Strategic Development Research of Caterpillar Inc


This report presents the Strategic Development Research of Caterpillar Inc. Caterpillar Inc. founded on 15th Apr, 1925 in California, United Stated. Caterpillar is involved with designing, developing, marketing and retailing heavy equipments, machinery and engines and it is also involved with advertising financial services to the customers all over the world. Caterpillar is the world's greatest manufacturer of producer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The business is providing worldwide and offers career to around 104, 490 employees. Its products includes Bulldozer, Excavator, Wheel Loader, Haul Pickup truck, Diesel Engine etc. and its own services includes Financing, Insurance, Maintenance and Training.

The developmental strategies found in the past, present strategies and the strategic planning for the future development of the Caterpillar, are mentioned further in this article. Strategic Planning is about the locating the best solution for future problems to be experienced by the organizations that not only solves the issues but also needs to proves to be beneficial to the organization. Caterpillar value statement is "We have the people, procedures, tools and ventures to deliver the product quality, reliability and strength customers expect from Caterpillar in each new product benefits. " This tactical planning report targets three major jobs

Describe the strategies deployed by the organization before and their causing final results i. e. the strategic development record of the company.

Undertake the evaluation and appraisal of the company's current proper situation with regards to the company's strategic macro industry and competitive environment and company's endowment of its resources and features.

Explore, examine and access the strategic choices available and recommend the best tactical plan available for the business.


It has been more than 85 years that Caterpillar is portion its customers and therefore ranked world's number 1 in its own industry. The business has been growing every year and has preserved its position in to the market. In 1980s, Caterpillar arrived very near to bankruptcy but nonetheless it manages another as a higher tech internationally competitive development company. The business has now proved itself as the world's greatest manufacturer of development and mining equipment, diesel and natural gas engines and commercial gas turbines.

Company's Establishment

In Apr 1925, the fiscally strong C. L. Best merged with the market head Holt Caterpillar to create Caterpillar Tractor Co. Caterpillar is involved in creation of heavy equipments found in development and mining that are recognizable with "Kitty" logo. Due to the rigorous competition over the market show, in 1963, Caterpillar varieties the jv with Mitsubishi Heavy Market sectors Ltd. which is rated 2nd in Japan for processing construction and mining equipments. Caterpillar agreement with Shanghai Diesel in China was helpful in enhancing the market share of Caterpillar as it was a technology showing alliance.

Come back again of Caterpillar from Recession

In the year 1981, Caterpillar encountered huge market downtown and was very close to personal bankruptcy. For 3 consecutive years, the recession costs around $1 million a day to the company which further makes the company to lessen the employment. There were three known reasons for this turmoil i. e. global recession, attacks and unfavorable currency exchange rates. Company encountered many competitors that point including Komatsu Ltd. as the perfect competitor. To overcome this recession, the business CEO's unveiled various strategic procedures like chopping costs, employee reduction, out sourcing of machinery, parts and their components, benefits of modernization, diversification of products and reorganization of company's structure. These methods were very important that time to save the business to be bankrupt. Later on the organization did the trick really well and were able to generate the highest profits. George Schaefer's urged the professionals to respond to recession.

Caterpillar outsources 80% of its parts and components and additional they used their brand names for reselling the outsourced products keeping the quality control of the merchandise. They doubled their product line in just 4 years from 150 to 300 equipments with an intro of small and light weighted products along with the customer diversification as well. Caterpillar also focused on repairing its romance with the labour as they experienced many attacks as a result of cost cutting the company successfully achieved the target of healthy staff and employer relationship. Also employee participation program was launched by Schaefer in 1986 which involves employee satisfaction, quality improvement and increasing efficiency level. The program was termed as Employee satisfaction Progress i. e. EPS. EPS assists with reducing the rate of absenteeism, drop in labour grievances, keeping in costs of upto $10 million and rises employee's devotion. "Plant with the future" (PWTF) is launched as a modernization program. Switch from batch production to adaptable work cells became good for the organization. The technological improvements and PWTF program led to high quality of products, increased efficiency level and high productivity. Due to all these work put by the business, the Caterpillars 30 worldwide crops managed to slice the inventory level by 50% and production space by 21% in only 3 years. Also Caterpillar's world market share goes up to 50% and its own earnings increased by 66% from the year 1985 to 1990. Caterpillar overcome the Komatsu insurance firms total sales of over $11 billion in the entire year 1989, which were nearly double the sales of Komatsu. The business takes the benefit of the growth in global demand for heavy construction industry at a steady rate of 4. 5% in the 1990s and was successful to make its way towards the very best most position.

Schaefer demonstrates to be the best administrator of any making company of heavy building equipments. After five yr tenure of Schaefer as CEO, Donald Fites becomes the next CEO of Caterpillar Inc. Donald brought leadership style to the organization. He further focuses on reorganization plan that involves the customer needs on main concern basis.

Research and Development

In 1904, Benjamin Holt solved the problem of generating tractors well in moist land experienced by farmers in California by developing a tractor with fuel engine rather than vapor engines that are much much lighter and this tractor was nicknamed as "Caterpillar". By 1915, the Holt tractors were sold in around 20 countries. Further they made a company called Caterpillar by merging with best company in tractors. Caterpillar was the first company that introduces diesel engines on a moving vehicle. In 1931, the business created separate engine unit sales group for the marketing of diesel engines to other equipment manufacturers plus they further replaced it with sales and marketing department for serving better selection of customers. The business was highly involved in manufacturing substitution parts as well because it generates over a quarter of the full total earnings because of two main reasons i. e. sale of replacement parts is more profitable than the whole machines and the alternative parts market was less cyclical than that of oe.

After World War 2, the demand for Caterpillar products risen to reconstruct the devastation happened in European countries because of the 2nd world battle. Finally in 1960s, Caterpillar becomes the first choice of the heavy structure equipment industry. Further in 1965, Caterpillar expanded its businesses to Britain, Canada, France, Brazil, Australia, India and Japan.

In 1983, the company starts providing financial services as well. There has been huge diversification in the product line to overcome the recession in the entire year 1985 to more than 300 products. As the business was producing and diversifying in its functions, it changes its name to Caterpillar Inc. In 2001, Caterpillar was the first company that launches 6 Sigma that helps the organization in enhancing its quality to the best level. Caterpillar starts sustainable development in the entire year 2005 as it taken care of immediately the Asian tsunami catastrophe and earthquakes in South Asia.


Caterpillar Inc. is the world's number 1 manufacturer of building and mining equipments, diesel and gas engines and gas turbines. The organization is developing daily and continuously growing their business. Its market isn't just limited to Europe but Caterpillar is providing its products across the world like China, India, America, Russia etc. Caterpillar provides its customers with the best quality product at a very sensible price and also involved in good customer relationships. Caterpillar is manufacturing its products at 110 plants worldwide and it is retailing its products in nearly 200 countries. Caterpillar made its sales through independent dealers that add around 66% of the full total sales.

Caterpillar uses many business strategies for its development and to compete effectively using its competitors. For the analysis and appraisal of company's current strategies, various tactical tools are being used like PESTEL Analysis for inspecting the macro environment, SWOT Research for studying the capabilities efficiency of resources as well and Porter's Five Make Analysis is used to analyze the market, customers, rivals, suppliers etc.

PESTEL Analysis

For analyzing and studying the macro environment of the organization, the PESTEL Research tool can be used. There are many macro environmental factors that impact the workings of a business like Political factors, Economical factors, Sociable factors, Technological factors, Environmental factors and Legal factors. Why don't we now discuss at length that how these factors affect the working of Caterpillar Inc.

Political Factors - Politics factors are one of the main factors that have an effect on the operations of the business. Every country has its own governments with different regulations and legislations, regulations, import and export procedures etc. As Caterpillar is working and serving the clients worldwide, it ought to be alert to the political factors.

Economical Factors - The economic factors includes the recession, inflation, development in GDP, expansion in inhabitants etc. In 1980s, the recession visits Caterpillar terribly as it was very near individual bankruptcy but somehow it manages to get over that economic downtown. The rise in the costs of raw materials, diesel, petrol, transfer and export costs etc. is big problems for the organizations. A rise in raw material prices increases the manufacturing costs in Caterpillar and also to maintain a balance, the business has to increase its prices.

Social Factors - Caterpillar is working in many diversified countries. Hence it becomes necessary to consider the interpersonal factors while framing the business strategies. Every single country has different societies with different prices, culture, religions, attitudes etc. the company must maintain a balance to avoid almost any discrimination into the organization.

Technological Factors - A creation company like Caterpillar needs ongoing technological advancements. It ought to be updated with all the current latest technology to contend in a better way and keep maintaining its position into the market. Caterpillar is obviously using the best solutions for processing its building equipments. Moreover it has invented many services with the best quality and cost range among the whole market.

Environmental factors - The Caterpillar has relocated towards the lasting development i. e. they are simply concentrating on new solutions and inventions to raise the efficiency and output of the organization by not impacting the surroundings and also providing suggestions to the clients for doing the same. Their mission is "to permit economic expansion through infrastructure and energy development, also to provide solutions that protect people and preserve the earth".

Legal Factors - The many regulations and legislations of the united states in which the company is functioning cannot be overlooked. The regulations related to import and export, occupation laws, labour laws, should be taken health care of. A lawful and legal business can effectively survives in long run.

SWOT Analysis

The SWOT Examination shows the Strengths, Weaknesses, Opportunities and Threats available with the business and an possibility to the organization to work with its Talents and Opportunities for the betterment of the organization and keep carefully the firm safe from its weaknesses and outside the house threats. Let us discuss the SWOT Analysis of Caterpillar.

Strengths - The primary power of Caterpillar is that it's a global leader in its industry as it is world's greatest manufacturer the building and mining equipment, diesel and gas engines and natural gas turbines. It is ranked as quantity 44 among all the organization in 2009 2009 by Bundle of money 500. It has the highest revenue technology and highest show value on the market as well. It has a solid financial condition as it could grab the worldwide opportunities available. Caterpillar has 110 plants worldwide and is also offering around 200 countries which show its huge customer diversification. It includes a solid dealer's worldwide network which contains over 200 full collection traders that helps the organization in taking about 60% of the market.

Weaknesses - In recent years the business has confronted many downtowns. The sales level of the company is lessening since 2003 which results in less earnings. Also the long term debts of the company have been increasing. The company does most of its sales through its indie dealers. Sellers show an extremely less confidence on the Caterpillar's new forecasting system.

Opportunities - Caterpillar has good opportunities of progress in developing countries like India and China. These countries demand lot of building equipments and engines as well. Again the growth in the populace demands more development. Entering into joint endeavors and acquisitions provides good opportunities for the business's development. In 2004, the business formed Caterpillar Ability Generation Systems in association with Solar Turbines Incorporates to advertise the products of both companies which further reduces the manufacturing costs of the company and makes the business more competitive.

Threats - The exterior threats can't be ignored as they have an impact on the business adversely. The recent hazards experienced by Caterpillar are the rise in the costs of raw material especially metal prices. This escalates the manufacturing cost and additional decrease the organization's profits. The demand of the mining equipments depends upon the population expansion and Gross Household Product development which is very uncertain. The offer between Caterpillar and United Auto Workers finishes in 2004 which permit attacks and disruptions in work. Hence such contract expuration are great risk to the organizations.

Porter's Five Forces

Porter's Five Causes is a small business strategy that is developed by Michael E. Porter. He points out the five makes available in the macro environment that impacts the capabilities and capacities of an organization. These five forces are risk of new entrants, power of competitive rivalry, risk of substitutes, bargaining ability of customers and finally bargaining electric power of suppliers. This can help an organization to understand the exterior environment and make their business strategies accordingly. The further conversation on Caterpillar's Porter's Five Causes is as employs

Threat of New Entrants - The risk of the new entrants in suprisingly low for Caterpillar. Caterpillar is into making the engineering equipments which takes a huge capital and resources. It is difficult for any new entrant to invest that much into this industry when it is aware that there are already highly competitive companies available. Caterpillar should be competitive continuously with its competitors to keep its position into the market.

Intensity of Competitive Rivalry - Caterpillar encounters a high competition in to the market and the other opponents can beat Caterpillar anytime if they lose focus or using bad business strategy. Caterpillar has around 50 opponents worldwide that adjustments around 80% of the market.

Threat of Substitutes - There exists nearly no threat of substitutes for Caterpillar as it is included into the production of such unique engineering and mining equipments.

Bargaining Vitality of Customers - The clients have a moderate bargaining vitality as most of the sales are done through indie dealers and charges is done based on the markets.

Bargaining Power of Suppliers - Again the suppliers likewise have a moderate bargaining power. For manufacturing engineering equipments, there is a need of material or other heavy recycleables which can be difficult to transport and also costs high. Hence an increase in the costs of raw materials is a major issue for the business.


Caterpillar has established various focuses on for future and is seriously involved in to the achievement of these targets. The business has place its strategy as Eyesight 2020. This plan sets the level for the next thing of the company's leadership and expansion in the global industries it functions. The visions and missions placed by Caterpillar are very practical and will provide further development to the organization. In the past 80 years, Caterpillar has demonstrated itself to be always a well established business with effective management and business strategies that helps the organization to keep its earnings and position in to the market even at the time of recession. The organization knows the ways of defeating the recession and wins back again its position in to the market.

Caterpillar's future tactical visions are like becoming a recognized innovator in its industry everywhere, the products, services and solutions provided will helps the customers to succeed, making use of the organization's distributions system as their competitive advantage, maintaining good labour relationships and acquiring highly talented people. The business has established various targets because of its next five years i. e. providing the best return to its shareholders, selecting and preserving the best talented people into the organization and becoming a global leader all over the place they conduct business. These targets already are attained by Caterpillar to great extent. The 100% success of these focuses on needs more initiatives. Caterpillar is currently centering towards more ecological development i. e. making the effective and effective use of the resources available without impacting the environment and also works for the culture as a whole.

Caterpillar has called among the top 10 10 industrial resource chains this year 2010 on Gartner's Inc. top 10 10 list. Also the Caterpillar's Chairman and CEO, Doug Oberhelman called into the top 50 people in business corresponding to Fortune's 2010. Hence Caterpillar is actively mixed up in development of its business and rivalling at its best in to the environment.

Future Recommendations

Caterpillar should be starting new markets worldwide as an development of its business mainly into the developing countries as around 80% of the populace lives there and they demand for such development equipments on high basis. Also the diversification in to the products and customers is very important to further growth. Insufficient diversification reduces the sales which has already suffered by the business. The diversification of the products done by the business in the past became very profitable.

Marketing has become an essential part of any group. Successful marketing plays an important role in increasing competitive advantage. A wide spread syndication service network is important is essential in contending with heavy structure equipment industry. Joint ventures are important to develop the new market segments and diversify into new products. This is very important to the growth and development of the business also to cover a sizable volume of customers.

Recently the global overall economy downturn decreases 25% of the Caterpillar sales. The capability to rebound the market plays a substantial role in the success maintenance of the business. The other critical issues for the business like changes in the prices of raw material, changes in the government financial and fiscal insurance policies, the credit risk includes into the financial services provided by Caterpillar etc. should get special attention as their influence on the business can proven to be the worst.

Continuous expansion and development initiatives are important for the maintenance of the topmost position into the market. Like getting into the new markets, diversification of products and services, customer diversification, ecological development, new syndication channels etc. The full consumption of its Talents like company's strong reputation, dominating among the list of industry, good financial condition for upto time frame technology and conquering any competition and varied business competencies, provides a competitive gain to the organization.

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