Porter’s Five Forces Analysis of Deere & Company
|Name||Deere & Company|
|Headquarters||Moline, Illions ,United States|
|Revenues||US$ 44.02 Billion ,2021
US $ 52.58Billion,2022
|Profit||US$ 5.96 Billion , 2021
US$ 7.13 Billion, 2022
Headquartered in Moline, Illions, United States reaching the 84th place in the Fortune 500 List and ranked 153rd by Forbes Global 2000 Year 2022,is one of the leading manufacturing firm for construction and agriculture equipment with a track record of 185 years. It is founded by John Deere in 1837.The Company has Net Assets of US$ 90.03 Billion in FY 2022,while compared to US$ 84.14 Billion in FY2021.The Company is operating through three major lines which are Production and Precision Agriculture , Small Agriculture and Turf ,Construction and Forestry, and Financial Services.
Today we are going over Porter’s Five Forces of Deere & Company
Deere & Company Rivalry among Existing Competitors
- Deere & Company Business Operations The company in present in more than 100 locations globally with a 75,600 employees globally. The 48% of the annual revenues are generating from outside USA.
- Deere & Company Business Segmentation FY 2022 and FY 2021 Analysis.
The revenue segmentation divided as 41% from Production and Precision AG which is US$ 21.68 billion, the 19% from Small Agriculturewith a revenue generation of US$ 10.02 Billion, Turf with a revenue of US$ 3.02billion, from Construction US$ 5.84billion, from Compact Construction US$ 1.67billion, Roadbuilding US$ 3.44 billion, Forestry US$ 1.30 billion and Financial Products and Services US$ 3.76billion, Other US$ 1.78 billion in FY 2022.
The revenue segmentation divided as 36.89% from Production and Precision AG which is US$ 16.24 billion, the 19.5 % from Small Agriculture with a revenue generation of US$ 8.61 Billion, Turf with a revenue of US$ 2.85 billion, from Construction US$ 4.68 billion, from Compact Construction US$ 1.48 billion, Roadbuilding US$ 3.74 billion, Forestry US$ 1.28 billion and Financial Products and Services US$ 3.66 billion, Other US$ 1.43 billion in FY 2021.
- Deere & Company Business Geographical Presentation FY 2022 and FY 2021 Analysis.
The geographical presentation by revenue US$ 28.23 billion from U.S.A and US$ 3.90 billion from Canada, the second segment is Western Europe which contributed US$ 6.34, while Central Europe and CIS generated US$ 2.2 billion ,while Latin America generated US$ 7.3 billion and Asia, Africa, Australia, New Zealand and Middle East generated US$ 4.4 billion in FY 2022.
The geographical presentation by revenue generation is approx. 57% revenue generated from U.S.A with a revenue generation of US$ 22.81 and Canada with a revenue generation of US$ 3.01, the second segment is Europe which contributed 22% with a revenue generation of US$6.42 and Central Europe with US$ 2.6 billion, while Latin America generated US$ 4.5 while 11% from Asia, Africa, Australia, New Zealand and Middle East with a revenue generation of US$ 4.5 billion in FY 2021.
- Caterpillar The Caterpillar Company, USA headquartered, is a market leading producer of construction and mining equipment with a model of financial products, gave a record revenue of US$ 59.4 billion in FY 2022, which is an increase of almost 16% compare to previous year, while US$ 50.97 billion in FY 2021.The Company reported a record revenue of US$ 6.70 billion in FY 2022,which is an increase of 3.5% compared to previous year,while the profits were US$ 6.48 in FY 2021.
The Caterpillar is also the top leading company by the market revenue share in the global market in FY 2020,declared by Statista.
- Komatsu The Komatsu Company, headquartered Tokyo, Japan is a market leading producer of construction, mining and industrial vehicles and manufacturing equipments with a model of financial products.In 2022, the company gave a record revenue of approximately US$24.5 billion (converted value from Japanese Yen) with an approximately US$1.8 billion of profits.
Deere & Company Threat of New Entrants
- Global Construction Equipment Industry Projections and Prospects for Future Growth: The Global Construction Equipment industry is standing at a market value of US$ 136.3 billion, with a projected growth rate of 25% in next 5 years, having a largest market in China. The North American market is project to be the second biggest market globally as of 2020.The highest globally growing markets are India and China.
In such scenario the Industry is potentially attracting new comers or any move from existing giants in any other industries or any technological development specially taking consideration of AI technologies.
- Heavy Investment and High Technological Advancement
As the company is not only operating on a manufacturing and servicing model or also facilitating as a Financer and it’s competitors like Caterpillar is also following the same model so any new entrant need the same financing. As for FY 2022 only Financing Receivables are amounted to US$ 36.63 billion while in FY 2021 they were US$ 33.79 billion. While the Equity was US$ 20.6 billion and Liabilities were US$ 69.67 billion in FY 2022 while maintaining such a ratio is not an easy task.
Deere & Company Bargaining Power of Suppliers
- Supplier Diversity, Inclusion, Quality – Code of Conduct (Supplier Industry Influencer)
Deere and Company believes in supplier diversity and inclusion, for such measures Deere and Company provided Supplier Quality Manual, Purchasing Terms and Condition, Supplier Code of Conduct, John Deere Quality Policy Restricted Material and Supplier Diversity.
- IT Advanced Supplier Portal &Hitachi Acquisition – Supply Chain Disruptions
Deere and Company provides along with wide Supplier Digital Network Services the Electronic Data Interchange Guidelines (EDI) and also self-application services for transparent selection of suppliers and for speedily transactions digital E-Invoice Application Services.
The John Deere Company fully acquired three former Deere Hitachi Joint Venture Factories for US$ 6.90 billion for a more smooth supply chain as of March 2022 while US$ 0.70 billion only worth for License Agreement.
Supply Chain disruptions are like to present due to COVID-19 slow recovery and Russia-Ukraine invasion.
Deere & Company Bargaining Power of Buyers
- John Deere & Customer Investment Through FoodBanking Systems and Volunteering :
The Company invested and developed a FoodBanking System with an investment of US$ 2.7 million, which further served people belong to home community crises worth of US$ 32 million in FY 2021.Also over US$ 3 million have been invested through volunteering 124000 out of which 111,000 hours were dedicated to U.S based communities.
- John Deere Investment in it’s Customers- Farmers Industry Leadership and Trend Setter:
The John Deere strives with a mission of equitable financial growth around the globe with such vision John Deere time to time invest it farmers as only FY 2021 John Deere invested US$ 3.4 million in it’s farmers which reached up to 1.4 million total farmers.
Investment in “Hello Tractor” is also an example of such an investment in Kenya which is initiative to make the farming modern with the connectivity with Technology.
Deere & Company Threat of Substitute Products or Services
- Russia Operations Cease – Ukraine Invasion – Geopolitical Crises:The John Deere & Company’s Russia’s operations sales were 2% of the annual sales from FY 2017 to FY 2021.As due to Russia-Ukraine invasion the company ceased all operations. The company was doing a range of operations and services in Russia including manufacturing and selling of equipments and providing Financial Services. Almost as of Oct 2020 the company had an exposure of US$ 226 million in Russia Business Operations.
- Global Economic Crises – World in COVID 19 Recovery –Global Warming:The Global Construction Industry was standing at US$ 12 trillion (spending value) COVID -19 even after slow growth it is expected the industry will be standing at US$ 19 trillion by 2035.Any further crises will slow down the economic demand or else any global resolutions towards climate change or any calamity will also the business operations of Deere & Company.
- Forbes, Deere & Company, Available at Forbes
- Forbes Global 2000 Year 2022 List
- Fortune 500, Deere & Company , (2/1/2023) .Available at Fortune 500
- Deere & Company, Annual Report 2022
- Deere & Company, Annual Report 2021
- Deere & Company , At a Glance
- Statista (Sep, 29, 2022).Largest construction machinery manufacturers globally in 2020, based on construction equipment sale (in billion U.S. dollars) | Statista. [online] .Availableat Statista
- Forbes, Profile, Komatsu
- John Deere Invests in Hello Tractor (August 02,2022).Available at John Deere
- Statista (April, 20, 2022) Construction equipment industry worldwide statistics and facts (in billion U.S. dollars) | Statista. [Online] .AvailableatStatista
- John Deere Supplier Network. Available at John Deere
- Statista (March, 21, 2022) Top Mining Companies worldwide Statistics and Facts – Statista
- Statista (April 20,2022) John Deere Statistics and Facts .Available at Statista