Sustainable Competitive Advantage

Having a sustainable competitive advantage is very important to staying ahead of the competition and gaining the most business possible.  There are many things that a company can do to gain a competitive advantage.  Two ways firms can do this is by becoming  an overall cost leader or by differentiating from the rest of the companies in their market.

John Deere has a very obvious business strategy.  They focus on differentiating from their competition.  The focus at John Deere is on the quality of the machine and the quality of the service they give their customers.

JD's first product. 1837

Another way to differentiate your company from competitors is by patenting your inventions and ideas making your company the only one to have these solutions.  John Deere is constantly looking to gain a competitive advantage through patents and trademarks.  In December of 2012, they were named as a top 100 global innovator according to marketwatch.com.  The criteria for being on this list included four main areas.  They were, overall patent volume, patent grant success rate, global reach of the portfolio, and patent influence as evidenced by citations.  This shows how concerned John Deere is to finding new and better ways for people to work the land and make a difference.

 By looking at the company through the lens of Porters Five Forces, we can gain a better understanding of their business plan and how they plan to deal with threats to their business and how they plan to keep customers from going to a different dealer.

The more bargaining power you have with your suppliers, the cheaper you can get good products.  John Deere has good bargaining power with their suppliers because of their economies of scale.  They are such a large company that it would be very hard for one of their suppliers to quit producing for John Deere because it would take out such a huge chunk out of their sales.

The more  bargaining power you have with your suppliers have over them the harder it is to make a profit.  John Deere's commitment to quality and innovation makes it hard for their customers to bargain for a lower price.  John Deere customers expect a higher price because they know the quality of service and equipment they are going to get with their purchase.  This in turn gives customers low bargaining power.

Rivalry among existing competitors is something that every company is going to have to deal with at all times, although it might be more pressing for some than others.  John Deere has many competitors such as Case IH, New Holland, and Cat.  These companies all compete with John Deere at different levels, but none have the global or market selection that John Deere has.  This give John Deere a competitive advantage when it comes to their overall business because they do not have to rely on one market to be favorable to make a profit. Where Case IH is focused on Agriculture, John Deere has many supporting businesses such as construction, forestry, and lawn care.

The threat of new entrants is not very great for this industry because it takes so much capital and so many assets to get started competing with these big companies.  It would take a whole new invention to compete or government intervention to get a company started and even then they would have to compete with the vast amount of relationships and captial that John Deere has.

There are not many different substitutes for a tractor or plow.  The only decision you have to make after you decide you need one, is which one to buy, John Deere, or one of their other competitors. It would be very difficult to turn 80 acres of land today with a hoe.  With today's methods, consumers need to do a lot of work in a small amount of time to be successful and John Deere's products help them to be much more efficient then they could ever be with a hoe or spade.