Caterpillar Tractor Co.
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Transcript of Caterpillar Tractor Co.
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An Overview of Corporate Strategy and Performance
Team Belinda Spring 2008
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Background Environment Corporate Strategy Business Strategy Strategic Management Financial Performance Success Factors Challenges And Solutions Current Problems Recommendations Update
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WWI and WWII created a high demand for EME (Earth-Moving Equipment)
The demand for EME rose after the wars for interstate highway construction, but waned after their completion
The demand for EMEs grew in under-developed countries as they began to industrialize
In the 1970’s, EMEs were a crucial part of the booming coal and oil industries both domestically and abroad
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Caterpillar Tractor Co. (CAT) was formed from the merger of Holt Manufacturing Co. and C.L. Best Tractor Co. in 1925
Began designing, manufacturing, and marketing: Earth-moving construction and material handling
machinery and equipment and related parts Engines for EME
Expansion of product line in 1940 Grew to become the worlds largest
manufacturer of EME
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J.I. Case (A Division of Tenneco) John Deere Clark Equipment Fiat-Allis International Harvester Komatsu (of Japan)
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Highly Vertically Integrated Nearly 90% of parts and components are manufactured in-
house Closely tied to all of the dealerships
Low-Level of Diversification Over 90% of revenue comes from parts, service, and sales of
EME
Expansion Development Strategy 6-7% Growth per year
Joint ventured with overseas companies to take advantage of tax benefits and international regulations (government funding)
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Quality-Based (Upward) Focused Differentiation Customer Service Excellence
Strong relationship with EME owners Many dealerships for repairs Offered repairs instead of replacements
Product Quality Improvements focused on existing products Premium Cost for Premium Products
10-20% Higher sales price than nearest competitor
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Resource Based Model for Internal Strategy Hire employees on a long-term basis only Conduct in-house management training
Sacrificed profit margins to prevent a loss of customers due to poor quality or service
Focused on globalization and expansion
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War-Time Opportunities The Allied Forces used parts for tanks and
machinery US Army decided to standardize on CAT’s
EME
Post-War Opportunities Established independent dealerships to
service machines left in Asia and Europe Reconstruction of war-torn countries
created a high demand for EME
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CAT has maintained over 50% of its industry’s market share since the 1970’s
Leading up to and through WWII (1941-44) sales tripled
In 1980, Sales reached a high of $8.6 Billion and projected even higher for 1981
57% of sales came from overseas
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Having local plants gave a competitive advantage by lower distribution costs
Leveraged technological advancements to provide innovative products, services, and solutions
More international recognition than competitors Highly dedicated employees and management “Severally Responsible”
Teamwork Corporate Culture of Dedication
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Decline in business after the completion of interstate highways CAT shifted its focus for the coal and oil industries both
domestically and abroad CAT focused on developing countries
Labor strike of 40,000 workers in 1979 CAT laid off 5,600 laborers and contended that the remaining
employees are paid an average of over 80% more than Komatsu
Overseas constructions were contracted out to local companies CAT entered into joint ventures to compete more
internationally
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Japanese steel costs 30% less than US made steel, giving manufacturers like Komatsu a manufacturing advantage
CAT’s US based labor is a larger percentage of manufacturing costs than its foreign competitors
Economic factors have caused a decline in US construction activity
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Increase International Business Establish and expand partnerships with overseas
suppliers to gain an advantage in materials Take advantage of low-cost foreign inputs, such
as materials and labor Continue to expand EME sales and service to
developing countries
Expand Into Other Industries Analyze other possible uses for EME technology
Continue Long-term Planning and Current Management Strategies
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CAT continues to be the world’s leading manufacturing company of construction equipment, diesel and natural gas engines, and industrial gas turbines.
CAT is also a leading service provider through its financial, remanufacturing, logistics, and progress rail services
Today CAT has nearly 300 operations in 40 countries on every continent
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