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8/11/2019 Caterpillar Model Bpsm
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PRESENTED BY:
Neha Parekh (13301)
Madhuri Kudekar (13309)
Shraddha Temgire (13320)
Vijay K Bokde (13338)
Apoorva Daydar (13341)
Shantanu Tupe (13349)
Lt.Col. Mangesh Wankhede (13361)Lt.Col. Vijay Khedekar (13362)
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World EME Industry in 1981
About CAT CAT’s strategy till 1980s
Competition
Need for new strategy
PESTEL Analysis Michael Porter’s Five Forces Model
SWOT Analysis
Suggestions and Key Learning
AGENDA
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1981, the construction industry along with EME usage
represented nearly 70% of the total dollar sales Excavators, bulldozers, graders, loaders of highway
tractors and haulers
EME demand was doubling throughout 1973-1980s
Mining/ construction industry – 60% of EME market
Low cost labour method created competition
EME industry focussed on improvements to existingproducts
WORLD EME INDUSTRY IN 1981
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Based in Peoria, Illinois
Two divisions
1) Earth moving and construction machinery and
related equipments
2) Engines for construction and power generating
systems.
Largest manufacturer of EME- Large geographical base
and broad product line
Great success due to world war II – triple sales
ABOUT CAT
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Extending its market globally – plants in over 8
countries Providing high quality extensive product line backed by
efficient service
Self-sustaining Dealership Network
100 % ownership of its subsidiaries Recognizing post-war opportunities
Manufacturing excellence & Quality Control
Uniform pricing strategy
Hired employees mostly from the US
CAT’S STRATEGY TILL 1980s
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53%
15%
10%
6%7%
5% 4%
Market Share (%)
Caterpillar
Komatsu
J.I. CASE
FIAT-ALLIS
JOHN DEERE
INTERNATIONAL HARVESTER
CLARK EQUIPMENT
COMPETITION
TOTAL ACCOUNTED FOR MORE THAN 90% OF THE SALES.
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Worldwide demand had doubled
Intensity of competition increased
LDCs increased their rate of construction activity
Saturation in domestic market
World contractors were becoming better placed than
US contractors to perform contract
Hardships due to enormous labour union strikes
NEED FOR NEW STRATEGIES
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Healthy environment in home country, USA
World War 2 provided heavy growth opportunities for EME
Industry.
Entry in Japan was under strict constraints: Caterpillar -
Mitsubishi alliance was delayed till Komatsu was in strategic
alliance with Cummins over licensing.
Governments of Countries like India, African nations stressedon partial manufacturing within national borders.
Joint Ventures: Caterpillar established subsidiaries in host
countries to get best deals with Governments to reduce their
tax liabilities.
Political
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Joint Ventures and Risk Reduction – Subsidiaries with
100% or maximum possible ownership
Higher wages of Employees and Workers in developed
markets reduced the Profit margins for Organization,
further pushing organizations to raise premium in
Pricing. Excessive Inventory Storage had associated carrying cost
which further pushed price higher.
Economical Environment
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Depleting market in Middle East. Softening of Oil Prices
led to low construction activity.
Global Debt Crisis of 1981. LDCs Mexico, brazil,
Argentina, Nigeria facing liquidity crunch.
Fed Reserve Policy leading to higher interest rates
affected the Construction industry.
Strengthening USD, adverse for Exports from US.
Economical Environment
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Developing Countries and specifically the African
nations were more Labor oriented.
Organizations stressed high on loyalty were consideredConventional in operations.
Ghetto creations( Clubbing housing and workinglocalities) observed.
Management- Labor Relations in Organizations werechallenged.
Social Environment
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During War, US military standardized usage of CAT
equipments.
Technology development and increase in Automation -
Result: electronically controlled equipment.
Post war, US military left heavy machinery in countries
while their return. This led to locals learning usage andmaintenance of Cat machinery.
However Caterpillar was mocked to have laid back
Technology as compared to Komatsu.
Technological Environment
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Opportunities seen in ASEAN, Australia, Japanese
markets.
LDCs required extensive infrastructure however faced
financing problems.
Other MNCs ready to take dealership of CAT in and
outside US. Ex: Unilever in Africa.
Ecological Environment
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USFCPA: US Foreign Corrupt Practices Act- Prohibited
Caterpillar from unethical activities like Bribery.
Different Nations varied on the Legal standards adopted
for Business. Joint Ventures with percentage of
Ownership was point of focus.
Tax policies depended on ownership and Investments.
Legal Environment
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MICHAEL PORTER’S FIVE FORCES
MODEL
Rivalry
High
Threat ofnew
entrants
Low
Bargainingpower of
buyers
Moderate
Threat ofsubstituteproducts
Low
Bargainingpower ofsuppliers
Moderate
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SWOT ANALYSIS
STRENGTHS
Dealership network
Broad product line
Large Geographic
BaseOperational efficiency
High quality products
WEAKNESS
Fewer markets
Few global managers
High Overheads andsetup cost
Labour Relations
OPPORTUNITIES
Emergingmarkets
Diversification
THREATS
CompetitionUncertain Economic
environment
Currencyfluctuation
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Hire local employees with local knowledge to work in a
particular country.
Concentrate on growing markets – far east, Australia,
ASEAN countries, South Korea, Japan and Taiwan
Full capacity utilization of existing plants to reduce
overheads
SUGGESTIONS
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THANK YOU!