THE COMEBACK OF CATERPILLAR

1985-2002

BY

GROUP 3- Terry

Darshini.s Robin aranha

Amit bernardMarilyn jennifer

HISTORY OF CATERPILLAR

The world's leading manufacturer of construction and mining equipment, diesel and natural gas engines as well as industrial gas turbines

 The company is a technology leader in construction, transportation, mining, forestry, energy, logistics, electronics, financing and electric power generation. 

Use of steam tractors to plow the fine delta

In 1904,Benjamin Holt ,acquired the Caterpillar trademark

The first company to introduce a diesel engine on a moving vehicle (1931)

The company differentiated itself from its competitors

THE CRISIS FACED DURING THE EARLY 1980’S

ISSUES POSED - Caterpillar plunged into three successive years of rising losses

totalling near $1billion

The crisis of 1982-1984 stemmed from three sources- a global recession ,a costly strike & a unfavorable currency exchange rates

PROBLEMS FACED- Komatsu limited emerged as Caterpillar’s principal rival

Komatsu achieved a 50% labor productivity advantage over Caterpillar

Komatsu’s global market share doubled to 25% while caterpillar’s fell by almost a quarter to 43%

GEORGE SCHAEFER’S CATERPILLAR ,1985-1990

ISSUES POSED-GLOBAL OUTSOURCING- Caterpillar functioned as a vertically integrated company

that relied heavily on in-house production Purchase of components from low cost suppliers with high

quality standards Branding as the additional goal of the policy

PROBLEMS FACED

BROADER PRODUCT LINE-

Re-evaluation of its product mix Doubled its product line Marketing to a new category of customers

LABOR RELATIONS-

In 1979, experienced an eight –day strike In 1982, contract negotiations erupted the longest 205-

day strike in the UAW history

PROBLEMS FACED ABOUT CATERPILLAR’S FUTURE

Employee involvement plan went hand in hand with a $ 1.8 billion plant modernization program launched by Schaefer in 1986

It challenged Komatsu by modernizing efforts of several manufacturing companies and arrived at two important conclusions

1. To change the layout of an entire plant; not just selected departments within a plant

2. To implement the program companywide It used the traditional ‘batch ‘ production process It re -configured the layout of its manufacturing plants into

flexible work “cells” It reduced material handling by means of an automated

electrified monorail

DONALD FITES’S CATERPILLAR 1990-1999

ISSUES POSED- Delegated district offices the authority to set prices,

thereby pushing responsibility to the lowest level possible.

Based all its incentive compensation schemes on return on assets.

Decentralized its research and development activities.

The new structure facilitated a more frequent interaction between manager and dealers

PROBLEMS FACED- Donald Fites take over, resulted in caterpillar facing

an industry wide downturn in both its domestic and international markets.

Next challenge to introduce change in the organization.

Bringing caterpillar’s labor relations closer to Japanese model.

Company did not pay sufficient attention to the customer needs.

Functional structure suitable for a small company.

PROBLEMS FACED Offered discount prices to reduce dealers cost.

Information system was designed to monitor machines and the parts to be replaced.

More attention was given to labor relation.

The company issued strict rules of work place conduct, behaviour etc.

THE FUTURE-GLEN BARTON’S CATERPILLAR FROM 1999

PROBLEMS FACED

Loss of allies on the board of director

Fall in American market

Decline in profits by 37%

STRATEGIES USED TO REVIVE CATERPILLAR

ISSUES POSED Focus on international markets

Four growth strategies- Expansion into new markets Diversification Development of a new distribution channel Buildup of new alliance with global competitor

EFFECTS OF PLAN

NEW MARKETS

New markets offered high sales as the economies were in a state of development

Counter the recession in the America

DIVERSIFICATION

Expansion into engines business

Focus on generators (diesel , natural gas)

Increase in farm equipment

A NEW DISTRIBUTION CHANNEL

Expansion into retail business as well as direct customer contact

Car rental store program

JOINT VENTURE

With Daimler Chrysler focused on medium engines and fuel systems

The medium engine yielded 10$ billion in sales

QUESTIONS

1)Compare and contrast the strategic leadership capabilities of George Schaefer and Donald Fites, two former CEOs of Caterpillar.

2)What were the opportunities & threats in the environment that faced Caterpillar in the period from 1985 to 2002?

3)List the strengths and weaknesses of Caterpillar in the period from 1985 to 2002. What were the firm’s distinctive competencies?

4)Describe Caterpillar’s business-level strategy. Is this an appropriate strategy for Caterpillar to pursue?

5)What changes did Schaefer and Fites make at Caterpillar from 1985 to 2002 that improved the effectiveness of the firm at the functional level?

6)What has new CEO Glen Barton done during his leadership? What should Barton do in the future?

7)Current prospects of the Company

THANK YOU!!!