For nearly 175 years, John Deere has capitalized on opportunities. We see opportunities coming again. Global macro-trends – population and income growth in developing nations – will drive increased demand for agricultural output and infrastructure investment. Technology advances and continued agricultural mechanization will open and expand markets.
John Deere is uniquely positioned to capitalize on these economic tailwinds. And, just as important, we're in a position to make a difference in the world by supporting a higher quality of life.
Macro-economic tailwinds are at our backs. By 2050, the world's population is expected to expand to 9 billion people. We're at more than 7 billion today. That growth will come mostly from emerging economies, such as China and India, where incomes are increasing, and diets improving. An increased demand for food, fuel, and fiber will require an approximate doubling of agricultural output in that timeframe.
Also expected to continue is the migration from rural areas to cities. In 2010, for the first time in history, over 50% of the world's population lived in cities. By 2050 that number is expected to reach 70%. A smaller labor pool in rural areas creates the need for more mechanized farming, as manual labor is replaced by more productive equipment solutions. Increasing urban populations also creates the need for housing, roads, bridges, and other infrastructure investments.
For the past decade, one key to our success has been our foundational success factors: Exceptional Operating Performance, Disciplined SVA Growth, and Aligned High-Performance Teamwork. They have guided our success and are critical to our future. We must leverage and build on these core strengths.
Future successes, though, will demand even more of us. Therefore, we're building our strength in four additional capabilities: Deep Customer Understanding, Delivering Customer Value, World-class Distribution System, and Growing Extraordinary Global Talent. These new success factors are critical in order to achieve sustainable SVA growth through global expansion.
Shareholder Value Added (SVA) – the difference between operating profit and pretax cost of capital – is a metric used by John Deere to evaluate business results and measure sustainable performance.
We'll track our progress as we pursue these growth goals because executing on our critical success factors is not optional. And we'll set and monitor progress towards two key types of metrics:
– These are the traditional financial measures based on what we are delivering today to our stakeholders.
||Net Sales Growth Target
||Return on Sales(Operating Margin)
*Implies a CAGR of ~ 9% (2010 – 2018) vs. historical CAGR of 7-8% Health metrics
– These are based on the company’s success factors, and are qualities, attributes, and actions being introduced to ensure the sustainability of our performance over time.
||% JDQPS certification
|Disciplined SVA Growth
||Sales/SVA Mix by Geography
||Employee Survey's Engagement
Our world and business are changing. Our core values remain.
How we do business is critical to our continued success. The "How" is represented by our core values of Integrity, Quality, Commitment, and Innovation. You see the "How" in our people, products and processes. You recognize it in how we operate every business, every day, and in the ways we treat employees, customers, suppliers, dealers, and other stakeholders.
Our core values define us. They unite us and differentiate us from competitors.
Our commitment to these core values is not optional, and never waivers.