John Deere is an American corporation that manufactures farm equipment such as construction, agricultural, diesel engines and forestry machine (Hughes and Cain, 2011). The company has three main business operations which include forestry, agriculture, and construction. This paper provides an outline of the SWOT analysis of John Deere. This is an important way of identifying John Deere weaknesses, Strengths, opportunities and threats. Using this information in the assessment of the company is important in understanding its position o and what is required of them for improvement. It helps to determine what may be important in helping the company to reach its objectives. It will also be important in defining the obstacles of the company and the opportunities and ways of overcoming their threats in order to achieve their desired results.
Agricultural market share
When John Deere was founded, it was created on the based on the innovation world of agriculture. For the last 178 years, the company has been able to achieve and has continued to lead the agricultural sector. The company has been able to hold 78.32% of the market share in the agricultural sector (Deere, 2003). The sales of the company include tractors, seeding equipment, and harvesters. This has made up to 73.1 percent of the company’s revenue. The company has continued to produce new products that have made it be ahead of other companies in the market. This has boosted its revenue and customer satisfaction by ensuring that the products they produce are technological and that they ensure efficient functioning in order to increase effectiveness due to increased threats in the agriculture market and facing challenges of lower income.
Framers have described themselves brand loyal in different markets when purchasing their equipment’s such as tractors. This has brought a great sense of the brand loyalty of the company. Most of the brand loyalists have favored the company and have boosted its growth (Deere, 2003). They have also shared important feedback that has facilitated the growth of the company. Their brand loyalty has been presented to most of their customers allowing the company to mature in terms of customer’s relations. Through increase customer relations the company has been able to increase their brand loyalty. This has reduced the demand for targeting new markets and costs that are incurred in ensuring that they gain more customers through marketing. This has been achieved through strategic branding and ensuring that they meet their customer’s expectations. Research has been carried out indicating that 66.7% of the customers have identified the company’s brand as their primary brand. In addition to the brand loyalty, customers have claimed that they have a strong relationship with John Deere.
Through research, the company’s inventory management has been very effective to the company. For instance, in 2000 the company was able to partner with Smartops in order to ensure shrinking inventory. The management of the company has not only ensured that they have an efficient process but also reduced the amount of capital that is being wasted in their stores. This has boosted substantial cuts in their inventories which have still continued to decline over years. This partnership with Smart Ops has been effective to the company’s inventory hence boosting their inventory management.
Diversified product portfolio
With such diversification of products in three different sectors which are construction, agriculture, and forestry, the company has been able to benefit from this diversity (Yunes et al., 2007). This is because the company has been put in a position that it has various equipment and different customers that increase their revenue. This puts the company in a perfect position whereby the company is able to compete with other companies in different markets. This has boosted the company’s identity because of their diversification hence increasing their sales revenue. A diversified segment of a company means that they have been created for a safety net in terms of their revenue stream. As the agriculture sector market declines, the company can be able to grow in other sectors such as forestry, and construction. This has reduced the risk of company decline due to various opportunities in different markets.
Research and development
John Deere has ensured that they use their resources in the most efficient way in order to ensure that they are effective in their market. The company has utilized common systems that have been used to lead to the best use of resources, shared corporate culture and execution. The company has invested a great deal of money in development and research, which has led to the company excelling in their processes. It is stated that four percent of the annual revenue goes to research and development in the company. Through such big investments, they have enabled the company to advance and influence their market growth in different areas such as Russia and Brazil. The need to innovate and acquire new markets, the company has ensured that it has innovated new products and that they ensure that they have created a relationship with other leading companies that will boost their investment decisions.
The company has faced long detriment that is caused by lack of liquid capital. This is evident because the company has seen a decline in both quick and current ratios. These have fallen 50% percent below the average of the industry. Despite the company collecting credit sales more than the industry, the large amount of finance does not benefit the company through providing enough immediate cash that will be considered as a liquid on the company. This issue of liquidity in the company has increased the number of debts that the company has. The company net debt has increased over $65 million up to $1.8 billion, This substantial increase in their debt has been effective in their operations because they do not make attractive investment due to lack of liquidity.
Forestry and construction market
John Deere has a better percentage of the market share of both construction and forestry market. This means that the company has a greater opportunity for expansion. These sectors are expected to increase and expand in order to boost the revenues of the company. They are expected to rise drastically over the next few years in relation to the construction rates in their markets. This is also related to the population and rural developments in their markets.
Through global market expansion, the company will be able to acquire more markets hence increasing their revenues. Global markets increase product awareness and boost the number of potential markets. This is because more exposure increases the potential of the company to gain more customers. Through such development, the company will be able to increase its market shares in the world. The continued global expansion increases the company’s international presence that enables it to invest in other parts of the world. This is because it will have increased its existence in the world with rising amounts of the market population which will enable John Deere to manipulate the regions than before.
The company has worked with the customers in order to ensure that they create new opportunities that are important to both the company and their customers. This has been done through leasing equipment’s, enhancing credit card and obtaining crop insurance. These opportunities have reduced the risks that other companies are facing in the market. leasing the equipment’s has led to lower and feasible payments that will not lead to detrimental to the farmer’s income. Through the provision of the crop insurance, the company is trying to boost the farmer’s decision to purchase the equipment’s despite the threat of unfruitful periods. The company has used the financial strategy in the attempt to clear the negative impacts on their revenue due to the economic state that is following the agricultural sector
High competition in the market
There has been a huge competition in the forest and construction market which has posed a great threat to the company. This is comparing its market position to its competitors such as Komatsu and caterpillar. This is because the existence of such companies has been known hence John Deere has to ensure that despite having forestry and construction ad new venture, it has to increase its shares in the market.
The agriculture sector has been declining hence bringing challenges to the company as the agriculture market has a greater influence on the company’s market sales. The company has reduced its sales in the agriculture sector which has influenced the company’s revenue.
High raw material costs
Another threat faced by the company is the increased material cost. This has affected the company’s cost behavior. The company has faced many variable costs that are necessary for the production of their products. This has affected the production cost of the company for all the equipment’s that have been built.
Construction and Forestry segment have been positioned to purposefully take advantage of the constant global growth. This has been a detailed strategic business assessment that John Deere has aimed at. Through a well-created supply chain, the company will be to run long (Nelson, 2002). As the economic conditions improve, the company will be able to grow strong and make better investments. Through global market expansion, there is a greater potential of the market which will boost the revenues of the company.