Case5 Caterpillar Tractor FAN Libo School of International Business Administration,UlBE
Case5 Caterpillar Tractor FAN Libo School of International Business Administration, UIBE
Background(1) World Earth-Moving Equipment (EME)Industry Worldwide demand for EME doubled from 1973 to 1980 The key users of EME are construction industry(60%), mining(30%)and forestry (10%).Since 1979 US construction industry faced downturn,meanwhile ME countries witnessed a massive rise in construction. Internationally EME manufacturers sold through dealers,who provided direct and after-sales service. EME industries focused more on products improvement,two-thirds of product cost was from heavy components engines,axles,transmissions and hydraulics
Background(1) World Earth-Moving Equipment (EME)Industry z Worldwide demand for EME doubled from 1973 to 1980 z The key users of EME are construction industry(60%), mining(30%) and forestry (10%). Since 1979 US construction industry faced downturn, meanwhile ME countries witnessed a massive ris e in construction. z Internationally EME manufacturers sold through dealers, who provided direct and after-sales service. z EME industries focused more on products improvement, two-thirds of product cost was from heavy components – engines, axles, transmissions and hydraulics
Background(2) Major Players in EME Industry International Harvester(IH) US company with three kinds of basic products:Heavy-duty trucks,agricultural equipment and construction equipment. IH has strong distribution system especialyy in Asia and Eastern Bloc countries.Its product line ranked the second only after Cat. ●J.l.Case A major construction equipment manufacturer in NA. Compared with Cat Case offered a wide array of machines for some product lines such as hydraulic excavator. ● Case gained access to the technology of a leading hydraulic excavator producer after it acquired 40%interest in Poclain of France in 1977
Background(2) Major Players in E ME Industry z International Harvester (IH) z US company with three kin ds o f basic products: Heavy-duty tru cks, agricultural equipment and con s t r u ction equip ment. z IH has strong distribution system especialyy in Asia and Easte rn Bloc cou n t ries. I ts pro d u ct line ranked the secon d only after Cat. z J.I.Case z A majo r c onstructio n eq uipme n t manufac turer in N A. z Compared with Cat Case offered a wide array of machines for some product lines such as hyd raulic excavator. z Case gained access to t h e technology o f a leading hydra ulic excavator producer after it acq uired 40% interest in Poclain of France in 1977
Background(3) e Major Players in EME Industry ●John Deere JD is a leading farm equipment manufacturer with a full product line especially in large hp tractors ● Sales of construction equipment accounts for 15%total revenue.Company's loyal dealer network was a major asset. JD aimed to be No.2 in US construction equipment market and No.4 worldwide ●Komatsu Komatsu dominated the Japanese construction equipment industry and was No.2 EME company worldwide. With the support of Japanese government and technical cooperation with other partners such as Cummins Komatsu rapidly expand its business after World War II. Outside Japan Komatsu lacked an effective dealer network especially in US market
Background(3) Major Players in E ME Industry z John Deer e z JD is a leadin g farm equip ment man ufactu r e r with a f ull pro d u ct line e specially in large hp t ract ors z Sales of con stru ction equip ment accounts for 15% t o t al revenue. Company’s loyal dealer network was a major a sset. z JD aimed to be No. 2 in US con s t r u ctio n equip ment market and No.4 worldwide. z Komatsu z Komatsu dominated the Japanese con s t r u ction equipment indust ry and was No.2 EME company worldwide. z With the support of Japanese g overnm ent and technical coo p e ration with other partners such as Cum mins Komat su rapidly expand its b usiness after World War II. z Out side Jap a n Komat su lacked a n effective dealer network especially in US market
Case Description The case is set in late 1981 when Caterpillar has just reported record sales and profits. The trigger issue focuses on a meeting called by CEO Lee Morgan to review the record results and evaluate Caterpillar's competitive strategy over the coming years
Case Description The case is set in late 1981 when Caterpillar has just reported record sales and profits. The trigger issue focuses on a meeting called by CEO Lee Morgan to review the record results and evaluate Caterpillar’s competitive strategy over the coming years
After an extensive review of the earth-moving equipment industry in 1981,including a profile of the major competitors,the case describes Caterpilla's historical development,including the nature and source of its main functional policies such as marketing,manufacturing,product development, finance,personnel,and so on. Information is also provided on the company's organizational structure and culture as well as its management styles and practices. Considerable detail is given on the evolution of Cat's overseas expansion and worldwide strategy
After an extensive review of the earth-moving equipment industry in 1981, including a profile of the major competitors, the case describes Caterpilla’s historical development, including the nature and source of its main functional policies such as marketing, manufacturing, product development, finance, personnel, and so on. Information is also provided on the company’s organizational structure and culture as well as its management styles and practices. Considerable detail is given on the evolution of Cat’s overseas expansion and worldwide strategy
The case ends with some concerns being raised by about changes in the industry structure and economic environment.In particular the downturn in economic activity in the United States and elsewhere has reduced demand,resulting in an industry situation of surplus capacity.Meanwhile demand patterns have shifted from the developed to the developing world, but concern about the impact of global debt crisis on the creditworthiness of some of these less-developed countries makes such markets less attractive
The case ends with some concerns being raised by about changes in the industry structure and economic environment. In particular the downturn in economic activity in the United States and els ewhere has reduced demand, resulting in an industry situation of surplus capacity. Meanwhile demand patterns have shifted from the developed to the developing world, but concern about the impact of global debt crisis on the creditworthiness of some of these less-developed countries makes such markets less attractive
The case concludes with Lee Morgan ask his management to comment on what actions they think the company should take
The case concludes with Lee Morgan ask his management to comment on what actions they think the company should take
Learning Purpose and objectives The first is to focus on the way in which forces of change can transform an industry structure and thus the competitive characteristics in a global environment. The second is to identify the sources of Caterpillar's extraordinary competition domination of this industry
Learning Purpose and objectives The first is to focus on the way in which forces of change can transform an industry structure and thus the competitive characteristics in a global environment. The second is to identify the sources of Caterpillar ’s extraordinary competition domination of this industry
The third is related to the issue of strategic fit.This case provides an ideal example of a company whose strategic posture has been designed to fit external industry demands and market needs.Furthermore,this external fit is reinforced by an internal fit in which the various functional elements support the overall strategic objectives
The third is related to the issue of strategic fit. This case provides an ideal example of a company whose strategic posture has been designed to fit external industry demands and market needs. Furthermore, this external fit is reinforced by an internal fit in which the various functional elements support the overall strategic objectives