PROJECT ON JOHN DEERE TRACTORS

Introduction

John Deere stands as a globally acclaimed brand synonymous with tractors, celebrated for
their exceptional quality, unwavering durability, and continuous innovation. With a rich
history spanning over 185 years, John Deere has solidified its position as a cornerstone in the
agricultural industry. Farmers worldwide rely on the brand's tractors, which have become
integral to modern farming practices.

The diverse range of John Deere tractors caters to a broad spectrum of agricultural needs.
From nimble compact tractors ideal for smaller operations to robust row-crop tractors
designed for extensive farming endeavors, John Deere offers a comprehensive lineup. This
versatility allows farmers to select a tractor that precisely suits their requirements,
irrespective of the scale of their agricultural pursuits.

One of the hallmarks of John Deere tractors is their incorporation of cutting-edge features and
customizable options. This commitment to technological advancement ensures that farmers
benefit from state-of-the-art solutions, enhancing efficiency and productivity on the field.
Whether a novice farmer just starting out or an established agriculturalist with a vast
operation, John Deere tractors are equipped to meet the diverse demands of modern farming.

John Deere's enduring legacy is built on a foundation of excellence, adaptability, and a

steadfast commitment to meeting the evolving needs of farmers across the globe. As
agriculture continues to progress, John Deere remains at the forefront, providing reliable and
innovative solutions that contribute to the success of farmers and the sustainability of the
agricultural industry.

Company Analysis

Compact tractor

Constituting a 19.21% share of overall sales, the compact variant holds a distinctive position
in the market, primarily catering to a niche group of users. Despite its relatively lower sales
volume compared to other variants, this particular model stands out as one of the less
frequently purchased options. Its appeal lies in its specialized features that cater to the unique
needs and preferences of a specific customer base, distinguishing it within the broader
spectrum of available choices.

Agriculture Tractors

Agricultural tractors represent the cornerstone of the company's success, contributing a

substantial 58.45% to the overall sales. This particular segment stands out as the flagship
category for the company, recognized and celebrated for its expertise in manufacturing and
providing top-tier agricultural tractors. Renowned for their reliability, efficiency, and
advanced features, these tractors have solidified the company's position as a leader in the
agricultural machinery industry. With a strong reputation built on the quality and
performance of these specialized tractors, the company continues to dominate the market,
meeting the diverse needs of farmers and further establishing its prominence in the
agricultural sector.

Utility Tractors

Utility tractors play a pivotal role in the overall sales strategy, constituting a significant
18.50% share. These versatile machines, designed for multipurpose use, have found
applications across various industries, underscoring their adaptability and indispensability.
While they may not be the mainstream focus of sales, their widespread utility and diverse
applications make them a cornerstone of agricultural and industrial operations. From plowing
fields in agriculture to hauling materials on construction sites, utility tractors prove to be
indispensable workhorses. The 18.50% sales contribution highlights the enduring demand for
these versatile machines, emphasizing their role as a reliable and multifaceted solution for a
broad spectrum of tasks across different sectors.

Tractor Spare Parts

It contribute 3.85% to the total sales as Given the robust nature of tractors as heavy
machinery, the inevitable wear and tear over time necessitate the replacement of various
essential spare parts. In response to this demand, manufacturers offer a comprehensive range
of tractor spare parts designed to be universally compatible across their diverse lineup of
tractors. These spare parts encompass a wide array of components, from engine parts to
hydraulic systems, ensuring that farmers and operators can easily access the replacements
they need to keep their tractors in optimal working condition. This commitment to universal
compatibility not only simplifies the maintenance process but also underscores the
manufacturer's dedication to providing a seamless and efficient experience for tractor owners.
As a result, the availability of a range of tractor spare parts becomes integral in sustaining the
longevity and performance of these heavy-duty machines across different agricultural and
industrial settings.

So, that’s three different power ranges, each with models reflecting three different specifications,
making a choice of nine different tractors. A model to suit every need!

 Basic is our starter model, with the lowest max power and the smallest size in each range.
Practical, no frills but still comfortable and able to get the job done!

 Regular is our mid-range model in terms of max power and size. Cabs are airconditioned with fully
adjustable seating, easy to use driver controls and rear cameras.

 Premium is our top of the range model, with the highest power and largest size in each range. All
models come with an air-conditioned cab, deluxe self-adjusting seating to give you the best ride
even in the roughest terrain, ergonomically designed driver controls and cameras that cover all
angles

Operational Analysis

2021-22 2022-23

Models Units Sales(000) Percentage Units Sales(000) Percentage

Compact 9200 619500 19.98 11600 780500 21.98
tractors
Agricultur 19600 1885200 60.80 24400 2375300 56.80
e Tractors
Utility 4100 596500 19.22 5100 751600 21.22
Tractors
Total 32900 3101200 100 41100 3907400 100
The overall performance is noteworthy when examining the growth in comparison to the
industry's overall expansion. While the industry has experienced a year-on-year growth of
26%, the price has surged by an impressive 45% over the same period. This substantial
increase in price demonstrates a robust performance that surpasses the industry's growth rate.

Cost Analysis

In the fiscal year 2022-23, there was a significant rise in the costs associated with raw
materials, components, and the purchase of products for sale, including changes in
inventories of finished goods and work-in-progress. Specifically, material costs increased by
25.2%, reaching ₹2,26,470 crores as compared to ₹1,80,886 crores in the previous fiscal
year, FY 2021-22. This increase was aligned with the growth in revenue during the same
period.

In terms of the percentage of revenue, material costs accounted for 65.5% in FY 2022-23,
showing a slight uptick from the 65.0% recorded in FY 2021-22. This data suggests that the
proportion of revenue allocated to covering material costs remained relatively consistent
despite the substantial increase in the overall cost figure. The rise in material costs is
indicative of the impact of market dynamics and economic factors on the procurement of
essential resources for the production and sale of goods. Understanding and managing these
cost fluctuations is crucial for evaluating the financial health and operational efficiency of the
business during this period.

Compact Tractors

In FY 2022-23, material costs for John Deere Compact Tractors rose significantly by 32.1%
to $52.828 billion from $39.999 billion in FY 2021-22, driven by increased volumes. Despite
the absolute increase, the proportion of material costs to total revenue exhibited a positive
shift, decreasing to 74.6% in FY 2022-23 from 76.5% in FY 2021-22, attributed to an
enhanced product mix. Noteworthy subcategories within Compact Tractors, such as ILCVs
and SCVs/Pickups, experienced respective increases of 32.6% and 16.4% in material costs,
primarily due to heightened volumes. Material costs for MHCVs and CV Passenger Vehicles
also surged by 37.0% and 133.1%, reflecting increased volumes. However, the overall
material costs as a percentage of revenue for John Deere Compact Tractors decreased to
80.6% in FY 2022-23 from 84.5% in FY 2021-22, showcasing effective cost management
strategies in response to changing market dynamics. The material costs for TDCV (John
Deere's South Korean division) remained stable at $3.528 billion in FY 2022-23, with a
marginal decrease in the percentage of total revenue from 62.5% to 62.0%, reflecting the
impact of commodity price fluctuations and adjustments in product mix.

Agriculture Tractors

In FY 2022-23, material costs for John Deere Agriculture Tractors experienced a notable
upswing, registering a 42.7% increase to $36,833 million from $25,820 million in the
preceding fiscal year, FY 2021-22, attributed to heightened sales volumes. Despite the
significant rise in absolute material costs, the proportion of these costs to total revenue
exhibited a favorable trend, decreasing to 76.9% in FY 2022-23 from 81.9% in FY 2021-22.
This positive shift is primarily attributed to an improved product mix within John Deere's
Agriculture Tractors segment.
Delving into the specific segments of John Deere's Agriculture Tractors operations, material
costs for Passenger Cars in their India operations increased to $7,383 million in FY 2022-23
from $6,072 million in FY 2021-22. Electric vehicles saw a substantial increase to $6,213
million in FY 2022-23 from $2,301 million in FY 2021-22, while Utility vehicles witnessed a
remarkable surge of 54.4% to $11,554 million in FY 2022-23 from $7,483 million in FY
2021-22. This overall increase in material costs can be attributed to the growth in sales
volumes and the impact of price adjustments under BS6 regulations. Despite these increases,
the material costs as a percentage of revenue for John Deere Agriculture Tractors decreased
to 85.5% in FY 2022-23 from 86.5% in FY 2021-22, underscoring the positive influence of a
more favorable product mix within the company's operations.

Utility Tractors

In FY 2022-23, material costs for John Deere Utility Tractors increased by 42.7% to $36.833
billion from $25.820 billion in FY 2021-22, driven by increased volumes. The material costs
as a percentage of total revenue decreased to 76.9% in FY 2022-23, compared to 81.9% in
FY 2021-22, primarily due to an improved product mix. For their operations in the United
States, material costs of Utility Tractors increased to $7.383 billion in FY 2022-23, compared
to $6.072 billion in FY 2021-22. Electric vehicles saw a substantial increase to $6.213 billion
in FY 2022-23 from $2.301 billion in FY 2021-22, while Utility vehicles witnessed a
remarkable surge of 54.4% to $11.554 billion in FY 2022-23 from $7.483 billion in FY 2021-
22. The increase in material costs is mainly due to heightened sales volumes and price
adjustments under BS6 regulations. The material costs as a percentage of revenue decreased
to 85.5% in FY 2022-23, compared to 86.5% in FY 2021-22, primarily due to a better
product mix.

Throughput Accounting

Unlike most companies that use throughput accounting as a performance metric, John Deere
Tractors employs it to identify bottlenecks in production and services, while preferring
variance analysis for performance evaluation. This approach helps pinpoint operational issues
in each department, revealing a shared challenge across all of them.

Bottlenecks:
• Semiconductor supply chain issues

• Growing cost of employment (tata company is ready to accept this cost as they realise the cost of
living has gone up )

Under specific departments, we see different or more complex or isolated problems

Compact Tractors

a. The cost of semiconductors within the industry

b. The cost of software integration

c. The cost of spares production and after sale support location

Agricultural Tractors

a. The cost of lithium is cost increasing

b. The cost of after sale operation

c. The cost of training and employment of mechanics with experience in electrical equipment

Utility Tractors

a. The cost of software integration

b. The cost of the frame integration in the products

Constrains

The rising costs associated with the acquisition of imports present a significant challenge for
businesses, impacting their bottom line. The escalation in import costs can be attributed to
various factors such as fluctuating exchange rates, tariffs, and global economic conditions.
Companies navigating this landscape must strategically manage and mitigate these increased
costs to maintain competitiveness.

Similarly, the heightened costs associated with acquiring patents pose a financial challenge
for businesses investing in innovation and intellectual property. As patents play a crucial role
in securing a competitive edge, the increasing expenses related to their acquisition require
careful consideration in budgeting and strategic decision-making. Balancing the need for
innovation with the associated costs is crucial for sustaining a competitive position in the
market.

In addition to financial challenges, the automotive industry faces intensifying competition at

various price points. As consumer expectations evolve and market dynamics shift, companies
must navigate a landscape where differentiation and value proposition become key drivers of
success. Managing this competition effectively involves not only offering competitive pricing
but also delivering high-quality products and services that meet or exceed customer
expectations.

The automotive sector is also grappling with the impact of increasing regulations on
production processes. Government regulations aimed at enhancing safety, emissions
standards, and overall sustainability contribute to the complexity of automobile production.
Companies need to adapt and invest in compliance measures to meet evolving regulatory
requirements while striving to maintain operational efficiency and product quality.
Navigating these regulatory challenges is crucial for staying compliant and sustaining a
positive reputation in the market.

Pareto Analysis

Compact Tractors

John Deere Compact Tractors strategically targets the pickup car segment, comprising 40%
of its customer base, and remarkably contributing to nearly 60% of the total revenue. This
emphasis on the pickup car category is driven by the substantial revenue potential associated
with this particular vehicle, highlighting its significant role in the overall financial
performance of John Deere Compact Tractors.

Agricultural Tractors
John Deere Commercial Vehicles prioritizes the pickup car customer segment, comprising
40% of their clientele and contributing to nearly 60% of total revenue. This strategic focus on
a specific market niche, particularly appealing to individuals managing chauffeur services or
industry companies, underscores John Deere's unique marketing approach and its
effectiveness in maximizing profitability within this key segment.

Utility Tractors

John Deere Utility Tractors strategically focuses on a specific segment, which stands out as
their most lucrative market, owing to its high profitability. Approximately 50% of their
customer base plays a crucial role, contributing to 50% of the total revenue. The company's
concentration on this particular segment is driven by the cost-effectiveness of developing
products within this category, further enhancing their overall success in the market.

ABM Analysis

Establishing a comprehensive system within John Deere Tractors poses a challenge, as the
brand diverges from a mere focus on cost control and reduction. Instead, John Deere adopts a
holistic approach to costing and procurement, considering all associated costs and social
factors to assess the suitability of suppliers for the brand. Even when evaluating costs such as
employee wages, the brand takes into account the social impact of potential decreases before
implementing changes and claims. However, if a division were to be considered for cost
reduction or efficiency improvements, it would be John Deere Electric Company.

Conclusion

John Deere Tractors is well-equipped to fulfill all the company's requirements, making
considerations for diversification, brand removal, or the sale of subsidiaries unnecessary. The
existing portfolio is either profitable or strategically invested in shaping the future of the
company, aligning with its social and corporate goals. A key priority for the brand, however,
lies in checking and maintaining John Deere Tractor Finance, particularly due to the elevated
risk profile associated with this aspect of the business.