Industry and Company Analysis

Team 3:Jacob Weems

Charles HodgesAmanda Barrientes

John WiseEthan Noble

Who They Are

“…the world’s largest manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines.”

-Caterpillar.com

History

Daniel Best & Benjamin Holt

“…take the road with them”

Holt Manufacturing & Best Gas Traction merged in 1925 to form Caterpillar Tractor Co.

Product Lines

Engine Electronics IT Turbine Apparel

Heavy Equipment

Vision Statement

Be the global leader in customer value.

Mission Statement

Caterpillar will be the leader in providing the best value in machines, engines and support services for customers dedicated to building the world's infrastructure and developing and transporting its resources. We provide the best value to customers.

Caterpillar people will increase shareholder value by aggressively pursuing growth and profit opportunities that leverage our engineering, manufacturing, distribution, information management and financial services expertise. We grow profitably.

Caterpillar will provide its worldwide workforce with an environment that stimulates diversity, innovation, teamwork, continuous learning and improvement and rewards individual performance. We develop and reward people.

Caterpillar is dedicated to improving the quality of life while sustaining the quality of our earth. We encourage social responsibility.

Industry Analysis

Competitors

Key Success Factors

Industry attractiveness

Competitors

Cat competes in two types of heavy equipment markets, Commercial Construction and Agriculture

Construction: Volvo, John Deere, Komatsu, and CNH Global

Agriculture: John Deere, Agco, and CNH Global

Competitors

Key Success Factor

Manufacturing and Distribution

Logistics

Quality and Durability

Marketing and Branding

Industry Attractiveness

Take the economy into consideration

You have to have a global presence

Have constant innovation

Strengths/ Weaknesses

Strengths› Leading manufacturer in construction and

mining equipment.› Diversified to offset impact of a cyclical

industry› Name associated with quality› Large dealer network servicing 182 countries

globally Weaknesses

› In a cyclical industry› Increasing Debt

Opportunities

Threats

Government policies at home and abroad› Tariffs and quotas › Environmental regulations

Health of the economy at home and abroad

Other potential threats that come with doing business globally

Core Capabilities

Logistics

Obtaining a large dealer network

Producing quality products

Short-term Strategy

Integrated Services

› Logistics

› Financing and Insurance options

› Operator Training Program

Short-term Strategy

Labor› Caterpillar has declined its labor force

close to 18,000 employees.› Caterpillar is facing increased expenses

from retiree pension, health care, and related benefits.

› Additional cuts include five plants in the states of Illinois, Indiana, and Georgia, by laying off another 2,500 workers.

Short-term Strategy

Debt› Cat has had to look for alternative capital

sources to finance their acquisitions.

› Recent cost of acquisitions has put CAT much further in debt.

Long-term Strategy

Acquisitions› Caterpillar has maintained a long history of

acquiring companies, both foreign and domestic.

› Right now CAT is taking advantage of the current market status.

› These purchases will prove beneficial in the long run.

Long-term Strategy

Dividends› By being able to pay dividends on a

regular basis and at an increasing rate it has allowed Cat to raise more capital from shareholders.

1-Apr-0

0

1-Nov-0

0

1-Jun-01

1-Jan-02

1-Aug-0

2

1-Mar-

03

1-Oct-

03

1-May

-04

1-Dec-

04

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5

1-Feb-06

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7

1-Nov-0

7

1-Jun-08

1-Jan-09

1-Aug-0

9$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

As Reported Amount Per Share ($)Split-Adjusted *** Per Share ($)

Critique of CAT

International Operations› “butt kicked in India” by Jim Owens

› Unbalanced Effort i.e. acquisitions vary by location/market widely

› Failure of one single global strategy U.S. strategies will not work in every market

› Six Sigma – Connects the global network

Critique of CAT Cont’d

International Operations

› Price-Premium Strategy High cost, competitors are low cost

i.e. Komatsu

› ‘Two-tier’ Attack Buy local company and sell under multiple

tiers CAT – premium price, high quality and large Local – cheaper price, less quality and smaller

Critiques of CAT

Labor

› Southern Strategy approach

› 60% of employees in 2001 outside of U.S.

› In last 18 months, 20% of workforce laid-off

› October 2009 2,500 employees laid-off were permanently let go and granted separation packages.

Critiques of CAT cont’d Labor History

› 1992 UAW (United Auto Workers) have union wide strike. CAT postpones R&D and uses engineers to man factories.

› 2006 CAT has Class Action lawsuit filed against on behalf of retiree’s. Based on healthcare coverage in contracts.

› Is Caterpillar ‘anti-union’ ?

› Are layoffs part of Caterpillars global push for new markets?

Recommendations Global Growth slowdown

› Caterpillar international growth model is too broad to succeed in all sectors.

› Focus resources on few specific markets i.e. India instead of China, Brazil, Japan, Ukraine

› Acquisitions in 2008 all were in different global markets. Canada, Japan, China, Brazil, North Dakota

Recommendations Cont’d Marketing

› Large marketing campaign to increase CAT’s brand perception in developing markets

› New Product line introduction Power tool product line

i.e. Caterpillar made Power saws, Power drills, nail guns, etc.

› Use already tapped consumer markets and distribution channels for promotion

› Caterpillars brand equity carries heavy weight with construction industry Increase market share by utilizing long lasting loyalty and

brand recognition

Conclusions Drawn

Balanced Approach

Optimistic

Boldly Aggressive