Caterpillar Tractor Company case study

KIA

Caterpillar Tractor Co

This report is a case summary and key issues (KIA) analysis of the Caterpillar Tractor Co. The KIA is a strategy development tool that can help assess a company's competitive position and help create a winning organizational plan. The KIA information is presented in a report format from a customer's perspective. The gathered information helps determine where Caterpillar stands from a customer's point-of-view in relation to competitors.

Statement of Issue

How can the Caterpillar Tractor Co. keep investors satisfied and environmentalists happy while at the same time maintaining its current industry leadership position and thus assuring continued success holding or gaining market share, profitability, and economic productivity well into the future in this highly competitive technologically changing global economy?

Present Situation

From a customer perspective, Caterpillar currently operates three main business lines: Machinery, Engines and Financial Products. The Fortune 100 Company is by far the world's number one manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company has at times been hampered by international business conduct such as understanding often accepted international bribery techniques and local governmental policies yet still has a good record of meeting international and local environmental regulations, using creative developmental and manufacturing solutions, solving customer's financial and environmental challenges and being an advocate for free trade in the world construction industry. The company has consistently generated attractive returns for its investing shareholders and has an extensive product line. Many of their goods are product line leaders. Unlike the rest of the industry, the company is well funded in R&D and is known for creative manufacturing and constantly enhancing product features. One strong aspect of their business is replacement parts which generates as much income as the sale of original equipment.

Globalization has increase the prospect of competition in construction, mining and other industry related markets as the world begins to migrate into lesser-developed regions. The global market introduces new intensified competition, new financial challenges, new expansion requirements, and new investment operations in developing countries. CAT no longer sees the base competition as only International Harvester, John Deer of other U.S. based manufactures. Today the competition entails foreign governments as well as private companies. The global economy has also created new approaches to purchasing, leasing and maintenance of equipment. Technology advances will continually create a demand for advances in efficiency and fuel consumption enhancements. Other trends include a migration towards leasing and rentals as a middleman industry gains momentum as opposed to purchasing decisions being made by individual construction operations.

Desired Situation

The company must get a better understanding of the global trends and become better acclimated in the new world economy. The company has been slow to accept partnering as a base for product distribution. CAT uses the 'run the entire operation from Peoria' line of reasoning and that approach can not take advantage of regional or local experience, governmental tax and cost relief and other locally generated perks. CAT's customers are and will continue to change so CAT should make a more intensive effort to recognize this fact. For example, the company currently distributes its products through dealerships even though that way of doing business is outdated and thus is not able to compete in a global economy. Other desires include the company adjusting to a more modern just-in-time manufacturing philosophy and eliminating the forty-eight hour parts replacement policy. Construction and mining practices today can not wait extended periods since they are utilizing just-in-time scheduling.

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