For Kim Woods only

Running head: CATERPILLAR SWOT 1

Caterpillar SWOT Analysis

BUSN 520 Marketing and Management

Name

Davenport University

Professor Philip Shaps

Date

CATERPILLAR SWOT 2

Table of Contents

Introduction……………………………………………………………………………………..3-4

Strengths…………………………………………………………………………………………..4

Weaknesses…………………………………………………………………………………...…5-6

Opportunities……………………………………………………………………………………6-7

Threats……………………………………………………………………………………………..7

External Factors Impacting Decisions…………………………………………………………..7-8

Future Scenarios………………………………………………………………………………...…8

Recommendations for Changes in Culture, Leadership, and/or Structure…………………..….8-9

Conclusion………………………………………………………………………………………...9

References………………………………………………………………………………..…..10-11

The Table of Contents will look

exactly like this one. Make sure

you include all of the topics.

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Introduction

The purpose of this paper is to perform an SWOT analysis on the project company

Caterpillar Inc. Internal and external factors will be evaluated to help formulate a strategic plan

for the organization. The factors will give me ideas of how effective the leadership structure and

culture are. The external factors will present a view of how flexible the organization is to

changes in the market. Based on these factors, I will be able to predict possible future scenarios

for Caterpillar. The flexibility and capacity of the organization will provide a great analysis for

determining if there needs to be a change in the leadership or the structure of the organization.

The SWOT analysis is the key in determining a long-term strategy for this company.

Caterpillar Inc. is the world’s largest manufacture of construction, mining, diesel

machinery. Some of their competitions are Komatsu, John Deere, and Kubota. The origins of

the company can be dated back to 1925 with the Holt Tractor company. The company could

shape the industry with mergers of companies between Benjamin Holt and Daniel Best. In 2014,

they were well ahead of their competitor Japan based Komatsu with an outstanding $55 billion in

sales. Caterpillar has a diversified portfolio with over 300 products. The company’s history can

be associated with the construction of engineering masterpieces like the Hoover Dam and the

Golden Gate Bridge. Caterpillar’s growth can be contributed to a high number of company

acquisitions. The trademark “CAT” logo can be recognized on machinery across the world.

With the stagnant economy, Caterpillar is not the only company faced with consecutive quarters

of declining sales. To remain competitive, the company has been forced to use labor practices

that seem inappropriate. Their high-volume diesel engines revolutionized the transportation

industry but are faced with a difficult road ahead with the strict emission requirements. In order

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for Caterpillar to remain on top will take a strong vision and plan from CEO Douglas

Oberhelman.

Strengths

Caterpillar is known for revolutionizing the construction and agriculture industry with its

diesel engines and crawling tractors. The CAT brand has a diversified portfolio of products that

keeps the corporation ahead of the competition. Some of the most notable equipment you have

seen is the bulldozer, hydraulic excavators, and the diesel engines. These products can be found

throughout the construction, resource, energy & transportation, and financial sector. Although,

Caterpillar has seen a recent decline in sales, they are far above the competition with over $55

billion in physical assets. The company now has over $1.5 billion in operating assets, which can

be used for more acquisitions. The operating income will allow the company to maintain growth

and wipe out any potential competitors threading to become a global manufacturing leader.

Another strength, is the multifaceted services that Caterpillar has to offer. Consumers are

able to buy products, finance equipment, rent machinery, train employees and repair equipment

all from a CAT dealer. Being an all-inclusive dealer generates tremendous amounts of brand

loyalty. Each customer is treated as if they were a part of the organization throughout product

lifespan. Caterpillar products are manufactured all over the world making it the largest

machinery manufacturer. Caterpillar has a global structure which has a network of CAT dealers

in over 22 countries. Their distribution system can be viewed as one of their competitive

advantages. Each dealer is independent but can obtain original parts and products through the

expansive dealer network. Even though Caterpillar’s profits come from the sale of machinery,

you can also find retail merchandise at CAT dealers and local stores. The ability to provide their

products to consumers globally, is why the organization is ahead of the competition.

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Weaknesses

Caterpillar is strong in a lot of areas but also has internal weaknesses that can cause the

organization to operate inefficiently. Over the years, Caterpillar has focused its growth and

innovation on corporate acquisitions. This company tries to acquire corporations that are in the

final stages of a technology breakthrough. Shareholder satisfaction tends to spark corporate

acquisitions (Craninckx & Huyghebaert, 2015). They have seen consecutive quarters of

declining sales, which have started to shrink their operating income. The reduction in sales will

decrease the amount of operating capital for future acquisitions. Caterpillar has a small research

and development team which is used to finding corporations that are in stage four in new

technology breakthrough. The reduction in capital will lead to stagnant growth for the

organization. Their focus on growth through mergers will leave them vulnerable to competitor

growth and innovation. There is just a matter of time before Caterpillar losses their spot as the

world’s largest manufacturer.

Another area that affects Caterpillar is their known labor practices. In order to stay

competitive, Caterpillar has shut down many of their plants. These plants were shut down and

reopened in the southern right-to-work states. This is a known tactic that companies use to force

the labor unions out. Caterpillar has over 20,000 unions with the plan to reduce that number by

half. This will result in job loss and union support. This tactic could spark a revolt from the

remaining unions causing them to strike. Caterpillar has locked out the union before, but it

caused a significant loss of production. In some instances, they had to force their professional

workforce to go into the plant to run machines. A part of remaining competitive requires

retaining a high-skilled workforce. Labor tactics that cause civil unrest will raise the employee

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turnover rate. Caterpillar will find it hard to find and retain high-skilled talent if it has a known

history of unfair labor practices.

Opportunities

Caterpillar can expand their competitive advantage by evaluating opportunities from

external factors affecting the organization. These factors are key in developing a long-term

strategic plan for the future of the company. The Cat diesel engine has changed the construction

industry providing a high horsepower engine at below market cost. With global warming

becoming the topic of the day, the Environmental Protection Agency (EPA) has established

demanding emission requirements. These requirements are so strict that companies cannot

remain cost competitive under the requirements. Caterpillar’s niche in this market is providing

renewable energy through solar panels. They are ahead of the competition by changing the focus

of relying on traditional fuels for power to using sustainable solar energy (Beckrich, 2014). This

will increase the quality of life for the world while reducing the environmental cost. Using

renewable solar energy is a cost saving competitive advantage for Caterpillar, which will

transform the industry standard.

Another area of opportunity for Caterpillar is stockholder loyalty. The Cat brand has

seen some decline in several areas. Caterpillar has had consecutive quarters of declining sales,

which have slowed dividend growth (Durden, 2015B). Stockholders have seen a decline in

dividends, which has caused stockholders to lose money. Caterpillar has recognized that the

future of the organization depends its ability to raise capital for expansion and research &

development. They have launched a stock repurchase plan to return capital to its shareholders in

exchange for their loyalty. Caterpillar has used this approach in the past, and it has been

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successful. This approach will restore shareholder confidence in the brand and will sustain their

place on the market once the economy begins to recover.

Threats

Being the top corporation, you are always faced with competition and external factors

that can affect your success. The economy has stalled the growth of many companies and can be

considered to be in a global depression. Caterpillar has been plagued with consecutive quarters

of declining retail sales due to a stalled economy. This has diminished shareholder confidence in

the organization. This threatens the overall financial security of the organization. In order for

Caterpillar to grow, they need the support from shareholders. Their ability to raise capital can

take away from the organization’s ability to adapt to the changes in the market. In order for

Caterpillar to remain competitive, then need to be flexible with the market which requires

capital.

Another factor that threatens the company’s success is the political conflicts and public

unrest in Africa & Middle East. Social unrest can disrupt a global supply chain by prohibiting

shipments of products (Durden, 2015A). Political conflicts cause governments to impose taxes

and penalties on incoming goods and services. This will disrupt Caterpillar’s distribution system

causing parts and product delays and increased handling cost. Caterpillar will lose its global

competitive advantage if these issues are not addressed.

External Factors Impacting Decisions

Before a direction can be planned for the future of Caterpillar, there are several factors

that should be considered. The projected timeline for economy recovery should be considered

before moving forward with expanding the company. World trade can halt from a stalled

economy (IMPS, 2010). Caterpillar needs to hold on to its operating capital until the economy

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show recovery. Alternatives for supply chain should be considered for areas in the Middle East

and Africa. Caterpillar will need to reroute distribution in areas affected by social unrest to

remain competitive. The EPA’s modern requirement for a cleaner environment will force

Caterpillar to invest a lot of capital to retrofit the older products to comply with the new

standards. A stagnant economy, will diminish Caterpillar’s working capital. These areas need to

be evaluated before making a strategic decision about the company’s future.

Future Scenarios

Looking at all the factors that affect the success of this company, I predict Caterpillar to

be an industry leader in using renewable solar energy. Caterpillar is taking the steps necessary to

change the world focus from traditional fuel sources. The EPA emission standards are so strict

that it is forcing Caterpillar to change its product line of gasoline engines. Caterpillar is on the

break of changing all industries to use renewable energy. They could corner the market with this

technology by supplying all industries.

Another scenario that I see happening is a loss of market share due to poor quality.

Caterpillar is known for using unfair labor practices to get rid of union support (Jacobs, 2013).

This display of company values will affect their ability to retain a highly-skilled workforce.

Hiring inexperienced workers to manufacture equipment will drastically affect the product

quality. Caterpillar’s reputation is established on manufacturing high-volume quality products.

Any fluctuations in quality will provide a pathway for competitor Komatsu to move ahead.

Recommendations for Changes in Culture, Leadership, and/or Structure

I believe that there needs to be a change in the board of directors. In order for Caterpillar

to sustain growth there needs to be a shift in the thinking of profit over employees. They need to

have an independent committee update the code of ethics which clearly outlines employee value

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(Flite & Harman, 2013). Corporate misconduct can lead to lawsuits and fines. I think

Caterpillar needs to change its culture that shows that their success depends solely on their

employee’s success and happiness. Innovation will help Caterpillar remain competitive in a

stagnant economy. They need to increase their focus in research & development to foster

growth.

Conclusion

In conclusion, Caterpillar is a strong organization but is highly affected by external

factors. These factors can disrupt the global supply chain and stop growth. The company needs

to shift its focus from corporate acquisitions to innovation. Company growth should be managed

with a balance of mergers and product developments. Caterpillar can take advantage of a niche

in the market if it can advance in using a renewable-energy source. This company should also

consider revising its code of ethics to demonstrate their commitment to their employees.

Overall, Caterpillar is a sound company that will sustain its position at the top of the market if it

can adapt quickly to the fluctuations of the market.

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References

Beckrich, A. (2014). Renewable energy. The Science Teacher, 81(9), 10. Retrieved from

http://search.proquest.com.proxy.davenport.edu/docview/1630022056?accountid=40195

Craninckx, K., & Huyghebaert, N. (2015). Large shareholders and value creation through

corporate acquisitions in Europe. The identity of the controlling shareholder matters.

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News. Retrieved from http://etfdailynews.com/2015/07/23/caterpillar-inc-cat-explains-

why-it-is-a-global-recession/2/

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Durden, T. (2015B). Caterpillar Inc. (CAT): What to make of the collapse in sales? ETF Daily

News. Retrieved from http://etfdailynews.com/2015/09/22/caterpillar-inc-cat-what-to-

make-of-the-collapse-in-sales/

Flite, C. A., & Harman, L. B. (2013). Code of ethics: Principles for ethical leadership.

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