Presented by:

Mozart Team Spring 2008

MGT 693

Company History & Background CAT’s Strategy SWOT Analysis Competition Industry Analysis – Porter’s 5 forces Recommendations CAT Today

Caterpillar Tractor Co. MGT 693

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

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

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

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

.

Caterpillar Tractor Co. MGT 693

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

High Labor costs High inventory 1970’s continued

to expand plant facilities

Consistent price structure

Caterpillar Tractor Co. MGT 693

Diversification Several countries

still growing- ASEAN

Economic environment

EME was operating at 60% of capacity

Caterpillar Tractor Co. MGT 693

7 manufacturers of the EME account for 90% of the dollar sales worldwide

Smaller companies use the flank attack

CAT loosing its market share

Caterpillar Tractor Co. MGT 693

Market Share of Major EME Producers

Rivalry Increasing rivalry with diverse

competitors Strong Brand Identity High switching costs and Barriers to exit

Threats of New Entrants High barriers to entry Govt policies Economies of scale Extensive dealership network

Caterpillar Tractor Co. MGT 693

Low threat of substitutionBalanced supplier power

Backward integration Substitute inputs

Balanced buyer power Low bargaining power Price sensitivity Brand Loyalty

Caterpillar Tractor Co. MGT 693

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 planCaterpillar Tractor Co. MGT 693

Caterpillar Tractor Co. MGT 693

1983- 1985

CFSC & product

line expansion

1990Plants

modernized & BU

restructured

2001-2005QA & CSR

measures

2008 CAT well on its way to realize its

Vision 2020

1986Caterpillar Inc. was formed.

1997Acquires UK

based Perkiin Engines

2006CLS in ShanghaiUpdated Code of

conduct & Enterprise Strategy

Caterpillar Tractor Co. MGT 693

In 2005, Forbes had listed Caterpillar as the best-managed industrial corporation in America

CAT expects record results in 2008. CAT’s current CEO, Jim Owens attributes this to

“..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