Deere and Company(DE), more commonly referred to as the John Deere. It is a manufacturing company of agrarian and building equipment. It is one of the largest manufacturing companies of its kind in the world. Since its inception in 1837, the company has continuously achieved high profit and demand.
John Deere – Business outline
Last fiscal year, the company’s equipment operating profit was about 75% which only comprised the Agriculture and Turf segment. The other remaining 25% was operating profit comprising the Deere’s Construction and Forestry segment.
Research shows that 60% of John Deere’s sales are induced in the U.S. and Canada only.
Understanding Competitive Advantage
Competitive Advantage is what compels a buyer to give priority to one brand over the other. It refers to the aspects that grant a company to manufacture goods or services better or more cheaply correlated to its opponents.
Competitive advantage is crucial to stay ahead of the competitors in this fast-running business world.
John Deere’s competitive advantage is mostly embedded in its long-running operations and the prudent culture adopted throughout its journey, with John Deere’s history dating back to almost 175 years ago.
John Deere’s biggest competitive advantage and strength are Agriculture itself.
Different competitive advantages
- It has relentlessly concentrated on the advancement and productivity of its customers by always keeping in mind their needs and further investing in the development of its products.
- It spends over $1.4 billion on only research and development.
- The Patent Board named John Deere as the number one innovator in the heavy industrial equipment industry.
Following are the different John Deere’s competitive advantages
1. Intangible in nature –
One of the biggest competitive advantages that John Deere possesses is its intangible nature.
- They have a very effective relationship with their independent customers.
- It has an enormous network of independent dealers in the U.S. agricultural business.
- These dealers further have developed a strong relationship within the farmer communities.
- This dealership many times goes on from one generation to the next.
- In the survey of 2000 Midwest farmers, 77% of farmers described themselves as brand loyal.
- It successfully pursues an extended web of distribution.
- Deere has fewer competitors than its dealers. Therefore, successfully maintaining a gap.
Farmers’ loyalty towards the brand and the more number of dealers is what makes its intangible nature successful.
2. Sustainable Competitive Advantage
Sustainable advantage plays a very vital role for a company to stay ahead of the competition and gain as much as business profile possible.
- It earns a competitive advantage by becoming a cost leader and by differentiating from the rest of the companies in the market.
- John Deere has a very apparent strategy of differentiating from the competition.
- The focal point of John Deere’s strategy is providing good quality machines and good quality of service for its customers.
- A very effective strategy that John Deere follows is of patenting its inventions and ideas and thus making itself the only company with those products and solutions.
- It is continuously attaining a competitive advantage through copyrights and trademarks.
- As per marketwatch.com, John Deere was included in the top 100 global innovators in 2012.
- It was judged on certain parameters. Those parameters included the areas of overall patent volume, patent grant success rate, global reach of the portfolio, and patent influence.
All these strategies and parameters proved what John Deere thrives to be and how uptight it is about searching and innovating better ways for people who work on the land.
3. Effective Bargaining Power
Bargaining power is something that can empower both the seller and customer at certain points and in certain situations. It somewhere holds the bargaining power with its suppliers.
- John Deere, with more bargaining power with its suppliers, gets good products at cheaper prices.
- It holds more bargaining power as compared to its suppliers because the suppliers know that quitting production for John Deere is going to bring a huge amount of loss at their doors only because John Deere is responsible for their huge chunk of sales.
- Therefore, more bargaining power is in the hands of John Deere.
- When it is about customers, even in that case, John Deere has more bargaining power.
- Their innovative products with high quality make it difficult for the customers to bargain for a lower price.
- The high quality of products and the high quality of services of equipment make customers realize that the prices of John Deere products are high.
- Customers know what they are investing in and what high-quality products they are attaining.
- That is why the customers have low bargaining power.
Rivals and competitors
- Rivals and competitors play a very significant role in the making of a company’s competitive advantage.
- Every company has to deal with its rivals and John Deere is not new to this. Many companies such as Case IH, New Holland, and Cat had competed with John Deere at one juncture or the other on distinct categories. But no company stands like John Deere at a global platform. This gives John Deere a competitive advantage over the others.
- It is not possible for new startups or companies to directly compete with such a settled and huge brand.
- It would require a new company to come up with a whole new set of ideas and innovations that can compete with John Deere at a global level.
Deere’s earnings might have faced a slight downfall in recent years because of the less agricultural cycle. Despite all of this, It is still standing tall. With the increase in demands and dependency on agriculture, John Deere can continue dominating the market as usual.