Question

Familiarize yourself with the following terms and concepts discussed this week in preparation for completion of this assignment: market capitalization, economic value created, sustainable strategy, business-level strategy, differentiation strategy, strategy canvas.

Create a 700 to 1,050-word entry in your strategic management research journal. You will use information from this entry in your presentation due in Week 5. Respond to the following prompts in your journal entry:

• Describe the role of strategic planning in achieving a competitive advantage.  
• Assess Caterpillar Inc. to determine whether their top focus is accounting profitability, shareholder value creation, or economic value creation.
• Assess whether Caterpillar Inc. leverages the appropriate value and cost drivers for their business strategy.
• Analyze the strengths and weaknesses of Caterpillar Inc’s competitive advantages.
• Evaluate the influence of ethics, social responsibility, and legal considerations on strategic planning.  
• Discuss the value of corporate social responsibility (CSR), and determine if Caterpillar Inc.’s CSR meets those values.
• Analyze the role of ethics and social responsibility in developing Caterpillar Inc.’s strategic plan while considering stakeholder needs and agenda.

Answer 1

Role of Strategic Planning

Today, amid the given challenging environment, it is observed that the organizations need to focus on the market competition, changes taking place in the external environment, demands of the customers, and accordingly deploy their working strategies. However, it is found that either due to their performance weaknesses or due to lack of proper strategic planning, the organization is not able to deliver to the given expectations (de, 2017).

It is thereby recommended to the top-level management of these companies to ensure proper strategic planning and subsequently make sure that they are able to perform better. In addition, they will need to define goals for the future, formulate on the objectives, implement strategies for all the departments, provide them with targets and measures, and accordingly evaluate on their results (de, 2017).

It will thereby make sure that the organization will be able to perform better amid the given challenging work environment. In addition, it is found that the organizations will face multiple issues and risk factors in their operational strategies (de, 2017). Thus, it will be crucial for the top-level management to determine these issues and accordingly implement risk management in a given working environment.

Caterpillar Inc. and its focus on Economic Value Creation

Caterpillar Inc. is an American Fortune 100 Corporation that is into designing, developing, manufacturing, and selling of machines, equipment, financial products, and even insurances to the customers. The core functions of the organization include - manufacturing, distribution, logistics management, and sales management.

As per the company reports of 2018, the total revenues of the company were $54.7 billion. The total number of employees working in the organization is around 101,500. Besides, they are serving in different parts of the world and thus it seems that they are not only interested in earning higher profits for the firm but also making sure that they are able to increase on the economic value that is added to each of the connected entities (Kearney, 2019).

It is thereby more important to analyse on their operational strategies and determine their key strengths in a given working environment. Furthermore, they have deployed Value Chain model to ensure that they will be able to perform all the activities in a sequential way and will improve on the economic value of the concerned stakeholders (Kearney, 2019).

Leveraging Value drivers for Business Strategy at Caterpillar Inc.

The organization is more into the manufacturing of machines, equipment, and engines depending on the demands of the customers across the world. They are having strong dealer network across the world that is allowing them to become the world's largest construction equipment manufacture.

Moreover, they are leveraging on their technological drivers and skills of the staff that is allowing them to meet upon the needs of the customers from across the world. It is due to this reason that they are able to manufacture - machinery, financial products, engines, and other equipment (Lebedeva & Zhikharevich, 2018).

In addition, they also have the world's largest manufacturing facility for wheel loaders. It thereby seems that they want to leverage on their value drivers and thereby make sure that they are able to perform better in a given working environment. In addition, they have even obtained license for financial and insurance products and hence are generating income through that business line as well. They have established on their operations facilities at different parts of Europe and hence are serving accordingly to the needs of the customers (Lebedeva & Zhikharevich, 2018).

Strengths and Weaknesses of Caterpillar Inc.

The major strengths of Caterpillar Inc. include - strong dealership network across the world, massive scale and volume for manufacturing different equipment’s, significant investment in the Research and Development operations, reputation for high quality and safety, and performance of CAT financial division.

It is thereby allowing them to leverage on their best available resources and are thereby serving accordingly in a given challenging work environment. On the other hand, the key weaknesses identified include - decreasing revenues, debt obligations, inventory turnover ratios, and high dependency on heavy equipment business line (Lebedeva & Zhikharevich, 2018). As a result, they are not able to diversify much in other products and are thereby missing on the opportunities in Digitization and Automation.

Influences of Ethics, Social Responsibility, and Legal Considerations on Strategic Planning

The role of ethical principles and corporate social responsibility will be large on the formulation of strategies in a given organization. It will be a legal responsibility as well of the top-level management to contribute to the community (Morimoto & Guillaume, 2018).

They can there by initiate on programs such as - education, poverty, healthcare, and solving on other key challenges of the people of a given community and thereby fulfill on their social responsibilities. Besides, they need to train their workforce on the principles of ethics, which will allow them to perform better and thereby adhere to the organizational guidelines and principles in a given working environment (Specht & Raquel Carolina Souza, 2017).

Value of Corporate Social Responsibility (CSR) at Caterpillar Inc. and its role in meeting Stakeholders’ Needs

The value of Corporate Social Responsibility at Caterpillar Inc. seems vital as both the Operations team and the Human Resources Management will need to formulate their working strategies as per the strategic objectives of the firm (Кostenko, 2016). In addition, they will even need to determine the needs of the concerned stakeholders and accordingly identify how they will be able to fulfill them amid the given challenging operational environment.

Moreover, the employees will need to follow to the principles of CSR and ethical principles and perform accordingly (Кostenko, 2016). It will thereby make sure that the organization will be able to improve on their performance and will thus serve on the needs of the concerned stakeholders of the organization.

References

de, M. F. (2017). From strategic planning to the designing of strategies: A change in favour of strategic design. Strategic Design Research Journal, 10(2), 91-96.

Kearney, C. (2019). Strategic planning for financing and growing biotechnology companies: Strategic planning for financing and growing biotechnology companies: Research and regulation. Journal of Commercial Biotechnology, 24(4), 31-47.

Lebedeva, N. A., & Zhikharevich, B. S. (2018). Strategists about strategic planning. Regionalʹnai︠a︡ Ėkonomika.I︠U︡g Rossi, (1), 1-18.

Morimoto, Y., & Guillaume, R. O. (2018). Re-conceptualizing strategic planning: Planning strategically for student success. Journal of Applied Research in the Community College, 25(2), 23-30.

Specht, A. L., & Raquel Carolina Souza, F. D. (2017). Planning oral narrative tasks: Optimizing strategic planning condition through strategy instruction. Acta Scientiarum.Language and Culture, 39(2), 203-212.

Кostenko, V. V. (2016). Legal regulation of the new model of the strategic planning. Regionalʹnai︠a︡ Ėkonomika.I︠U︡g Rossi, (1), 58-68.