Catepillar Case

Some of the problems Caterpillar was experiencing included, core operations were too costly, some of their equipment was old, their production process was slow, their production design activities were too costly and they were having union disagreements.

In the 1980’s, Caterpillar’s name was recognized globally and they were considered a leader in the heavy-duty construction equipment industry. They were facing an industry collapse and union difficulties. Global demand was dropping and the yen was weak which allowed their biggest rival, Japan’s Komatsu Ltd., to undercut prices by 40% and Komatsu began gaining market share. This coupled with a lengthy, debilitating strike with the Union Auto Workers (UAW) in 1990-91 made the situation worse.

Donald Fites, who was named CEO of Caterpillar took an aggressive stance toward the UAW and put a strategy in place to rebuild Caterpillar as the industry leader.

Mr. Fites strategic plan began with, seeki

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Mr. Fites choice here was concentric diversification into related product-markets that leverage key strengths making engines into less cyclical markets than trucks and tractors; and into product-markets that leverage sales and distribution strengths. Mr. Fites used acquisitions to accelerate this effort. Mr. Fites also increased global presence of facilities over time to decrease currency fluctuation impact and reliance on UAW labor. Some 51% of Cat sales come from overseas but Mr. Fites want to hit 75% by 2008 and he wants to trim labor costs by pushing some of the manufacturing abroad. Roughly, half of Cat’s 74 plants are abroad versus 30% of its 38 plants a decade ago.

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