assignment

Competitive Analysis

The market for agricultural equipment is essentially an oligopoly that consists of Deere, CNH, Caterpillar and AGCO. All these companies have dealer network and operation in developed and developing countries and there is intense competition among them for the market share. The key markets where these rivals are fighting for the market share are India, China, Brazil, USA, Canada, Russia and European Union. It appears that on the basis of 2013 sales, Caterpillar is more susceptible to rising interest rates and or economic slowdown because most of its sales are in the construction sector ($18 billion out of $57 billion). The industry overall is highly competitive which provides sustainable growth opportunities to these four operators because of the low threat of substitute or new entrants. The intense rivalry will remain in the future because every company is trying to capture maximum possible share in the existing few markets.

Corporate Analysis

1. Financial Analysis: Revenues of the Deere and Company have seen a steady increase from 2011 to 2013, with an average year over year growth of 8.74%; and moreover, Deere and Company’s profit margin have been an average of 8.88% of revenue from year 2011 to 2013, greater than the industry average of 6.2%. Deere and Company are also more efficient with cost of goods sold, and operating activities relative to revenues in comparison to its top four competitors (Exhibit X). In addition, Deere’s inventory turnover in days of 47.7 days further illustrates the company’s financial success. Its apparent that Deere and company are extremely successfully in selling their products as equipment is flying off the shelf 20.5 days faster then the next fastest selling competitor (Exhibit X). However, despite all their success in sales, the company faces major challenges in their cash cycle (Exhibit X). The company is extremely inefficient in collecting receivables as their company’s receivable turnover in days is 334.8 days which is 283.8 days longer than the next competitor who takes the longest (Exhibit x). A slow collection period may be in result of Deere’s strong bond with farmers to not reposes equipment if payments are not made in time. Though the reason for leniency is Deere’s great commitment to customer satisfaction, the company is unable to pay their current liabilities in time which takes 30.1 days longer than the next slowest competitor. Deere and company is also highly leveraged with 83 percent of total assets financed with debt (Exhibit x). Also, the company’s total capital invested is financed 68 percent through debt (more than half). Consequently, despite their great success with sales growth, with the current issues involving their cash cycle and debt, Deere is greatly hindered with expanding globally.

2. Corporate Culture: Deere’s corporate culture is revolved around delivering great quality and providing innovative products that result in greater customer value and service. Stemming from striving to provide value and service to its customers, Deer developed culture of corporate responsibility. The company is giving back to the world by identifying solutions to world hunger, improving educational opportunities, and helping to develop better communities in locations where it operates. In most cases, Deere’s employees volunteered to assist in the execution of its social initiatives. In addition, employees can feel a sense of purpose to work for a company that always aims to innovate and improve lives. As a result, employees are most likely proud to work for a company that is socially responsible and a company who provides a purpose (Innovate), which sets a positive culture within Deere and Company.

3. Company Structure: The structure of Deere and Company is made up of three divisions; Agriculture and Turf Equipment, Construction and Forestry Equipment, and the Financial Services. The agriculture and Turf Equipment division was Deere’s largest division and was the focus of its new product development activities. In addition to the three divisions, the company’s structure was also made up of strong dealership collaboration for an effective distribution system. The company has plant dealerships all across the world. Deere also has several plant operations in the United States and on a global scale.