John Deere & Company

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Deere & Company

In 1837, Deere and Company was founded by John Deere. Deere & Company is one of the seven full-line farm equipment manufacturers in the world. During the three-decade, post-World War II boom period, Deere expanded its product line, built new plants, ran plants at capacity, and still was unable to keep up with demand. During this same period, Deere had diversified into off-the-road industrial equipment for use in the construction, forestry, utility, and mining industries. Competitive environment In the 1980’s, the collapse of farmland values and commodity prices led to the worst and most sustained agricultural crisis since the Great Depression. Several factors intensified the crisis; the high dollar reduced US exports and hurt both American farmers and American farm equipment producers. Farmers had been encouraged to go into heavy debt to expand and buy land, consequently when land values and farm prices plummeted, the number of farm foreclosures skyrocketed. Few farmers were in a position to buy new equipment, and resale of repossessed equipment further reduced the market for new equipment. Due to this, Deere adjusted its level of operations downward, cut costs where possible, increased emphasis on pushing decision making downward, and restructured manufacturing processes.

Deere wanted its captive component divisions to supply other companies and industries to add production volume. However, nearly all of John Deere Component Works (JDCW) sales were internal. Deere equipment producing factories were required to buy internally major components that gave Deere a competitive advantage. Corporate policy specified that transfers between divisions would take place at full cost. Corporate also had a make-buy policy that when excess capacity was available, buying divisions should compare component division’s direct costs, rather than full costs, to…...

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