caterpillar inc
DESCRIPTION
Here is a presentation I did with other classmates on Caterpillar Inc in September 2011TRANSCRIPT
Caterpillar Inc.Kyle Abbey Nigel Jordan Ken RatliffScott Spencer Kyle Zaunbrecher
Company Overview
World’s largest manufacturer of heavy equipment
Markets include construction, mining, agriculture, forestry, and many others
Recent acquisition of Bucyrus
Competitors Deere & Co., Komatsu Ltd., Joy
Mining, CNH Global
Additional Brands
CAT Logistics World-class supply chain management Serves more than 60 global firms▪ Aerospace, oil and gas, industrial, and high
tech CAT Financial
Provide customers with a means of financing equipment purchases
Insurance provided as well
Financial Analysis
3 Months Ending June 30 Fiscal Year EndingIn Millions (Except EPS) 2011 2010 % Change 2010 2009 % ChangeTotal Assets $ 73,611 $ 58,793 25% $ 64,020 $ 60,038 7%Total Stockholder's Equity $ 13,436 $ 9,185 46% $ 10,864 $ 8,823 23%Total Debt $ 60,175 $ 49,608 21% $ 53,156 $ 51,215 4%Sales $ 14,230 $ 10,409 37% $ 42,588 $ 32,396 31%Cost of Goods Sold $ 10,303 $ 7,372 40% $ 30,367 $ 23,886 27%Gross Margin (%) 28% 29% -5% 29% 26% 9%EBIT $ 1,601 $ 977 64% $ 3,963 $ 577 587%Interest Expense $ 299 $ 315 -5% $ 343 $ 389 -12%Net Income $ 1,015 $ 707 44% $ 2,700 $ 895 202%EPS (Undiluted) $ 1.57 $ 1.12 40% $ 4.28 $ 1.45 195%
Strong recovery in 2010 from 2009. Surpassed 2010 2nd quarter figures for
2011. Growth of company continues.
Financial Analysis
Ratio Category Ratios 2010 2009 % Change Efficiency Total Asset Turnover 0.69 0.51 35%
Fixed Asset Turnover 3.42 2.60 31%
Inventory Turnover 3.17 3.76 -16%
Days Receivable 60.44 84.55 -29%Liquidity Current Ratio 1.44 1.39 4%Profitability Return on Assets 0.04 0.01 211%
Return on Equity 0.28 0.12 129%Return on Sales 0.09 0.02 422%
Increased efficiency of assets. Exceptional profitability increase after
2009 economic downturn.
Financial Analysis
SWOT Analysis
STRENGTHS
Operational Efficiency Wide Product Base Extensive
Distributorship Research and Design
WEAKNESSES
Legal Proceedings
SWOT Analysis
OPPORTUNITIES
Emerging Markets Inorganic Growth Facility Expansion
THREATS
Environmental Regulations
Currency Rates
Strategy
Execute the Business Model
Execute at Product Development
Simplify and attack cost structure
Achieve profit and cash pull through
Win in China… grow to leadership in India, ASEAN and CIS
Achieve profitable global machine leadership
Expand leadership in Mining and Quarry & Aggregates
Aggressively grow Power Systems
“BIG 8” IMPERATIVES
Vision
Caterpillar is the recognized leader everywhere it does business
Our Products, services and solutions help the customer succeed
Our distribution system is the competitive advantage
Our supply chain is world class
Vision
Our business model drives superior results
Our people are talented and live Our Values in Action
Our work today helps our customers create a more sustainable world
Our financial performance consistently rewards our stockholders
Values
Integrity The Power of Honesty
Excellence The Power of Quality
Teamwork The Power of Working Together
Commitment The Power of Responsibility
Goals
Delivering Superior Results EPS, OPACC, Cash Flow
Delivering the Best Team of People World class safety and inclusion
Global Leader Everywhere We Do Business Product Quality, PINS, aftermarket parts
growth
Porter’s Generic Strategies – Construction/Farming/Mining Equipment
Market Share
ROI
Porter Generic Strategy
Differentiation Strategy Michael Porter uses Caterpillar as an
example for this strategy Vast Dealer Network - 3,500 Dealers
Worldwide in more than 180 Countries Spare-Parts Availability Brand Identity- Quality/Durable Products
Worldwide Coverage
Porter’s “Five Forces” Strategy
Low toModerate
Low toModerate Low
Low to Moderate
Moderate
Collins’ Analysis
• Level 5 Leadership– Doug Oberhelman• Millikin University (Finance)• Positions in South America, Japan, Florida,
Canada, Illinois
• First Who, Then What– Picked top team of 16 people prior to
taking over– Examined company’s strategy &
strengths
Collins’ Analysis
• Confront the Brutal Facts– Forced managers to model worst periods
in history– Threat from Komatsu
• Hedgehog Concept– “Ensure that customers make more
money using Caterpillar equipment than using competitors’ equipment”
Collins’ Analysis
• Technology Accelerators– Electro-Motive Diesel– MWM– Bucyrus– Opportunities in China
• The Flywheel– Large dealers help company sell most of
their machines.
Strategy Recommendations
Increased emphasis on mining Emerging markets will require coal
and other resourcesStrong positioning in BRIC
countries Firm grasp on US and China
markets
Questions for the CEO
With the recent acquisition of Bucyrus, do you see Caterpillar continuing to pursue further mining acquisitions to increase its market coverage?
Caterpillar has acknowledged that their competitor Komatsu is beating them in price. What are some of the ways the Caterpillar is looking at to lower total ownership costs, to better position the company to compete with Komatsu on a cost basis?