Thursday, 27 September 2012


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Caterpillar has been around for a long time and the company has been through a lot of ups and downs, but for some strange reason they have still held their ground in the heavy equipment industry. We have been hearing about Caterpillar; some of us can even remember having little toy tractors and cranes that we played with as kids that had that infamous Cat engraved on the sides. In this analysis, I will focus on the CEOs, Board of Directors, mission Identification, intent, corporate level strategy, strengths, weaknesses, opportunities, threats, buyers, suppliers, and new entrants.

CEOs and Board of Directors

Through out the case, three CEOs were mentioned George Schaefer, Dan Fites and Glen Barton. Mr. Schaefer was the CEO that helped with the comeback of Cat in terms of his human relations oriented leadership style. Mr. Schaefer came along at a very good time for the Caterpillar Company. He had very good people skills which helped him when he dealt with employees. He was once called the best manager the construction industry has ever had by one analyst in the case. Mr. Fites had a much different style than that of Schaefer but was also successful as a leader. Fites was described as very determined and combatable; he was a hard liner who was feared by employees. He was very familiar with Japanese business practices and was instrumental in establishing Japanese type work teams in the company. Mr. Barton was the new guy, faced with the challenges of continuing the company’s success. He was a year veteran that had seen the company go through good times and bad times, and had first hand experience learning from two of the best CEOs Caterpillar had ever had in Mr. Schaefer and Mr. Fites.

Mission Identification

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Caterpillar’s mission is to make profits selling their products and make progress possible around the world in terms of economics. When speaking of making progress, Caterpillar machines help build the world infrastructure thru construction (ex. highways and airports). Caterpillar engines provide power for developing nations and standby power for hospitals. Caterpillar has a network of over 00 dealers worldwide, with sales in over 00 countries.


Cat intended is to be the leader in providing the best machines, engines, and support services for its customers. Their objective, is to empower its employees to facilitate the cross utilization of employees, innovation, and teamwork.


Caterpillar’s management team � Schaefer, Fites, and Barton- was one resource, another intangible asset for Cat was its network of dealerships; Cats relationships with its dealers were very valuable. Cat’s employees were instrumental to its success during its reorganization period. In 1, Cat employed 67000 people. The expansion and upgrades to their IT system was a valuable resource, which allowed Cat to monitor inventories and control cost.

Corporate-Level Strategy

Caterpillar implemented a distribution and dealership network that contributed to the company’s worldwide success. The network included independent dealers, strategically located around the world, which sold and serviced Cat’s equipment. There are numerous examples of corporate level strategy in this case. For example, CEO Barton, during his tenure, undertook expansion into new markets by the development of new distribution channels, and establishing themselves as global competitors. Under CEO Schaefer’s direction, Caterpillar devised and implemented a series of strategies that included purchasing, manufacturing, marketing, personnel, and labor relations. Lastly, CEO Fites revamped Cat’s product development process, by utilizing an integrated approach based on Japanese-style functional teams.


In terms of strengths, Schaefer’s development of the ESP (employee satisfaction program) benefited the company by reducing grievances, improving quality, saving assembly cost and reducing reject part rates. Instituting PWAF (plant with a future) improved overall conditions, and modernized tools and systems. The change from batch to cell manufacturing allowed Cat to gain more integration of the work process and reduce inventory levels by 50%. Cat had a reputable relationship with its dealers. To combat with price competition, Cat offered its dealers discounts when possible. They also assisted dealers during recessions, and helped them to conduct surveys relating to customer satisfaction.


The rift between Cat and UAW was a major weakness. In 18, Cat experienced the longest strike by employees in the history of UAW despite the efforts of the ESP (employee satisfaction program); Cat’s inability to work effectively with UAW cost the company dearly. By 18, Cat had reached an agreement with the union. Because this agreement brought a sense of peace to the fight among the two, it is seen as a resource. Customer satisfaction is highly regarded by most companies, but Cat did not do a good job in this area in the past. Customer service is an imperative aspect of business that Caterpillar failed to realize.


Initially, Caterpillar set out to become one of the world’s most exclusive heavy-duty machinery movers. In the beginning, they were successful. However, an unstable economy forced them to venture out into new markets (small machines and tools). Global demand from heavy construction machines grew at a steady rate of 4.5% in the 10’s. The rate of growth was extremely fast in the developing nations of Asia, Africa, and Latin America.


The crisis of 18 � 184 came from a global recession, strike, and unfavorable currency exchange rate. The use of old construction machines came to a stand still as the threat of highway construction slowed down to a halt in the 180’s. The price of oil declined, which would have made gas cheaper, but with no business Cat missed out on the opportunity to gain ground on the market. The ever-fluctuating dollar rose in value and made US exports more expensive abroad and U.S imports a lot cheaper at home. Cat’s heavy machines weren’t selling well which lead them to diversify their product line, hence leading them in the production of smaller light weight equipment (back hoes, farm tractors, and small bull dozers).


Customers of Caterpillar are construction companies, government development agencies, miners, and engineering firms. In Cat’s light equipment division they supplied equipment to farmers, landscapers, homebuilders, gardeners, road pavers, or just any one who had a need for a light machine for yard work. That was the beauty of the light equipment market there was always someone with need to use a machine.


Caterpillar produced a couple of there own parts but majority of their parts were outsourced. Caterpillar used the just in time process to construct machines giving them about four hours of work on the assembly line at a time.

New Entrants

It is very hard for a new company to break into the heavy equipment industry and take over the market. Caterpillar doesn’t have much to worry about in that aspect. All they have to worry about are the companies that are already in business. If there was to be a new comer in the market, it would probably come after Caterpillars light equipment market.


Caterpillar is a company that has been shaken a few times but still manages to keep its head above water. It has done so by reorganizing its weaknesses and not being afraid to change its ways of doing things. Cat has managed to stay consistent with what it has been doing for years, both internally and externally except for a few diversification moves. Its CEOs have came through the ranks of the company, so they know exactly what Cat’s intentions are and they try not to stray too far from those intentions. Cat realizes that there is competition out there and that the company can’t get too complacent with its actions. My colleagues and I feel that if Caterpillar keeps that same mind frame they will keep being productive for years to come.

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