Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Caterpillar was founded in 1925, in Peoria, Illinois, which remains the base for much of today's production. Their ideal environment stemmed from demand created during World War II, when large parts of Europe and Asia needed rebuilding. This paved the way for healthy growth and profitability right through to the early 1980s. Caterpillar as a global company from U.S base with 75% of employees and 70% of production residing in the U.S (Wall Street Journal,1992). It manufactures products in wholly owned or affiliated plants In the United States, Brazil, Canada, France, the United Kingdom, Australia, Belgium, Indonesia, India, Italy, Japan, and Mexico. It also has contract manufacturers in the United States, Finland, Norway, South Korea, the United Kingdom, and Germany. Products are manufactured under license in eight countries, and parts warehouses and distribution facilities are located in the United States as well as in nine foreign locations. Caterpillar's main form of competition came from the Japanese earth moving equipment (EME) manufacturer, Komatsu, who held an estimated 60% of the Japanese EME market, and were the second largest manufacturer in the world. In 1982, 57% of Caterpillar's sales were made abroad while 82% of sales were manufactured in the U.S and by the early 1990s Caterpillar accounted for 1% of total U.S exports.
Over Expansion and Slower Economic Growth of Caterpillar
"Managements accustomed to successful expansion do not look much at the possibility of contraction. Those who neglect adverse exposures, however, invite catastrophe" (Eckley, 1989). Caterpillar saw negative earnings in 1982 for the first time in 50 years, and this trend continued for eleven quarters with one single exception. The record...