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.
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.
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
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
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
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
1-Jul-0
5
1-Feb-06
1-Sep-06
1-Apr-0
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