Strategic Recommendation Memo
The CATERPILLAR Expanding the Organization
Theadelle dyn Santos
MGT 576/ University of Phoenix
7/25/2021
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Agenda
The country
Elements of the Diamond of National Advantage
Analysis of forces to help success of Caterpillar Company in Philippines
Forces hindering the organization’s success
Leadership actions to make 4 adjustments identified by Burkus
Recommendation and rationale
Conclusion
References
Target Country for Expansion
Philippines, Asia is in high demand of mining, forestry and construction equipment therefore Caterpillar Company could consider expansion into the country.
Caterpillar Company is the leading company that is involved with the manufacture of equipment used in construction and mining, natural gas engine, turbines for industrial gas and diesel electric locomotives. Expansion of the company relies on the demand of its products in a given country. Philippines, Asia is in high demand of mining, forestry and construction equipment therefore Caterpillar Company could consider expansion into the country.
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Elements of the Diamond of National Advantage
The four factors of the Diamond of National Advantage: industry rivalry, demand conditions, related and supporting industries, and factor endowments have been favorable for Caterpillar in helping the company boost its international growth with continuous innovation and technology upgrades.
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Industry rivalry
Demand conditions
Related and supporting industries
Factor endowments
Industry rivalry
In terms of global competition, Caterpillar needs to gain an understanding of different international business behavior to foresee potential threats; and understand regional business practices and culture in the Philippines in order to develop region-specific products and services.
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Competition with global players
Understanding of different international business behavior
Understanding of regional business practices and culture
Demand conditions
When it comes to Demand Conditions, Caterpillar should look into the size of the domestic market for its international expansion measures. As the size of local markets and domestic customer increases, understanding the dynamics at play with larger markets, will help the company strategize and plan their operations accordingly. Utilizing the sophisticated and demanding domestic customers for Caterpillar will challenge them into utilizing its resources to drive innovation in order to develop unique products and services. Anticipating the nature and behavior of domestic customers with can help predict behavior of customers with the same profile in other markets.
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Demand conditions state the size of customer products
Nature of customer base for production
Drives innovation
Determines improvement of product
Related and supporting industries
Related and supporting industries contribute to innovation relying on the level of transparency and transfer of knowledge. Related industries correspond to suppliers and customers who can represent threats and opportunities in the Five Force model.
For Caterpillar, the supporting and related industries helped the company in achieving new heights. The presence of related industries, have supported the company by providing materials needed for the operation of the business. For example, Caterpillar was able to source raw materials in different markets that allowed them to control cost and achieve economies of scale.
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The upstreaming and downstreaming industries
Facilitation of change by switching ideas
Factor endowments
One of the main role of government in controlling the economy of the nation is encourage and challenge business operations within the country to focus on the design and growth of the elements of factor condition. The government establishes and enforces anti- trust laws to stimulate competition.
If Caterpillar pursues The Philippines for expansion, the nation can create factor endowment such as low-cost skilled labor, its land which is rich in natural resources, strong knowledge base, easy government support and adaptable culture, huge opportunities for technological innovation and high potential infrastructure and capital.
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Most important according to Porter’s theory
Created by the country’s economy
Large skilled labor
Technological innovation
Infrastructure and capital
Analysis of forces to help success of Caterpillar Company in Philippines
The mission statement of Caterpillar Company will rely on its missions including provision of the best machines will support services for potential customers. Intensive strategies such as market penetration and develop will enhance success of the company in Philippines. The strong brand image of the company will serve as a success force in Philippines. Philippines is one of the emerging and developing markets in Asia hence the company can successfully develop in the country.
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Mission statement
Intensive strategies
Strengths of the company
Opportunities of the company
Forces hindering the organization’s success in Philippines
Related companies in the country increase the level of competition as they are all struggling for the same customers. Substitutes such as crude tools can be used in the place of heavy equipment in the company. Buyers’ bargaining power lowers the company’s sales and profits over a given period. New entrants in the market may attract most of the customers hence affecting the company’s entry in the market.
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Competitive rivalry
Threat of substitutes
Bargaining power of buyer
New entrants
Leadership actions to make 4 adjustments identified by Burkus
Burkus identified adjustments include development of a global mindset which requires the leaders to develop a mindset that is open to team members on cultural diversity. Development of sensitivity to cultural differences requires the leaders to perceive and leverage the variation of familiar and foreign culture. Decentralization adjustment entails the executives to change philosophy of management. Deciding on the level of involvement entails deciding on anticipation on new markets such as exploration, joint venture and foreign operation.
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Synthesize the company’s global strategy
Perceive and leverage differences between familiar and foreign cultures
Change philosophy of management
Decide on anticipation
Recommendation and rationale
Caterpillar Company can improve performance through differentiation
The company should produce new and unique products
The company should invest more in developing novel products
Caterpillar Company should create its distribution network
The company should focus on developing markets
Creation of new and unique products will contribute in attraction of more customers in the company. To increase competitiveness, the company should invest in developing novel products. To focus on performance, the company should develop its network for distribution.
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Conclusion
The Caterpillar can grow and emerge in developing markets , mostly Asia
The company is able to exploit construction boom in the countries it expands
To capture more global market the company can innovate new products
Philippines can support the expansion of the company since it is in Asia where there are high chances of carrying out construction, mining, forestry and electric power,
References
Byrnes, B. (2021). Caterpillar's Emerging-Market Strategy | The Motley Fool. The Motley Fool. Retrieved 24 July 2021, from https://www.fool.com/investing/general/2011/11/30/caterpillars-emerging-market-strategy.aspx.
Caterpillar Inc. Vision, Mission, Intensive Strategy, Five Forces, SWOT - Panmore Institute. Panmore Institute. (2021). Retrieved 24 July 2021, from http://panmore.com/caterpillar-inc-strategic-analysis-vision-mission-swot.
Burkus , D. (2012). Essay: Developing Global Leadership: A review of barriers and adjustments for international expansion. International Management Review, 8 (2), 83–84.
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