John Deere’s 7310R tractor set a new total fluid efficiency record of 258g/kWh for high horsepower Stage IIIb and Stage IV tractors after undergoing the demanding Powermix test at the DLG test centre in Germany at the end of 2014. A similarly high level of performance efficiency was also achieved by the same tractor in the DLG’s Transportmix test.
Fuel efficiency, productivity and pulling performance are the key benefits of John Deere’s high-horsepower 7R, 8R and 9R Series tractors, which will be featured on the company’s working demonstration area at Tillage Live in Lincolnshire this September.
The current global economic state is slowly progressing, which is a positive indicator for the industry. Increasing farm income over the next five years will most likely boost demand for agricultural and turf machinery, but farmers will probably remain cautious with their purchasing decisions. Therefore, domestic sales will continue to be static. However, increasing demand in South America, China, India, and other global emerging markets is expected to significantly boost international sales of all product lines over the next few years as population and income growth in these emerging markets will drive this trend. In an effort to analyze the company’s place within the industry and to identify John Deere’s organizational strengths and weaknesses, as well as opportunities and threats in the industry, we’ve analyzed the company with two tools, the SWOT and the C5 analysis.
General Economic Conditions:
A subdued recovery of the US economy and the slowly improving domestic housing market poses a threat on the overall condition of the company. The US housing market is a bellweather to the construction industry and has a heavy influence John Deere’s construction and forestry segment’s performance. A lethargic economic improvement in Europe has also lowered the demand for machinery purchases and affects the number of leasing operations. Industry sales in the 28 European Union countries (especially in the agricultural and turf equipment segment) are forecast to decrease about 5% in 2014 due to a slow post-crisis recovery and financial woes. 15 Weather Conditions:
John Deere competes in agriculture equipment and construction machinery sector. This industry is highly competitive with many companies competing for limited customers and a share of the sector’s revenues. Competitors’ objective is to increase (or at least maintain) their position in the marketplace nationally and internationally. It is difficult for the smaller companies to enter the market because of the economies of scale, well-established relationships with the major suppliers and dealers, and huge expenses on research and development. John Deere has quite a few competitors. Out of all these companies, the main threats seem to be from Caterpillar and Kubota. Both rivals have made emerging markets a high priority; and Kubota has also aggressively targeted farmers in Africa. Deere has targeted Latin America as well, but it hasn’t been as aggressive with its international efforts as its peers. Deere’s stock price has reflected its lack of initiative in expanding globally.16 Caterpillar Inc.
Complemented by the new e23 transmission offering 23 forward and 11 reverse speeds, this makes John Deere 7R Series tractors among the most efficient in the industry, helping customers to significantly reduce their operating costs. This in turn was reflected in the introduction last year of a new fuel guarantee programme, designed to reward 7310R tractor customers financially for fuel-efficient driving on the road.
According to John Deere executives, whichever company (Monsanto, Dupont, Chery, etc.) masters this technology will have a competitive advantage in the industry. However, one of the biggest challenges in this new development is getting independent John Deere dealers and farmers to understand and use these complicated systems. John Deere has overcome the first hurdle, by being one of the first agriculture machinery companies to develop this technology that is embedded in its tractors, now the company must focus on educating, selling and constantly improving the technology.19
Become the Leader in Precision Farming Technology:
Despite significant gains in technology, especially GPS systems over the last few decades, seed planting and tools to cultivate the land have largely remained the same. For generations, planting has been done on the farmer’s ability to know his field and his equipment. Production efficiencies were more a function of the farmer, than of his equipment. Frequently, one field is more productive than the other and the farmer just accepts that predicament. In the last decade, John Deere has created technological systems on its tractors that give the farmer the ability to understand the composition of his soil, foot-by-foot. This technology includes detailed mapping, soil makeup, archived crop yields and the water and fertilizer needs of each plant. The technology presents this information in an organized fashion that assists the farmer in making a plan for future planting and more productive crop rotations.
(3) Expand its sales offerings into the selling and marketing of its own seed and fertilizer. Take Advantage of Emerging Markets:
John Deere has spent much of its 172-year lifespan largely focused in the North American markets while its competitors have made international expansion a priority. The company aims to increase its market share every year in North America, but John Deere must move its focus to outside of the United States. With opportunities in emerging markets due to technology, population growth, increased wealth and urbanization, Deere has an opportunity to grab hold of these opportunities to grow its market share outside of this region.
Due to the interconnected, yet diverse nature of the products and services John Deere provides, each service line tends to have its own market collaborators and strategic partners in that specific market space. Modern agricultural and construction equipment have become as technology driven as our automobiles, and John Deere’s strategic partnership with the Denso corporation benefits John Deere by providing new technology that makes more powerful, yet more full efficient engines. John Deere’s collaboration with General Electric has resulted in precision agriculture technology called Greenstar. Greenstar is a GPS driven, topography scanning technology that has reduced the farmers need for fertilizers and herbicides by nearly 20% per acre, by more accurately tracking farm machinery planting and production processes which reduces waste. Customers:
The company, similarly to Caterpillar, is aggressively challenging Deere, specifically in the agricultural and turf equipment service lines. Kubota is a tractor and heavy equipment manufacturer founded in 1890 and based in Osaka, Japan. Kubota currently has operations in North America, Europe, and Asia. Kubota, together with its subsidiaries, manufactures and sells farm equipment, engines and, to a lesser extent construction machinery. The company has three business segments: Machinery, Water and Environment, and the Others segment. The latter involves design, construction and servicing of various works, as well as the manufacture and sale of housing equipment. Kubota is also involved in the provision of retail finance and finance leases, which primarily finance sales of equipment by dealers. The company sells its products directly, as well as through wholesale and retail dealers, agricultural cooperative associations, trading companies, and local distributors.18 John Deere C5 Analysis