Cummins Is the Dominant Player

Cummins is the dominant player in the global truck and heavy equipment engine market. Founded in 1919, Cummins had grown to this position of dominance on the basis of technological leadership and an aggressive growth strategy. The company now operates in nearly 200 countries in the world, in four major divisions. Cummins typically competes on a global basis against other global giants. Cummins is a strong player in emerging markets, thanks to establishing first mover advantages and joint ventures with a number of major manufacturers.

Cummins has a number of stakeholders and works to meet all of their needs, not just the needs of one or two primary groups. According to the Cummins website, the company was founded in 1919 in Columbus, Indiana as the Cummins Engine Company. Clessie Cummins founded the firm because he believed that Rudolph Diesel's engine technology had untapped commercial potential. Cummins was able to found the firm through partnership with a financier, William Irwin, a local banker.

The company struggled at first, with the diesel engine not taking off as Cummins had hoped. Clessie turned the company's fortunes around in 1929 when he installed a diesel engine in a Packard limousine and began to drive the vehicle, gaining exposure for what was the first diesel-powered automobile. Cummins received more investment capital and plugged that into product development. As a result of this effort, Cummins became an engine supplier to the trucking industry. Irwin's great-nephew J. Irwin Miller, took over the firm in 1934, one year after the Model H.

engine was released. The Cummins engine built its reputation upon the combination of economy, power, reliability and durability. By the late 1950s, Cummins was a $100 million company and was the dominant player in heavy truck engines. In 1956, Cummins expanded overseas for the first time, opening a manufacturing facility in the Scottish town of Shotts. By the 1960s, the company had sales and distribution in 98 countries, through a network of 2500 dealers. The company's early move international has made it a pioneer in the development of today's key emerging markets.

Cummins now has over 5000 dealers in 197 countries and is one of the largest engine makers in both India and China. Cummins has built their operations over the years via an acquisition strategy. The first major acquisition was Holstet Engineering in 1973, the basis of what would become Cummins Turbo Technologies. They purchased Onan Corporation in 1986 to become the foundation of their power generation business. They purchased Newage to bolster their generation technologies business. In 1999, Cummins purchased Nelson Industries to enter the emissions solutions business.

To improve back-end operations, Cummins adopted Six Sigma quality control methodology and Design for Six Sigma. The company to date has completed over 12,000 projects under the program, resulting in cost savings of $2 billion (Marx, 2005). Today, Cummins has four business segments -- Engine, Power Generation, Components and Distribution. With over $14 billion in annual sales, Cummins has maintained technological leadership in diesel engines and continues to be the dominant player in that industry in the U.S. And around the world.

Corporate Structure Cummins operates a divisional structure around the four aforementioned divisions. Within this superstructure, Cummins operates sub-divisions based around products. For example, Components has four subdivisions of Filtration, Turbo Technologies, Emission Solutions, and Fuel Systems. Despite being a global company, Cummins does not have a matrix structure or a geographic structure. This component of the company's operations is incorporated under the Distribution operating segment.

The company also has a number of joint ventures, including North American distributors, and international joint ventures with large truck makers in key markets -- Dongfeng in China, Komatsu around the world and Tata in India for example (Cummins 2008 Form 10-K). The joint ventures allow Cummins stronger access to these markets. The focus on product-based divisions allows Cummins to take a product-centered focus. This is reasonable given that the needs of the customers in each market do not vary significantly.

Mission Statement Cummins' mission statement is encompassed by five core ideas. These are: Motivating people to act like owners working together Exceeding customer expectations by always being the first to market with the best products Partnering with our customers to make sure that they succeed Demanding that everything we do leads to a cleaner, healthier, safer environment Creating wealth for all stakeholders (source: Cummins.com) Legal Actions Information about ongoing legal actions is typically disclosed in the annual report.

An examination of Cummins' Form 10-K from 2008 reveals that while the company is subject to a wide range of legal risks, there are no major legal actions pending. Referring to environment-related legal actions, the company states that "we do not believe that these lawsuits are material individually or in the aggregate." Negative Publicity At present, there is little indication that Cummins is faced with any significant negative publicity.

The company faces some minor environmental lawsuits, which may not be financial material but could generate some negative publicity should the company be found culpable for any impropriety. Cummins' track record with regards to negative publicity -- or the lack thereof -- is enviable for a multinational country, in particular one with manufacturing operations overseas. Cummins' approach has been proactive. There are hints of the company's approach in its stated core values and in its vision statement, which contains two lines about corporate leadership.

Competitors Cummins has a variety of competitors in its core industries. In engines, Cummins competes against Caterpillar, Detroit Diesel Corporation and Navistar. Detroit Diesel is a private corporation and does not publish financial statements. Navistar is around the same size as Cummins, with $11.57 billion in sales, compared with $10.8 billion at Cummins. Caterpillar has sales of $36.22 billion, but operates many more business lines. Its engine business is smaller than that of Cummins.

According to the 2008 Form 10-K, other engine competitors are Volvo Powertrain, International Truck and Engine Corporation, Mercedes Benz, Volvo, Renault, Scania, Weichai Power Co, Nissan Diesel, Yanmar and Deutz. In power generation, Cummins competes against Tognum and Mitsubishi primarily, as well as FG Wilson, Kohler, SDMO and Generac. In the components segment, Cummins competes with a variety of different firms around the world, including Donaldson, Clarcor, Mann + Hummel Group, Tokyo Roki, Borg-Warner, Bosch, Tenneco and Honeywell.

While each of the first three operating groups compete against other large players in a global environment, the distribution group faces innumerable competitors in local markets, making for a significantly different competitive environment. Stakeholders There are a wide number of stakeholders of Cummins. One of the company's mission statements is to create wealth for all.