Ashley Bennington
Bennington2011@live.missouristate.edu
Resource
Based View,
Section #7,8,9
Ariel Foley
Ariel585@live.missouristate.edu
SWOT Analysis:
O/T in Industry
Environment,
Section #7,8,9
Charles Harris
Harris357@live.missouristate.edu
SWOT Analysis:
O/T in General
Environment,
Competitive Strategy
Lauren Pierce
Pierce890@live.missouristate.edu
Introduction,
Section #7,8,9
John Werner
Werner06@live.missouristate.edu
SWOT Analysis:
S/W in Companys
Value Chain
Signature
The instructions and procedures are there to provide integrity and uniformity to all reports. They
have resulted from my experience and FAQs. They also enable you to think more and write less. I
also believe everybody will understand they need to contribute well.
The content itself is an attempt to interpret all the key concepts and frameworks of this course in
the context of a single company and thus, is directed at many learning goals of the course and COB.
I look forward to your turning in a great analysis. THANKS!
Table of Contents
I. Caterpillar Inc. Introduction..4
II. Resource Based View...6
III. SWOT Analysis8
i.
ii.
iii.
(A) SCOPE
-Caterpillar Inc. is worlds leader in the machinery industry and leading U.S. exporter
-Three product segments are Resource Industries, Construction Industries, and Energy and
Transportation.
-Product offerings include selection of industrial gas turbines, diesel-electric locomotives, and diesel and
natural gas engines.
- 21 brands include CAT, CAT Financial, CAT Reman, Hindustan, , Asiatrak, FG Wilson, and Mak,
-Core technology is trademarked CAT Connect, which allows for unique combinations of products
customizable to job site needs. Developed to manage equipment, sustainability, safety, and productivity.
(B) SIZE
-2014 revenue of $55.18 billion
-Total assets $84,896,000, total liabilities $64,085,000
-Market cap $51.15 billion, P/E: 16.72, EPS: 5.88
-May 1, 2014 share price $105.20 compared to February 21, 2015 share price $84.44
-CEO Doug Oberhelman, CFO Bradley Halverson
(C) GRAPHS
2. RBV:
Show analysis of the core competency of the company, as per RBV (resource based view, Chapter 2).
(1-2 pages, 10 points)
Accurately list in the table the four properties that an organizational R/C should have in order to be a
source of sustainable competitive advantage according to RBV (resource based view) (2 points). Now, for
each of those properties, rate the core competency _______Technology __________ (write an identifying
name of the core competency) of ____Caterpillar______ (write company name) as a source of sustainable
competitive advantage. Be sure to address applicable conditions for each property we discussed.
First, describe the core competency in some detail here (be specific and provide any applicable data) (2
points):
Caterpillars core competency is their customizable technology, which sustains their status as the
worlds leader in manufacturing construction and mining equipment, diesel and natural gas engines,
industrial gas turbines and diesel-electric locomotives. This technology provides a huge competitive
advantage for Caterpillar as they give customers more combinations of technology and service to
accomplish their business goals, regardless of the size or complexity of their job. Trademarked Cat
Connect Solutions is centered on equipment management, productivity, safety, sustainability, and
command. This gives the company the ability to focus on improving the utilization of their machines,
optimize production efforts, improve the safety of their employees, as well as meet every possible
customer need.
Now, rate and explain your rating of competitive advantage from that core competency (2 points).
Property
1
Valuable
Rating
0= Lowest, 5=
Highest
5
Rare
Difficult to
Imitate
Nonsubstitutable
2
3
Threat
or
Opportunity?
Which
Force
of
the
Industry
Environment
applies?
Opportunity
Rivalry
among
Existing
Firms
Opportunity
Threat
of
New
Entrants
Threat
Bargaining
Power
of
Buyer
Threat
Bargaining
Power
of
the
Supplier
Large
number
of
competitors
and
low
switching
costs
for
buyers
Opportunity
Threat
of
product
Substitutes
Performance
comparable
to
focal
product
is
low.
Low
number
of
substitutes
Ref:
#5
4. SWOT Analysis: O/T in General Environment.
Describe and evaluate opportunities and threats in the external general environment (Chapter 3) that
are particularly applicable to the company. Use the table format shown below. ONLY use items,
from those on the overheads we discussed in the class for each sector, that are crucial for the
company. Describe 5 important opportunities/threats, no more than one from each sector. You
must provide data or other specific information where applicable. (1 page, 10 points)
Threat
or
Opportunity?
Which
sector
of
the
General
Environment
applies?
Opportunity
Natural
Weather/
National
Disasters
Opportunity
Technology
Multi-Fuel Machines
Opportunity
Demographic
Ethnic Make-Up
Threat
Political
Laws/
Regulations/
Judicial
Decisions/
Quasi-Govt.
(CADE)
Threat
Economics
Currency
Exchange
Rates
Strength
or
Weakness?
Which
sub-
heading
from
Tables
4.1,
4.2
or
4.3
in
the
text
applies?
Strength
4.1
-
Servicing
Customers
Do
we
take
care
of
customer
issues
quickly
and
successfully?
Strength
4.1
Getting
Products
to
Customers
Do
we
have
the
equipment/tools
and
personnel
needed
to
get
products
to
customers?
Strength
4.2
-
Research
and
Development
Weakness
4.2
Managing
Human
Resources
Do
we
have
a
good
relationship
with
our
employee
unions?
10
Ref:
#22
2014
sales
and
revenues
were
$55.184
billion
an
Caterpillar
is
still
the
worlds
leading
manufacturer
of
construction
and
mining
equipment,
energy,
and
transport.
Ref:
#6
Employee
selection
process
includes
an
extensive
application
process,
assessment
tests,
and
multiple
interviews
including
reference
checks.
Ref:
#6
Acquisition
of
Siwei
in
2014
hurts
Caterpillar
after
finding
that
Siwei
falsified
accounting
records.
Ref:
#7
Cat
Connect
was
a
technology
created
to
provide
tailored
services
to
each
jobsite
that
increases
efficiency
and
effectiveness
on
each
job.
Ref:
#11
Strength
4.3 Marketing
Strength
4.3
Management
Weakness
4.3
Financial
and
Accounting
Do
financial-accounting
employees
use
appropriate
financial-
accounting
tools
and
techniques?
Strength
4.3
Information
Systems
Information
Technology
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6. Competitive Strategy:
Show complete matrix for Porters Competitive (also called Generic Business level) Strategies (Chapter
5B) and mark your company in the cell that correctly identifies its competitive strategy. Explain how that
is the correct cell. (Note: See Competitive Strategy assignment (1-2 pages, 10 pts).
Matrix (1 point):
Company:
Caterpillar
Strategy: Broad Differentiation
Competitive Scope of the company (2 points):
Caterpillar Inc. manufactures and sells construction (52.39% market share) and mining equipment
(93.55% market share), diesel and natural gas engines, industrial gas turbines, and diesel-electric
locomotives worldwide composing 60.9% of the market share. The Construction Industries segment of
Caterpillar offers a variety of equipment such as backhoes, loaders, excavators, tractors, and select work
tools along with motor graders, tele handlers, soil compactors, and pipe layers, as well as its related parts
for the heavy and general construction, rental, mining and quarry, and aggregates markets. Caterpillars
Resource Industries segment provides electric rope and hydraulic shovels, trucks; large wheel loaders,
scrapers, and dozers along with machinery components while supporting equipment with electronics and
control systems for use in mining and quarry applications. The Energy & Transportation segment of
Caterpillar offers engines, reciprocating engines powered generator sets, integrated systems and solutions
for the electric power generation industry along with turbines and their related services, centrifugal gas
compressors, diesel-electric locomotives and components, and rail-related products and services. Its
Financial Products segment of Caterpillar provides retail and wholesale financing primarily for Caterpillar
equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance,
insurance brokerage services, and purchases short-term trade receivables. Caterpillar also has a segment
called All Other which remanufactures engines and components, provides business strategy, and
development, management, manufacturing, marketing, and support primarily for paving, forestry,
12
industrial, waste, and Cat products. The company was formerly known as Caterpillar Tractor Co. and
changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in
Peoria, Illinois.
Explanation of how the company uses its Value Chain achieve THAT competitive strategy
(Refer to Competitive Strategy assignment for details of instructions)
1. Marketing and Sales (4 points):
Product: Caterpillar offers extensive line of mining, construction, and home or farm equipment with a
variety of options depending on the customers projects and needs such as bulldozers, dump truck,
excavators, etc and software for the maintaining of the equipment.
Price: Cost of Caterpillars equipment and software are competitively priced to its competitors.
Caterpillar provides exceptional customer service and with instance upgrades in the software the
customer is able to maintain its equipment efficiently and be more productive.
Promotion: Caterpillar offers incentives and packages to customers for on-site expert technicians for
scheduled and unscheduled maintenance of Caterpillar products. Caterpillar is using the
Caterpillar Foundation, Mining Sustainability Project, and the use of Blur Collar Social Media in
promoting equipment and services around the globe.
Place: Caterpillar is in over 200 countries and operates 110 production plants worldwide which allows
customers affordable access to Caterpillars expertise in heavy machinery. Caterpillar enters rapidly
industrializing markets such as the $210MM investment in Indias forecasted growth in road
infrastructure.
2. (Technological Development VC activity) (1 point):
The continuous development of new software packages for Caterpillars equipment (such as
trademarked CAT Connect) from the R&D departments has allowed Caterpillar to increase its
machinery capability and product life cycle resulting in more efficient and effective lines of
equipment.
3. (Operations VC activity) (1 point):
Since 1925, Caterpillar has operated 110 production plants which produce heavy machinery for
multi-purpose use in many industries. The extensive experience in this business allows Caterpillar
to successfully design and implement upgrades quick and easy. Caterpillars efficient operations
have allowed Caterpillar to have revenues of $14,244MM and a net income of $736MM.
4. (Customer Service VC activity) (1 point):
Caterpillar stands by its superior customer service as it is one of the companys founding
principles. Because of this long-established policy, the company continues to provide in-depth
assessment of a customers needs while building a package of equipment and software along with
service contracts to allow the customer to reach their goal.
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14
8. Recommended Actions:
Provide recommendations as to how the companys top management should address each issue you
identified. Explain your recommendations and the reasons for your recommendations. Provide thoughtful
recommendations for future actions; do not repeat what they have already been doing. Be creative. Also,
ensure that your recommendations are not contradictory (about 1 page, 6 points).
Example: Recommendation for A1: Slowing Growth McDonalds has huge opportunity to grow in
developing nations such as Indonesia, Malaysia, and Turkey. They share the same characteristics
that the BRIC countries showed a decade ago, such as large number (provide data) of middle
income families whose household income has risen by (provide data) % in the last 5 years.
Likewise, explain recommendations for other issues.
Recommendation for A1: Slowing Growth: Caterpillar should consider a reverse stock split to help
increase the perceived value for shareholders. Their stock is consistently down and they need to regain
lost support while their operations take a fall as well.
Recommendation for A2: Undergoing legal-political environment issues: Caterpillar is working to
make improvements with the situation that arose after acquiring Siwei. Shareholders have lost faith in the
company which is in turn leading to a decrease in their stock price and market share. They need to try and
gain back trust of both CAT and previous Siwei customers through providing forecasted financial
statements for the upcoming year. They could also provide unique benefits for their shareholders to
increase and regain loyalty to their brand.
Recommendation for B1: Difficulty maintaining competitive advantage: This provides CAT an
opportunity to strengthen relations with customers and offer higher service levels to compensate for the
higher bidding price. The company may now focus on outstanding customer service and lay stronger
foundations internationally to keep future losses to Komatsu from occurring.
Recommendation for B2: Failure of exploiting competitive advantage: Caterpillar should create new
product awareness for their mining equipment and cut down production until sales have caught up.
Caterpillar needs to focus more on a few services and solidify customer relations before expanding their
company to new industries.
Recommendation for C1: Poor product strategies:
Conduct a thorough internal investigation as to
which individuals allowed the defective parts to be sold. Re-call all engines and replace at no charge.
Attempt to regain customer and dealer trust.
Recommendation for C2: Poor people strategies/ weak human resource department: If Caterpillar
continues their brutal approach to labor unions, it will continue to build a strict negative reputation for the
company. Caterpillar needs to open more communication between top executives and the labor unions
and create a new human relations organization in their company to oversee all issues. Instead of strikes,
the company needs to put more of their resources into harmonizing relationships.
15
will never occur again. Locate and replace all damaged engine systems and offer future discounts on CAT
products.
Implementation of recommendation for C2: Poor people strategies/ weak human resource
department: Caterpillar constantly rewards and raises pay of top management, while freezing union and
factory workers pay to preserve future competitiveness. Instead Caterpillar needs to find room in the
budget to better compensate their labor and factory workers. Caterpillar made over 4.9 billion dollars in
2012, but still wont allocate sufficient funds to labor unions. They need to implement a section in their
budget and strategic plans to reward essential labor union employees.
17
18
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articles/2014-07-24/caterpillar-raises-forecast-quarterly-sales-disappoint. Accessed from
Bloomberg.com on 05/08/2015
19
#11. Caterpillar shares are falling after it reveals a Big Accounting Problem at a Chinese
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Construction, Mining and Utility Equipment Division | Winners | Porter Prize."
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<http://www.porterprize.org/english/pastwinner/2011/12/03151230.html>.
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