organizational analysis - Wal-mart

1 Table of Contents Introduction ................................ ................................ ................................ ................................ ................. 3 History/Company Background ................................ ................................ ................................ .................. 3 Mission Statement ................................ ................................ ................................ ................................ ....... 4 Vision ................................ ................................ ................................ ................................ ............................ 5 Values ................................ ................................ ................................ ................................ ........................... 5 Industry ................................ ................................ ................................ ................................ ........................ 6 Economic Segment ................................ ................................ ................................ ................................ ...... 7 Technological Segment ................................ ................................ ................................ ............................... 7 Economic & Technological Segment: Data & Graph Analysis ................................ ................................ 8 Political/Legal Segment ................................ ................................ ................................ ............................ 10 Sociocultural Segment ................................ ................................ ................................ .............................. 11 Global Segment ................................ ................................ ................................ ................................ ......... 12 Industry Environment Analysis (5 Forces) ................................ ................................ ............................. 13 Threat of New Entrants ................................ ................................ ................................ ........................... 13 Power of Suppliers ................................ ................................ ................................ ................................ .. 13 Power of Buyers ................................ ................................ ................................ ................................ ...... 14 Product Substitutes ................................ ................................ ................................ ................................ .. 14 Intensit y of Rivalry ................................ ................................ ................................ ................................ . 15 SWOT Analysis: Opportunities and Threats ................................ ................................ .......................... 15 Competitor Analysis ................................ ................................ ................................ ................................ . 17 Industry Concentration Analysis ................................ ................................ ................................ ............. 17 Resources ................................ ................................ ................................ ................................ ................... 18 Financial Resources ................................ ................................ ................................ ................................ 18 Physical Resources ................................ ................................ ................................ ................................ .. 19 Technological Resources ................................ ................................ ................................ ........................ 20 Human Resources ................................ ................................ ................................ ................................ ... 22 Innovation R esources ................................ ................................ ................................ .............................. 22 Reputational Resources ................................ ................................ ................................ ........................... 23 Capabilities ................................ ................................ ................................ ................................ ................ 24 Core Competencie s ................................ ................................ ................................ ................................ ... 25 The Four Criteria of Sustainable Competitive Advantage ................................ ................................ ... 25 SWOT Analysis : Strengths and Weaknesses ................................ ................................ .......................... 26 2 Value Chain Analysis ................................ ................................ ................................ ................................ 28 Customers ................................ ................................ ................................ ................................ .................. 30 Business -Level Strategies ................................ ................................ ................................ ......................... 31 Co mpetitive Dynamics ................................ ................................ ................................ .............................. 34 Corporate -Level Strategies ................................ ................................ ................................ ...................... 35 Market Power ................................ ................................ ................................ ................................ ............ 35 Resources & Diversification ................................ ................................ ................................ ..................... 36 Merger & Acquisition Strategies ................................ ................................ ................................ ............. 36 Restructuring ................................ ................................ ................................ ................................ ............. 37 Downsizing ................................ ................................ ................................ ................................ ................. 38 Cooperative Strategy ................................ ................................ ................................ ................................ 38 Organizational Structure & Controls ................................ ................................ ................................ ..... 40 Strategic Leadership ................................ ................................ ................................ ................................ . 41 Strategic Entrepreneurship & Innovation ................................ ................................ .............................. 42 Recommendations & Actions ................................ ................................ ................................ ................... 42 Co nclusion ................................ ................................ ................................ ................................ ................. 44 Bibliography ................................ ................................ ................................ ................................ .............. 45 3 Introduction Since its beginning over 90 years ago, Caterpillar Inc. has grown to dominate market share on every continent across the world . Caterpillar makes extreme positive impacts throughout the world by sticking to their core principals. They are dedicated to global productivity , and they have the highest standards of responsibility set forth so they can ensure only excellent service to their stockholders and other stakeholders. Caterpillar has had a revolutionary impact within the past ten decades concerning their manufacturing capabilities and locations throughout the world. Many of the world’s natura l resources and major developments have evolved and thrived due to the progress & dedication of Caterpillar. Within the history section of their website, you can find a timeline of projects completed around the world from the 1930’s to present date . These hundreds, if not close to thousands of accomplishments vary from Caterpillar tractors assisting to construct the King Albert Canal in Belgium from 1930 -1939, to 1991 when around 700 Caterpillar machines help ed extinguish 750 oil wells that were on fire in Kuwait. The significance and impact of this company is extraordinary. Throughout the rest of this paper, we will take a deeper look at the organization, both internally and externally, to gain a better understanding of just how they evolved from a small tr actor company to the multi -billion dollar corporation that they are today. History/Company Background Caterpillar Inc. ( NYSE: CAT ) is an American corporation that was founded in 1925 through a merger of the Holt Manufacturing Company and the C.L. Best Tractor Company, creating the Caterpillar Tractor Company (“History of Corporations,” n.d.) . In 1986, the company re -organized itself as a Delaware corporation under the current name, Caterpillar Inc . The company is headquartered in Peoria, Illinois and em ploys over 11 4,000 individuals 4 worldwide. Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel -electric locomotives. According to the 2013 Fortune 500, Cate rpillar was ranked number one in its industry of “Construction and Farm Machinery” and 42nd overall including all industries (Fortune 500 2013: Full List, 2013). The company principally operates through its four product segments: Resource Industries, Const ruction Industries , Power Systems and also provides financing and related services through its Financial Products segment (Caterpillar Power Systems Business Segment Renamed, 2014). Caterpillar breaks up their four product segments into ten different divi sions that expand all over the world. The divisions include: Cat Financial Offices, Cat Logistics, Governmental Affairs Offices, HR Service Centers and HR District Offices, Manufacturing, Marketing/District Offices, Parts Distribution Centers, Proving Grou nds, Research and Design Technical Centers and Training Centers & Demonstration Areas. These locations total to 576 facility locations worldwide; 298 locations outside of the United States, and 278 locations inside of the United States (CAT Worldwide Locat ions, 2014). Mission Statement “Our mission is to enable economic growth through infrastructure and energy development, and to provide solutions that support com munities and protect the planet ” ("Caterpillar," 2015 ). Caterpillar’s miss ion statement is clear, concise and most importantly, we can see that this is actually who the organization “is. ” Some call a mission statement just a PR move; however, in this case we can see this statement truly is the guiding factor towards the bottom -line for the company and has a concrete, near -term focus on current product markets . 5 Vision “Our vision is a world in which all people’s basic needs – such as shelter, clean water, sanitation, food and reliable power – are fulfilled in an environ mentally sustainable way and a company that improves the quality of the environment and the communities where we live and work ” ("Caterpillar," 2015 ). Caterpillar’s vision statement is inspirin g to many. Vision statements focused on results areas usually describe desired outcomes that are five to ten years away; nevertheless , Caterpillar looks even further out. The world cannot be transformed overnight – but that is not Caterpillar’s vision. They look towards long -term sustainability all over the world, and from their past and present work we can see that goal is truthfully a reality for them. Values Caterpillar has always done a really great job of connecting all aspects of thei r business through their values back to the most impor tant aspect of their organization: their customers. “Value is measured by a product’s performance characteristics and by its attributes for which customers are willing to pay” (Hitt, Ireland, & Hoskisson, 2015, p. 77 ). Many believe this is true, but some also consider values to be so much more than that as well. Value is the commitment from the company to its stakeholders; and in turn, value is the loyalty from the stakeholders to the company. Caterpillar has written a 32 page worldwide Code of Conduct book called Our Values In Action. This book conveys Caterpillar’s four main values which include: Integrity (The Power of Honesty), Excellence (The Power of Quality), Teamwork (The Power of Working Together) and Commitment (The Power of Responsibility). Wi thin the booklet, there is a specific section in which I feel deeply underwrites to their values and is the foundation their core competencies 6 (which we w ill discuss later in the paper): “Through our Code of Conduct, we envision a work environment all can take pride in, a company others respect and admire and a world made better by our actions. Together, we are laying the foundation for the values -based culture that will carry us forward to even higher levels of success. Together, we are upholding the reput ation of one of the world’s great companies — and strengthening it for tomorrow” ("Caterpillar," n.d.). As you can see, Caterpillar is living by the code of their values. Industry Caterpillar falls within the Machinery & Equipment Manufacturing I ndustry as a whole; however, they also are a part o f many industry subsectors including: Construction Machinery , Agricultural & Food Machinery & Equipment, Manufacturing Machinery and Power & Energy Equipment . “The U.S. machinery manufacturing industry for heavy equipment includes more than 20,000 companies with combined annual revenue of more than $400 billion. Top countries for machinery manufacturing include China, Germany, Japan, South Korea, and the U .S.” ("Millennium Web Catalog," n.d.) . The industry itself is hundreds of years old with a current composite value of 1267.6. Even though machinery is manufactured all of the world, t he United States is the world’s largest market for machinery, as well as the third -largest supplier. American ma nufacturers held a 58.5 percent share of the U.S. domestic market. Other industry stat istics include a price/earnings of 13.0, price/book of 4.7 and a net profit margin of 5.9%. Other statistics include return on equity of 19.6%, total debt/equity 228.6 an d a dividend yield of 2.2% ("Farm & Construction Machinery Overview: Industry Center - Yahoo Finance," 2015) . Even after devastating economic issues, t he industry as a whole has see n significant growth in numbers due to the fact that globalization of multi ple sectors is on the upward trend. 7 Economic Segment Caterpillar can be classified as an oligopoly and again, is defined as a company within the Farm & Construction Industry. How did Caterpillar become on oligopoly? By cyclical business, expansion and acquisitions. When the economy is thriving, Caterpillar does very well.

Conversely , there have been difficult times where profit and revenue plunged because the economy was suffering. Throughout time, o pportunity for growth does occur, for example after the Second World War, Caterpillar prospered and regained market share. Uncertainties within the economic segment incl ude inflation rates, interest rates, trade deficits or surpluses and budget deficits or surpluses. If trade barriers were eliminated, Caterpillar could sell its products without paying tariffs . T his would also be considered a possible opportunity and threa t as this would mean the same terms for foreign competitors. To overcome their labor troubles, Caterpillar could work on the relations with labor unions as well. Regardless of what could or will happen, these are all possible economic uncertainties that Caterpillar has to consider. Technological Segment Caterpillar’s commitment to technological innovation is key to their continued leadership in a highly competitive global marketplace. The technological segment revolves around product innovations and applications of knowledge. Both of these things have been a continuous growth process for Caterpillar over time. Their dedication to the a pplication of technology in terms of machinery engineering has and will achieve greater productivity, efficiency and sustainability. Caterpillar’s focus on private and government R&D supported expenditures , as well as their advancements for new communication technologies , has truly put them ahead of their competition. However, technology is not the mere factor for competitive advantage. We will 8 discuss this concept later in the paper when we analyze their co mpetition’s current achievements through recent years. Economic & Technological Segment: Data & Graph Analysis The first factor that Caterpillar has to consider regarding supply and demand is the scenario of technological advances. Caterpillar was initi ally born from the want and need of a “technological advance,” which at that time was more efficient wheels and steel planks for the already operating steam engine tractors. Caterpillar has evolved in many facets of the company in regards to their technolo gy, from design to manufacturing, and even in the area of conserving the environment. Therefore, it is safe to say, after already 90 years of the company seeing a constant development of advances in technology, there will most likely be more technological advances to come. So what does advances in technology do to the supply curve? It will shift the supply curve to the right; conclusively, there will be an increase in supply due to the improvements in technology. Ultimately, the equilibrium price will decr ease and the equilibrium quantity will decrease. This scenario in regards to the supply curve is extremely important to consider when looking at Caterpillar due to the fact that advances in technology can greatly affect overall business for them, and they will want to stay ahead of the curve when considering their competition. 9 (Source: http://easyeconomics96.files.wordpress.com/2012/09/picture1.png ) The second main factor when analyzing supply and demand curves for Caterpillar is the idea of an increase or decrease in labor. With over 11 4,000 employees worldwide, the supply and demand for labor is extremely important as Caterpillar is a company that is based off expansion, econo mic uncertainty as well as constant technological advances. The graphs below highlight increases and decreases in labor supply and demand, and show the effects of each occurrence. (Source: http://easyeconomics96.files.wordpress.com/2012/09/picture1.png) 10 Political/Legal Segment The political segment revolves around antitrust laws, taxation laws and deregulation philosophies. However, there is much more than just legality issues at stake for Caterpillar when they consider global expansion. Other challenges include transfer risk, disaster risk and most importantly security risks. See the two images below as t hey score risk for both political stability and security risks, respectively. This is extremely important to Caterpillar because they d o not want to invest in a geographical location where they might end up actually losing money, or worse caught in political warfare. Caterpillar must consider such scenarios such as armed forces conflict, civil disturbance, capital controls and expropriati on as all of these can be difficult to evaluate. Disaster preparedness in countries where floods, earthquakes and other natural disasters occur needs to be another factor of consideration due to the costs associated with such disasters. (Political & Sec urity Risks | Assess Costs Everywhere. (2015). Retrieved from http://acetool.commerce.gov/political -security -risks) 11 (Political & Security Risks | Assess Costs Everywhere. (2015). Retrieved from http://acetool.commerce.gov/political -security -risks ) Sociocultural Segment “The sociocultural segment is concerned with a society’s attitudes and cultural values” (Hitt, Ireland, & Hoskisson, 2015, p. 47 ). Caterpillar values women in the workforce, global diversity and they constantly evaluate the attitude about the quality of work life. Caterpillar started the Caterpillar Foundation in 1952 to purposefully focus in the areas of education, environment and basic needs. T hey make sustainable progress possible by being dedicated to transforming lives in the communities where they live and work around the world. Thousands of their employees are involved with this foundation and it is primarily focused around women and girls. “Guided by Our Values in Action and leveraging the Cat Production System and 6 Sigma principles, Caterpillar people demonstrate a passion for innovation and customer service. Our diverse workforce speaks over 100 languages and is bound by a common goal: making the world better tomorrow because of the work we are doing today (Caterpillar, 2015 ). Caterpillar has worked towards supreme internal communication w ith a section of their we bsite “ CAT @Work ,” 12 which is designed for Caterpillar employees and retirees, allowing easy access to news and many of the applications they need. Global Segment As firms evolve, they acquire skills, abilities, and resources that are unique to them, which e ventually reflect on their path through out history. “For Caterpillar, the greatest aspect of the global segment has historically revolved around important political events. These resources and capabilities reflect the unique personalities, experiences, and relationships that exist in only a single firm ” (McNay, 2014). In 1939, Caterpillar was one of numerous medium -sized firms who were struggling to compete within the industry . Right before World War II, the Department of War decided that they would need on e worldwide supplier of heavy construction equipment to build roads, air strips, army bases and more to pursue worldwide war. “ After a brief competition, Caterpillar was awarded this contract and, with the support of the Allies, was able to develop a world wide service and supply network for heavy construction equipment at very low cost ” (McNay, 2014). This was the ultimate historical breakthrough for Caterpillar. Once the war was over, Caterpillar had a strong global competitive advantage. They continued to excel with their strong supply chain that developed over the time period of the war. Even to this day “ Caterpillar management still advertises their ability to deliver any part, for any piece of Caterpillar equipment, to any place in the world, in less than two days ” (McNay, 2014) . Through these value capabilities , which we will discuss more so later in the paper, Caterpillar has created and maintained global dominance. Presently, m ost industry watchers and economists believe that the coming year’s grow th in the overall global machinery sector will be the strongest in emerging markets ( primarily Brazil, Russia, India, and China ). Growth is expected to be slower in the developed markets of 13 North America, Western Europe, South Korea, and Japan. Despite recessions and unpredictable markets, Caterpillar still remains the global market share leader within the heavy equipment manufacturing industry. Industry Environment Analysis (5 Forces) Threat of New Entrants Due to the high level of capital that is required to compete in this manufacturing arena, there is a low threat of new entrants in this industry. Even if a small -scale manufacturing company successfully entered into this market, they would have little no to effect on Caterpillar due to their larg e amount of capital and more so, their history in the industry. What also works in Caterpillar’s favor is their huge economies of scale . As we will see next within the Competitor Analysis section, this is due to the fact that Caterpillar has almost a 40% m arket share with in this industry. This global market share leads us to another example of low threat regarding new entrants. Cost advantages independent of scale include proprietary product technology, in which Caterpillar holds over 4,000 patents, as well as desirable locations. Caterpillar has spent almost 100 years strategically growing, globally. This is not something that anyone can rapidly repeat . Power of Suppliers With the Caterpillar’s worldwide growth , growth of their suppliers has increased ove r time too . Suppliers are those who provide the raw materials and components that contribute to the production of Caterpillar’s goods. An example of a raw material item for Caterpillar would be the tires that they use on their 637G Wheel -Tractor Scraper. S crapers are manufactured and sold all over the world; therefore, there are many suppliers where Caterpillar can get the tires from. Since there is many relationships with various suppliers all over the world, the power of suppliers is low in Caterpillar’s case as they can replace any current supplier if needed. This in 14 turn, increased Caterpillar’s upstream and downstream bargaining po wer with their suppliers. Lastly, supplier power is also low because there are low switching costs, no real threat of forward integration and Caterpillar purchases extremely large volumes of these standardized products. Power of Buyers Caterpillar’s buye rs include individuals, government agencies, small groups and large organizations. Their machinery is used all over the world for numerous reasons: civilization development, disaster relief, resource extraction (mining ) and various project developments – the list is close to limitless . Since Cate rpillar operation is global, the bargaining power of buyers is quite low. The demand from buyers is high and it is varied across the market so their power is diminished. Other factors that contribute to low bargaini ng power is high switching costs, no threat of backward integration and consumers that purchas e specialize products such as specific Caterpillar machine s or part s. Product Substitutes The threat of substitute s for Caterpillar is very low. Substitutes include products other than heavy machinery that can also provide functionality to achieve similar results. Product substitutes are always concerning for any company because these substitutes don’t always come from companies that are your actua l competitors; so you might not be looking for them in the marketplace. For instance, crude tools for agriculture can be considered as substitutes for the heavy machinery that Caterpilla r produces for agricultural use. “However, the trend is towards increasing mechanization and automation, which means that the probability of customers shifting into the use of substitutes is very low, thereby leading to a very low threat of substitutes” (Thompson, 2012). 15 Intensity of Rival ry Competitive rivalry in this industry is high, and thi s is the only area of Porter’s Five Forces where Caterpillar must remain above the benchmark at all times. When it comes to foreign competitors from Japan or the Netherlands, technology in the pipel ine becomes the indicator to who will obtain and hold the most market share. “ An important factor that determines the success of a company in the heavy equipment/machinery industry is engineering expertise as well as the efficiency of production. The compe titors that are also major players in the global market have engineering expertise that is comparable to that of Caterpillar” (Thompson, 2012). How does Caterpillar stay on top of this threat? To continue with innovative technology as well as stay consistent with the same quality products, coupled with excellent customer service that they always have delivered . SWOT Analysis: Opportunities and Threats The Industry Environment Analysis allows us to understand the industry’s structural characteristics influence a firm’s choice of strategies. Before we move onto any specific strategies, we must consider another aspect which is the external o pportunities and t hreats of the industry. Caterpillar’s has the opportunity to increase its revenues by further expanding its operations in the new and emerging markets around the world, especially the markets in the developing Asian economies as well as South America (Johnson, 2015) . Even after t he financial crisis of 2008, there has been a construction boom in many parts of China and other countries as well . Moreover, the company also has the opportunity to improve engineering regarding its products so that it can becom e more competitive . Caterpi llar will have to continue to be innovative and aggressive with their engineering to stay ahead of the curve. “Improving the 16 products through research and development, along with the use of advanced materials can help increase the quality of the heavy mach inery products and, consequently, contribute to better customers and investor confidence in the company ” (Johnson, 2015) . Other opportunities include any possible acquisition synergies. This has been successful for them in the past and later in Mergers & A cquisitions we will analyze their strategy on this subject. Threats include economical/financial crises, volatile currencies, and intense international competition. Unpredictable ec onomies can have short and long -term effects on Caterpillar. Financial crises can almost instantaneously decrease the number of current and potential buyers.

It took them years to even somewhat recover when the U.S. real -estate took a plunge in 2008 . Europe accounts for nearly a quarter of Caterpillar’s total revenues ; therefore, the Eurozone crisis that has been unfolding since 2009 has been a major concern for Caterpillar as well (“MBASkool.com,” n.d.). Also, there is financial issues with specific geographic areas that have taken a hit within the past few years, such as falling sales in Africa and the Middle East. Years of economic troubles can deteriorate the firm’s entity, which will in the long -term detract from the value of Caterpillar. Volatile currencies are unpredictable and can involve costs and revenues to quickly change. Since international expansion has been , and still is such a great opportunity for Caterpillar, economic risk, including inflation and currency appreciation/depreciation should be a considerable factor. Arguably, the most important threat that Caterpillar has to worry about is intense international competition. These international organizations have a competitive advantage regarding the location they are in, just as Caterpillar has a domestic competitive advantage here in the United States. The competition internationally is intense due to the fact that they have up and coming engineering and innovation that might produce superior products compa red to 17 Caterpillar’s machinery. For instance, even though the company already has operations in China, the company still does not have an extensive network or sub -network in the Chinese market. For example, competition in Japan would be Komatsu but also Joy Global who has been setting up new capacities and productio n in China. Lastly, mining operations dependent upon raw material prices as well as political instability are an issue. Later in the paper we will discuss how heavily the decline of the mining sector has affected Caterpillar. Competitor Analysis Competit ive analysis focuses on each company against which a firm competes directly. “In a competitor analysis a firm will seek to know the following four dimensions: one, what drives the competitor, as shown by its future objectives; two, what the competitor is d oing and can do, as revealed by its current strategy; three, what the competitor believes about the industry, as shown by its assumptions; lastly, what the competitor’s capabilities are, as shown by its strengths and weaknesses” (Hitt, Ireland, & Hoskisson , 2015, p. 60 -61 ). Once, these four dimensions are covered, then a firm can then better interpret, predict and respond to competitors’ actions. Caterpillar’s competitor landscape mainly involves three companies: John Deere, Komatsu and AB Volvo. However, this is just in terms of annual sales. Their competitor list is actually quite extensive including GE, Hyundai Heavy Industries, Rolls -Royce, Cum mins and many more. The list actually includes 35 companies that range from manufacturing to finance within the industry. Industry Concentration Analysis Using the four firm concentration ratio, we will measure how much of the total output in an industry is produced by th e largest firms in that industry. The formula below is calculated by 18 the fraction of total industry sales produced by the four largest firms with in the industry. The sum of the ratio will equal the total amount of market shares among the top four firms (Baye & Prince, 2014). CAT: 37% ($55.18 Billion) John Deere: 24% ($36.07 Billion) Komatsu: 11% ($16.59 Billion) + AB Volvo: 28% ($42.07 Billion) = 100% total market share As we can see from this data (provided from Hoovers), and the tot al percentage of the four firm market shares (100%), there is extremely high concentration in regards to these four firms dominance within the industry (Anderson, n.d.). Therefore, the degree of intensity regarding competition between these companies is ex tremely high as they are really the only main competitors within the industry. Resources Caterpillar possesses both tangible and intangible resources. Caterpillar’s t angible assets include financial, organizational, physical and technological resources. Caterpillar’s intangible resources include human, innovation and reputational resources. Financial Resources Caterpillar has a strong financial state with the ability to generate internal funds as we can analyze their fixed asset turnover ratio of 3.8 ×, wh ich indicated that firm generated $3.80 in sales for every $1 it had in fixed assets. Caterpillar currently has a turnover ratio of 3.1×, which means the firm successfully sells and replaces its inventory stock . Also, Caterpillar has a n average collection period (day’s sales outstanding) of 119.92 days. Deere’s DSO is 134 days and AB Volvo comes in at an average of 111.85 days ("CATERPILLAR INC (CAT:New York Consolidated): Financial Ratios - Businessweek," 2015). Unfortunately, with a 79.35% debt 19 ratio, the y do not have a robust borrowing capacity. However, this is not necessarily uncommon in this industry as the industry comparison average is just over 80%. Overall, it is important to consider Caterpilla r’s $85 million in total assets, total sales and reven ues of $55.184 billion and a market cap of $63.66 billion as an indicator that they have the financial resources needs to sustain long -term success. Physical Resources Backed by a world class supply chain, Caterpillar has the best distribution and product support system in any capital goods industry. With 576 offices (CAT financial, marketing & sales, human resources , etc.), 237 manufacturing plants and over 180 dealers worldwide, Cat erpillar has a product l ine of mor e than 300 machines which reflects their increased focus on customer attainment . More importantly, Caterpillar has spread out their physical resources with strategic timeliness. For example, the first image below will show you the worldwide deale r network for Caterpillar’s Marine Power Systems that began around 45 years ago when there was a need in the market for glob al distribution of marine parts. T he second image will show you Caterpillar’ s worldwide dealer network for their m ining sector . Caterpillar states on their website, “We will remain the leader by continuing to help our customers meet their needs with durable and reliable equipment” ("Caterpillar," 2015 ). Ultimately, physical resources (led by lean product inventory and strategic dis tribution facilities) are the strongest tangible resource Caterpillar achieve d throughout the years. 20 (CMPS' worldwide dealer network. - Image - Ship Technology. (2014). Retrieved from http://www.ship - technology.com/contractors/propulsion/caterpillar -power2/caterpillar -power24.html ) (Cat Mining Locations. (2015). Retrieved from https://mining.cat.com/locations ) Technological Resources “As technology continues to enhance our world, Caterpillar is constantly developing and refining advanced technologies to help make your equipment more productive and efficient, and to help you more effectively manage equipment fleets and operations. From advanced engine technologies to in -cab monitoring — from machine health management to fleet -wide information systems — Cat technologies are reshaping the process of using, managing and owning heavy 21 equipment” ("Caterpillar," 2015 ). Again, Caterpillar was initially born from the want and need of a “technological advance,” (more efficient wheels and steel planks for the already operating steam engine tractors ). Since then Caterpillar has witnessed that each jobsite their customers are on has i ts own unique challenges, so they designed CAT Connect which is built to help their customers monitor, manage and enhance their operations in four key areas to give them more control of the jobsite. It also partners them with a local CAT dealer to open opp ortunity to build a stronger relationship with their customers. This is where they ultimately combine technology and relati onship building with their customers all over the world, and sincerely excel. For example i n most recent years, Caterpillar has revea led tier 4 technology where power and performance integrated design boosts power and performance across applications and takes the environment into consideration. This leads to process control and other automation technologies enable end -users to maximize the productivity of their equipment. Another example of where they have really dedicated time to advancing the technology is within the mining segment. They now offer technology solutions that range from machine health monitoring and advanced fleet managem ent to the latest in high - precision machine tracking and guid ance systems ("Caterpillar," 2015 ). Caterpillar holds trademarks for many of their brands such as “Caterpillar,” “CAT,” “MaK,” “Perkins,” “Progress Rail” and a few others. They own more than 4,00 0 of patents , including most recent patents in automated bulldozers, hydraulics and energy efficient vehicles. Tog ether, all of their trademarks and patents have contributed to the overall value in the growth of Caterpillar’s business. They are constantly spending millions of dollars, and around 3 percent of their sales and revenues on research and development. 22 Human Resources Caterpillar is ranked #248 America’s Best Employers and has a HR Professional Development Program to prove it ("Caterpillar on the Forbes America's Best Employers List," 2014) . “The HR professional will begin a career with Caterpillar as an active participant in a three -year program performing a variety of complex assignments within our HR community ("Caterpillar, " 2015 ). This program provides HR professionals the opportunity to participate in various senior HR manager meetings and interact with senior HR managers as well as scheduled visits to various facilities to get hands on training. This program has been extr emely successful in coaching and career development. The Human Resources (HR) Professional Development Program provides the foundation needed for prospective individuals’ success and leadership in Human Resources at Caterpillar. This program provides the k nowledge, trust and skills to allow individuals to effectively collaborate with others. This extensive program sets Caterpillar apart from others in terms of foundationally setting their employees up for success. Innovation Resources “Caterpillar was founded by two innovators from the agriculture industry, Benjamin Holt and Daniel Best, whose mission was to provide better solutions for their customers' business needs. Both were among the first to introduce steam - and gasoline -powered farm equipment. Af ter joining forces to form Caterpillar, they were first to market with diesel -powered track -type tractors. Over the years, Caterpillar people have followed in our founders' footsteps, introducing breakthrough solutions in turbo charging technology, electro nic controls, fuel systems, drive systems and more for the purpose of enhancing our customers' success ” ("Caterpillar," 2015 ). As you can understand from Caterpillar’s beginnings – innovation runs through their blood. 23 R&D at Caterpillar means by which the y identify, create and perfect the technologies and solutions that help their customers be successful. Caterpillar breaks down their product creation into four steps: strategy definition, product development, manufacturing execution and product support. Th ey have “forged bold improvements in the use of virtual tools, predictive analysis and quality and manufacturing systems, and is using them to design better, more cost effective products to provide our customers with competitive advantage ("Caterpillar," 2 015 ). Caterpillar has a global innovative footprint that is a 24/7/365 effort. With more than 8,000 engineers, over 350 PhD -level scientist and technology experts and products currently being engineered on nearly every continent, Caterpillar can be conside red an extremely innovative organization. Reputational Resources Caterpillar is ranked #57 as the world’s most valued brands ("Caterpillar on the Forbes America's Best Employers List," 2014) . They own a complex portfolio of brands whose roles and relationships support the growth to achieve their enterprise goals. “The Caterpillar brand is used in communication to represent our corporation with the investment community, employees, public policy makers, and other key stakeholders. The Caterpillar brand is the umbrella that shelters all other brands in the portfolio” ("Caterpillar," 2015 ). Caterpillar owns over 20 brands that they have displayed on their website which allows their customers an opp ortunity to explore their diverse portfolio. The images below are Caterpillar’s most reco gnized images, worldwide. With t heir distinctive yellow and revolutionized branding techniques from CAT on their 24 equipment to the CAT hat and sweatshirt given to you w hen you purchase a piece of equipment, you can truly find the brand almost anywhere you look. Caterpillar’s products are associated with p erceptions of product quality , durability and reliability. This is only accomplished over time. Caterpillar’s accomplishments throughout its 90 year history, backed by the relationship between the dealer and the customer reinforce the true value of their products. Caterpillar maintains the positive relationship and reputation with all of their sta keholders. “Since 2005, Caterpillar has published an annual sustainability report, with detailed performance information and data and highlights about specific projects that support our sustainable development efforts. Each year the report serves as the flagship document f or stakeholders to understand Caterpillar’s commitment to sustainability” ("Caterpillar," 2015 ). They are a well -know n, world -class brand on multiple levels. Capabilities Caterpillar’s two strongest capabilities revolve around manufacturing and research & development. Capabilities represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state. In terms of manufacturing Caterpil lar excels in d esign and production skills that yield reliable products , robust product and design quality , as well as a variety of components and products . In terms of R&D they offer innovative technology , development an d sustainability of overall job site performance improvements, r apid 25 transformation of technology into new products and processes and on -going modernization of digital technology . These combined resources, coupled with Caterpillar’s foundation which is represented by their employee’s unique skills and knowledge has allowed them to emerge over time through complex interactions among these tangible and intangible resources. Core Competencies Together, both resources and capabilities lead to the four c ore competencies of Caterpillar and is ult imately the backbone to their competitive advantage. Core competencies distinguish es a firm competitively and reflect is character istics . Core competencies emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities. And this is especially true for a company such as Caterpillar where you can see their resources and capa bilities that revolve around strategic manufacturing has significantly evolved over time. With significant R&D investments, strong distribution perspectives through their dealers, industry -leading engines and durable equipment & electronics, Caterpillar’s core competencies are second to none in the industry. The Four Criteria of Sustainable Competitive Advantage The Four Criteria of Sustainable Competitive Advantage includes valuable, rare, costly - to-imitate and non -substitutable capabilities. Valuable re sources help neutralize threats or exploit opportunities. By effectively using capabilities to exploit opportunities, Caterpillar can then successfully create value for their customers. Through global manufacturing plants Caterpillar has access to cost efficient import ing of machinery; therefore, they can exploit the opportunity of major growth areas [internationally] where construction and agricultural development is heavily needed. See the chart below as this is a good example of Caterp illar’s capabilities regarding high global reach, but also a high focus on heavy machinery compared to their competitors. 26 (Competitive Analysis - Marketing Experiments. (2014). Retrieved from http://www.marketingexperiments.com/downloads/CompetitiveAnal ysisSupplement.doc caterpillars Four Criteria of Sustainable Competitive Advantage) Rare capabilities are not possessed by many others. When evaluating this, a good criterion to ask is: “How many rival firms possess these rare capabilities.” For Caterpi llar, that revolves around their technological resources as well as their brand name/image. Cost -to-Imitate capabilities are values that firms cannot easily develop. F or Caterpillar revolve around the historical aspect which their unique and valuable cultu re and brand name. Non -substitutable capabilities mean there is no strategic equivalent. Even though Caterpillar’s competitors have many of the same resources as them, what they lack is across the board invisible capabilities like Caterpillar has built overtime. Caterpillar successfully reaches a competitive advantage over other firms ; therefo re, they have above average returns within the industry. SWOT Analysis : Strengths and Weaknesses Now that we have identified Caterpillar’s competitive advantage, we must analyze their strengths and weaknesses which are their internal qualities. Firms must recognize their strengths 27 and weaknesses to have a better strategic business planning process. Also, when considering your strengths and weaknesses, a firm should consider it from an internal perspective as well as the perspective from customers and client s. Caterpillar’s main strengths include its brand image, its large -scale assets and its strong global dealer network including their dealer service . The company’s brand image and name is highly esteemed . This allows them to charge higher prices for their products because consumers see and know the value of the brand. For instance, the name Caterpillar is well known around the world in terms of quality of its products. Their strong portfolio of products (ov er 300 different types of machinery) will meet any application need. “ The company has large -scale assets around the world, which means that these assets can be used to support the further development of the business ” (Johnson, 2015) . Their world class netw ork of dealerships has reinforced their distribution channel and their 48 hour guarantee regarding delivery of parts around the world as soon as the customer request is. Also, the company already has a superior channel network throughout the world. This ne twork is extensive in terms of relationships with their suppliers, distributors and other partner companies. Caterpillar makes sure their dealer service is the same no matter what location you go too; y ou will get the upmost quality in terms of service at each dealer location throughout the world. Thus, the brand image, assets and the global network all contribute to the overall strength of Caterpillar. Caterpillar’s main weaknesses include any outdated technology, employee turnover , weak management and cyclical sales . Caterpillar spends millions of dollars each year on technology, however, many of their machinery is still ran off outdated technology. Therefore, parts must be manufactured to those outdated specifications. Employee turnover has, and most likely will always be a struggle for Caterpillar due to their size. As mentioned in the 28 sociocultural segment, they do implement many internal communications to try and keep personnel satisfied, but at any large corporation, it can be tough. Weak management has been an issue in the past where Caterpillar has faced agency problems. Later in the paper, we will look at their new management and understand just how far they have come. Lastly, and possibly the greatest weakness to Caterpillar is the fact that they have cyclical sales depending on the industry. For instance, construction and even more specifically cement companies tend to have business that comes in cycles. An example of an industry that is not as cyclical in sales would be agriculture. Value Chain Analysis Value chain analysis basically shows how a product moves from the raw -material stage to the final customer; it allows a firm to understand the parts of its operations that create value and those that do not . This is a template that firms use to understand their cost position as well as identify multiple means that might be used to facilitate implementation of a chose business -level strategy. As you can see from the figure below, t he value chain is broken down by primary activities as well as seco ndary (or support) activities (Hitt, Ireland, & Hoskisson, 2015, p. 90 ).

29 “Primary functions are activities or tasks the firm completes in order to produce products and then sell, distribute and service those products in ways that create value for the customers ” (Hitt, Ireland, & Hoskisson, 2015, p. 89 ). Examples of primary activities include inbound & outbound logistics , operations, marketing & sales and service. In 1985, Caterpillar set forth a goal to outsource 80 percent of their parts and components. This inbound logistics strategy was known as “shopping around the world” where Caterpillar would purchase from low -cost suppliers who had high standards of quality . In the 1980’s, under George Schaefer’s leadership, Caterpillar also combined branding within their various distribution channel. Caterpillar began purchasing final products from smaller regional manufacturers and would place their logo on them. This was the beginning of strategic private label branding for Caterpillar. This strategy kept production costs low for Caterpillar in specific regional distribution channels. “Operations Plant with a Future (PWAF) was a modernization program that combined just -in-time (JIT) inventory techniques, a factory automation scheme, a network of computerized machine tools, and a flexible manufacturing system. This seven year process changed the entire layout of the plant, and Caterpillar deemed it so successful that they im plemented it globally. PWAF reduced the assembly process time fourfold. CAT also cut inventory levels by 50% and manufacturing space by 21%. In 1989 CAT had 50% higher sales and profits than Komatsu” ("Comeback of Caterpillar, 1 essays," n.d.). Caterpillar ’s marketing & sales and follow -up service excels from their dealerships that are strategically located throughout the world. This network of dealerships has reinforced their distribution channel and their 48 hour guarantee regarding delivery of parts arou nd the world. This is key as downtime for organization that rely on Caterpillar machinery is very costly. These dealerships, on average, have remained same family or company owned for 30 over 50 years which contributes to the trustworthiness factor of Caterpi llar’s global network ("Comeback of Caterpillar, 1 essays," n.d.). “Support functions include the activities or tasks the firm completes in order to support the work being done to produce, sell, distribute and service the products the firm is producing ” (Hitt, Ireland, & Hoskisson, 2015, p. 89 ). Examples of support activities include procurement, technological development and human resource management. Caterpillar has two main secondary functions that support their entire value chain. The first support sy stem is the computer network that Caterpillar developed in 1996 that connected over 1,000 locations in 166 countries. This network supports the communication between all of their dealerships. The second support function was the IT system developed in 2000, “that monitors machines remotely, identify parts that need to be replaced, and replace them prior to failure. The new IT system is designed to help dealerships repair machine before breakdown thus reducing customer downtime” ("Comeback of Caterpillar, 1 e ssays," n.d.). This system helps its dealers manage inventory costs, which ultimately helped them expand the rental distribution aspect of the primary function regarding their value chain. Overall, Caterpillar tries to remain creative, yet realistic regard ing their value chain as they understand that these functions are all intimately linked to their business goals. Customers “Your marketing efforts are more successful when you focus on the customer --- not the product --- even when you sell machines large enough to move mountains” says Tim Altier of Bridgz Marketing Group (Altier, 2013) . Caterpillar breaks their target market segm ents into large and small scale machinery. Of course, it’s not that simple as they consider other statistical (qualitative and quantitative) segmentations such as demographics and psychographic as well. 31 This customer -centric focus bega n when they realized they already kne w the buyers of their large -scale equipment, but they wanted to have a better understand ing of the small to medium construction, landscape and agriculture markets/firms. Caterpillar uses four customer - centric approaches to understand their customers on a deeper level. First off, Caterpillar combines data sources such as proprietary warranty data an d dealer intelligence, blended with public data from a variety of sources as well. This allows them to create a holistic view of their customers. Secondly, Caterpillar customizes their customer data information which allows them to predict when target cust omers, within a specific industry, might need a new piece of equipment. Thirdly, Caterpillar uses competitive positioning against its competitors. If the potential customer is using another brand, they will speak to that target customer about their specifi c strengths that they competitor is lacking. Lastly, Caterpillar measures their customers by tracking sales data that is linked to their marketing costs. Caterpillar has seen successful results as “Sales to targeted companies yielded a 6:1 ratio of ROI fro m marketing expenditures in a recent measurement period” (Altier, 2013) . Ultimately, customer segmentation is extremely important to Caterpillar as it allows them to stretch the proper communication channels to successfully execute marketing metrics that a re favorable in return of their bottom line. Business -Level Strategies “A business -level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain competitive advantage by exploiting core competences in specific marke ts” (Hitt, Ireland, & Hoskisson, 2015, p. 104 -105 ). Caterpillar uses the differentiation strategy which is an integrated set of actions taken to produce goods or services that customers perceive as being different in ways that are important to them (Hitt , Ireland, & Hoskisson, 2015, p. 117 ). Supported by Caterpillar’s backbone, their global dealer network, they have perfected 32 their strategy of differentiation around the world. Caterpillar’s customers are loyal to them because they offer responsive custome r service, consistent product innovations & engineering design as well as proven quality in performance throughout their 90 years in existence. With this business -level strategy of differentiation, Caterpillar has strong ties with their buyers and supplie rs, and faces no real threats when it comes to potential entrants or product substitutes. They can mitigate buyers’ power because their products are differentiated , therefore this will reduce customer sensitivity to price increases. They can also mitigate suppliers’ power by absorbing price increases due to higher margins, as well as the ability to pass along higher supplier prices because buyers are loyal to brand differentiation. Caterpillar can defend themselves against new entrants because any new produ cts that enter into the market must surpass Caterpillar’s proven products and offered at lower prices; this is almost an impossible reality for new entrants. Ultimately, Caterpillar maintains their differentiation strategy by understand ing trends and advan ces in technology , which they have learned to incorporate into their product lines without significant cost increases. 33 Business -Level Strategy & t he Industry Cycle Now that we know Caterpillar survives and thrives from its business -level strategy of differentiation, we can understand where they are at in the industry lifecycle. An industry cycle, or lifecycle is “a concept relating to the different stages an industry will go through, from the first product entry to its eventual decline ” ("Industry Lifecycle Definition | Investopedia," 2015) . There are typically five stages in the industry lifecycle as you can see from the chart below. They are defined as: the embryoni c/early stages phase, innovation phase, cost or shakeout phase, maturity and finally decline stages. (Retrieved from http://www.bing.com/images/search?q=5+stages+of+industry+cycle&view) Presently, as a whole, Caterpillar falls within the maturity stage of the industry cycle. In this phase, growth is no longer the main focus as market share and cash flow is their primary concern. Caterpillar will try and prolong this phase as long as possi ble. They must constantly have innovative products in the pipeline to keep their shareholders interest, but more importantly to stay ahead of the competition. Usually during this phase, prices tent to drop due to lower costs from competitor, but that is ve ry different in this industry as we are speaking about in terms of 34 manufacturing machinery that is retailed at hundreds of thousands of dollars for Caterpillar’s customers. At this point Caterpillar is merely focused on obtaining global market share to ste er away from the declining stage of the industry lifecycle. Competitive Dynamics Caterpillar is characterized as an oligopoly due to the fact that there are few large firms within the industry. Their main competitors include: AB Volvo, Joy Global, Komatsu and John Deere. AB Volvo was founded in 1927, Joy Global in 1884, Komatsu in 1921 , Sany Heavy Industry Company in 1986 and John Deere in 1837. Clearly, Caterpillar being founded in 1925 is not the oldest firm around, but quality and volume in terms of the ir dealer network is how Caterpillar competes with these firms. There is competition regarding market share, but Caterpillar domin ates the market by 37%. There are significant obstacles in regards conditions of entry into the marketplace, and that has to do with the long -term success and existence of Caterpillar and its competitors. Therefore, small to medium firms are not so much of a threat to Caterpillar. Typica lly, when one of the major firms within this industry changes its price or marketing strategy, their profits, as well as their competitors profits are affected. Therefore, if Caterpillar decided to change in almost any manner, other firms will have to chan ge as well. This concept is called mutual interdependence. From this concept, sometimes collusion will occur as two companies within an oligopoly will strategically partner with one another to agree on a certain aspect of their company, such as: same price s or each firm can only produce so many units within a certain timeframe. On the scale of the four basic market models, Caterpillar is an oligopoly, but also leans closer to a pure monopoly. This is due to the fact that within the industry, there really ar e not too many competitors for Caterpillar, there is little pricing pressure. 35 Corporate -Level Strategies “A corporate -level strategy specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. Corporate -level strategies help companies to select new strategic positions — positions that are expected to increase the firm’s value” (Hitt, Ireland, & Hoskisson, 2015, p. 166 ). Depending on the connections between a nd among businesses, there are two areas of diversification: low levels and moderate & high levels. Caterpillar is mostly considered a low level of diversification firm as they use a single business corporate strategy because of their focus on manufactur ing heavy equipment. For this low level of diversification, Caterpillar generates 95 percent or more of their sales revenue from its core business area. Caterpillar also has a series of differentiated products and follows a product proliferation strategy t hat represents a form of intra -industry diversification. However, many would argue that through Caterpillar’s other business divisions (Resource Industries, Construction Industries and Power Systems as well as CAT Financial) engage in moderate diversificat ion in the form of highly related constrained diversification. Overall, Caterpillar strives to work on three value -creating diversifications: economies of scope, market power and financial economies to increase their value and overall performance. Market Power “Market power exists when a firm is able to sell its products above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both” (Hitt, Ireland, & Hoskisson, 2015, p. 174 ). Caterpi llar’s uses vertical integration to gain market power. “Caterpillar is fortunate to have complete component product lines which gives us complete design control over our own engines, transmissions, hydraulics, 36 electronics and machines. As a result, we can choose where to invest in differentiation and how best to integrate these components into systems to deliver greater value to our customers” ("Caterpillar Technology Development," 2013). Overtime, Caterpillar has acquired market power by their ability to save on their operation, avoiding market costs where possible and exploiting underlying capabilities in the marketplace. Caterpillar maintains market power by constantly improving product quality and creating new technology. Resources & Diversification In many firms, when several value -neutral incentives to diversify exist, “a firm must have the types and levels of resources and capabilities needed to successfully use a corporate -level diversification strategy” (Hitt, Ireland, & Hoskisson, 2015, p. 183 ). Caterpillar’s strongest tangible resource is the free flow of cash that is used to diversify the firm. They als o have an excess of tangible resources such as worldwide plants and equipment. Caterpillar does a really great job of diversification with their equipment out in the market. For instance, t heir differentiated businesses divisions have been able to be blended within each other. “T heir locomotive engines power the trains that haul the machines across country, and the diesel engines are used to power the hea vy machinery they manufacture. They have created a business strategy t hat allows their various units to complement each other and at the same time be a sep arate entity of the corporation” (Engstrom, 2012). Where Caterpillar excels in intangible reso urces is their innovation and tactic knowledge regarding technology that they have accumulated as they’ve evolved. Merger & Acquisition Strategies Mergers and acquisitions have also been key towards Caterpillar’s success as an oligopoly. Caterpillar immolates a horizontal integration where they acquire small companies 37 over time. The most successful acquisitions th at Caterpillar bought over time were with specific companies that eventually led them into construction, mining and forestry fac ets. This certainly gave them a diverse pla tform within the industry and many advantages over their competition. “In line with its goal of expanding its role as an equipment and services provider throughout Europe, in 2013 the company acquired Johan Walter Berg AB (Berg), headquartered in Öckerö Islands, Sweden. Berg is a manufacturer of mechanically and electrically driven propulsion systems and marine controls for ships. With the acquisition, Caterpillar transitioned from selling only engines and generato rs to providing complete marine propulsion package systems” (Anderson, n.d.). To broader their mining segment, Caterpillar acquired Bucyrus International and they are now one step closer to their main competitor in this segment, Joy Global. They also make strategic decisions such as buying companies who excel in certain areas of the market. Caterpillar bought Electro -Motive Diesel (EMD) and a German engine manufacturing MWM Holding for $820 and $810 million, respectively. Each acquisition that Caterpillar h as made thus far has been extremely beneficial to the company’s top line. Restructuring In 2006, Caterpillar began to restructure their manufacturing divisions by creating three new divisions: the U.S. Operations Division, the Heavy Construction and Mining Division and the Infrastructure Development Division. This effort was to maximize its manufacturing synergies. The new divisions would also se e a number of executive changes as well as replace the following divisions : Wheel Loaders & Excavators Divi sion, Track -Type Tractors Division, and Mining & Construction Equipment Division ("Caterpillar to restructure manufacturing divisions - Finance News - Crain's Chicago Business," 2006). What forecast that Caterpillar was not sure of at the time of this rest ructure was that in 2013 their high -margin m ining division 38 would come to a slump. Fortunately, this decline in the mining segment has been offset by additional growth from its construction equipment sales. This concludes that the restructuring in 2006 of t he Heavy Construction and Mining Division was strategically successful. Caterpillar maintained its 2014 sales outlook within the first quarter from the 20 percent rise in construction equipment sales as well as the 8 percent annual rise from the energy & t ransportation segment which includes reciprocating engines, turbines and locomotives ("Caterpillar's Net Rises As Cost Cuts & Construction Sales Growth Outweigh Mining Weakness - Forbes," 2014). Downsizing Due to the global decline in the mining segments, Caterpillar began slashing costs while growing sales in some sectors. To boost investors’ confidence and to ensure their long -term outlook, in 2014 Caterpillar issued a $10 billion stock repurchase program for the next four years. However, Caterpillar would have to consider downsizing to strengthen their overall mining segment, which typically contributes to one -third of their overall profits. However, vast mining activities and related machinery sales oppor tunities were begi nning to prevail in China, and is expected to be the fastest growing region through 2017 (Ortt, 2014). Caterpillar plans to regain market share and eventually revitalize their workforce that was affected within the mining sector recession. Cooperative Strategy “A corporate -level cooperative strategy is a strategy through which a firm collaborates with on e or more companies for the purpose of expanding its operations (Hitt, Ireland, & Hoskisson, 2015, p. 276 ). Caterpillar has been participating in various strategic alliances for decades , but their most recent, significant move was in 2008 with Navistar International Corporation. Caterpillar and Navistar signed a memorandum of understanding in order to form a 39 diversifying strategic alliance to pursue global on -highway truck business opport unities and cooperate on a various level of engine platforms. Navistar is an American holding company that owns the manufacturer of brands such as MaxxForce, IC Bus and Workhorse. These are international brands that include segments such as diesel engines, school & commercial buses and chassis for motor homes & step brands. Both companies have a plan to focus on global truck opportunities, including domestic severe -service construction trucks as well as technological advancements for engines worldwide. “ Thr ough this alliance, Caterpillar plans to target a 2010 introduction of a North American Cat -branded heavy -duty truck for severe -service applications, such as road construction, large infrastructure projects, and oil and petroleum development. The firms int end to work together to develop, manufacture, and distribute commercial trucks in select regions outside of North America. The product offering would include a full line of medium - and heavy -duty trucks in both conventional and cab -over designs” ("Caterpil lar, Navistar form strategic alliance,” 2008). This was a perfect strategic alliance for Caterpillar as they can be fully emerged within this market now, partnered with a company who already has their foundation set within the industry. 40 Organizational Str ucture & Controls With over 11 4,000 employees and 576 locations worldwide, organizational structure and controls is imperative to the success of Caterpillar’s business mode l and global strategy. They imitate a SBU form of the multidivisional structure for implementing a related link strategy for their operations worldwide. See the Ch. 11, F igure 11.6 below take n from the in -class slides regarding the structure of the SBU form . Multidivisional structures in SBU form can be complex due to an organizations size. However, with strong strategic leadership and a devoted workforce, Caterpillar connects their shareholders on a worldwide level. For Caterpillar, most of the controls and decisions remain at their corporate headquarters located in Peoria, IL; although, Caterpillar does have somewhat of a multi -domestic strategy where some business units in other countries will have the ability to complete operating decisions. Since Cate rpillar balances between international strategies and their worldwide structure, they are able to obtain their core competencies while having the 41 opportunity to improve on their resources & technologies while finding their way into new markets. Strategic Leadership “Caterpillar’s s corporate governance program ensures we serve the interests of stockholders and other stakeholders with the highest standards of responsibility, integrity and compliance with all laws. These standards are guided by our board of directors and global management team, who work to oversee the company’s actions, perf ormance and governance pol icies” (Caterpillar, 2015 ). Below is a picture from Caterpillar’s website that includes some of their executive officers. Third from the lef t is Doug Oberhelman who is chairman of the Board of Directors and chief executive officer (CEO). Oberhelman joined Caterpillar’s treasury department in 1975 and has worked in or led a wide variety of businesses across the company. He was elected vice pres ident and chief financial officer in 1995, and became a group president in 2002 with responsibility for Caterpillar’s engine and power systems businesses. Oberhelman was named vice chairman and CEO -elect in October 2009, and immediately began to develop th e company’s future strategic plan. Oberhelman became CEO on July 1, 2010, and chairman on November 1, 42 2010. Oberhelman successfully anticipates and envisions certain internal and external dynamics for Caterpillar . He empowers others to create strategic cha nge through selecting and implementing Caterpillar’s strategies as necessary. He also has sustained a high performance record over time and truly understands what Caterpillar needs to maintain its long -term sustainability in the global marketplace. Strate gic Entrepreneurship & Innovation Peter Drucker once said: "the two most important functions of a business are Innovation and Marketing ," as they are the only two functions that contribute to profit while all others are costs. Oberhelman as well as many others at Caterpillar strive for innovation and have successfully established a competitive advantage. When it comes to their process es, Caterpillar has strategic tactics for invention, innovation and imitation. They are the tech nological leaders within this industry; however, with fierce global competitors such as Komatsu, they will have to remain efficient and innovation to maintain their lead. With hundreds of scientists and expert engineers, Caterpillar is on the brink of radi cal innovations regarding clean energy. This is where the future is heading and they recognize that. But for Caterpillar, it is more than creating new knowledge and processes internally; it is about creating value for their customers who livelihoods depend on their machinery. Recommendations & Actions After the economy collapsed a few years ago, and remained unsteady until recently, profits dwindled for Caterpillar. But then, from 2009 to 2010, the top line went from $32.4 billion to $42.6 billion. In 2011, the expectation was that sales and revenues wo uld exceed $50 billion but CAT actually surpassed that; their revenue rose to an all -time high of $60 billion in 2011, and almost $66 billion in 2012 ("Caterpillar Inc. Annual Financials," n.d.) . Caterpillar’s 43 revenue has continuously grown at a good rate, investors love their stock (CAT NYSE: 103.28), and it is clear that their cash flow is strong. Risk seems low when analyzing Caterpillars outlook.

Economic and political uncertainty are always a risk; however, political ties, such as expanding within coun tries that are connected with organizations such as the European Union are beneficial. Caterpillar needs to also focus on their marketing and innovation. As we analyzed their strengths and weaknesses, we can conclude that these two areas will be crucial f or the organizations on -going success. Caterpillar’s marketing needs to be strong in the upcoming years as the intensity of rivalry continues to grow. As we can now understanding that is the most concern in the industry environment analysis. Therefore, wit h strong integrated marketing communications (IMC) tactics both externally and internally, Caterpillar can continue to grow their current competitive advantage. The same concept applies for them regarding innovation and technology. To stay ahead of the com petition, they will have to remain innovative and understand what each of their market segment’s needs. The overall recommendation is to continue strategizing total market share domination. Strong competition from Komatsu can jeopardize their success in As ia. However, with strong deal making tactics, Caterpillar can continue acquisitions in that location, which still has much expansion opportunities. They also have the opportunity to not only focus their manufacturing efforts on strategic locations, but the ir dealer system which is located across the U.S. as well as 138 countries. “This is not only an effective way to sell equipment but also provide services to customers” (Taulli, 2011). The company has always moved toward more sustainable production, being more environment -friendly in its operations, and accountability regarding their shareholders; and ultimately, they should continue to focus on their core values. 44 Conclusion From Caterpillar’s beginnings, nearly 90 years ago, they have evolved to dominate market share on every continent. They have been making sustainable progress possible due to the high standards that Caterpillar sets forth in terms of responsibility that has in turn reflected on their stockholders, as well as their stakeholders. Andrew Grove once said, “ A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change.

Values have to change. The sum total of those changes is transformation.” As long as Caterpillar remains to always consider proper and timely adaptation as their number one ineveitable strategy, their future will continues to look bright. 45 Bibliography Anderson, A. (n.d. ). Hoovers | Caterpillar Inc. Retrieved from http://0 - subscriber.hoovers.com.leopac.ulv.edu/H/company360/overview.html?companyId=1 03040000000 00 Altier, T. (2013, June 12). Marketing Strategy - Understand Your Customers Better: Four Tips From Caterpillar : MarketingProfs Article. Retrieved from http://www.marketingprofs.com/opinions/2012/23601/understand -your -customers - better -four -tips -from -caterpillar/ Baye, M. R., & Prince, J. T. (2014). Managerial economics and business strategy (8th ed .). New York, NY: McGraw -Hill/Irwin. Caterpillar. (2015 ). Retrieved from http://www.caterpillar.com/ Caterpillar Financial Services: About Us › Worldwide Locations. (2014, January 1). Caterpillar Financial Services: About Us › Worldwide Locations . Retr ieved from http://finance.cat.com/cda/layout?m=395102&x=7&f=65814 Caterpillar (CAT) Industry Analysis . (2013, November 19). Retrieved from http://www.bidnessetc.com/business/caterpillar/industry -analysis/ Caterpillar Inc. Annual Financials . (n.d.). Retrieved from http://www.marketwatch.com/investing/stock/CAT/financials CATERPILLAR INC (CAT:New York Consolidated): Financial Ratios - Businessweek. (2015, March 31). Retrieved from http://www.bloomberg.com/research/stocks/financials/ratios.asp?ticker=CAT Caterpillar on the Forbes America's Best Employers List. (2014, May). Retrieved from http://www.forbes.com/companies/caterpillar/ Caterpillar to restructure manufacturing divisions - Finance News - Crain's Chicago Business. (2006, October 16). Retrieved from http://www.chicagobusiness.com/article/20061016/NEWS01/200022453/caterpillar - to-restructure -manufacturing -divisions Caterpillar's Net Rises As Co st Cuts & Construction Sales Growth Outweigh Mining Weakness - Forbes. (2014, April 30). Retrieved from http://www.forbes.com/sites/greatspeculations/2014/04/30/caterpillars -net -rises -as- cost -cuts -construction -sales -growth -outweigh -mining -weakness/ Caterpillar Technology Development. (2013). Retrieved from http://www.jointeamcaterpillar.com/cda/layout?m=402478&x=69&printerFriendly=tr ue 46 Cox, B. (2014, March 14). Caterpillar Power Systems Business Segment Renamed. Caterpillar . Retrieved from http://www.caterpillar.com/en/news/corporate -press - releases/h/caterpillar -power -systems -business -segment -renamed.html Engstrom, J. (2012, March 14). Jason Engstrom's International Strategic Management Blog: Corporate -Level Strategy [Web log post]. Retrieved from http://jasonengstrom.blogspot.com/2012/03/corporate -level -strategy.html Farm & Construction Machinery Overview : Industry Center - Yahoo Finance. (2015, May). Retrieved from http://biz.yahoo.com/ic/620.html Fortune 500 2013: Full List. (n.d.). CNNMoney . Retrieved from http://money.cnn.com/magazines/fortune/fortune500/2013/full_list/ Graph Images (2) . (n.d.). Retrieved from http://easyeconomics96.files.wordpress.com/2012/09/picture1.png History of Corporatations . (n.d. ). Retrieved from http://www.thehistoryofcorporate.com/companies -by -industry/construction - industry/caterpillar -inc/ Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2015). Strategic management: Competitiveness & globalization : concepts & cases (11th ed.). Stamford, CT: Cengage Learning. Industry Lifecycle Definition | Investopedia. (2015). Retrieved from http://www.investopedia.com/terms/i/i ndustrylifecycle.asp MBASkool.com. (n.d.). Retrieved from http://www.mbaskool.com/brandguide/heavy - equipment -and -engineering/4226 -caterpillar.html McNay, B. (2014). Attaining Sustainable Competitive Advantage. Retrieved from http://brianmcnay.com/portfolio -items/attaining -sustainable -competitive -advanta ge/ Millennium Web Catalog. (n.d.). Retrieved from http://0 - subscriber.hoovers.com.leopac.ulv.edu/H/industry360/description.html?industryId=1397 Ortt, G. (2014, March 7). Caterpillar: Betting On The Recovery In The Mining Sector - Caterpillar Inc. (NYSE:CAT) | Seeking Alpha. Retrieved from http://seekingalpha.com/article/2074043 -caterpillar -betting -on -the -recovery -in-the - mining -sector Taulli, T. (2011, May 2). Caterpillar Shares -- 3 Pros, 3 Cons | InvestorPlace . Retrieved from http://investorplace.com/2011/05/caterpillar -shares -3-pros -3-cons/#.U -aNg01OWUk 47 The Comeback of Caterpillar, 1 essays. (n.d.). Retrieved from http://www.megaessays.com/viewpaper/21343.html?page=2 Thompson, A. (2015, January 8). Caterpillar Inc. Strategic Analysis, Vision, Mission, SWOT - Panmore Institute. Retrieved from http://panmore.com/caterpillar -inc -strategic -analysis - vision -mission -swot