Case 19 Assignment

Assignment Questions:
1. How strong are the competitive forces confronting Deere in the global market for agricultural
and construction equipment? Do a five-force analysis and identify the key driving forces and
key success factors to support your answer.
The five forces are:
Supplier power. Deere managed to keep its other competitors from driving up the price
because of suppliers pricing by building its own supply channels. In each of its six identified
key regions Deere established manufacturing plants that supported its main production line.
For example, the Company had three primary businesses: Agriculture and Turf Equipment,
Construction and Forestry Equipment. Deere opened manufacturing plants across the U.S.A in
such area as (Iowa, Illinois, North Dakota, Georgia, Louisiana, Missouri, and Wisconsin) each
plant designed to manufacture different parts. Internationally Deere opened manufacturing
plants in key markets such as China in support of construction equipment, engines, and large
farm equipment. Apart from raw material to make parts Deere doesnt depend on external
supplier in support of its equipment. They specialize in making everything deer this is evidence
by all supporting parts and equipment stamped with the green color and Deere logo on them.
Buyer power. Deere & Company was the worlds leading manufacturer of agricultural and
forestry equipment, with a market share of 35.4 percent in 2013. Primary competitors in the
tractors and agricultural equipment industry were CNH Industrial N.V the maker of Case and
New Holland tractors and construction equipment; AGCO Corporation, the maker of Massey
Ferguson and other brand; and Caterpillar, Inc. Deere own the buyer power over its rivals.
What is uniqet about owning a Deer is everything comes complementary by color and fit.
Farmers who own Deere equipment are loyal to the brand and would only buy parts that fit the
brand name. Deere have expanded their business to international markets where they strengthen
their band by providing humanitarian support through its corporate responsibility programs.

Competitive rivalry. It appears that Deere rivals pose no threat. There are more than 1000
business that produce farm equipment but Deere has carved out a stake in the market that makes
them the big fish in the pond. Deere band and customers focus has proven to be a strategy that
has kept them above all others. Product quality, innovation, customer service, branding, and
performance were essential areas rivals competed on. Generally, price competition between the
three rivals was low; as a result, competition centered on overall value instead of price. Deere

aim at feeding the world has pushed them to seek what farmers need and make the equipment
tailor to those needs.
Threat of substitution. Deere aftermarket products along with its unique band color and logo
makes its products special. Deere & Companys farming equipment product lines were aimed
at supporting the farming of every owner of Deere equipment and compelling the thought of
shouldve got a John Deere among those who farmed with rival equipment.
Threat of new entry. Competitor barriers to entry into the industry ranged from low to medium;
however, with such fierce competition among the top three, entrants were surely challenged.
2. How have Deeres business strategic choices strengthened or weakened its competitive
position in the agricultural and construction equipment industry?
Deere strategically aimed at supporting owners of farmers with Deeres farming equipment
and compelling the thought of shouldve got a John Deere among those who farmed with
rival equipment has strengthened its competitive positioned. Their approach to supply every
farmer with a Deeres equipment in a global strategy that has proven to worked and left and
impression on the mind of rivals customer about the quality of Deere products. Deeres strategy
of producing the highest-quality, most reliable farm equipment and offering farmers the highest
level of customer service has continued to make them a stand-alone in the industry. Discuss
how the companys senior management has chosen to increase the horizontal or vertical scope
of the firm. Deeres horizontal or vertical scope is to integrate their business minds into a
particular region with the intent of understand the business challenges facing the customer base.
The company believed its critical business factors (CBFs) consisted of better understanding
consumers at a root level, delivering value, offering a world-class distribution system, and
grooming and hiring extraordinary international associates. The CBFs were predicated on
building from the foundation already in place. The company evaluated the health and
performance of its operation on an ongoing basis and as necessary,, made appropriate
adjustment s to further improve customer value. Deeres purpose was to be fully committed to
those linked to the land.
3. Has Deeres increase in scope also been a part of its international strategy? Yes,
Is the international strategy best characterized as a multi-domestic strategy, global strategy, or
transnational strategy? Explain. Deeres is using a transnational strategy as it seeks a middle
ground between a multi-domestic strategy and a global strategy. Deeres tries to balance the
desire for efficiency with the need to adjust to local preferences within various countries. For

example, Deere & Company management would be compelled to develop an international

strategy that yielded competitive advantage in domestic and rapidly growing emerging markets
to capitalize on the industrys opportunities.
4. Is Deeres business strategy producing good financial results? Use the financial ratios in
Table 4.1 in the text as a guide.
Gross profit margin: shows the percentage to revenues available to cover operating expenses
and yield a profit. Deeres @ 32% means that they are above industry standards for profit.
Operating profit margin: shows the profitability of current operations without regard to interest
charges and income taxes. Deeres 84%
Net profit margin: shows after tax profits per dollar of sales. Deeres @ 9%
Total return on assets: a measure of the return on total investment in the enterprise: Deeres @
7%
ROA: measure of the return earned by stockholders on the firms total assets. Deeres @ 9%
ROE: return stockholders are earning on their capital investment in the enterprise. Deeres
@34% above average returns on investment.
ROIC: a measure of the return that shareholders are earning on the monetary capital invested
in the enterprise. Deeres @ 11% means that are great at using long term debt to their
advantage.
Liquidity:
Current ration: shows a firms ability to pay current liabilities using assets that can be converted
to cash in the near term. Deeres @ 2.04 above normal
Working capital: cash available for a firms day to day operations. Deeres @ $22,963,900.
5. How do Deeres financial results measure up to those of its direct rivalsCaterpillar,
AGCO, and CNHin the top tier of the agricultural and construction equipment industry?
Deeres financial position is strong giving the market they are servicing. They are committed
to selling Deere industrial products to every farmer large or small; at the end of 2013 Deere
Net income was $3,537,300 and Caterpillar reported net profit of $3,789,000. Deere in
comparison to AGCO Corporation Deeres gross profit was $12,128,100 to AGCO $2,390,600
from this prospective they were more profitable in 2013. Deere are meeting its strategic goals
and making a healthy profit also.
6. What business strategy recommendations would you make to Deeres management? I
recommend that Deere use the best-cost provider strategy. Deeres vision of servicing every
farmer with Deeres superior equipment speaks to its corporate values. They are making money

as a business but money making is not what drives this business, helping the worlds farmers
seems to be the ultimate objective. Should the company consider divesting assets or acquiring
new assets? I dont see any reason why they should be divesting assets at this point
Are there other potential strategic options that should be under consideration? Please justify
your recommendations by outlining the pros and cons of each.