Caterpillar

Question: What is Caterpillar’s sustainable, distinguishable, and competitive edge?

Answer: Caterpillar Tractor Co.’s edge comes from its sheer span.[1]

Supporting Case Observations:

  1. Span across the world
    1. Caterpillar (Cat) manufactures and sells across the globe so they don’t depend on domestic markets. (p. 7, ¶ 5)
    2. Because of this, Cat has access to foreign markets that are growing
    3. Demand for earth-moving equipment (EME) growing in the Middle East, Latin America, and Asia (p. 2, ¶ 5)
  2. Span across the market
    1. Full product line makes a range of products available to customers[2]
    2. Caterpillar has twenty times more machines being used than its nearest competitor (p. 8, ¶ 6)
    3. Caterpillar strives to make high quality products (p. 8, ¶ 8), which small contractors and governments alike prefer when buying EME
    4. Cat has an excellent reputation, which helps them have a strong customer base.
    5. New companies will face difficulty entering the industry; Caterpillar management purposely hinders competition (p. 8, ¶ 1)
  3. Span of operations
    1. Diversification of products
      1. Caterpillar devotes resources to solar turbines, natural gas compressors, generators, and power drives. (p. 12, ¶ 3)
      2. This diversity allows them flexibility in the types of products they sell, giving them an advantage in the EME industry
    2. Because Cat assembles their products in the foreign areas that they sell them in (p. 8, ¶ 2), Cat does not have to pay as many tariffs and has easier distribution
    3. Cat has many dealers everywhere, and they have good relations with these dealers (p. 8, ¶ 4&5).
      1. Dealers are the main distribution source for EME products, so having good dealer relations is essential to good distribution.
      2. Training dealers means that dealers become self-sustaining (p. 8, ¶ 4&5), and a self-sustaining distribution network aids in making a sustainable market for Caterpillar
    4. Cat has excellent customer service, which gives them a good reputation.[3] Having a good reputation is essential in establishing an edge in a market. [4]

 

 

 

 

Weaknesses

  • Strained labor relations due to lowering wages and laying people off (p. 10, ¶ 1)
  • Cat does not devote its R&D to developing new technologies; if a competitor comes out with a substantially better product at a cheaper price due to technology advances, Cat will suffer
  • There is apparently secrecy within the EME industry, so claims may not be substantiated and the truth may be obscured
  • The rivalry with Komatsu may grow too big, and Komatsu may win. If this were to happen, Cat would lose its standing in the EME industry[5]

[1] Worked with [teammates] on this case study

[2] School of International Business Administration, http://jpkc.uibe.edu.cn/jingpin/jpkc2003/courses/mgt213j/download/icmcase5.pdf

[3] See above source

[4] Harvard Business Review, Reputation and Its Risks, https://hbr.org/2007/02/reputation-and-its-risks

[5] Council on Sustainable Development, Caterpillar vs. Komatsu: Four Decades of Global Competition http://theinternationalcouncil.blogspot.com/2005/08/caterpillar-vs-komatsu-four-decades-of.html