Strategic Management Project

MGT/498: Strategic Management Research Journal Part 2

STRATEGIC MANAGEMENT RESEARCH JOURNAL PART 2 2

Strategic Management Research Journal Part 2

SWOT Analysis of Caterpillar

Strengths · High skilled workforce · Positive returns on capital expenditure · Product innovation · High customer satisfaction levels · Automation of activities · Strong global distribution network · Large scale assets · String brand image	Weaknesses · Poor integration of different work cultures · Poor marketing of products · Poor investment in research and development (R&D) · Poor investment in new technologies · High attrition rate · Gaps in product range · High day inventory
Opportunities · New taxation policy · Organization’s core competencies · Changing consumer behaviour · New markets opening up · Increase in consumer spending · Decreasing transportation cost · Stable free cash flow · New technology	Threats · Adoption of new technologies by competitors · Rising raw material costs · Increasing trend of isolationism · Rising pay level · Imitation · Currency fluctuations · Liability laws · Intense competition

Analysis of Strengths

The automation of activities at Caterpillar has enabled the company to attain a greater level of flexibility. Taking an example, the company scaled down its level of production during the outbreak of the Covid-19 pandemic in line with the decreasing product demand across the world. Moreover, Caterpillar has accrued a desired level of stability through its high level of customer satisfaction. For example, the revenue streams of the company have remained steady regardless of the new entrants into the market over the years. Additionally, Caterpillar has been associated with efficient supply chains with this being attributed to its large-scale network of distributors across the globe as revealed by the reliable supplier community and dealership allowing the company to overcome any potential bottlenecks in its supply chain. A positive return on investment has been instrumental in drawing investors to the company causing the company to realize huge profits such as $10.74 per share in terms of profits in 2019 (Caterpillar, 2020).

Evaluation of Weaknesses and Threats

The evaluation of Caterpillar’s weaknesses and threats reveals three key common themes that might be a risk, including fluctuating market conditions, profitability and competition. Caterpillar faces significant risk from the fluctuating market conditions. This is so since changes in currencies adversely influence the company’s profitability, while also negatively impacting free trade (Xia & Zhu, 2017).

Additionally, Caterpillar faces competition risk due to the increasing adoption of new technologies by industry rivals thereby shaking the company’s market position. For instance, major players such as Toyota and Mitsubishi are capitalizing on the gaps in Caterpillar’s product range by introducing cutting edge technologies.

These gaps have been associated with the company’s poor investment in R&D. Lastly, the company also faces profitability risks with this being largely attributed to the increasing competition over the years. This trend might result in the decline of the Caterpillar’s market share over the long haul thereby undermining its revenues and profits.

Comparison of Weaknesses against Opportunities

Caterpillar experiences substantial weaknesses and opportunities. Regardless of this, the effective employment of its opportunities can enable Caterpillar to alleviate the risks resulting from its weaknesses. For example, one of caterpillar’s weaknesses is its poor investment in R&D and technology in comparison to its industry rivals. However, government agreements have opened up new markets that provide opportunities for the company to generate more revenue and increase its profits, which, in turn, will enable it to increase its spending or investment in R&D in technology to even greater levels that surpass its competitors. This reveals how the company’s weaknesses are outweighed by its opportunities with these opportunities serving as risk mitigation measures.

Problem-solving strategies for Caterpillar

It is imperative for Caterpillar to address the weaknesses and threats it faces through making a business decision or maximizing on a business opportunity. First, the company may take advantage of the new consumer trends or changes in consumer behavior as a means of opening up new markets. The resultant new revenue streams from this approach will not only neutralize the threat of intense competition Caterpillar currently faces but also provided increased revenues and improved profitability.

Second, with the increased revenue streams, Caterpillar should make relatively huge investments in technological research and development so as to overcome the stiff competition. This way, Caterpillar will stand a better chance of preventing the loss of its market share and coming to a state of ‘parity’ with its competitors as a result of poor investment in R&D.

Third, Caterpillar can utilize the adoption of new technology in implementing differentiated pricing strategy. This will enable the company to prevent the loss of its loyal customers who might be lured away by Caterpillar’s competitors thereby stabilizing the company’s revenues. Moreover, adopting new technology is an approach that might be instrumental in luring new customers, and subsequently, increasing its revenues. Hence, the main problem-solving strategies that can be utilized by caterpillar include adjusting to the changing consumer trends, investing in R&D, and adopting new technologies.

References

Caterpillar. (2020). Caterpillar reports third-quarter 2020 results. Retrieved from https://investors.caterpillar.com/financials/quarterly-results/default.aspx

Xia, Y., & Zhu, Y. (2017, June). Influence of stock market fluctuation on the operating performance of Chinese listed companies in new energy industry. In 2017 International Conference on Service Systems and Service Management (pp. 1-4). IEEE.