Strategic Recommendation Memo
Caterpillar’s Opportunities and Value
THEADELLE DYN SANTOS
UNIVERSITY OF PHOENIX
Good Morning Professor and Class,
This presentation is about one of 500 Fortune Companies, Caterpillar and its opportunities to add economic, social and environmental value.
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Agenda
The Agenda of this presentation is to provide the description of the Caterpillar as a company. We will also tackle Caterpillar’s strengths and weaknesses and my recommendations to address opportunities for its economic, social and environmental value.
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Description of the organization.
Summary of the strengths.
Summary of the weaknesses.
Caterpillar Organization
This slide includes the description of caterpillar Inc. In 2020, Caterpillar’s sales and revenues of $41.7 billion has made them the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Since 1925, they have been driving sustainable progress and helping customers build a better world through innovative products and services. Throughout the product life cycle, they offer services built on cutting-edge technology and decades of product expertise. These products and services, backed by our global dealer network, provide exceptional value to help their customers succeed. They do business on every continent, principally operating through three primary segments – Construction Industries, Resource Industries, and Energy & Transportation – and providing financing and related services through their Financial Products segment.
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Caterpillar Inc. is the world’s leading manufacturer of:
Construction and mining equipment.
Diesel and natural gas engines
Industrial gas turbines
Diesel-electric locomotives.
They do their business in every continent.
Summary of Caterpillar’s strengths
Now, let’s talk about Caterpillar’s strengths. The company has a strong brand image that is appealing to their target customers who seek their services. Besides, the company’s large-scale assets have the ability of performing any tasks they are given to do by their various clients across the world. Also, the company has a strong global network of distribution which allows their products and services to be found easily all over the world. The company focus on quality products and services that are offered at premium prices thus allowing many customers to be taken care of at the same time. Moreover, the company make quick pre-planned decisions that enable them work towards achieving the goals of its target market.
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The company has a strong brand image.
They have large scale assets
The company has strong global network.
They focus on quality products and services.
They make quick pre-planned decisions.
Summary of Caterpillar’s Weaknesses
When it comes to weaknesses, Caterpillar’s weaknesses include its low rate of innovation and limited connections in emerging markets. The low rate of innovation is typical in the heavy equipment and financial services industries. This weakness makes the company vulnerable to competitors that aggressively invest in technological innovation. Limited business connections in emerging markets prevent the firm from maximizing revenues. For example, while it already operates in China, Caterpillar still lacks an extensive network of distributors in the Chinese market.
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They have low rate of innovation and limited connections.
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They have limited business connections in emerging markets.
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Competitive Rivalry
The company faces high competition.
They have various competitors.
The competitors are major players in the global market
The competitors have similar strategies.
This slide includes the discussion of one of the key aspects of external environment assessment that presents opportunities for adding value. The company faces high competition in the industry. In heavy equipment manufacturing, there are significant competitors from countries like Japan and the Netherlands. These competitors are also major players in the global market. They have engineering expertise comparable to that of Caterpillar. In financial services, competition is even higher. There are many small, medium, and large financial service companies that directly compete with firms like Caterpillar.
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Threat of Substitutes
This slide includes the discussion of another key aspect of the assessment of Caterpillar Inc. external environment which is threat of substitutes. The threat of substitution is low. For instance, crude tools can be used as substitutes to heavy equipment from the company. However, the current trend is toward mechanization and automation. Thus, customers are unlikely to shift away from using heavy equipment like those from Caterpillar Inc.
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The company has a low threat of substitutes.
Crude tools can be used as substitutes
The current trend is toward automation and mechanization.
The customer may not shift from using heavy equipment.
Evaluation of opportunities to add economic value
Let’s go over how Caterpillar Inc. adds economic values through pursuing their opportunities. Caterpillar strives to provide customers with quality equipment that provides the best economic proposition for their business. Their remanufacturing (reman) and rebuild businesses provide customers not only with an immediate cost savings, but also help extend life cycles and use materials more efficiently.
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They ensure maximum productivity from their equipment
They increase reliability and equipment uptime.
They ensure cost-effective performance
They increase the customer’s return on their investment
An evaluation of opportunities to add environmental value
Let’s discuss some opportunities of Caterpillar to add value to the environment. The company is committed to further reducing their greenhouse gas emissions while helping their customers meet their climate-related objectives. They are supporting their customers during the energy transition to a lower-carbon future through investments in new products, technologies and services. Caterpillar has a legacy of providing products and services that continually improve the quality of the environment and communities by fulfilling society’s basic needs such as shelter, clean water, education and reliable energy – in a sustainable way.
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The company focus on reducing greenhouse gas emissions.
The company supports their customer during energy transition.
The company provides products and services that improve the quality of environment.
Opportunity Recommendation
My first recommendation is for Caterpillar to increase its revenues through growth and expansion. Secondly, Caterpillar will benefit from global growth in the construction market by creating improved products and meeting market demands. From 2016 to 2020, the global construction output in advanced economies is expected to increase by 2.5%, and the output in emerging markets is expected to increase by 4.2%. The Asia-Pacific region is expected to hold the largest share of the global Construction Industry. Caterpillar owns and operates a dealership in Japan that reaches 85% of the Japanese heavy machinery market. The global energy requirement is expected to increase by 30% from 2017 to 2040. $44 trillion is the expected amount required for global energy supply in addition to $23 trillion for energy efficiency improvements . I believe these demands for energy across the world will lead to an increase in demand for Caterpillar products related to resources and mining markets. Moreover, these demands should be taken advantage of by increasing their competitive advantage through innovation and utilizing the global demand for energy.
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The company should increase its revenues through growth and expansion.
The company should increase their competitive advantage through innovation.
They should increase global construction output.
Utilize the global demand for energy.
CONCLUSION
In order to sustain the topmost position into the market, Caterpillar needs to maintain its continuous growth and development initiatives. The company needs to leverage its strong reputation, use of advance technology and diversification of products and services which will provide a competitive advantage to the organization.
Therefore, in order for Caterpillar to sustain the topmost position into the market, the company needs to maintain its continuous growth and development initiatives. It would be best for Caterpillar to leverage the full usage of its strengths such as strong reputation, good financial standing, use of advance technology and diversification of products and services will provide a competitive advantage to the organization.
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References
(2021). Retrieved 12 July 2021, from https://www.caterpillar.com/en/company.html.
Caterpillar Inc. Vision, Mission, Intensive Strategy, Five Forces, SWOT - Panmore Institute. Panmore Institute. (2021). Retrieved 12 July 2021, from http://panmore.com/caterpillar-inc-strategic-analysis-vision-mission-swot.