Caterpillar
serviced Cat’s equipment. There are numerous examples of corporate level strategy in this case. For example, CEO Barton, during his tenure, undertook expansion into new markets by the development of new distribution channels, and establishing themselves as global competitors. Under CEO Schaefer’s direction, Caterpillar devised and implemented a series of strategies that included purchasing, manufacturing, marketing, personnel, and labor relations. Lastly, CEO Fites revamped Cat’s product development process, by utilizing an integrated approach based on Japanese-style functional teams.
Strengths
In terms of strengths, Schaefer’s development of the ESP (employee satisfaction program) benefited the company by reducing grievances, improving quality, saving assembly cost and reducing reject part rates. Instituting PWAF (plant with a future) improved overall conditions, and modernized tools and systems. The change from batch to cell manufacturing allowed Cat to gain more integration of the work process and reduce inventory levels by 50%. Cat had a reputable relationship with its dealers. To combat with price competition, Cat offered its dealers discounts when possible. They also assisted dealers during recessions, and helped them to conduct surveys relating to customer satisfaction.
Weakness
The rift between Cat and UAW was a major weakness. In 1982, Cat experienced the longest strike by employees in the history of UAW despite the efforts of the ESP (employee satisfaction program); Cat’s inability to work effectively with UAW cost the company dearly. By 1998, Cat had reached an agreement with the union. Because this agreement brought a sense of peace to the fight among the two, it is seen as a resource. Customer satisfaction is highly regarded by most companies, but Cat did not do a good job in this area in the past. Customer service is an imperative aspect of business that Caterpillar failed to realize.
Opportunities
Initially, Caterpillar set out to become one of the world’s most exclusive heavy-duty machinery movers. In the beginning, they were successful. However, an unstable economy forced them to venture out into new markets (small machines and tools). Global demand from heavy construction machines grew at a steady rate of 4.5% in the 1990’s. The rate of growth was extremely fast in the developing nations of Asia, Africa, and Latin America.
Threats
The crisis of 1982 – 1984 came from a global recession, strike, and unfavorable currency exchange rate. The use of old construction machines came to a stand still as the threat of highway construction slowed down to a halt in the 1980’s. The price of oil declined, which would have made gas cheaper, but with no business Cat missed out on the opportunity to gain ground on the market. The ever-fluctuating dollar rose in value and made US exports more expensive abroad and U.S imports a lot cheaper at home. Cat’s heavy machines weren’t selling well which lead them to diversify their product line, hence leading them in the production of smaller light weight equipment (back hoes, farm tractors, and small bull dozers).
Buyers
Customers of Caterpillar are construction companies, government development agencies, miners, and engineering firms. In [next page]