In this post, we will conduct a pestel analysis of John Deere, one of the leading agricultural and construction equipment manufacturer, based in the United States and with sales and operations across the globe in several countries. This analysis will show how the various macroenvironmental factors affect John Deere’s business and the key challenges before it as an international business operating in an intensely competitive industry environment.
John Deere is a leading manufacturer of agricultural, forestry, construction and road construction equipment, based in the United States. The company has its headquarters at Moline, Illinois, United States. John Deere is a multinational company with sales and distribution across more than 100 countries. A large number of its customers are large and small businesses and buyers from the government sector. The company enjoyed strong financial performance in fiscal 2021.
Since its foundation in 1837 by John Deere, the focus of the company has been on innovation and quality to drive higher productivity for its customers. The company has continued to expand its product line and market share and offers a large range of products for customers across various sectors.
John Deere is operating in an intensely competitive environment and apart from its leading competitor Caterpillar, there are several more players including international and local players that compete with John Deere.
However, the company has maintained its strong competitive position and market leadership through a continuous focus on innovation. It enjoys strong popularity and brand recognition in various corners of the globe.
A Pestel Analysis of John Deere
Political:
John Deere is a leading manufacturer of agricultural, forestry and construction equipment with operations around the globe in several countries. The company sells its equipment across more than 100 countries through a large network of distributors.
Any company operating in the international environment faces political challenges since government policies and regulations can have a significant impact on demand and sales of products in specific regions. For example, developments in the US-China trade relationships can have a significant impact on John Deere’s ability to capitalize on the opportunities in the Chinese market.
Geopolitical changes in various parts of the world can also have a significant impact on the business of brands like John Deere. For example, the war between Russia and Ukraine led to several leading brands suspending their operations in Russia which is a key market for agricultural equipment and other related products. John Deere has also suspended its shipments to Russia, following the escalating situation in Ukraine.
There are more political factors like government-imposed embargoes, sanctions and export controls on certain persons, entities, financial institutions, or geographical regions that affect the sales of John Deere products in various regions. Political volatility in various regions also affects the sales and profitability of John Deere in those areas.
Economic:
Economic factors are among the most crucial considerations related to international business. Economic volatility, condition of the global and local economies, competition, fluctuating currency exchange rates, interest rate levels, certain commodity prices, and other economic factors affect the sales and profitability of international businesses like John Deere.
The pandemic caused a global recession and led to higher economic and demand uncertainty. If negative economic conditions sustain for longer, they have a negative impact on demand in various sectors including housing, energy, construction and other sectors, which in turn can dampen the demand for John Deere equipment.
There are various types of economic and financial risks involved in the business of John Deere. The banking, monetary and financial policies of various governments including the US and other governments undertaken to stabilize the economic and financial situation in various markets can also impact the market conditions and sales of John Deere products.
The performance of various industry sectors depends on the performance of the global and local economies. Following the pandemic, there has been some economic recovery in 2021, but how sustainable the recovery is remains unclear. John Deere enjoyed improved revenue in 2021 following the decline in 2020 caused by the pandemic. However, uncertainty still remains and the company has made several changes to its operating model to beat the negative impact of the pandemic and resulting economic uncertainty.
Social:
Social or sociocultural factors have also affected international businesses worldwide in various regions. Social uncertainty in various regions can affect the company’s operations and profitability. These factors also have a significant impact on the business of John Deere in terms of marketing. The company has maintained a strong social image and invests in various philanthropic activities to improve the condition of living in the several communities where it operates.
The changing consumer demographics are also an important factor that affect the sales and profitability of large international brands like John Deere. Worldwide, changing demographics and the growing use of technology and internet across various societies and cultures has affected how businesses market their products. With demographic changes, consumer preferences have also changed and businesses like John Deere are focusing on innovation to cater to the changing demand patterns and consumer preferences.
Technology:
Technology is also a leading factor in today’s intensely competitive business environment that has a significant impact on business productivity and performance. John Deere is operating in an intensely competitive environment and invests heavily in innovation to maintain demand and sales. It deals in a large range of equipment for several industries including forestry, construction, and agriculture.
Technology has remained a key driver of business growth and expansion since John Deere’s foundation.
In 2021, the company invested around $1.6 billion in research and development to improve its existing products and to create new technologies that can help its customers improve their productivity.
In the heavy equipment industry, from production to sales, distribution and marketing, technology plays a crucial role in each area, helping firms create more and create better in less time and market to more customers worldwide while spending less.
Technology is the main growth driver across most industries including agricultural and construction equipment industry.
Even during the pandemic, technology remained a crucial driver of sales for the John Deere brand. Since the company could not depend on traditional marketing channels for business growth, it relied upon digital technology mainly for marketing and sales. Even after the pandemic, digital continues to remain at the center of the marketing and distribution strategy of John Deere.
Environmental:
Environmental factors have also taken center stage and grown crucial for large and international businesses. It is not just about minimizing one’s carbon footprint any more but businesses are investing in environmental protection, sustainable business processes and the production of more sustainable products for several other reasons as well. It helps them maintain a strong brand image and several businesses like John Deere are also able to help their customers and suppliers minimize their carbon footprint.
The John Deere brand family includes more than 25 brands. Its family includes a Blue River Technology brand that makes products to help farmers improve production sustainably. It developed the See & Spray select technology which is available on John Deere 400 and 600 series sprayers and combines computer vision, machine learning and robotics.
The company has also launched several more sustainable innovations in the recent years like integrated Exact Rate Liquid Fertilizer solution, CH950 Sugar Cane Harvester, and C770 Cotton Harvester. John Deere has also achieved 20% reduction in scope 1 & 2 greenhouse gas emission.
The focus on the environment has intensified since the pandemic as well and companies like John Deere are investing more in building sustainable solutions and making their processes environment friendly. While it will help the company minimize its environmental impact, it will also help it maintain a superior brand image among its customers and other stakeholders.
Legal:
Legal factors have grown increasingly important for businesses operating in an industrial environment. Companies with global operations have separate and dedicated compliance functions to deal with legal issues and developments in their legal environment across various countries. John Deere has its operations across a large number of countries worldwide and the business is required to comply with all the relevant laws including antitrust laws in the US and abroad, labor laws, and other laws related to consumers’ rights and product quality.
John Deere has established a code of conduct in place for its business operations that its employees, suppliers and other key internal stakeholders are required to follow. It ensures ethical business operations and apart from them the compliance team takes care of the legal concerns affecting business across various locations throughout the globe. However, the company is also dealing with a number of legal challenges across the United States particularly. Farmers have filed complaints in the US against John Deere regarding the violation of Sherman act alleging monopolization of the repair service market for John Deere equipment.
A few last words about John Deere and its Macroenvironment:
John Deere is enjoying a leadership position in its industry sector which is an outcome of its continued focus on innovation and product quality. The company faces several challenges in its macroenvironment. However, its strong image, focus on innovation, digitalization and strong relationships with suppliers have helped the company overcome several of its biggest challenges. In the coming years, technology will continue to play a central role in terms of market expansion and business growth. Sustainability and environmental factors have also grown highly crucial for industry leading brands like John Deere. The company is focusing especially on sustainable operations and the sustainability of its business processes to minimize its carbon footprint. While john Deere has maintained a strong social image, it is also facing some legal challenges. Overall, the company is enjoying a strong competitive position and seems to be poised for faster growth in the future.