GSM 7300 Module 1 External Environment Analysis Example

Tariffs, Farm Incomes and the Right to Repair: Deere's General Environment in 2025

Student Name

Master of Business Administration, Thomas Edison State University

GSM-7300: Global Strategic Management

Mentor Name

Month Day, Year

Tariffs, Farm Incomes and the Right to Repair: Deere's General Environment in 2025

Hitt et al. (2024) begin the strategic management process with strategic inputs: an analysis of the external environment, which reveals what a firm might choose to do, and of the internal organization, which reveals what it can do. The external environment has three layers, the general environment of broad societal forces, the industry environment of competitors, suppliers and buyers, and the competitor environment of particular rivals. This paper applies the first two layers to Deere & Company, the world's largest maker of farm equipment, during a fiscal year in which nearly every segment of its general environment turned against it. It closes with the opportunities and threats those forces create and a recommendation.

The Year in Numbers

Deere's fiscal 2025 ended on November 2, 2025. Net sales and revenues fell from $51.7 billion to $45.7 billion, about 12 percent, and net income fell from $7.1 billion to $5.0 billion (Deere & Company, 2025). Every equipment segment shrank.

The largest decline came in the segment that sells big tractors and combines to large row-crop farms, which signals that the causes lie outside the company: the same products that set records in 2023 found fewer buyers two years later.

The General Environment, Segment by Segment

Hitt et al. (2024) divide the general environment into seven segments: economic, political and legal, sociocultural, technological, demographic, global and physical. Deere's annual report contains evidence for each.

Economic and Global Segments

Farm equipment demand follows farm income. The company reported that commodity prices, acreage, yields and macroeconomic uncertainty weighed on farmers' income and sentiment in 2025, producing lower volumes, greater use of sales incentives and higher receivable write-offs (Deere & Company, 2025). Interest rates matter as well, since most large machines are financed, and Deere's own financial services arm carries that exposure. In the global segment, Deere sells agriculture and turf equipment to dealers in more than 100 countries outside the United States and Canada, so currency movements and foreign harvests shape demand far from Moline.

Political and Legal Segment

Trade policy was the most visible force of the year. New U.S. tariffs on a broad range of imports and materials, and retaliatory tariffs abroad, raised Deere's costs; the company estimated the direct cost of incremental tariffs in fiscal 2025 at about $600 million, before any effect on suppliers or on demand (Deere & Company, 2025). The tariffs cut both ways, since Deere is a net exporter of agricultural and turf equipment from the United States and assembles nearly 80 percent of its domestic sales in this country, which partly shields it against import competitors. The legal segment added a second front. In January 2025 the Federal Trade Commission, joined by several state attorneys general, sued Deere for monopolization and unfair competition over farmers' and independent shops' access to repair tools, and the company has disclosed preliminary discussions about a resolution.

Sociocultural and Demographic Segments

The repair lawsuit reflects a sociocultural shift as well as a legal one. Many farmers see the right to fix their own machines as part of independence, and software locks on modern equipment have become a public grievance. Demographically, Deere's core customers are aging and consolidating. The 2022 Census of Agriculture counted about 1.9 million farms, fewer than five years earlier, and an average producer age of 58.1 (U.S. Department of Agriculture, National Agricultural Statistics Service, 2024). Fewer, larger and older operators mean concentrated buying power and a premium on labor-saving machines.

Technological and Physical Segments

Technology is where Deere has tried to turn environmental pressure into advantage. Its Smart Industrial operating model and Leap Ambitions emphasize automation, autonomy, digital tools and Solutions as a Service, through which farmers pay for precision capabilities over time. Labor shortages on farms make autonomy valuable, and data on soil, seed and spraying can reduce input costs. The physical environment, finally, enters through weather, drought and sustainability rules; demand for biofuel feedstocks, which Deere's report notes, ties crop demand to energy policy.

The Industry Environment

Duncan (1972) showed that managers perceive uncertainty as highest when the environment is both complex and changing, which describes Deere's 2025. The industry environment adds structure to that uncertainty. Rivalry is concentrated among a few full-line makers, which limits price wars but raises the stakes of technology races. Buyer power is rising as farms consolidate. Supplier power increased as tariffs lifted the cost of steel and components and as rare earth inputs for motors and batteries became exposed to trade restrictions. Threat of entry remains low because of the capital required and Deere's dealer network, and substitutes are limited, although used equipment competes with new machines when incomes fall.

Opportunities and Threats

The analysis yields two main threats and one opportunity. The threats are the cyclical squeeze on farm income, magnified by tariffs on both costs and export markets, and a legal and social challenge to the control Deere exercises over repair and software. The opportunity is the shrinking, aging farm workforce, which raises the value of autonomous and precision equipment that does more with fewer people.

Recommendation

Deere should accelerate recurring revenue from precision technology, sold as subscriptions that can be added to machines farmers already own, while settling the repair dispute on terms that give owners and independent shops diagnostic access. Subscription revenue smooths the equipment cycle, and an open repair policy removes a grievance that threatens the trust on which subscriptions depend. The trade-off is real. Deere would give up some service revenue and some control over its dealers' parts and labor business, and dealers may resist. That cost is smaller than the risk of a court-imposed remedy and a customer base that resents the brand.

Conclusion

Deere's 2025 shows why Hitt et al. (2024) place environmental analysis at the start of the strategic management process. Tariffs, farm economics, a lawsuit and a changing farm population cut revenue by $6 billion in one year, while the same forces point toward the technology that could make the company less dependent on the cycle.

References

Deere & Company. (2025). Annual report on Form 10-K for the fiscal year ended November 2, 2025. U.S. Securities and Exchange Commission.

Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17(3), 313-327. https://doi.org/10.2307/2392145

Hitt, M. A., Ireland, R. D., Hoskisson, R. E., & Harrison, J. S. (2024). Strategic management: Competitiveness and globalization: Concepts and cases (14th ed.). Cengage Learning.

U.S. Department of Agriculture, National Agricultural Statistics Service. (2024). 2022 Census of Agriculture: United States summary and state data (Vol. 1, Part 51).