduction was projected to double by 2050 to keep up with thepopulation increase. The infrastructural development would be neededdue to the growth in urbanization. In addition, more constructionservices and paraphernalia would be required. The longstandingmacroeconomic trends were favorable for the industry which hadexperienced a 3.9% growth annually in the 2009-2013 period. Much ofthe equipment were dusters, blowers, sprayers, dairy farm machinery,and attachments. Consistently, growth in the industry was mainlyattributed to the favorable economic conditions, sociocultural forcesand the weakening of the US dollar. However, in 2014, thestrengthening of the dollar led to lower exportation.
Morethan 1000 companies are involved in tractor and agriculturalequipment production with only four of them dominating the industry.Competition in many countries was primarily affected byimplementation of policies that were aimed at reduction of emissions.Other strategic factors included Quality Control, Research, andtechnological improvements. Firms competed mainly on the basis ofcustomer service, branding, and performance.
Conclusionand Recommendation
Tobe able to solve the problem facing Deere & Company, the firmshould strive to convince more consumers to purchase its products anddevelop more brands. The management should come up with acost-effective processes that will be profitable. One possiblestrategy is the reasonable reduction of the prices while stillmaintaining the excellent quality of the equipment it produces.Customers prefer buying goods that are cheaper, and therefore thestrategy will attract more individuals. Some clients will makeconclusions that the quality of the products has lowered andtherefore it will be substantial for the company to convince theformer by producing high-quality goods. More customers will beattracted, and in addition, the loyal customers will be compelled tobuy goods in bulk. Reasonable reduction of the prices will be lesscostly since it will not require much monetary input.
Ifthe price reduction strategy fails to work, the company can turndecide to pursue brand reinforcement strategies to create more brandawareness. It can do so through the different media platformscurrently available in the world. The management teams in the variouscountry would ensure that information about the company`s brandsreaches potential customers.
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