caterpillartractor 1985 spring2008 padres

7/29/2019 CaterpillarTractor 1985 Spring2008 Padres

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Caterpillar Tractor Co.Spring 2008

The Padres


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Table of ContentsI. History of EME

II. Industry

III. Central Question

IV. Recommendations

V. The Future for

Caterpillar


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History of EME Worlds largest manufacture of earth

moving equipment (EME)

The EME industry began in the late1800s with the development of

steam powered equipment The demand for EME depended on

the increase at which machines weresubstituting manual labor.

Demand was higher in developedcountries (US)

Demand structure changed due to thechanging oil demands within theMiddle Eastern countries

This lead to an increase withconstruction activity


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EME Industry

1981, the construction industryalong with EME usagerepresented nearly 70% of totaldollar sales

Excavators, bulldozers, graders,

loaders off highway tractors andhaulers EME demand was doubling

throughout 1973-1980s Mining / Construction industry -

60% of the EME market Low cost labor method created

competition EME Industry focused on

improvements for existingproducts


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Central Question

How does Caterpillarmaintain such an

extreme competitiveadvantage,

representing nearly 70percent of the dollar

sales of theconstruction equipmentindustry?


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Differentiation strategy Extending its markets globally-

plants in over 8 foreigncountries

Providing high-quality,extensive product line backedby efficient service

100% ownership of its

subsidiaries (resists jointventures)

Recognizing opportunities inexternal environment (postwaropportunity)

Key Elements in Caterpillars Strategy / Sources of its

Outstanding Success in the EME Industry


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Key Elements in Caterpillars Strategy / Sources of

its Outstanding Success in the EME Industry

Self-sustaining dealers Intangible assets-

training, excellenthuman skills

Flexible and consistentmanufacturing-avoided obsolescencethrough constantlyupdating technologyand equipment

Commitment toconstantly developingnew products


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Worldwide demand has doubled-expanding markets globally

Intensity of competition increases

Understand these markets needs and

wants better. (Competitive analysis) Less developed countries are

increasing their rates of constructionactivity

New opportunities to target new

customers Financing problems with LDC

Changes in the Industry and Competitive

Environment/ Implications for Companies in the

Industry


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Changes in the Industry and Competitive

Environment/ Implications for Companies in the

Industry

Construction in the U.S isdecreasing-less U.S dominatedand less concentrated in the U.S

Advanced developing countries are

entering the industry andincreasing competitive competition

World contractors are becomingbetter placed than U.S contractorsto perform contracts

Foreign companies are moreflexible and easier to form jointventures with

Free from constraints such as theFCPA


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CAT responded effectively tothe 1981 hardship, but notwithout criticism from theirformer employees

They laid off a largepercentage of workers,bringing about enormous laborunion strikes

CAT delegated the tasks ofwarehouse and production tooutside firms, rather thantrying to battle the union

How did Caterpillar manage tostay on top after 1981?


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How did Caterpillar manage to

stay on top after 1981?

Instead of using their officeworkers for research anddevelopment, CAT facedthem directly in thefactories

This allowed them tosuspend innovation andsave money on labor costs

Throughout this hardship,20,000 high-wage union

jobs were lost


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Recommendations (1981)1. Expand their dealership facilities

into the Asia and Middle Easternmarket

2. Enhance product reliability

3. Support customer relations

through repair & maintenancescheduling

4. Develop relations with outsidemanufactures and designers

5. Launch rental and leasearrangements

6. sIncrease their productionsystems to reach the level of

their competitors


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Where is Caterpillar Now?

Despite hardships faced in late 1981,CAT has maintained their competitiveadvantage of the constructionequipment industry in most of theworld

They still rely on the sales of countriesoverseas

In 2006, 44% of CATs sales were thedirect result of customers overseas

CAT products are currently sold in

almost 200 countries through 220dealers

Much of the warehousing and partsproduction is now being outsourced,however, there are still four major

plants in the Peoria, Illinois area


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Where is Caterpillar Now?

The Caterpillar Defense ProductsSubsidiary has been developed,which provides diesel engines andautomatic transmissions to manyother countries engineer tanks andmilitary vehicles

CAT is still the worlds largestmanufacturer of construction, but inJapan, China, and the Middle East,they have fallen in second place. Inthose regions, Komatsu owns a

larger share than CAT

CAT has been listed on the DowJones sustainability index every yearsince 2001. They have become aFortune 100 Company, with more

than $40 billion in assets


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The End

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