Caterpillar Inc.’s Measures to Verify Its Strategic Effectiveness
Caterpillar is one of the world’s leading manufacturers of specialized equipment for the mining, construction, and transportation industries. With 2021 sales and revenues of $51.0 billion, the firm is a leader in its industry (Caterpillar, 2019). For nearly 100 years, Caterpillar Inc. has been making significant progress and driving positive change worldwide. In many ways, the company’s success lies in the application of measures for verifying its strategic effectiveness. Unique technical characteristics, high quality, reliability, competitive price, well-established stable service system, and equipment delivery are the key to increased customer attention to new models of equipment that have left the Caterpillar production line. Over the years, the company has gained a reputation as a reliable partner that guarantees its customers the high quality of its products.
The efficiency of the company is also achieved through the application of a customer-centric strategy, a business strategy focused on customer needs. According to Wilson et al. (2020), one of the expected results of purposeful work with clients is forming a loyal client base of the company, which has several positive effects. Among them are reducing the costs associated with customer service and consumer price sensitivity and spreading positive feedback.
Caterpillar Inc.’s Organizational Structure
Caterpillar Inc. has a linear organizational structure. The advantages of this type of organization are the clarity and consistency of managerial relations, the clear delineation of areas of authority and responsibility, and the promptness of decision-making. Putting this type of organizational structure into practice is also key to the effectiveness of Caterpillar. Caterpillar’s organizational structure is Holacracy due to its decentralized management system. Management decisions are made through a Holacracy of managed groups, not a management hierarchy. There is a senior management staff that is independent and free. The CEO leads five presidents who lead the organization’s operating regions. These five presidents manage 25 vice presidents who manage regional offices and service and marketing centers. A fundamental feature of Caterpillar’s management is the presence of a committee that monitors management effectiveness. Decentralization of management allows for generating new ideas to achieve maximum efficiency of the company.
Caterpillar Inc.’s Internal and External Environments
Various factors of the external and internal environment affect the successful functioning of the company and set certain restrictions that must be taken into account when achieving goals and objectives. The external environment of the enterprise is a source of resources necessary to unlock its internal potential at the proper level. Studying the company’s internal environment allows management to assess the company’s current resources and future capabilities and identify strengths and weaknesses. It allows for expanding and strengthening competitive advantages and preventing potential problems.
Despite internal and external challenges, Caterpillar’s competitiveness is strong, as evidenced by its leading market position. Caterpillar does not rely heavily on product development as an intensive growth strategy. The company rarely introduces an entirely new product but instead improves and upgrades existing products. It allows to provide new features and add value to customers. As for external challenges, the key one is aggressive competition, which is manifested in the significant technological progress of key competitors. However, building a solid company image, increasing assets, and developing a distribution network help offset the adverse effects. Caterpillar creates quality products that enhance the brand image, uses assets to grow and develop the business, and constantly expands its distribution network, including in developing countries in Asia and Africa.
Caterpillar can increase productivity through differentiation. The company should increase its investment in research and development to create unique products. Nowadays, Caterpillar’s heavy equipment, engines, and financial services are very similar to those available from competitors. To improve competitiveness, organizations should invest more in developing new products. Moreover, discoveries accelerate the improvement of existing products and take them to a new level. Moreover, the expansion of the distribution network should be continued, as this strategy has contributed to the improvement of the company’s financial performance. Of particular importance are emerging markets, including China, South Korea, India, Thailand, Peru, Malaysia, Indonesia, and Morocco.
Caterpillar (2019). About Caterpillar. Web.
Wilson, A., Zeithaml, V., Bitner, M. J., & Gremler, D. (2020). Services marketing: Integrating customer service across the firm (4th ed.). London, England: McGraw Hill.