Deere & Company's Business Strategy: Evaluation and Analysis

This report provides a comprehensive analysis of Deere & Company's business strategy, evaluating its financial performance through liquidity, profitability, and solvency analyses. It utilizes Porter's Five Forces and PESTLE analysis to assess the external environment, identifying key macroeconomic factors influencing the company's operations. The report examines Deere's competitive rivalry, comparing its performance with competitors in terms of financial metrics, services, and product offerings within the farming equipment industry. Ultimately, the analysis aims to provide insights into the effectiveness of Deere & Company's strategies and its position in the market. Desklib provides a platform to access similar documents and study resources.

Running head: BUSINESS STRATEGY
Business strategy
Name of the student
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BUSINESS STRATEGY
Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................3
Evaluation of strategy:.....................................................................................................................3
Analysis of liquidity position of Deere and company:....................................................................4
Analysis of profitability position of Deere and company:...............................................................4
Analysis of solvency position of Deere and company:...................................................................5
Analysis of eternal environment:.....................................................................................................6
Description of competitive rivalry:..................................................................................................9
Conclusion:....................................................................................................................................10
References list:...............................................................................................................................10
Introduction:

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The report is prepared to analysis the overall business strategy of Deere and company.
Performance of strategy of company and evaluation of external environment are done by the
application of Porters five forces and PESTEL analysis. It helps in the identification of the
significant macroeconomic factor that is affecting the business of company. The product line and
farming equipment of Deere and company intends to support the farming of owner of Deere
equipment and the company excelled in a particular financial year. It was because providing
farmers with highest level of customer services and producing the equipment that are most
reliable. The key of business of Deere was to expand globally and enhancement of its
complementary business (Deere.com 2018). In the later part of report, description of competitive
rivalry of organization has also been demonstrated and comparisons between the competitors are
done in terms of financial performance, services and products and their respective positions in
the farming equipment industry.
Discussion:
Evaluation of strategy:
The analysis of financial performance of Deere and company has been evaluating by
using three performance measures of tools of ratio analysis. The three financial measures are
liquidity analysis, profitability analysis and solvency analysis. Liquidity position of company is
analyzed by the computation of current ratio and quick ratio. Profitability position of company is
evaluated by computation of return on equity ratio and return on assets. Solvency position of
Deere and company is evaluated by debt to equity ratio and debt ratio.
2014($) 2013($)
Liquidity measures

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Current ratio 2.152 2.037
Quick ratio 1.955 1.815
Profitability
measures
Return on equity 0.346 0.345
Return on assets 0.051 0.059
Solvency ratio
Debt to equity ratio 3.406 2.641
Debt ratio 0.852 0.827
Analysis of liquidity position of Deere and company:
Current ratio of Deere and company has increased to 2.15 in year 2014 compared 2.03 in
year 2013 respectively. The reduced figure is indicative of the fact that ability of company for
meeting their short-term obligations have increased and the reason is attributable to increased
amount of current assets and reduced amount of current liabilities. Now, looking t the figures of
quick ratio, the figures have increased from 1.81 in year 2013 to 1.955 in year 2014 respectively.
Increase in value of quick ratio is not favorable as it is indicative that business environment in
which company is operating is not certain. It also depicts that cash flow generation of company
is not stable. Therefore, the liquidity position of company has improved in one aspect while it is
no so favorable in aspect of quick ratio analysis.

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Analysis of profitability position of Deere and company:
Return on equity of Deere and company for financial year 2013 stood at 0.345 and for
year 2014 value stood at 0.346. This figure show that ratio has reduced by less value and depicts
that efficiency of firms for generating profits from shareholder funds has not reduced. There is
not much effective utilization of investors fund as the ratio is below the industrial standards.
Now, looking at the figures of return on assets, it can be seen that figures have reduced from
0.059 in year 2013 to 0.051 in year 2014 respectively. This reduced value depicts that the
effectiveness of company to generate return on investment using assets have reduced. It can be
ascertained from the analysis of case study that net income of company has significantly declined
in year 2014.
Analysis of solvency position of Deere and company:
Debt to equity ratio of company has increased from 2.641 in year 2013 to 3.406 in year
2014 respectively. This increase in figures of ratio is attributable to increase in total value on
noncurrent liabilities and decrease in total value of shareholder’s equity. An increase in debt to
equity ratio is indicative of less financially stable business and investment in company is
considered risky from perspective of investors. Moreover, it also depicts that investors have not
funded the operations of company.
Now, looking at figures of debt ratio, there has been increase in figures from 0.827 in
year 2013 and value has increased to 0.852 in year 2014 respectively. Increase in figure is
because of increase in value of total liabilities by higher than increase in total assets. However,
this particular figure is not favorable but increase in value of ratio is alarming for organization.
Therefore, from the analysis of figures, it can be said that solvency position of Deere and
company is alarming and appropriate measures should be taken to reduce their total liabilities.

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Analysis of eternal environment:
The analysis of macroeconomic factors that is considerably influencing the business of
Deere and company is done by the employment of PESTLE analysis. It is a strategic tool for
conducting the analysis of political, environmental, economic, social and legal factors that have a
impact on Deere and company’s macro environment.
Political factors- The Company have exposed itself to several types of political
systematic risks and political environment because it is operating in constriction and farm
machinery of dozens of countries (Deere.com 2018). It is required by company to diversify the
systematic risks of political environment for achieving success in a dynamic construction farm
and machinery industry. Deere and company is required to analyze the factors such as antitrust
laws, pricing regulations, wage regulations, interference and bureaucracy in construction and
farm machinery.
Environmental factors- The need for infrastructural is expected to increase the demand
for construction services and equipment. Growth in industry segments of dairy farm equipment,
harvesting machineries, dusters and sprayers also determined the success of Deere and company.
Profitability of organization can be considerably impacted by the environmental standards of
different countries (Deere.com 2018). This can be explained with the help of an instance, the
liability clause in case of international disasters is different in Texas and Florida. Some of other
European countries gives tax benefits to companies that operate in renewable sectors.
Social factors- Social factor that should be considered by Deere and company involves
skill level and demographic population, attitude of farmers, broader nature of society and
entrepreneurial spirit along with education level of population. Success of company is also

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attributable to their relationship with dealers throughout the world. The aftermarket support
system and effective distribution by dealership determines the success of company.
Technological factors- Technological factors play a very important role in meeting the
requirement of customers in meeting the requirement of growing demand of farmers. Cost
structures, product offerings and value chain efficiency of company is dependent upon the
advanced technological factors (Deere.com 2018). Market share of company can be increased by
continuously focusing on technology.
Economic factors- The competitive environment of Deere and company is impacted by
competitive norms and other economic factors of different countries such as spending of farmers,
growth rate and inflation. Growth trend in the agricultural sector of different countries and usage
of technology and aerial photography determines the success of business. Demand of farm
machineries and currency strengthening of different countries of operation influence the
performance of farming company. Other factors affecting the performance of company is labor
costs, discretionary income, and skill level of workforce in industry of farm and construction
machinery (Deere.com 2018). Income growth and growth in global population is expected to
provide advantages and opportunities of company.
Legal factors- While entering into any new market area, Deere and company should take
into consideration of legal factors such as discrimination law, antitrust law of machinery and
construction farm industry, data protection and consumer protection.
Porter’s five forces can be used by an organization for gaining an understating about the
competitive forces affecting the profitability of business and accordingly help in the development
of competitive advantage.

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New entrant threats- The production of tractor and agricultural equipment industry is
concentrated primarily among four major players and Deere Company being one of the top
players. However, there are rivals of the company but in the current situation; there is not any
threat of new entrant towards the company. Nonetheless, any danger of new entrants would have
pressure on the pricing strategy of company and cost structure of company.
Suppliers bargaining power- The suppliers in the farm and construction industry have
abundance of bargaining power and only few suppliers, which does not have good relationship
with companies have lower bargaining power. There has been increase in number of dealership
by 50% and this has led to addition of new distribution centers (Deere.com 2018). It can be
inferred that some suppliers in the industry have stronger bargaining power and some have lower
bargaining power.
Buyers bargaining power- In the construction market, buyers of the heavy equipment
industry are the large corporations. Small independent farming firms do not have much
bargaining power and most suppliers have plenty of bargaining sources. Governments who are
the bulk buyers also enjoy considerable bargaining powers.
Threats from substitute products- Some of the rivals of Deere and company has a
strong presence in the farm equipment market. They provide customers with diversified range of
products, however, heavy equipments generally does not have substitutes as they have a very
specialized market. Therefore, threats from substitute products are low.
Existing player’s rivals- Some of the rivals of Deere and company are CNH Industrial
N.V, AGCO Corporations merger, New Holland tractor and constructor equipment and

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caterpillar Inc. company operates in a very competitive environment, however, this does not take
a toll on overall profitability of business.
Description of competitive rivalry:
Deere and company is the leading manufacturer of forestry and agricultural equipment
that has a market share of 35.4% in year 2013 (Deere.com 2018). The primary competitors faced
by company in the tractor and equipment industry are the maker of Case and New Holland
tractors that is CNH Industrial NV, AGCO corporations and caterpillar Inc who is the maker of
Massey Ferguson. There three players in the industry are the closest rival of company. CNH
Industrial N.V markets agricultural equipments under twelve different regional brands. This
particular brand markets and manufactures commercial vehicles, truck and buses under the brand
Heuliez and Iveco. Selling of construction and agricultural equipment helped in generation of
revenue for company. ACGO Corporation have market share of 4% of global equipment and
farm industry and the product lines of company involved grain storage silos, planters and many
other agricultural equipments (Deere.com 2018). In some of the emerging market, this company
enjoys a strong market presence. Tractors were sold under different brand and this is the major
source of generation of revenue. ACGO had a wide range of dealers in different areas of
operations.
Caterpillar Inc was engaged in the construction and manufacturing of the natural gas
equipment, mining equipment, diesel power locomotives and gas turbines. Company was also
engaged in manufacturing of medium to small sized track type tractors for the mining and
construction industries. Construction equipment of company was sold in different countries such
as Europe, North America, Latin America and Middle East. The strategy of caterpillar was
focused on after sales service and best in quality of industry. Products of caterpillar were in top

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notch and the construction projects of different consumers were able to schedule properly.
However, company experienced a decline in sales during the financial year 2013.
The primary business of Deere and company are turf equipment, agriculture, forestry and
construction equipment (Deere.com 2018). Strategy of company was to manufacture the heavy
equipment and specialize and that is the differentiating factor of company. In can be seen that net
sales of Deere and company also fell during the year 2015 and in light of this, the management
of company revised the projects due to several macro economic factors. The industrial forces
dampened demand for farm equipment and Deere’s adopted the strategy of increasing their
revenue.
Conclusion:
From the analysis of case study relating to Deere and company, it is ascertained that the
overall financial position is not favorable. There has been considerable decline in revenue and
net income of company year on year. Considerable decline was witnesses in the sales of
equipment manufactured by company. Some of the factors attributable to this significant decline
in sales and revenue generation were mostly attributable to industrial forces of different countries
in which they were operating. However, amount of total liabilities has increased, but the short-
term liabilities have reduced in year 2014. It was required by business establish a more durable
business model and wide ranges of revenue sources.

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References list:
About the Company | John Deere US. (2018). Deere.com. Retrieved 23 February 2018, from
https://www.deere.com/en_US/corporate/our_company/our_company.page