Presented by:
Mozart Team Spring 2008
MGT 693
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Company History & Background
CAT’s Strategy
SWOT Analysis
Competition
Industry Analysis – Porter’s 5 forces
Recommendations
CAT Today
Caterpillar Tractor Co.
MGT 693
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Headquartered in Peoria, Illinois
Started out in farm equipment
Late 1920’s moved to EME (earth-moving
equipment)
1941 to 1944 sales tripled due to WWII
Bulky equipment left behind after the war
Company has only experienced a loss one
time
Caterpillar Tractor Co.
MGT 693
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Multinational company
Designs, markets and manufactures
EME and engines
Cat is world’s largest EME
manufacturer
In 1981 it was estimated that 57% of
the sales were overseas
68% of these sales were made in the
USA
Parts revenue is about 35% to 45%
Caterpillar Tractor Co.
MGT 693
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Management takes a long term approach to business
High quality products
Effective service
Strong brand value and brand loyalty
Company was always on the defense – mostly self-reliant
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Key Success Factors:
 Cost competitiveness through high volume production
 Reliability backed by a stockpile of spare parts
 Service delivery through a widespread network of
independent distribution agents
 Localized ability to customize
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Caterpillar Tractor Co.
MGT 693
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129 overseas dealerships
87 US dealerships
Manufacturing
consistencies
Make 90% of
components and parts
Profit margins higher on
parts and attachments
Differentiation
advantage
Low dependence on
debt
Caterpillar Tractor Co.
High Labor costs
High inventory
1970’s continued to
expand plant facilities
 Consistent price
structure
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MGT 693
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Diversification
Several countries still
growing- ASEAN
Caterpillar Tractor Co.
 Economic
environment
 EME was operating
at 60% of capacity
MGT 693
Market Share of Major EME Producers
7 manufacturers of the
EME account for 90%
of the dollar sales
worldwide
 Smaller companies use
the flank attack
 CAT loosing its market
share
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60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
Caterpillar
J.I.Case
Deere
Clark
Caterpillar Tractor Co.
Komatsu
Fiat-Allis
International Harvester
MGT 693
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Rivalry
 Increasing rivalry with diverse competitors
 Strong Brand Identity
 High switching costs and Barriers to exit
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Threats of New Entrants
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High barriers to entry
Govt policies
Economies of scale
Extensive dealership network
Caterpillar Tractor Co.
MGT 693
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Low threat of substitution
Balanced supplier power
 Backward integration
 Substitute inputs
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Balanced buyer power
 Low bargaining power
 Price sensitivity
 Brand Loyalty
Caterpillar Tractor Co.
MGT 693
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Lower capacities on existing factories
Continue diversification strategies
Go back to basics and offer smaller products
Continue with partnership agreements
especially in growing economies
Extend dealerships in Asia & MiddleEast
Establish EME rental or lease systems
Educate labor unions about Caterpillar’s
current challenges and short-term plan
Caterpillar Tractor Co.
MGT 693
1983- 1985
CFSC &
product line
expansion
1990
Plants
modernized & BU
restructured
1986
Caterpillar Inc.
was formed.
Caterpillar Tractor Co.
2001-2005
QA & CSR
measures
1997
Acquires UK based
Perkiin Engines
2008
CAT well on its
way to realize
its Vision 2020
2006
CLS in Shanghai
Updated Code of conduct
& Enterprise Strategy
MGT 693
In 2005, Forbes had listed Caterpillar as the bestmanaged industrial corporation in America
 CAT expects record results in 2008.
 CAT’s current CEO, Jim Owens attributes this to
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“..the way Caterpillar reshaped its DNA, permanently changing
the culture and capabilities of the enterprise. Caterpillar
focused on its decision rights, organizational structure,
motivating factors and metrics and measures - the four
essentials of organizational DNA”.
Caterpillar Tractor Co.
MGT 693
Caterpillar Tractor Co.
MGT 693