The caterpillar was failure and lost many of money. The major competitor was Japanese company called Komatsu. The caterpillar faced global challenge, So it must to reinvent itself, or die. By George Schafer and Donald Fits between1985 – 1999, caterpillar improved itself. It improved all the structure for the company. In 1999 the CEO was Glen Barton. After that the company declined in sales and earnings. Caterpillar produce earthmovers, road building was by Benjamin Holt, when he nicknamed his tractor. II. Situational Analysis
1) External analysis:
A. Porte's five forces:
* Risk of new entrants:
Risk of new entrants is low because the new entrant not able to implement the same strategies in the big companies. The big companies implement number of strategies that made high barriers such as R&D, innovation, economies of scale, and high quality. The equipment industry is very costly for new entrants. * bargaining power of buyers:
Bargaining power of buyers is moderate because there are many choices in the market but Caterpillar still have a good reputation, quality, customer responsiveness and brand loyalty in the marketplace. * bargaining power of suppliers:
Bargaining power of suppliers is high because Caterpillar depend on outsources products and sell these product under its brand name, so the suppliers can increase the product prices or sell these products into other companies.
Threat of substitutes:
Threat of substitute is high because there are alternatives products from other companies in the same industry such as Komatsu, Volvo, and Deer. These products are available for customers in different locations of the world and some of these products are lower price than Caterpillar. * Rivalry among established company:
Rivalry among established company is high because there are high competition in the equipment industry and many of companies compete with Caterpillar such as Komatsu, Volvo, Terex, and Deer. All of these companies want to gain a market share and customers satisfaction.
* The agreements with dealerships is important thing for caterpillar to expand globally and gain more profit. * After the decrease in the local market the company decided to take advantage of its global position to increase it sales in the other markets and to compensate the local fall. * The company has a chance to increase its sales because the growing countries need to develop its infrastructure, such as electricity and highways. * C. Threats:
* The increase in the value of dollar made advantage for other company such as Komatsu to be principal rival for caterpillar because the cost structure increase, So it was not able to decrease the price, that allowed to other company to be competitor. * Komatsu achieved a 50 percent labor productivity advantage over caterpillar and made much 30 percent underpriced caterpillar products because there are motivation and economies of scale in Komatsu, So it was able to produce more unit in low price and gain market share. * Between 1979and 1984, Komatsu made more than 50 percent of global market share while caterpillar was about 11 percent because there are increase in production and more dealership around the world at Komatsu while caterpillar focused on domestic market and the dollar was increase, So it faced a crisis at this period of time. Competitive Environment is unattractive because:
* Rivalry is vigorous.
* Competition of substitutes is strong.
* Suppliers and customers have considerable bargaining power.
2) Internal analysis:
* The caterpillar distribution system is the main thing that made more profit over its competitors. because the company product is reduced to every customer around the world. * Caterpillar joint venture with Mitsubishi Heavy industry in Japan to improve its production and take advantage of experiences between each others. * Caterpillar made...