Deere & Company recorded its best-ever year in fiscal 2013, with sales and earni

Question

Deere & Company recorded its best-ever year in fiscal 2013, with sales and earnings of $37.8 billion and $3.5 billion, respectively. The company’s revenues and earnings declined to $36.1 billion and $3.2 billion in fiscal 2014, but the company’s global strategy keyed to product innovation and quality, operating excellence, and best-in-industry customer service protected the company from slowing demand for agricultural equipment. Deere & Company achieved its record-setting year in 2013 and an impressive year in 2014, despite a slowdown in the construction industry, where it also competed with a line of tractors, articulating dump trucks, backhoe loaders, motor graders, excavators, and bulldozers. The company also manufactured and marketed forestry equipment, turf equipment, and diesel engines for marine and construction equipment uses. Deere had introduced dozens of technologically advanced agricultural and construction products that helped boost productivity and lower the costs of its customers in farming and construction.

An increasing world population and the consequential global increase in the demand for grain and grain-dependent foods, as well as the increasing need for construction, turf, and forestry equipment, were all factors that would benefit the company in the long-term. International markets such as China, Brazil, and Russia already accounted for more than 35 percent of the company’s revenues in 2013, and they would likely make up a much larger percentage of sales in the long-term as living standards in emerging markets improved. Deere & Company had recognized the importance of international expansion as early as 1956, when it first established operations outside the United States, but it was accelerating its efforts to prepare for rapid increases in the demand for food in international markets. The company built or acquired new plant capacity in Brazil, Germany, and China in 2013. In 2014, new construction equipment factories were opened in Brazil.

The company’s prospects for stronger performance in 2015 were challenged, however, by a sudden and significant overall weakness in the global agricultural sector. In 2014 and 2015, the weakening farm economy resulted in lower agriculture sales, which more than offset the increase in construction and forestry sales, resulting in a 5 percent drop in new sales. Reuter’s reported that Deere’s sales had suffered in 2014 and 2015, as bumper corn harvests drove down prices, leaving farmers with less cash to spend on equipment. Corn prices fell about 15 percent in 2014, on top of a decline of nearly 40 percent in 2013. The company’s primary challenge in 2015 was the continuing declining demand for agricultural equipment, which was resulting in significant reductions in sales and earnings. Deere’s CFO commented in 2015 that the company was facing the deepest downturn in the North American agricultural sector in 25 years. Nonetheless, John Deere’s management expected to have a profitable year despite the prospect of lower sales.

Using the Deere & Company in 2015 Case Study, respond to the following questions:

How would you describe Deere & Company's international strategy?

What opportunities and/or threats are present in the international arena to which Deere & Company must respond?

What actions do you think Deere & Company should take in response?

Explanation / Answer

Deere’s international strategy was to expand business globally and improve its complimentary business. The company jams understood the importance of world class distribution. The company wants to increase its customer base across new regions. So company would like to increase the horizontal scope of the firm. The company wanted to capture the globally increased demand due to increasing world population and increase in living standards internationally. Deere has the ability to quickly move into newer emerging markets which is the opportunity for the company in response to growing population and demand. Since agriculture sector depends on the condition of the economy at that time, it is cyclical in nature. Economic downturn can price a threat to the company. the company has to adhere to the government regulations in every country having different method of doing agriculture John Deere needs to decrease their dependence on the agricultural equipment segment of their business. They should shift their focus from the agricultural sector to other parts of their business, thereby diversifying their overall risk.

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