Question

Review the Strategic Management Project Background and your strategic management research journal entries from Weeks 1–4.

Create a 10-12 slide presentation, including title, agenda, and reference slides, for Caterpillar Inc.'s leadership in which you summarize your key findings, propose recommendations, and provide appropriate rationale for them.

Respond to the following prompts:
•   Summarize your evaluation of the alignment between what Caterpillar Inc. is currently doing and their mission, vision, and values statements. Would you propose any changes to Caterpillar Inc.'s mission, vision and/or values statements? Why or why not? (Refer to Wk 1, Bullet #4.)
•   Summarize your assessment of whether Caterpillar Inc. is leveraging the appropriate value and cost drivers for their business strategy. Would you propose any changes? Why or why not? (Refer to Wk 2, Bullet #3.)
•   Summarize your analysis of the strengths and weaknesses of Caterpillar Inc’s competitive advantages. Based on your analysis would you propose any changes? Why or why not? (Refer to Wk 2, Bullet #4.)
•   Summarize your assessment of whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness. Based on your analysis would you propose any changes? Why or why not? (Refer to Wk 3, Bullet #1.)
•   Summarize your evaluation of Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments. Would you propose any changes in how Caterpillar Inc. responds to shifts in the external and internal environments? Why or why not? (Refer to Wk 3, Bullet #5.)
•   Summarize your evaluation of how mergers and acquisitions in the past five years have contributed to Caterpillar Inc.’s performance. Would you propose that Caterpillar Inc. pursue mergers and acquisitions in the future? Why or why not? (Refer to Wk 4, Bullet #2.)
•   Summarize your assessment of Caterpillar Inc.’s global strategy. Based on your assessment would you propose any changes? Why or why not? (Refer to Wk 4, Bullet #3.)

Answer 1

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Summarize your evaluation of the alignment between what Caterpillar Inc. is currently doing and their mission, vision, and values statements. Would you propose any changes to Caterpillar Inc.'s mission, vision and/or values statements? Why or why not?

Caterpillar Inc. is one of the biggest manufacturer of heavy equipment and engines. Some of the products are bulldozers, excavators, wheel loaders, diesel engines and trucks. Caterpillar also provides services, such as financing and insurance, as well as maintenance and training services. The company is established in California in the Year of 1925, and has grown significantly to become one of the world’s leading provider of construction machinery. However, the company competes with few big firms like Mitsubishi Heavy Industries and Toyota Industries Corporation.

Caterpillar Inc.’s Mission Statement:

Caterpillar Inc.’s mission statement is a combination of four missions that provide strategies and decisions. In short, the company’s mission is “to provide the best value to customers, grow a profitable business, develop and reward people, and encourage social responsibility.” The details of Caterpillar’s mission statements are as follows:

1. To give the best value to the customers: The company will be the leader in giving the best value in machines, engines and support services to the customers across the world.
2. To grow a profitable business. Company will rise the value of the business by aggressively following growth and profit opportunities that control engineering, manufacturing, distribution, information management, and financial services expertise.
3. To develop and reward people. Caterpillar will furnish its overall workforce with a situation that gives diversity, innovation, teamwork, continuous learning and improvement and rewards to individual performance.
4. To encourage social responsibility. Caterpillar is committed to improve the quality of life while maintaining the nature of our earth.

Caterpillar Inc.’s Vision Statement:

Caterpillar’s corporate vision is to “be the global leader in customer value.” The company aims at being a global leader in the industry through high quality products that satisfy customers. The company also effectively creates its business value through marketing and its distribution network around the world. Hence, the corporation follows this vision statement and continues to improve customer value.

Caterpillar’s vision statement is really good, based on conventional guidelines on creating vision statements. The company’s corporate vision is short and simple, which makes it easy to understand. The term “global leader” is ambitious enough to push the company to improve. However, this vision statement has various issues in terms of specificity to Caterpillar’s business. The statement does not contain enough information to relate it to the company’s nature of business or industry.

Recommendations for Caterpillar Inc.

Based on the results of the business analysis, as a recommendation, Caterpillar can really improve their performance through differentiation. The company can increase its investment in research and development to create unique products. At present, the heavy equipment, engines, and financial services of Caterpillar are very similar to the products available from other competitors. To increase competitiveness, the company must invest more in developing unique products.

Caterpillar can also improve its financial performance by growing its distribution network in various countries. The company can focus on developing markets because these markets have high economic growth rates. For an example, the company can increase the number of Caterpillar distributors in countries like China and India.

Summarize your assessment of whether Caterpillar Inc. is leveraging the appropriate value and cost drivers for their business strategy.

Caterpillar Inc. had recently adopted a new business strategy referred to as the Operating and Execution Model. This strategy has allowed the company to appropriately leverage its value and cost drivers as the O&E model systematically builds a competitive advantage by allocating more and more resources to the most profitable parts of the enterprise. The O&E business strategy force a laser-like focus on its business strengths. The core competence of its strategy is based on provision of products, services and solutions that make efficient and productive use of resources based on innovation and technology. With this, it is evident that the company focuses on increasing value creating activities by commissioning more resources and decreasing cost incurring activities by applying innovation and technology to minimize costs and to obtain a sustainable performance.

Summarize your analysis of the strengths and weaknesses of Caterpillar Inc’s competitive advantages. Based on your analysis would you propose any changes? Why or why not?

Caterpillar Inc. is one of the leading manufacturers of heavy equipments such as trucks, wheel loaders, excavators, bulldozers etc. In the construction and heavy equipment market, Caterpillar Inc. is able to maintain its position despite tight global competitive market.

Strengths of Caterpillar Inc. :

(a) Reach and distribution network : Caterpillar Inc. has a wide global reach which is further supported by strong distribution channels to ensure that its products reach a large number of customers.

(b) The company has a large asset base that can aid in the future growth and development of the company.

(c) Caterpillar Inc. has a really strong brand image because of its premium quality products and their reputation for safety. It is because of this reason that it is one of the biggest players in the market.

(d) Caterpillar's acquisition strategy and growth is also remarkable as it has acquired a few companies in the past. Also, Caterpillar's research and development is unquestionable as it spends around 2 billion dollars every year on R & D to stay amongst the top in the market.

(e) Strong work force - When it comes to high skilled labor, Caterpillar invests extensively on the training of its employees and has over 10,000 engineers working to produce profitable products of high quality.

Weakness of Caterpillar Inc. :

(a) High debt to equity ratio - Caterpillar has a really high debt to equity ratio as compared to its competitors. In 2016, the debt to equity ratio of Caterpillar was at 2.78 which is quite risky as it can affect the company's money borrowing ability and likewise, harm the company's ability to fulfill its debt obligations.

(b) Another weakness of Caterpillar is low current ratio and its ability to meet short term obligations is lower than the industry average which means that the company might face liquidity issues in the future.

(c) Meeting the boom in the demand is quite a challenge for the heavy equipment manufacturer. Besides surplus demand in the market, Caterpillar doesn't invest in the factory capacity and focues to invest more in technology and sell used and rental equipment.

After analyzing the strengths and weaknesses of Caterpillar Inc., it is important for Caterpillar to increase its cash flow and boost either its sales or margins or both so as to increase profits which will help the company to fulfill its debt obligations and reduct debt to equity ratio because in times of market slow down, high debts can sometimes even bankrupt a company. Considering the facts that Caterpillar has a strong brand image, invests immensely in R&D and has more than 10,000 engineers and 20,000 patents, Caterpillar must focus more on bringing innovatiion because since innovation in the heavy equipment industry is limited and if Caterpillar Inc. is able to focus and bring some innovative concepts into its equipment and marketing strategies, it will make Caterpillar Inc. stand out in the market and will help Caterpillar to gain a sharp edge over its competitiors.

Summarize your assessment of whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness. Based on your analysis would you propose any changes? Why or why not?

The appropriate steps are in fact taken by Caterpillar Inc. Caterpillar is the world's guiding force for the production and mining of vehicles, oil, gas and new gas turbines. Caterpillar is committed to providing consumers with solutions to a better future and helping them to improve their business more efficiently than to improve their businesses.

Caterpilla has the strength to handle his critical initiative and finally to ensure that his work continues to be beneficially progressed, by information-driven theory–the operating and execution model. Caterpillar is focused on knowing consumers ' needs, as well as solutions, passing on market driving items and organizations in three areas:

Expanding operational enormity concentrating capacities–protection, efficiency, lean and costing discipline–to build up a strong position. Growing commitments to customer achievement through unified and independent action plans. Developing organizational dependency in relation to modernized committed preparation and support to customer reliability and enhancement.

The greatest benefit of Caterpiller comes from the price, the economies of scale of the association and the amazing stock network in which the association has been involved for many years. The movement and storage network of world class offers a high level of land and a longer age when taking into account different customer needs. Caterpillar is making choices at low costs across economies of scale, contributing to consumer trust and potential success in this area. The ongoing commitment of Cat to system accessories will strengthen its market driving positionCaterpillar Inc. has a straightforward organizational framework to ensure that mining equipment, gaseous oil engines, developers and diesel engines are set up, assembled and marketed by the company.

Summarize your evaluation of Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments. Would you propose any changes in how Caterpillar Inc. responds to shifts in the external and internal environments? Why or why not?

The government must be cautious about situations. The value of the partnership is influenced by the organization's expertise and activities. By considering and recognizing the interior and exterior conditions of the company, the Authority that recognize and identify opportunities that would generate increased incomes and appropriate tasks. Association opportunities may be tracked in and outside situations by following organizations.

The government must be cautious about situations. The value of the partnership is influenced by the organization's expertise and activities. By considering and recognizing the interior and exterior conditions of the company, the Authority that recognize and identify opportunities that would generate increased incomes and appropriate tasks. Association opportunities may be tracked in and outside situations by following organizations.

The authority of Caterpillar Inc. has been on the successful road to business growth. The association has built mechanisms to protect the company by extending its business in cases of risk. The program inspired skilled workers to be hired. When the power is kept, the upper hand can be gained in the business. The relationship is continuous as innovative papers and administrations can be created. Dangers have been reduced by the creation of reasonable, fragmented customer base items and administrations. Resources were used to discourage change in order to reduce waste.

Summarize your evaluation of how mergers and acquisitions in the past five years have contributed to Caterpillar Inc.’s performance. Would you propose that Caterpillar Inc. pursue mergers and acquisitions in the future? Why or why not?

Caterpillar has 4 main divisions:

1. Construction Industries ($23 bn in revenues)

2. Resource Industries($ 9 bn revenues)

3. Energy & Transportation ($18 bn in revenues)

4. Financial Products( $2.9 bn)

It made 2 major acquisitions in last 5 years :

Yard Club by its Construction division in May 2017.

Caterpillar was an investor in startup “Yard club” which is a marketplace for construction equipment. According to the company’s website, Yard Club processed $120 million in transactions across 2,500 contractors and rental companies in 2016. Yard club business model has moved from a transactional business based on taking a cut of rentals made on its platform to one that provides a SaaS platform to help customers manage all the pieces of equipment they own or rent. Construction being a cyclical industry more construction companies prefer to rent rather than buying the machines outright and Yard Club is a strategic investment for Caterpillar as it sees its sales stagnate.

Kemper valve and fittings by its Energy and transportation division in Mar 2017. Kemper manufactures a complete line of high and low pressure flow iron to the oil and gas industry. Kemper has nine facilities located across the United States and Canada. It is expected that the acquisition will increase Caterpillar’s well service product portfolio, Caterpillar Oil & Gas will have the ability to sell engines, transmissions, well stimulation pumps, valves, seats and other related parts.Kemper has been a trusted, high quality supplier to the well service industry for over fifty years.

Both the acquisitions have been made keeping strategic priorities in mind and have served the company well as seen in its robust financial performance in the 3 years post this acquisition. Caterpillar has a history of successful mergers and acquisitions and these two investments are part of this stellar history. It goes without saying that this strategy has yielded rich financial dividends and therefore needs to be pursued.

Summarize your assessment of Caterpillar Inc.’s global strategy. Based on your assessment would you propose any changes? Why or why not?

Caterpillar Inc.’s (CAT) is the world’s largest manufacturer of construction equipment. It is multinational company engaged primarily in designing, developing, engineering and manufacturing machinery and engines to customers worldwide[i].        

CAT’s strategy for growth is broadly based on its Operation & Execution (O&E) model. In 2010, to insulate the company from the ups and downs of global economic cycles, it adopted the O&E strategy. Under this strategy, CAT strengthens its competitive advantage by allocating resources into its most profitable parts of the business. The company invests in those businesses where it believes has the maximum potential to generate value. It uses data and facts to understand the most attractive industries. Based on this, it then devises strategies to improve its competitive position and allocate resources to areas with maximum potential. The company invests a lot of resources in understanding its customers. It researches on how the customers use the products and services, including the most important attributes. Based on the customer feedback, it is expanding its product offerings thereby generating greater customer value and loyalty. To deliver robust operational performance, CAT continuously builds on its core competencies, which are safety, quality, lean and competitive and flexible cost structure.

The O&E model helps in managing inventory, develop up to date products, and generate customer loyalty. I would not propose any drastic changes to the company’s strategy as the present model is driving business growth. Given its focussed approach, the O&E model is likely to make it easier for the company to remain profitable even during troubled times. I would recommend the company to be more aggressive in its expansion plans in developing countries as most of the population lives in these countries and they are likely to drive growth in the future. Diversification into new products can also increase profitability.

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