Overview
Caterpillar Inc. is an American corporation that was founded in California in 1925 and is currently the world’s leading manufacturer of construction equipment. According to Caterpillar (n.d.a), the company also produces mining equipment, natural gas and diesel engines, diesel-electric locomotives, and industrial gas turbines. Caterpillar operates on all continents, mainly through three major segments – Construction Industries, Resource Industries, and Energy and Transportation – and offers financing and related services through the segment of Financial Products (Caterpillar, n.d.a). Today, the company competes with firms such as Mitsubishi Heavy Industries and Toyota Industries Corporation, Toyota Group’s main company. Despite the global competition, Caterpillar Inc. retains its leading position in the market of construction equipment.
Mission Statement
The mission statement of Caterpillar Inc. can be presented as a combination of different missions that define strategies and solutions. According to Caterpillar (n.d.b), there are four of these, and they are as follows:
- The growth of a profitable business. Caterpillar aims to add shareholder value by assertively pursuing development and profit opportunities that enhance the company’s expertise in design, production, distribution, financial services, and information management.
- The development and reward of people. Caterpillar aims to provide its employees all over the world with an environment that promotes diversity, improvement, innovation, constant learning, and teamwork and rewards excellent performance.
- The provision of the best value to customers. Caterpillar aims to be the leading business in the provision of the best value in engines, machines, and support services for customers engaged in the construction of global infrastructure and the development and transportation of its resources.
- The promotion of social responsibility. Caterpillar aims at improving the quality of life while focusing on sustaining planet Earth.
Evaluation of Mission Statement
When it comes to evaluating how well Caterpillar follows its mission statement, it is reasonable to go over each of its parts. For the growth of a profitable business, the company needs to continue making profits. Caterpillar follows this mission statement element as it keeps on growing internationally while maintaining financial sustainability. For the development and reward of people, an organization is to benefit the workforce and business partners. Caterpillar does it by implementing various employee development and business partner support programs.
Furthermore, the provision of the best value to customers is in the provision of high-quality products and services, which is traditional for Caterpillar: its products are known for their quality and durability. Finally, the promotion of social responsibility is ensured by meeting the needs of the environment and community. This mission statement component is followed by Caterpillar through its numerous sustainability programs. In general, there seem to be no recommendations in terms of changes that can be made, and the only recommendation for Caterpillar is to continue in the same vein. The company addresses all-important business aspects in its mission statement and follows them all.
Competitive Advantages
As Caterpillar operates in an extremely competitive environment, solid competitive advantages are essential to the company’s success. According to Hughes (2021), Caterpillar’s main strengths are its strong brand image, extensive product portfolio, and high product quality. Moreover, Hughes (2021) highlights the role of the company’s excellent operational performance, vast dealer network, and secure financial position in its performance. Implementation of the Operating & Execution Model is Caterpillar’s other advantage as it allows to allocate resources to the most profitable areas of the enterprise (Forbes, 2018). In addition to that, investments in the field of R&D make it possible for the organization to create new products that meet customer needs better. Finally, Caterpillar compares favorably with other companies by providing customer-centered solutions to its clients throughout the life cycle of products.
Competitive Disadvantages
Granted, Caterpillar is among the most efficient companies in the field; however, it has a number of competitive disadvantages, one of which is foreign market prices. Hughes (2021) states that Caterpillar’s product prices in foreign markets might be impacted by exchange rate fluctuations. Consequently, the organization’s prices might become too high and, therefore, non-competitive outside of North America. Other weak points are debt agreements and environmental litigation, both of which can damage Caterpillar’s financial position. Furthermore, the company’s sales and revenues declined by 22% in 2020 (Hughes, 2021). Granted, while it might be due to the global pandemic, such a number can still indicate problems in the organization’s cost structure.
Business Performance Recommendations
Some operational changes can be made for Caterpillar to improve its competitive advantages and enhance business performance. The company’s product line can be extended even more with the help of Caterpillar’s product development and R&D investment competencies. For this to be achieved, a number of new designers and engineers to create and implement new product ideas are to be hired. This would allow to increase the organization’s competitive position and address the threat of possible technological progress of its competitors. Caterpillar also needs to strive to reduce its greenhouse gas emissions and utilize alternative energy sources so that they account for 20% of total energy use. It would help Caterpillar address the issue of environmental litigation, as well as establish itself as a sustainable company.
Plan for Recommended Changes
There are several ways in which companies can measure the efficiency of their operational plans. Some include financial reports and quality indicators, for instance, the percentage of product defects and LOB efficiency measures. For these recommended operational changes, Caterpillar can employ performance measures such as the number of launched new products, the amount of greenhouse gas emissions, and the alternative energy sources percentage in total energy use. The organization should regularly report on these measures so that any problems can be identified early and the plan can be improved.
Global Strategy
The global strategy of Caterpillar can be described as transnational due to the company acting as domestic in markets overseas and adding local features to its products. The organization also experiences high cost-cutting pressures as it competes with other players in the market not only in terms of product quality and customer service but in terms of prices as well. One way to reduce costs for Caterpillar is to have manufacturing facilities in different areas, thus decreasing transportation costs. Hughes (2021) notes that Caterpillar receives considerable benefits from its highly-developed network of global dealers. It establishes strong relationships with said dealers by providing them with advantageous partnership terms and training.
Global Strategy Recommendations
As per Caterpillar’s mission statement, one of its main goals is long-term growth and development; therefore, it needs to consider how to expand its business further. For instance, the company could expand the production capacity of its currently operating plants or open a plant in a new location. It would allow the organization to increase its production to meet the existing demand. Moreover, as it was mentioned earlier, Caterpillar is facing the risk of exchange rate fluctuations in foreign markets. This issue can be addressed by the company using more local resources in areas outside North America and trade utilizing local currencies. It would reduce the impact of exchange rate fluctuations on Caterpillar’s operations.
Plan for Recommended Changes
When it comes to measuring and monitoring the effectiveness of a global strategic change plan, Caterpillar is to evaluate the production capacity of its plants and report on production volumes. Growth in these measures would indicate the efficiency of the changes proposed. In terms of the issue of exchange rate fluctuations, the organization is to evaluate its foreign exchange risks to determine which regions bring the most problems. After the risk assessment, Caterpillar would be able to improve the plan by selecting the strategy most relevant to address the exchange rate fluctuations risk. Overall, the company has already successfully implemented its global strategy, and these changes can only further expand and strengthen its global market position.
References
Caterpillar. (n.d.a). About Caterpillar.
Caterpillar. (n.d.b). Strategy & Purpose.
Hughes, J. (2021). Caterpillar competitors analysis: 5 biggest competitors. Business Chronicler.
Markman, J. (2018). This is what you should know about Caterpillar. Forbes.