Agcriculture industry, Economics, College Term Papers.com


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Back to Subjects - Economics

Agcriculture industry

Agcriculture industry There are various factors affecting the demand for John Deere's products. These factors can be categorized as Financial, Crops, Crop Prices, Line Stock Prices, Farm Equipment and the competition. Financial factors include interest rates, credit availability, currency exchange rates, monetary and fiscal policies set by the government, net farm income and government regulated price floors on the agriculture segment. Crops/Crop Prices include planed acreage, grain export and crop prices of wheat, corn, soybeans and cotton. Live Stock prices that affect the demand for the company's output are primarily the prices of Dairy, Beef and Hogs. Animal diseases like "mad cow", "foot and mouth" and crop pests and harvest yields play an important role in the live stock prices and in turn affect the demand. Farm equipment category consists of resale demand for used farm equipment, farmer's attitude towards farm equipment and new equipment prices which play an important role in the demand of the new equipment. John Deere faces a strong competition around the world, more in Europe than in US. The company realizes that demand for farm equipment is same in Europe as in the United States, but the current market share captured by John Deere in Europe is much less and hence there is a lot more room to grow there. Of these factors, the most important factor seems to be the ability of the farmer to buy the new equipment. This in turn depends on the prices of the new versus used equipment, and any financing available to buy the new equipment along with farmer's net income. World wide competition, which also affects the demand of the company's products, cannot be ignored. As far as substitutes for the firm is concerned, John Deere faces competition at home and abroad. Recent merger of New Holland NV and Case Corp to form CNH had become a threat to John Deere in the equipment industry and John Deere had to do major price slashing to gain market share from these competitors. Another competitor, AGCO, has a list of brands, which include Massey Ferguson, Fendt, White, Agco-Allis, Spray Coupe and Hesston, to name a few. AGCO has been selling a host of brands that had a long-term customer identity, but the company now has plans to develop its on brand. One of the steps AGCO has taken in this direction is the purchase of Fendt. Same Deutz-Fahr is another Italian Competitor and a ambitious leader on international front. Same, after the take over of German Deutz-Far, faced certain liability costs for a while, but now, it is very well under control. Same Group has now successfully expanded into India and Poland. In spite of strong competition world wide, John Deere continues to have a strong control in the North American markets. It is a true American multinational and is the biggest farm machinery company in the world. John Deere found its way in Europe by acquiring German based Lanz tractor operations. John Deere had also acquired a few other machiney compannies in Europe, but those acquisitions did not work up to Deere's satisfaction. John Deere is now marketing itself as a technology-based company. Farmers still perceive John Deere at the quality end of the league and John Deere is cashing on this perception to gain more market share. John Deere is definitely facing a price based elasticity. This was evident during the green sweep pricing program when John Deere decided to slash prices to gain market share from CNH. When financial incentives were offered to farmers to switch form CNH to John Deere's equipment, the company saw a gain in the market share. John Deere is now in a position where the company now has a advertising based inelasticity. The brand is popular in the market place and there is not much need to increase the awareness for the existing products. However, as and when the company introduces new products in the market place, advertising will help gain more business. At this point, the company should focus on introducing new products to the market. It has enjoyed all the benefits of the price-cutting program with out hurting the profits significantly. The consumers already trust the quality and service of John Deere. Hence, introducing new products in the market will be easy. Moreover this is the only way to continue to be a global leader in the farm machinery industry. Bibliography:

Word Count: 728