Caterpillar Case Analysis

Executive Summary At the end of 1991, Caterpillar Incorporated, the innovations largest maker of heavy industrial engines and earth-moving equipment, faced mounting monetary losses, poor labor relations, and a lackluster grocery. The previous disco biscuit saw the family post its first loss create the chief executive officer (CEO) to admit, Almost overnight the world changed on us. Ever since its foundation in 1925, Caterpillar has lead the heavy industrial equipment through innovation and value-added services. It was the first company to introduce a diesel tractor. The 1970s saw the depute of the most technologically advanced tractor in the world featuring a design that reduced repair and down time by as much 80% than conventional models. Innovative designs and post-sales nutriment commanded high premiums for Cat products and customers were willing to pay.

In the early 1980s, several(prenominal) factors combined to undermine Caterpillars seemingly unvanquishable market position. Commodity prices dramatically declined impacting Caterpillars pristine market segment, the heavy equipment used in mining, forestry, and oil drilling. Secondly, the US dollar rose in value against the Japanese Yen, effectively presenting Cats largest competitor, Komatsu, a 40% price advantage. In addition to these economic factors, labor relations reached a crisis evince culminating in a seven-month strike in 1982.

Caterpillar direction responded to the crisis by launching a giant restructuring program trim its labor force and equity by forty and twenty-eight percent respectively. It also began to look to new markets, particularly the littler construction contractors. To preserve market share in its join businesses, it slashed it prices- and profits to compete with Komatsu of Japan. Although losing eleven percent market share, it pricing strategy did prevent an almost certain big loss of market share.

The company returned to profitability in 1985, moreover management recognized that the companys long-term prosperity was far from certain. To secure a...

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