Caterpillar Corporation Strategic Audit Case Analysis

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Posture

Mission

The company is involved in the design, manufacturing, marketing, and selling of machinery, engines, financial products, and insurance to the customers through a worldwide network of distributors. The company is the world’s leading manufacturer of construction and mining equipment and different engines of locomotives. The company has more than $89 billion in assets. In the year 2009, the caterpillar was number one in the industry in which the company belongs. The company is ranked 44 in the top 500 list of companies as per the list by Fortune.

Corporate, Business, and Functional Objectives

The company by the year 2020 wants to be recognized as a leader in every business that it is involved in. The company wants its products of the company should help the customers in achieving success. The distribution system of the company should also act to provide a competitive advantage to the company. The strategic objectives which the company has set for itself to be achieved by the year 2020 are presented in the following figure.

Strategic Audit of Caterpillar CorporationThe company expects the people working for the company are talented and lives the life in action doctrine set by the company. The business model likely helps in driving superior results, and the supply chain is world-class.

Strategies:

Caterpillar Corporation Strategic Audit Case Analysis

Figure 1: Strategy of the company (Caterpillar)

The long term strategic goals of the company which are set for the year 2020 are along there different dimensions of Superior results, the best team, and global leadership. The company aims to achieve a superior result, which results in the fact that the company is regarded as a substantial long term investment venture, which gives shareholder return of the top 25% of the companies listed in the S&P 500. The company also has a goal of having the best team. The team should be comprised of people who enjoy a workplace characterized by features such as safe and inclusive. The company also wants to ensure that the customers of the company should be more successful with the company than with its competitors.

Policies

The values of the company are put into action through different activities. The company ensures integrity by delivering what they promise, being trustworthy and fair, and not influencing or getting influenced by others. To achieve excellence, the company has in place the Caterpillar production system and six sigma. To be sustainable, the company gives products and services which are durable, and devote time and resources to sustainability. The company also focuses on teamwork and commitment to achieve the long term vision of the company. 

Opportunities and Threats on External Environment

  1. Natural Physical Environment

Caterpillar Corporation Inc. is an American company that manufactures, designs, sells and markets different product segments, including financial products, machinery, insurance, and engines to customers. The company uses a worldwide network of dealers to sell products to customers. It is one of the world’s leading manufacturers of mining and construction equipment, natural gas and diesel engines, electric-diesel locomotives, and gas turbines. Based on the above principles, the company believes that innovation and technology will help develop the sustainability of its services, products, and solutions for all the clients. So caterpillar plans to increase the fleet hours by 100% and re-establish business sales by 20 percent. The company also plans to maintain good relations with the government as a part of the company’s policies. These initiatives will help the company to maintain a healthy natural physical environment.

  1. Societal Environment

The company prides itself because it can service society and provide necessities to the people. From the mission statement of the company, it is clear that it aims to provide basic needs to the people of the world, including clean water, shelter, food, sanitation, and consistent power. The main products of the company are also designed and manufactured based on these principles. Form the mission statement of the company. It can be said that it intends to facilitate economic growth through energy development, infrastructure and to offer a resolution that sustains the environment, communities, and thereby conserve financial resources and protects the planet.   

  1. Task Environment

The company plans to maintain a balanced task environment. The following are the company’s goals that it intends to achieve in the next five years:

Decrease intensity of energy by a minimum of 50 percent in the next five years

  • Lessen the intensity of greenhouse gas releases by minimum 50 percent in the next five years
  • Employ renewable/alternative sources to convene twenty percent of caterpillar’s energy requirements
  • Minimize authentic injuries rates to 0.7 at the workplace and also lost-time injuries to 0.14
  • Minimize water utilization intensity by at least 50 percent in the next five years
  • Minimize by-product materials utilization intensity by at least 50 percent in the next five years

The company intends to achieve the above goals by keeping workers content and prolific. It requires open and regular communication, positive feedback, and customary acknowledgement of achievements.  

Research and Development

R&D Objectives, Strategies, Policies, and Programs

For the caterpillar, the writing on the wall is pretty simple, that is, to innovate or to die. The company acknowledges the fact that if it stops innovating, then it will soon be overtaken by another company in the industry. The company also recognizes the fact that it cannot rely on its history and success to dictate the future, and it has to go on innovating continuously. Innovation for the company is to design new products that can add value to the customers. The company invests more than $2 billion each year in innovation and has research and development centers in all the continents across the globe. The company employs more than 11000 engineers and 350 Ph.D. level scientists and technology experts.  

Return from its Investment in R&D

Due to its investment in R & D, the company has 15,000 active patents in its name. The R& D footprint of the company reflects the commitment of the company to provide the best of the product and services to the customers of the company and results in the dominant position of the company (Colvin).

Competency in Technology Transfer

The company is quite competent in transferring technology, as is evident from the product demonstrations of the company.

The Role Played Technological Discontinuity in the Company’s Products

The company is a significant innovator and thus can innovate new technologies before the old technology becomes obsolete.

Compare with the Investment of Similar Corporations

Komatsu, which is the largest competitor of caterpillar and is the second-largest company in this sector, also invests a significant amount in R&D. The company spent 46.3 billion yen in the year 2007, 49.6 billion yen in the year 2008, and 53.7 billion yen in the year 2009 and 44.1 billion yen in the year 2010. 

The ratio of the amount invested by the company in R&D for sales is given in the following figure.

Strategic Audit of Caterpillar Corporation

Figure 2: Ratio of R&D to sales (Komatsu)

Role of the R&D Manager in Strategic Management

R& D investment of the company is one of the significant sources of the strategic advantage of the company. The company came into the market by building the first diesel power tractor, thereby opening the industry and inviting others in the industry.

Operations and Logistics

Question 1

The corporate objectives of the company are centered on maximizing business life cycle benefits by developing enhanced systems. The business objectives of the company are to minimize the social, economic, and environmental expenses of rights, as reflected in the sustainability principles of the company. The present service/manufacturing objectives, strategies, policies, and programs of Caterpillar Inc. are discussed below:-

  • The company plans to be recognized as the leader ubiquitously irrespective of where it conducts business.
  • It intends to develop services, products, and solutions that will help its customers to succeed in today’s competitive environment. 
  • The company appreciates its supplier network and distribution system, which is also its competitive advantage in the market.
  • The supply chain network of the company is acknowledged as a world-class by many companies in the private sector and the government as well.
  • The business model of the company is superior compared to its competitors helps the company to drive excellent results.
  • The most significant advantage that the company has is its employee motivation. The employees of the caterpillar are not only talented, and but they also live the core values of caterpillar in action.
  • Caterpillar’s work helps its customers to make more sustainable earth.
  • The financial performance of the company is very consistent, and the company has also been rewarding its stockholders by paying dividends.

Question 2

The main types of caterpillar’s operations are distribution and manufacturing. These two primary types pave enormous opportunity for the company to increase the extent of its business lines. Caterpillar’s activities extend to machinery, engines, trucks, electronics, defence goods, agricultural products, and financial services (SEC).

Question 3 

The goals of the company are quite impressive thus far as in the long-term, the total shareholder return of caterpillar increased by 25% of the S&P 500. The employees of caterpillar experience a safe workplace domestically. 

In the international market, the caterpillar has been able to actively lead the earth in creating an improved environment for opportunity and economic growth.

Question 4

The highest profit margin comes from the distribution of heavy equipment like machinery, energy, and transportation products to customers. The lowest profit margin may be attributed to the financial outcomes of the company. In the farm and machinery construction industry, Caterpillar is the market leader and followed by Komatsu (Yahoo Finance). The total sales of the company were $55 billion in the year 2014, and its nearest competitor’s sale was almost half this amount. 

 Works Cited
  • Colvin, G. Caterpillar, is crushing it. 12 May 2011. Web. 01 Oct. 2015. < http://fortune.com/2011/05/12/caterpillar-is-absolutely-crushing-it/ >.
  • Caterpillar. Enterprise strategy. 2015. Web. 01 Oct. 2015. < http://s7d2.scene7.com/is/content/Caterpillar/C10211355 >.
  • Komatsu. Financial highlights. 2015. Web. 01 Oct. 2015. < http://www.komatsu.com/CompanyInfo/ir/financial_highlights/ >.
  • SEC. Form 10-K: Caterpillar Inc. 2015. Web. 01 Oct. 2015. <http://www.sec.gov/Archives/edgar/data/18230/000001823015000061/cat_10-kx12312014.htm>.
  • Yahoo Finance. Caterpillar Inc. (CAT): Industry. 2015. Web. 01 Oct. 2015. < http://biz.yahoo.com/ic/620.html>.

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