Executive Summary. 3
Industry and Company Description. 4
Competitive Position 6
Ethical Business and Social Responsibility.. 10
Competitive Strategy 11
Foreign Market operations 13
Diversification Strategies 14
Corporate Culture and Operations 16
Strategy Execution18
References.19
Appendices20
Executive Summary
With the economic slum which almost brought many companies to their knees in 2009, John Deere managed to remain sound and operational, registering increased profit margins. This is thanks to the visionary management and staff of the company which devised strategies that insulated the company from the pangs of the economic recession. As contained in the mission statement, “Double the experience of authentic value for customers, employees and share holders”, the company’s mission and vision is deeply rooted in improving the financial status and consequently the living standard of all its customers, employees and share holders. Through the company’s strategies of Running Fast, Running Smart and Running Lean has largely helped the company to remain true to its mission and vision over the years; registering handsome financial results every year. Analysis of the company’s strategies and finances indicates that John Deere is strong. Moreover, there are still many unexploited opportunities that promise both short and long-term increment of the company’s value. In the short term, Deere aims at protecting the company’s brand’s repute through addressing latent performance issues in the retail merchandise line. Worldwide operations are also instrumental in securing the company’s growth. John Deere intends to stretch its branches so as to cover the various global economic regions such as Brazil. In the long term, John Deere’s investments in renewable resources such as wind energy will play an empirical role in further tightening the company’s partnership with farmers. These initiatives will not only promise a good future financial position for the company but also to its customers, shareholders and employees. This is because the company believes in the concept of mutualism where all parties involved equally benefit.
1. Industry and Company Description
John Deere deals with production of agricultural and construction machinery. Since the inception of the company over 170 years ago, the company has remained to be an iconic figure of value and quality in the world of farm and construction machinery. The company has been guided by unique vision and mission which with the collaboration of smart strategies have steered the company to great heights of success amid the competition that exists within the industry. The mission of the company is to deliver services and products of high quality to their customers and retailers for mutual benefit. The vision of the company is to make the company the number one choice when it comes to farm and construction machinery. From the vision and the mission of John Deere we can easily conclude that the company’s leadership is not only interested in profitability but customer satisfaction. The company is cemented on core values which can be described as mutualistic (Becker 2013). The company holds a belief and a value that it is only through good treatment of employees, share holders and customers that the company can remain competitive in the industry. The strong ties that the company maintains with its various stake holders are a confirmation of the company’s core values.
The key competitors of John Deere are Caterpillar (USA), Kubota from Japan and Case New Holland (USA).Compared to its competitor’s John Deere appears to have favorable customer relations. This can be much attributed to its vision and mission of which the customers can identify with. Based on the key accounting information, the companies appear to have smartly weathered the economic depression better than its competitors. Although there was a general decline in total revenues, the company maintained the highest gross profit proportions in the industry. The secret behind the success of John Deere is its orientation which leans more to customer satisfaction than profits. Or otherwise, isn’t it through customer satisfaction that profits are realized? (Becker 2013)
2. Competitive Position
The main competitors of Deere and Company include: Caterpillar Inc, CNH Global N.V, Terex Corporation and the AGCO Group. Of these, Caterpillar Inc and CNH Global N.V offer the greatest competition particularly on agricultural and construction machinery. One particular strength or advantage that Deere and Company has over its competitors is the quality and excellence brand recognition that the company has acquired during it 175 years of existence (Arnold 2004). In the United States, the company’s domestic citizenship has significantly increased its credibility especially with projects that are government funded which have helped it to effectively compete against companies that are foreign based, for example CNH Global (Magee 2005).
SWOT analysis
Strengths
The biggest strength of Deere and Company is its popular and widely known brand name. The brand is known for its long history and its consistent commitment to quality and product development. The company has had a relatively strong history of success, from its first official product which was a fast moving plow, even to the Great Depression when it offered financial support to struggling farmer, the company’s yellow and green tractors are easily recognizable. Another particular strength of the company is diversification of product lines. This is particularly in relation to the turf and agricultural segment. High manufacturing capability is also another major strength of John Deere. In North America, the company has over 20 factories. In foreign countries, John Deere owns and has also leased factories in areas that have strong and growing markets so as to meet changing demands and make necessary adjustments with regards to the demands of the customers (Magee 2005).
Weaknesses
Some of the weaknesses that have recently been plaguing the John Deere are recalls of residential lawn mowers and commercial or large scale farming equipment. The company has found itself recalling lawn mowers and tractors due to different safety issues that include blade safety and overheating. These issues have deeply hurt the established excellence and quality brand image of the company and could significantly have a negative effect on sales. Another weakness is the geographical concentration of manufacturing and revenues. Most of John Deere’s operations are concentrated in North America and are therefore quite susceptible to lagging growth from areas that are already developed and also to macro-economic issues .
Opportunities
Some of the major opportunities that the company has include the emerging new markets. Countries like China and in India have experienced increased demand for various agricultural commodities. This has consequently driven up the demand for agricultural machinery to produce these agricultural commodities. Deere has therefore been developing and promoting in these areas so as to capture these new markets. Increased demand for global construction has also driven up the company’s growth (Magee 2005). This is because many emerging markets are accompanied by huge population shifts which increase the need for infrastructure in order to support these needs.
Threats
The biggest threat facing John Deere is intense competition. Caterpillar Inc has a dominant share of the market and therefore offers the biggest competition. In recent years, the agricultural machinery manufacturing industry has witnessed competitors becoming more specialized and therefore focusing on product and techniques of marketing that are differentiated. This has forced John Deere to adapt and even expand its current product lines, a factor that has really stretched the company’s production thin. Another huge threat is the volatile nature of raw materials used to make or manufacture most of the company’s products, for example increased steel prices.
Porter’s Five Forces analysis
Supplier Power
John Deere usually seeks out suppliers that are small and diverse and that are in struggling markets so as to minimize the supplier’s power. John Deere also prefers to exploit high unemployment areas and whose economies are developing or looking forward to growth and whose selling prices are relatively cheap (Magee 2005).
Barriers to entry
Barriers to new entrants in this particular industry are very high and high due to the fact that it takes a lot of capital investment to compete against brands that are already established. The economies of scale also offer significant barriers.
Buyer Power
The buyers in this industry have a very huge power since most are farmers who expect to acquire machinery at low prices and later expect the acquired machines to perform exemplary. One of the most essential aspects in this industry is loyalty and hence, the post sale process is of extreme importance
Threats of substitutes
The threats of substitutes is very real to John Deer since new firma are coming up every day with eagerness to compete in this big construction and agricultural machinery manufacturing industry. This is particularly most damaging when the new firm specializes to produce customized products for customers.
The company has been facing intense competition from emerging competitors in Europe and India. Smaller and more specialized firms have also started gaining significant market share. This competition will surely become tighter in coming years.
The core competency of John Deere is Design for manufacturing and specialized processes of manufacturing that produce high quality and reliable therefore gaining an edge over competitors.
The company should try to formulate various competitive strategies in addition to the ones that it has already enacted. The value chain should also be adjusted relevantly but there should be absolutely no compromise on quality. This will ensure that the company continues with its success trend.
3. Ethical Business Practices and Social Responsibility
John Deere’s code of ethics was adopted by its board of directors in the year 2002 and it’s in line with the 2002-Sarbanes Oxley laws and the NY Stock Exchange obligations. John Deere has for seven consecutive years made to the Etisphere Institute list of most ethical companies. According to the Chief Executive Officer, Samuel Allen, the company finds it inspiration from doing well to the humanity through ethical business practices and social responsibility. The company holds a stout belief that it is the level of social responsibility and ethical standards that a company portrays that builds a good corporate image for any business.
The company has devised various strategies and methods of engaging in social responsibility. The biggest customer to John Deere is the farmer. Therefore the company has an obligation in conserving the environment to the advantage of the farmer. When the farmer benefits; John Deere also benefits. The company has thus embarked on utilizing the renewable energy sources such as wind energy as a way of fighting the global problem facing the world from the use of non renewable energy sources such as petroleum which is contributing to global warming. John Deere also maintains a sound ethical culture and tough compliance programs (Magee 2005).
Another tool of social and ethical responsibility that John Deere utilizes is the quality controls and regulations over which the company manufactures, distributes and delivers it products and services to its clients all over the world. This explains why the company is an icon for value and quality in the United States of America.
4. Competitive Strategy generic
In its competitive strategy, John Deere uses the focused differentiation strategy and the cost leadership strategies. The effectiveness of focused differentiation strategy is further backed by the market segmentation strategy. John Deere has segmented its markets into three major areas of which each of these areas is given special attention due to the different needs. These groups of consumers include the commercial farmers, the “Do It Yourself” (DIY) and the landscaping professionals. This segmentation enables the company to create a product collection that broadens quality as well as functionality based on customer needs (VanderMey 2013).
John Deere’s positioning statement that “Nothing runs fast than Deere” communicates an aspect of differentiation from its competitors within its market segments.
The distribution channels are also specialized and unique for each of the market segments. John Deere uses different retailers and distributors of products within these three distinct market segments.
John Deere has been the number one choice for customers because of its comparatively lower prices. The company uses a best cost provider approach whereby it offers more value for cash through incorporating excellent commodity attributes at a cost lower than that of rivals (VanderMey 2013). This explains why John Deere tractors, lawn mowers and other machinery may appear cheaper considering the superior attributes that they come with.
However, I would recommend that the company compliments its strategies with diversification. This will be possible through pumping more resources to the research and development department so as to come up with new products which do not only serve the farming and construction needs but also other needs such as mining. Diversification also will entail reaching new markets that remain unexploited all over the world. For example there are major construction projects in Africa and Asia that John Deere can take advantage of.
5. Foreign Market Operations
The company has however been able to gain competitive advantage due to be widely recognized brand. Various promotional strategies have also been used to promote the company/s products to potential customers who are mostly farmers. The company has also been engaging in non formal interactions with customers for example by availing loans to farmers (Becker 2013).
One other potential foreign market entry method is the acquirement of local manufacturing firms in foreign countries and putting them under its global brand. This does however involve the dismissal of local employees. In fact, the company should acquire foreign small and struggling firm and use local labor force to boost operations.
6. Diversification strategies
John Deere is indeed a very diverse multinational cooperation which has resulted from the implementation of an effective diversification strategy. The company sells a lot of things ranging from trucks, tractors and engines. Currently the company has diversified into the production of collectible toys and even tricycles. The Company has realized that there is need for them to enter into new and emerging markets. There is also the need to keep innovating or pumping funds into markets perceived as cash cows.
John Deere has made a stride towards producing new products as part of its diversification strategy. The company has been a constant innovator in this market and their longstanding commitment towards continuous innovation has produced quite impressive results. Today, the company is a top class manufacturer of forestry, agricultural and construction machinery (VanderMey 2013). It has also diversified into the supply of construction equipment, lawn care, heavy engines and financial services. In the year 2010, the company also diversified into wind energy. The company has also made significant investments in rural communities.
The need for diversification has been brought about by the increased competition and the emergence of companies producing similar products. This has prompted the company to indeed diversify and differentiate itself from the rest.
Al these diversification strategies have been very beneficial to the company. The sales, revenue and profit volumes have increased and the brand image has become even more recognizable. The company has also witnessed an increase in customer loyalty.
A potential diversification strategy for John Deere is to enter into the electronics or the automobile industry. Since the company already has a well established and known global image, it would indeed be very easy to venture into this market since the company will already have a loyal customer base head start.
7. Corporate Culture and Operations
Organizational culture is a fundamental determinant of employee motivation in any given company or organization. John Deere has over the years developed and valued a culture that guarantees employee security, comfort and satisfaction. Deere’s culture can described as a learning culture. A learning culture allows employees to independently make decisions and try out new things without punishment for failure. This has enabled the company to remain innovative as employees are ever learning and developing or improving the company’s products. An employee is also allowed a chance to exercise his or her skills as well as sharpen them for even better future jobs.
The company motivates the management and the non management team through good salaries and other incentive such as housing and bonuses. The top management also enjoys career development opportunities provided by the company where employees attend business seminars and conferences to acquire skills to enable them perform even better. The company also carries out an appraisal where employees who perform exemplary are promoted and given financial motivations.
Employee compensation comes in form of an insurance cover that indemnifies the employee in case he or she suffers loss in the line of duty. The company also secures a work man’s policy which covers employees from injuries acquired in the line of duty.
The company’s compensation package is much better than most players in the industry. As contained in its core values, the company values the role that the employee plays in making the company a giant in the industry. There is a general satisfaction of employees work in Deere than there is in other companies in the industry .For instance the Caterpillar does not acquire a work man’s policy for its employees.
However I would recommend that the company establish a savings plan for their employees whereby all employees will be remitting a specified percentage of their income to the savings plan. This savings plan will also play a role in acting as collateral incase an employee requires credit. The savings plan can also work as retirement savings plan where employees will receive their life time savings at the end of their service in the company.
8. Strategy execution
A business organization structure significantly affects how it is run. Therefore, it is very essential that the business or company establishes a structure that it deems most fitting or complementary to its strategic plan.
John Deere has a centralized organization structure. This structure is actually very orderly and is organized into a total of eight divisions. These include agricultural, turf, forestry, construction, power systems, financial services, intelligent solutions and part services. This business organization has allowed each division to be able to fully concentrate on the particular industry’s needs (Becker 2013).
However, this structure has several disadvantages with one being that is it relatively very expensive to hire into each division some duplicated personnel. This structure also leads to competition between divisions which may result to lack of information sharing. This places a huge dent on internal integration which is an essential component of the strategic plan. Therefore, a decentralized structure might work in such a scenario. With the retirement of key executives of John Deere, the company has embarked on an organizational change. This reorganization according to the C.E.O will tap more young talent so as to steer the company to its 2018 goals. This change will profoundly impact on the company’s 2018 visions. It is true that the young talent will be very resourceful in carrying this vision.
I would recommend that the company as the company embarks on a globalization plan to nurture decentralization. This implies that the multinational branches will function independently so as to attend to the different needs of the various countries without necessarily waiting for a green light from the headquarters as the case lies at the moment.
References
Authentic history of Deere & Company. (19). Moline, Ill.: The Company.
Becker, E. (2013, April 26). John Deere Management Strategy: John Deere Business Organization. John Deere Management Strategy. Retrieved May 16, 2013, from http://johndeeremanagementstrategy.blogspot.com/2013/04/john-deere-business-organization.html
Magee, D. (2005). The John Deere way: performance that endures. Hoboken, NJ: Wiley.
Arnold, D. (2004). Vintage John Deere. Stillwater, MN, U.S.A.: Voyageur Press.
VanderMey, Anne (February 25, 2013). "John Deere Plows Ahead". Fortune 167 (3): 19.
Appendices
John Deere Company ISO 9000 is undisputedly the biggest manufacturer of construction and farming machinery in the United States. The company is named after its core founder John Deere (1804-1886).The Company was founded in 1836 by the then 32 year old John Deere. John Deere was a humble black smith was determined to make farming easier through his innovations and inventions.
