Strategic Audit of Caterpillar Corporation - Research Paper Example

Id: Strategic Audit of Caterpillar Corporation Posture Mission: The company is involved in the design, manufacturing, marketing and selling of machinery, engines, financial products and insurance to the customers through a worldwide network of distributors. The company is the world’s leading manufacturer of construction and mining equipment and different engines of locomotives. The company has more than $89 billion in assets. In the year 2009 Caterpillar was number one in the industry in which the company belongs. The company is ranked 44 in the top 500 list of companies as per the list by Fortune. Corporate, business, and functional objectives The company by the year 2020 wants to be recognized as leader in every business that it is involved in. The company wants that its products of the company should help the customers in achieving success. The distribution system of the company should also act in order to provide competitive advantage to the company. The strategic objectives which the company has set for itself to be achieved by the year 2020 is presented in the following figure The company expects the people working for the company are talented and lives the live in action doctrine set by the company. It is expected that the business model helps in driving superior results and the supply chain is world class. Strategies: Figure 1 Strategy of the company (Caterpillar) The long term strategic goals of the company which are set for the year 2020 are along there different dimensions of Superior results, best team and global leadership. The company aims to achieve superior result which results in the fact that the company is regarded as a solid long term investment venture which gives shareholder return of the top 25% of the companies listed in S&P 500. The company also has a goal of having the best team. The team should be comprised of people who enjoy a work place characterized by features such as safe and inclusive. The company also wants to ensure that the customers of the company should be more successful with the company than with their competitors. Policies The values of the company are put to action through different activities. The company ensures integrity by delivering what they promise, being trust worthy and fair, and not influencing or getting influenced by others. In order to achieve excellence the company has in place the Caterpillar production system and 6 sigma. In order to be sustainable the company gives products and services which are sustainable, and devote time and resources to sustainability. The company also focuses on team work and commitment in order to achieve the long term vision of the company. Opportunities and Threats on External Environment 1. Natural physical Environment Caterpillar Corporation Inc. is an American company that manufactures, designs, sells and markets different product segments including financial products, machinery, insurance and engines to customers. The company uses worldwide network of dealers to sell products to customers. It is one of the world’s leading manufacturer of mining and construction equipment, natural gas and diesel engines, electric diesel locomotives and has turbines. Based on the above principles the company believes that innovation and technology will help develop sustainability of its services, products, and solutions for all the clients. So Caterpillar plans to increase the fleet hours by 100% and re-establish business sales by 20 percent. The company also plans to maintain good relation with government as a part of company’s policies. These initiatives will help the company to maintain a healthy natural physical environment. 2. Societal Environment The company prides itself because it is able to service the society and provide basic necessities to the people. From the mission statement of the company it is clear that it aims to provide basic needs to the people of the world including clean water, shelter, food, sanitation, and consistent power. The main products of the company are also designed and manufactured on the basis of these principles. Form the mission statement of the company it can be said that it intends to facilitate economic growth through energy development, infrastructure and to offer resolution that sustains environment, communities and thereby conserve economic resources and protect the planet. 3. Task Environment The company plans to maintain a balanced task environment. The following are the company’s goals that it plans to achieve in the next five years: Decrease intensity of energy by minimum 50 percent in next 5 years Lessen the intensity of greenhouse gas releases by minimum 50 percent in next 5 years Employ renewable / alternative sources to convene twenty percent of Caterpillar’s energy requirements Minimize authentic injuries rates to 0.7 at workplace and also lost-time injuries to 0.14 Minimize water utilization intensity by at least 50 percent in the next 5 years Minimize by-product materials utilization intensity by at least 50 percent in the next 5 years The company intends to achieve the above goals by keeping workers content and prolific. It requires open and regular communication, positive feedback, and customary acknowledgment of achievements. Research and Development R&D objectives, strategies, policies, and programs For caterpillar the writing on the wall is pretty simple that is to innovate or to die. The company acknowledges the fact that if it stops innovating then it will be soon over taken by another company in the industry. The company also recognizes the fact that it cannot rely on its past history and success in order to dictate the future and it has to continuously go on innovating. Innovation for the company is to design new products which can add value to the customers. The company invests more than $2 billion each year in innovation and has research and development centers in all the continents across the globe. The company employs more than 11000 engineers and 350 PhD level scientists and technology experts. Return from its investment in R&D Due to its investment in R & D the company has 15,000 active patents in its name. The R& D footprint of the company reflects the commitment of the company to provide the best of the product and services to the customers of the company and results in the dominant position of the company (Colvin). Competency in technology transfer The company is quite competent in transferring technology as is evident from the product demonstrations of the company. Role played technological discontinuity in the companys products The company is a major innovator and thus is able to innovate new technologies before the old technology becomes obsolete. Compare with the investment of similar corporations Komatsu which is the largest competitor of Caterpillar and is second largest company in this sector also invests significant amount in R&D. The company invested 46.3 billion yen in the year 2007, 49.6 billion yen in the year 2008, and 53.7 billion yen in the year 2009 and 44.1 billion yen in the year 2010. The ratio of amount invested by the company in R&D with respect to sales is given in the following figure. Figure 2 Ratio of R&D to sales (Komatsu) Role of the R&D manager in strategic management R& D investment of the company is one of the major sources of the strategic advantage of the company. The company came into the market by building the first diesel power tractor thereby opening the industry and inviting others in the industry. Operations and Logistics Question 1 The corporate objectives of the company are centered on maximizing business life cycle benefits by developing enhanced systems. The business objectives of the company is to minimize the social, economic, and environmental expenses of rights, as reflected from the sustainability principles of the company. The present service / manufacturing objectives, strategies, policies and programs of Caterpillar Inc. are discussed below:- The company plans to be recognized as the leader ubiquitously irrespective of where it conducts business. It intends to develop services, products, and solutions that will help its customers to succeed in today’s competitive environment. The company appreciates its supplier network and distribution system which is also its competitive advantage in the market. The supply chain network of the company is acknowledged as world class by many companies in private sector and the government as well. The business model of the company is superior compared to its competitors helps the company to drive superior results. The biggest advantage that the company has is its employee motivation. The employees of Caterpillar are not only talented and but they also live the core values of Caterpillar in action. Caterpillar’s work helps its customers to make a more sustainable earth. The financial performance of the company is very consistent and the company has also been rewarding its stockholders by paying dividends. Question 2 The main types of Caterpillar’s operations are distribution and manufacturing. These two primary types pave enormous opportunity for the company to increase the extent of its business lines. Caterpillar’s operations extend to machinery, engines, trucks, electronics, defense goods, agricultural products and financial services (SEC). Question 3 The goals of the company are quiet impressive thus far as in the long-term the total shareholder return of Caterpillar increased by 25% of the S&P 500. The employees of caterpillar experience safe work place domestically. In the international market Caterpillar has been able to actively lead the earth in creating improved environment for opportunity and economic growth. Question 4 The highest profit margin comes from distribution heavy equipments like machinery, energy and transportation products to customers. The lowest profit margin may be attributed to financial products of the company. In the farm and machinery construction industry, Caterpillar is the market leader and followed by Komatsu (Yahoo Finance). The total sales of the company were $55 billion in the year 2014 and its nearest competitor’s sale was almost half this amount. Works Cited Colvin, G. Caterpillar is absolutely crushing it. 12 May 2011. Web. 01 Oct. 2015. < http://fortune.com/2011/05/12/caterpillar-is-absolutely-crushing-it/ >. Caterpillar. Enterprise strategy. 2015. Web. 01 Oct. 2015. < http://s7d2.scene7.com/is/content/Caterpillar/C10211355 >. Komatsu. Financial highlights. 2015. Web. 01 Oct. 2015. < http://www.komatsu.com/CompanyInfo/ir/financial_highlights/ >. SEC. Form 10-K: Caterpillar Inc. 2015. Web. 01 Oct. 2015. . Yahoo Finance. Caterpillar Inc. (CAT): Industry. 2015. Web. 01 Oct. 2015. < http://biz.yahoo.com/ic/620.html>. Read More