Deere & Company in 2015: Striving for Growth in a Weakening Global Agriculture S

Question

Deere & Company in 2015: Striving for Growth in a Weakening Global Agriculture Sector In 2015, Deere & Company, headquartered in Moline, Illinois, remained the largest agricultural equipment and machinery manufacturer in the world, with operations in more than 26 countries. Despite a slowdown in the global construction industry, Deere had its best-ever year in fiscal 2013 with record net income for the third consecutive year. The company’s record sales and earnings of $37.8 billion and $3.54 billion, respectively, resulted from the success of its global strategy keyed to product innovation and quality, operating excellence, cost reduction, and best-in-industry customer service. The company built or acquired new plant capacity in Brazil, Germany, and China in 2013, and planned seven new factories in international markets in 2014. Deere’s prospects for even stronger financial performance appeared favorable as the global demand for agricultural products was forecast to double by 2050. International markets such as China, Brazil, and Russia already accounted for more than 35% of the company’s revenues in 2013, and these emerging markets would likely make up a much larger percentage of sales in the long term as living standards in emerging markets improved. 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, continuing into 2015, a weakening farm economy resulted in lower agriculture sales which more than offset the increase in construction and forestry sales, resulting in a 5% drop in new sales, 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. In fiscal 2014, John Deere’s revenue declined by 3.4%, and net income fell by 10.6%. Deere’s Chief Financial Officer, Rajesh Kalathur, 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. The company’s primary challenge, moving from fiscal 2014 to 2015, was how to best defend against the competitive pressures stemming from its chief rivals in the agricultural and construction equipment industry — Caterpillar, CNH Industrial N.V., and AGCO Corporation, and how to manage in face of the reduction in global demand for agricultural machinery and equipment.

1. How strong are the competitive forces confronting Deere in the global market for agricultural and construction equipment? Do a five-forces analysis and identify the key driving forces and key success factors to support your answer.

2. How have Deere’s business strategy choices strengthened or weakened its competitive position in the agricultural and construction equipment industries? Discuss how the company’s senior management has chosen to increase the horizontal or vertical scope of the firm.

3. Has Deere’s increase in scope also been a part of its international strategy? Is the international strategy best characterized as a multi-domestic strategy, global strategy, or transnational strategy? Explain.

4. Is Deere’s business strategy producing good results?

5. What business strategy recommendations would you make to Deere’s management? Should the company consider divesting assets or acquiring new assets? Are there other potential strategic options that should be under consideration? Please justify your recommendations by outlining the pros and cons of each.

Explanation / Answer

1. a. bargaining power of customer----Farmers who won deer product are loyal to the brand and would only buy parts that fit the brand name. A unique difference about buying a deere is that everything comes complimentory by color and fit. At the time of great depression in 1932 ,when its revenue decreases , even through deer company was loosing money ,the company management chose not to repossess farm equipment owned by farmer unable to make payment during the depression . this can be seen in the fact that deere and company was the world leading manufacturer of agricultural and foresty equipments.

2. Bargaining power of supplier-----deer has manufacturing plant in the united state, located in seven states. Also expansion plans called for new manufacturing locations in key market that were to be completed in 2013 and ready in 2014 to support increased production.

3. 3. Inductry rivalry------competitor are intense, it is to be noted that most manufacturers tend to be market leaders in sub segement of heave equipments. every brand has distinct competative advantage over its competitor , but no brand truly stand out.

4. substitutes----heavy equipment has almost no substitutes. it is very specialized market and substitutes would consist of using man power as substitutes but no other could exist to do so.

5. goverment regulations-----All equipments may pass stringent emission test, as well as number of number of health and safety regulations before being able to operate.

2. Deere and company set a goal to achive $50 billion in sales by 2018 and 12 percent profit margin by 2014. these seem to be lofty goals in the organization. the key for deere was to expand business globaly and improve its complementory businesses. Deere also understand the importance of delivering value, understanding customer, and also offering world class distribution centre. deere also increase its customer base across key region. the leaders at deere realizes that they could improve the market share of north america as well. the choices the company made has strengthen its competative advantage. I think the chompany choose to increase the horizontal scope of the firm. the company is seeking to grow and is attempting to enhance its presence in newer markets.

3. Yes, Deere has increases in scope has been a part of its international strategy. specifically the company planned to advance operations and increase market share across six key market. the united state, canada, brazil, china, russia, india nd european union. The international strategy can be best characterized as a transnational strategy. this is due to the fact that deere company have developed international strategy concentrated in generating compitative advantage in domestic and emerging markets around the world to capitalize on the industry opportunities.

4. Deere company business strategy is defenatly producing the good reasult. i found that they are performing at profit.

5. The business strategy that i would recommed the deere company is a continious focus on technology and increased customer service, coupled with compiative pricing, which would help the company to increase its market share. Instead of divesting assets and acquiring new assets another potential strategic option shoyld be to increase sales and market share domestically and international by merging with one of its competitor or other similar straegies.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.