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Running Head: CATERPILLAR

MANAGEMENT PLAN 2

CATERPILLAR

Institutional affiliation

Professor’s name

What are the main issues described in the case?

The chief issue described in the case is that of the cyclical nature that the Caterpillar Company is currently facing. The issue is as a result of sudden swings, which include both the upswings as well as downswings both of which have distinct effects to the entire organization. When the demand of the products and services produced by Caterpillar booms up, it has been realised that no one within the entire company, including the management can be able to put up with that particular demand. In this case it means that the company will be able to sell most of its products at the required prices and gain profits as planned, but in the long run, some customers of the company may end up lacking these products since the demand at that particular time is high.

Again, during the periods of downswing whereby the productions of goods and services within Caterpillar Company remains constant or is increased it has been noted that the demand of these goods reduces by a larger percentage, which in the long run affects the company very negatively. Most downswings as seen from the history of the company have a number of adverse implications to the company; for instance, a very large number of workers are relieved off from their jobs and therefore leaving them as unemployed. The company is also at the verge of handling great losses since a big percentage of products they have produced during the downswing period will not be bought.

Other main issues described in this case are various strategies in which Caterpillar Company is actually apply in order to deal with these adverse effects caused by both the upswing and downswing. One such strategy applied by Caterpillar is the refurbishing of used equipment, rather than the production and construction of other new equipment to be used by the consumers of their products.

List and describe the main principles of management involved in the case

One major principle of management in which that has been applied in the operation of this company is the initiative taking. The management was able to foresee that coming up with totally new products will always have adverse negative effects with great severity during the downswing period. Instead, the company has taken an initiative by coming up with an alternative way in which they actually deal with the refurbishing of the used products. As stated from the case, this shift has enabled the company to enjoy more profits in comparison to the periods when the company had not employed the idea of refurbishing the used equipment.

Another key principle used in the case is the subordination of individual interest, which is always done for the benefit of the company, rather than the benefits of few individuals. This has majorly been observed during the downswing period whereby the company not only sacks some of its employees, but also reduces the salaries of the remaining employees starting from the executive members. As stated in the case, the compensation of the executive was cut by 50%, salary of top manager cut by 35%, and that of support staff by 15%. This is generally done to ensure that the company does not lose it all totally but be at a position in which the company can once again rise up (Jay 2004).

Division of labour is also seen in the case, which is a key principle of management that ensures employees only engage in tasks that they have specialised in. This will in the long run ensure that activities within the company are done to perfection, since each and every person will be engaging in fields in which they have skills in. Some of the different fields within Caterpillar Company include; cleaning, repairing, and reassembling of engines; transmissions among others.

If you were the CEO at Caterpillar, what would you do?

As the new CEO of Caterpillar, it is very necessary to lay a strategy that will greatly assist in the confrontation of the various adverse effects associated with the dramatic swings experienced by this company, especially the downswing. The best way to tackle this issue is by looking at the root of cause, which leads to such dramatic swings that the company is currently facing. One major causal factor is the weakness in coal, which has led to the soft demand of mining equipment. In order for better preparation on for the next downswing, it is necessary that the company should come up with other ways in which the mining equipment can be run instead of coal which has adverse effects and especially to the environment.

One goal to implement in the company is to come up with other income generating activities other than the major products of caterpillar, which are majorly the mining and construction equipment. The company should introduce the selling of other equipment that is related to the industry so that these sales will be sustaining the business when the demand of the major product actually goes down. This will therefore ensure that the company does not suffer many losses during the periods of downswings. Also, in order to maintain a given number of employees, the company should come up with machines that can actually replace human labour. When a machine is used, it cannot result into any effects since during downswings they will not be used; in other words, they will only be used when they are actually required because machines would replace same human labour during downswings the company can simply not use the machines; and not be required to pay employees that are not needed.

After this paragraph you need to write an paragraph about upswings according to the question (If you were the CEO at Caterpillar, what would you do?)

To reduce any form of customer loss, the company should ensure it comes up with very unique products, which are highly differentiated and branded in comparison to the similar products of similar companies to Caterpillar. By being unique, it means that these products are highly efficient and easy to use and thus making it suitable for the users (Florian 2011).

Last paragraph should be longer than I did. The question you need to answer for last paragraph also given into the assignment sheet. What can Caterpillar and its dealer to decrease customer losses and defections? What can top management do to make sure it keeps a stronger focus on customer?

References

Joseph P. (2003). PMP Project Management Professional Study Guide. McGraw-Hill Professional.

Cattani, G. & Florian, T. (2011) Project-Based Organizing and Strategic Management, Advances in Strategic Management, Emerald.

Jay P. (2004). Caterpillar Inc: Roots in Late 19th-Century Endeavors of Best and Holt. International Directory of Company Histories 63. Farmington Hills, Michigan: St. James Press.

Caterpillar, China Are to Promote Remanufacturing,” The Wall Street Journal, 15 September 2006, A10; T. Van Hampton, “Down to Earth,” Engineering News-­‐Record, 21 March 2011, 26-­‐32.