Running Head: STRATEGIC PLAN 1
Strategic Plan for Caterpillar
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Caterpillar, Inc. is the world’s leading producer of heavy construction and mining equipment with diversification into financial services. The company has an extensive dealer network that keeps it ahead of its competitors, such as John Deere and Komatsu. To achieve such competitiveness, Caterpillar has an established corporate culture that ensures customers come first. This paper thus seeks to analyze the Caterpillar’s strategic plan by discussing its vision and mission, SWOT analysis, competiti
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Running Head: STRATEGIC PLAN 1 Strategic Plan for Caterpillar Student’s Name Professor’s Name Course Title Date
Executive Summary Caterpillar, Inc. is the world’s leading producer of heavy construction and mining equipment with diversification into financial services. The company has an extensive dealer network that keeps it ahead of its competitors, such as John Deere and Komatsu. To achieve such competitiveness, Caterpillar has an established corporate culture that ensures customers come first. This paper thus seeks to analyze the Caterpillar’s strategic plan by discussing its vision and mission, SWOT analysis, competition, financial outlook, and providing strategies for growth.
a brink of bankruptcy but turned around as a high-tech globally competitive growth company. The company was able to streamline the manufacturing process by implementing a US$1. billion plant modernization plan. Since then the company has become the world’s leading manufacturer of mining, industrial gas turbines, and construction equipment. Products and Services Caterpillar deals in machinery, engines, and financial as well as insurance products with engine and machinery being its core competencies (Caterpillar, 2016a). The machinery portfolio focuses on mining and construction while the engine principle produces natural and diesel engines. The products include haul trucks, wheel loaders, diesel engines, excavators, and bulldozers. The company’s products and services are competitively priced to gain an edge over rivals. Caterpillar Inc. prides itself on exceptional customer service whereby customers can maintain their equipment efficiently for productivity using instant software upgrades. The company continually develops software packages for its equipment, for example, CAT Connect. It also invests research and development to improve the products’ capabilities and product life cycle thus attaining effective and efficient equipment (Caterpillar, 2016a). Caterpillar operates over 110 production plants which have allowed the company to reach the US$47.01 billion revenue mark. As such, the company strives to meet customers’ needs through state-of-art equipment and software packages. Operations Caterpillar has two main product categories with six operating segments. The energy, machinery, and transportation involve energy and transportation, construction industries, resource industries, and All Other. The All Other product segment is made up of refurbishment
and restoration of used machinery and technologies, remanufacturing services, and defense industry. Moreover, the energy, machinery, and transportation account for 94 percent of the company’s net sales while financial products make the remaining 6 percent (Caterpillar, 2016d). The company’s financial products include Cat Insurance and Cat Financial. The company’s manufacturing operations are based in the 110 facilities worldwide with 51 of those products being located in the United States. Caterpillar’s headquarters in Illinois undertakes the company’s core research and development activities. The firm distributes products to consumers in over 200 countries through independently-owned dealerships in diverse geographical locations. The company’s dealers offer parts distribution, rental equipment, sales, as well as maintenance and repair services. Caterpillar’s Vision The company has a vision of fulfilling people’s basic needs in an environmentally sustainable way and offering high-quality products that satisfy consumers. Caterpillar continues to develop business value through global marketing and distribution networks with the vision as a guide to improve customer value. As such, caterpillar’s vision statement is significant in the industry and follows the guidelines of developing vision statements. The vision statement is easy to understand and represents an ambition to spur productivity amongst employees (Hill & Jones, 2011). However, the vision statement does not contain relevant information concerning the industry or business of Caterpillar. Caterpillar’s Mission Statement Caterpillar’s mission is to use infrastructure and energy development to enable economic growth and to provide solutions that support communities and protect the planet. The company strives to provide the best value to customers, grow a profitable business, develop and reward
The company aims to become more customer-focused by establishing a vast dealer network for its products and services. As such, it strives to maintain core values, for example, commitment, teamwork, excellence, and integrity, which are integral to its ethical code. The company instills the culture of integrity in its employees by advocating for fair competition, open and honest communication, as well as managing conflicts whenever they arise (Caterpillar, 2016d). Concerning excellence, Caterpillar provides workers with the opportunities for professional and personal growth. It also fosters teamwork by prohibiting discrimination and building excellent relationships with distributors and dealers. SWOT Analysis Caterpillar regularly analyzes its strengths, weakness, opportunities, and weaknesses to set a clear roadmap for attaining its goals and objectives. The company’s strengths include its large asset base, global brand image, and the vast distribution network. The brand image emanates from the positioning the company has done for its products regarding quality (Pinedo & Walter, 2013). The large asset base of the firm is crucial in supporting further operations for business growth and development. The resulting economies of scale and the global network of distributors help Caterpillar in gaining a competitive edge over its rivals. The company’s weaknesses include limited connections in emerging markets and low rates of innovation. Caterpillar lags behind its competitors in innovation, especially in the heavy equipment and financial services industries. As such, the company is more vulnerable to competition, which when combined with limited business connections in the emerging markets, such as China prevents Caterpillar from maximizing profits (Pinedo & Walter, 2013). However, Caterpillar can capitalize on opportunities, such as boosting competitive advantage through innovation and increasing revenues using growth and expansion. There is
room for growth and expansion, especially in the Asian and Chinese construction markets. Further, these markets have an increasing population size that would demand construction needs. Caterpillar faces threats, such as aggressive competition and imitations. The company faces stiff competition from companies, such as Komatsu, which produces technologically- advanced products. Additionally, some Japanese competitors are using robotics to gain a competitive edge over Caterpillar. The increasing number of competitors is posing a threat of technological and product imitation to Caterpillar designs, which are sold cheaply in the market (Daft, 2008). Competition Caterpillar’s competitors include J.I. Case, Komatsu, and John Deere. J.I. Case has a network of more than 1,200 dealers and 219 retailers in the world, which poses a competitive threat to Caterpillar (Hoovers, 2016). The company manufactures and distributes hydraulic excavators in 13 models as opposed to caterpillar’s 5 models. Case has increased its competitiveness by acquiring major competitors, such as Poclain and International Harvester. Komatsu, on the other hand, is the second largest producer of heavy construction equipment in the world with a big market in Asia and Africa. The company produces industrial machinery, for example, sheet metal presses, wire saws, and laser-cutting tools. However, Komatsu lacks an effective dealer network outside Japan (Hoovers, 2016). John Deere has a large dealer network and manufacturing facilities that pose competition to Caterpillar. Deere has also diversified in large part to include forestry and residential lawn care equipment, which forms an untapped equipment market (Hoovers, 2016).
Strategies Caterpillar uses intensive growth strategies for market development and penetration since different markets have different characteristics. Through market penetration, Caterpillar has been able to grow significantly by increasing presence globally. The company puts an emphasis on developing the existing products to include new features and thus improve customer value rather than developing new ones (Gillet, Fink & Bevington, 2010). Moreover, Caterpillar should keep in line with Vision 2020 strategy to ensure an acceleration of aftermarket parts and services growth. The strategy aims to simplify cost structure, achieve profitability, aggregate sales, and expand mining leadership. Further, Caterpillar should increase its focus on quality control in addition to forming systems thinking and cross-functional teams. The company should continuously embrace mergers and acquisitions to expand its global operations, for instance, the 2015 acquisition of RDS Manufacturing to grow the turbine business as well as boost manufacturing expertise. The company should focus on its difficulties in maintaining a competitive advantage to strengthen customer relations and offer higher service levels to make for the highest bidding price. Therefore, it should focus on the outstanding customer service to maintain profitability (Gitman & McDaniel, 2008). Conclusion Caterpillar has a dominant market share, which when utilized efficiently can spur the company to greater financial heights. If the company utilizes the strategies effectively, then it has room for revenue growth. Critical to the company is its corporate culture which ensures that customer needs are met to the benefit of all the stakeholders (Grant, 2010). However, Caterpillar can boost its financial outlook by increasing the distribution networks in line with the Vision
2020 strategy. It should also invest more in creating novel products that are differentiated from the competition. Caterpillar enjoys a large asset base, global brand image, and vast distribution network, which should be effectively used to beat competitors and thus ensure market leadership globally.
Hoovers (2016). Caterpillar Inc. Competition. Retrieved from http://www.hoovers.com/companyinformation/cs/competition.caterpillar_inc.7f9fd7e5b cf194c.html Kotler, P. and Keller, K. (2006). Marketing Management , 12th^ Ed. Upper Saddle River, NJ: Pearson Education, Inc. Pinedo, M. and Walter, I. (2013). Global Asset Management: Strategies, Risks, Processes, and Technologies. New York, NY: Springer.