imm.john deere
TRANSCRIPT
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International Marketing Management term paper
ON
JOHN DEERE
SUBMITTED BY
MUTHU KUMAR. M
1PT11MBA21
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CONTENTS
1)INTRODUCTION
2)STP ANALYSIS OF JOHN DEERE
3)DYNAMIC ENVIRONMENT OF JOHN DEERE
4)PRICING STRATEGIES OF JOHN DEERE
5)OPERATIONAL DIFFERENCE IN DIFFERENCECOUNTRIES
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COMPANY & INDUSTRY PROFILE
Nothing Runs Like A Deere
Since 1837, the John Deere brand has been an iconic American symbol of quality and value.
Unlike many American corporations, John Deeres success is measured in generations, rather
than years or quarters. Tied to the crafts of agriculture and construction and guided by a
genuine partnership with those who profit from the land, John Deere has defined its industry
through continued innovation and service.
Now, after a 170-year race to become the worlds leading manufacturer of heavy machinery
for farmers and contractors, John Deere is getting a second wind. Refocused after a strategicshift in corporate direction in 2001, John Deere has set out on a new path to significantly
increase the value it provides to its shareholders. Within the agricultural and construction
machinery category, John Deere comfortably held a top spot in the minds of customers by
consistently producing high-quality products and intently handling service issues. However,
the organization suffered from the seasonal ebbs and flows inherent in the agricultural
sectorits most profitable and largest division . In addition to the pressures of a seasonal
business, the organizations internal operations were nearly vertical. Inefficient teamwork and
communication processes plagued the organization and isolated the value of best practices
within the operational and manufacturing silos.
Since 2001, John Deere has worked to streamline the organization, rallying around ultimate
performance yardstick: Shareholder Value Added (SVA) . John Deeres renewed focus on
SVA has improved the efficiency and profitability of the organization by striving to achieve:
1. Exceptional operating performance
2. Disciplined SVA growth
3. Aligned, high-performance teamwork
By measuring success across the organization in terms of these three objectives, John Deere
has rewarded shareholders with consistently strong performance across the business cycle
and through the economic downturn.
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Company Overview
John Deere organizes its operations into three core categories: Agriculture & Turf,
Construction & Forestry, and John Deere Credit Accounting for 79% of total revenues,Agricultural and Turf equipment makes up the majority of John Deeres operations. As of
their October 31st fiscal year end,
revenue was down 18.7% with gross profit and earnings-per-share (EPS) also falling 21%
and 56%,
respectively.1 While the $5 billion sales decline during 2009 was the largest year-over-year
in company history, net income of $900 million ranks among the highest in the companys
history.
SWOT ANALYSIS
Deere & Company, usually known by its brand name John Deere , is an American
corporation based in Moline, Illinois, and the leading manufacturer of agricultural machinery
in the world. In 2008, it was listed as 102nd in the Fortune 500 ranking. Deere and Company
agricultural products, usually sold under the John Deere name, include tractors, combine
harvesters, balers, planters/seeders, ATVs and forestry equipment. The company is also a
leading supplier of construction equipment, as well as equipment used in lawn, grounds and
turf care, such as ride-on lawn mowers, string trimmers, chainsaws, snowthrowers and for a
short period, snowmobiles.
The company's slogan is "Nothing runs like a Deere" and has a picture of a deer as a logo, a
word play pun on "nothing runs like a deer."
Additionally, John Deere manufactures engines used in heavy equipment and provides
financial services and other related activities that support the core businesses.
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Strengths
* Cost advantage
* Asset leverage* Innovation
* Online growth
* Market share leadership
* Strong management team
* Strong financial position
* Pricing
Weaknesses
* Bad communication
* Diseconomies to scale
* Low market share
* Weak management team
Opportunities
* Acquisitions
* Asset leverage
* Financial markets (raise money through debt, etc)
* Innovation
* Product and services expansion* Takeovers
Threats
* Competition
* Economic slowdown
* External changes (government, politics, taxes, etc)
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Target Market Segmentation
The segmentation decision involves decomposing a market into homogenous subgroups and
selecting target segments within operating divisions. The riding lawn mower productcategory provides valuable insight into John Deeres approach to market segmentation. In our
evaluation, the Agriculture and Turf Division targets three major consumer segments:
Commercial Farmers
Landscaping Professionals
Do It Yourselfers (DIY)
This segmentation decision allows John Deere to build a product portfolio that expands
quality and functionality based on end user demands. Within the riding mower product
category, the main consumer segments are Landscaping Professionals and DIYs. These
segments have important ramifications on channel selection for John Deere because they
deviate from the companys core agricultural customers.
Positioning
John Deeres famous positioning statement, nothing runs like a Deere, communicates both
differentiation from the competition and meaningfulness within the target segment. This
statement reinforces the key quality attributes inherent in John Deeres reputation and
positions the brand as a source of value for the consumer. From a job completion perspective,
John Deere claims that its tractors get the job done faster than the competition, a message that
John Deere promotes in the product catalogue.
Targeting
John Deere targets all kinds of farmer, from big to small farmers. Their products are
designed such that they cater all the needs of the farmers. Also, the company has various
earths moving equipment and these products are targeted mainly to the US customers.
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Dynamic environment
Deere & Company, usually known by its brand name John Deere (NYSE: DE), is an
American corporation based in Moline, Illinois, and the leading manufacturer of agricultural
machinery in the world. In 2008, it was listed as 102nd in the Fortune 500 ranking. Deere and
Company agricultural products, usually sold under the John Deere name, include tractors,
combine harvesters, balers, planters/seeders, ATVs and forestry equipment. The company is
also a leading supplier of construction equipment, as well as equipment used in lawn, grounds
and turf care, such as ride-on lawn mowers, string trimmers, chainsaws, snowthrowers and
for a short period, snowmobiles.
The company's slogan is "Nothing runs like a Deere" and has a picture of a deer as a logo, a
word play pun on "nothing runs like a deer."
Additionally, John Deere manufactures engines used in heavy equipment and provides
financial services and other related activities that support the core businesses.
The company was founded in 1837 by John Deere, who developed and manufactured the first
commercially successful cast-steel plow.
Politics
Globalization has been a current trend to every industry which also includes the apparel and
fashion industry in which is due to the construction of import international facilities and
establishment.
It has been noted that when products are traded regulations and policies are present. With
these regulations and policies, companys operations may be impaired. Some countries also
control the entrance of foreign companies which would also affect the process of operation of
these companies. Large tax implementation is one of the controls that government usually
pursues. With such government control many companies are impaired and usually can not
operate on those countries.
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In the case of the regulations in the retail industry it has negative impacts because the
regulations in the retail industry could easily be changed beyond the established limit and will
affect the business adversely, in addition companies such as target will obtain higher costs in
expenses due to the changes.
Furthermore, changes and transformation in overtime regulations and the share of the retail
stores in the healthcare bill. It has a huge effect on GAP negatively or positively. In the case
of the regulations in the retail industry it has negative impacts because the regulations in the
retail industry could easily be changed beyond the established limit and will affect the
business adversely, in addition companies such as target will obtain higher costs in expenses
due to the changes. The healthcare bill, on the other hand, will have positive effects on GAP
because the bill will aid in controlling the prices of the medicines in the market which in
return will help the consumers, as well as the company.
Economic
During the period of 2004 to 2006, a change in consumer preferences in apparel is more
apparent. Many underground sales of unbranded apparel are very common. It even extends to
the export of these apparel to many Asian countries.
Another factor that would affect the external environment of Target is the US economic
growth; the rapid or slow growth may have a positive or negative impact on the business. If
the growth is fast then consumers will have higher purchasing power, on the other hand, if the
economy is very slow then it will also have an effect on the attitude towards purchasing
products. Another is the low-cost destinations sourcing; it will either affect the economy
positively or negatively. Positive, in the sense wherein the company will have more
consumers because of the cheaper products offered. On the other hand, the local suppliers
would be affected because the company prefers outsourced products.
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Socioeconomic
With the increasing globalization of business, society has also been more concern with thedegradation of the environment and a continuous concern for the benefit of the employees.
The society has call for attention to industries for social responsibility. This includes human
right protection of corporate employees, consideration for the health and safety of consumers,
and contribution to local communities.
And with the increasing global environmental issues that arise with the globalization, people
are now increasingly aware of the effects of the continuous industrialization.
Another factor is the rise of the population of the retiree, companies such as GAP wherein it
has numerous employees will have a hard time obtaining more employees, the retirement of
employees is rapidly getting higher while the replacement does not increase.
Technological
It has been noted that apparel and fashion industry has experience a rapid technological
changes over the years. This fast changes has lead to a more sophisticated, with a significant
apparel and fashion items present in the present time. To provide comfort and aesthetic value,
while still being friendly to the environment, these new fashions use the latest developments
of many different technologies.
The utilization of new software and technology for faster production and marketing, which is
more helpful and useful because it makes the job of the employees and management easier
and error free.
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organizational structure
The organizational structure of a business has a great effect on how the business is run. The
organization needs to look at all of these structures and decide which one fits their business
best. They should first decide if they want to have a centralized or decentralized strategy and
which one would be more beneficial to them.
John Deere has chosen to be centralized and very orderly. They are organized by eight total
divisions. These divisions include agricultural, construction, turf, forestry, financial services,
power systems, parts services, and intelligent solutions. Organizing their businesses in this
manner gives each division the advantage of concentrating on the needs of their particular
industry. For example the agricultural team has recently developed a line of row tractors that
enable the operator to widen or shrink the space between the wheels at the push of a button
from inside the cab. This allows for the tractors to drive down the rows of fields much easier
and be adaptable to each individual farmers rows. The turf division does not need to worry
about driving down rows but instead should look for ways to take pressure off the ground so
that they don't leave indentations in the earth because they are usually working on soft
ground.
The disadvantage of this type of business structure would have to be that it is expensive to
hire duplicated personal for each division. It can also lead to divisions not sharing ideas if
they are competing against each other. John Deere doesn't seem to have to much of a
problem with this because they are organized by industries. Forestry generally doesn't have
to much to do with agriculture and vice versa. This prevents the divisions from competing
for the same customers.
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Pricing strategies adopted by John Deere:
John Deere & Co. (DE) is slashed on farm tractors prices as part of a strategy to chip
away at Agco Corp.'s (AGCO) leading market share in the American market. Agco
Chairman and Chief Executive Martin Richenhagen said he's reluctant to engage in a pricewar with Deere, but added that Agco is determined to maintain its market share and would
resort to retaliatory price cuts if Deere's discounting persists in America. "They're trying to
buy market share," he said during remarks to reporters. "They're very aggressive on pricing.
This is something we haven't done yet."
A Deere spokesman said that the company does not comment on its prices in sepcific
markets. While a price war between equipment manufacturers would provide farmers with
lower costs for tractors and harvesting combines, profit margins for machinery manufacturers
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would suffer and a price war could potentially destabilize the industry. Deere, the world-
leader in machinery sales, is targeting overseas markets for additional sales growth. The
Moline, III. Company is making a push to expand sales in South America, Russia and India.
Agco, whose brands include Massey Ferguson, Fendt and Challenger, is a distant third in the
global farm machinery market behind Deere and CNH Global NV (CNH). But Georgia-based
Agco maintains a strong presence in several key machinery markets, including Brazil and
France, which is Europe's largest market for high-horsepower tractors. In Brazil, Agco's share
of the tractor market reached as high as 60% at the peak of the last equipment cycle. But
demand in Brazil cooled in 2010 and Agco ended the year with 53.7% of the tractor market,
according to equipment shipment data supplied by Brazil's Authorities. Analysts expect a
10% decline in industry-wide equipment sales in Brazil this year. But Deere has been
outperforming the Brazilan market lately, increasing its monthly tractor shipments from a
year earlier, while overall industry shipments retreat. Agco and CNH Global have largely
followed the industry trend with lower year-over-year monthly shipments. Agco's share of the
tractor market was 52.7% in March, down from 53% in February. Richenhagen maintains
that monthly market share data is typically volatile and not an accurate reflection of the
results of Deere's discounting strategy. He said Agco continues to have advantages over
Deere in South America that should help Agco combat Deere's price-cutting. "John Deere has
always been in South America. But we have a better brand image. We have better
distribution," he said. "So far, we haven't had to do something special." But Richenhagen said
Agco could launch a counter attack on Deere in North America--where it dominates the
market--if Deere doesn't back off its pricing strategy. "I'm not in favor of these price battles,"
he said. "But we could reduce our tractor prices by 15% in America. It wouldn't kill us
because we are comparably small there, but it would be a big problem for Deere." Agco stock
was recently up 0.56% at $51.71 a share.
From the above price battle, one can conclude that John Deere has been following a
Discount Pricing strategy where they want to capture the market by providing tractors at
lower price than their competitors thereby want to capture the markets worldwide with the
same strategy.
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Operations of John Deere: India and Overseas
In India, the farm lands are rather small compared to that in USA or other big
countries. This has prompted John Deere to come out with different variants of tractors (bhp)
to cater to the Indian Market.
Also, due to less use of technology in India, the tractors produced for India have
rather less technological superiority. Whereas in USA, farmers prefer tractors with advanced
technology. Thus the company manufactures tractors with superior technology to cater to US
and other developed market.
Also, John Deere has only restricted itself by releasing only tractors to the Indian
market. Whereas, to the US market, the company has various other agricultural equipment.
This is done as there is not much demand for agricultural equipment in India as it is there in
the US markets.