Value-Chain Analysis

2013 6125R Tractor

There are many things that give a tractor value.  The work that it does, the quality of work that is done by the tractor, and the durability of that tractor all contribute to its value.  In order for a company to create value with its products, the company needs to look at what the consumers need and how they can make these needs come to reality as efficiently as possible without sacrificing quality.  Doing a value-chain analysis will help a firm to understand its primary goals and needs of its business.  This way they can better serve their customers and in turn give their products more value. 

According to Michael Porter and his book Competitive Advantage, there are five primary activities.  John Deere needs to work hard on their inbound logistics, operations, outbound logistics, marketing and sales, and service.  All of these attributes contribute to the efficiency of the firm and in turn the value that the customer receives in the final product.

John Deere needs to be very efficient in its primary activities.  There are many ways that they can achieve this efficiency. When looking at the inbound logistics of John Deere's manufacturing places, it is easy to see how important this primary activity is.  They need to be able to assemble machinery quickly and get it out to the consumer.  They also need to avoid confusion to insure that everything is built with quality.  they can do this through making sure they have distribution facilities strategically located to cut down on shipping time, warehouse layouts and designs need to be efficient, etc.

Their operations, or the building of the machines also needs to be efficient strategically designed to cut down on costs, time, and confusion. Implementing technology can be a big help but they also need to keep their workers in mind as they grow in size and revenue.

Outbound logistics are very important to the customer.  Efficiency is important in this section of business also.  Having an efficient shipping process ensures the product is delivered in a timely fashion and without damages.  They can also cut down on costs by having good communication and shipping multiple things at once.  John Deere's gold key member program allows their customers a chance to come see their operations and outbound logistics activities.  The customer can come and see the last pieces being put on the equipment and then drive the machine out of the production line themselves.  This gives them something more than a machine but an experience.

Marketing, sales, and service are very important.  Without sales the company would not make a profit and ultimately, this is what drives business.  John Deere needs to make sure they are serving the customers needs in the correct region.  In other words they should not be selling a combine in the middle of Chicago.  Servicing a machine in this industry is one of the most important features of picking a brand.  In order for John Deere to be successful, they need to be able to quickly respond to breakdowns and customer emergencies.  They need to make sure that they know what they are talking about.  This makes ongoing training vital to the service industry. 

There are also support activities.  According to Porter there are four support activities important for gaining a competitive advantage over a firms competition.  These include procurement, technology development, human resource management, and general administration.  These actions support the primary activities and help in innovation to stay ahead of the competition.

John Deere has very expensive consumable items and assets.  It takes a lot to put machinery together including space, tools, machinery, and the best parts.  John Deer needs to make sure they have good relationships with their suppliers.  Having these good relationships helps them to be more efficient in the production of their product.

The Tango E5 mows on its own

In order to stay ahead of the competition, John Deere has concentrated on innovation and research and development.  They need to keep up with the technology as this section of business is growing at an extremely fast pace.  From GPS to automatic sensors, the machinery industry is becoming an increasingly technologically advanced place.

Human resource management is important for firms of all types.  Keeping the best employees in your business is important to success.  People are the ingredient that makes a business succeed.  Having a good relationship with your employees and the organizations that directly impact your employees is very important to keeping and drawing these quality workers.  Having good reward and incentive programs can greatly help motivate employees.

General administration is important to firms because they are the ones who set the tone for the business. They need to have good relationships with various stakeholder groups and need to be good at goal setting and evaluation.  Administration needs to be able to communicate well with all the parts of the business in order to set good goals and help the business succeed.

John Deere needs to continue doing value-chain analysis to better understand how they are doing and improve their efficiencies to keep a competitive advantage in their industries.