Strategic Management – The Case of Caterpillar Inc.

Strategic Management – The Case of Caterpillar Inc.

Assess whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness.

The effectiveness of a strategy of any business organization is assessed based on how the management links the strategy with the firm’s objectives. There must be an elaborate plan outlining the means through which a set of goals can be achieved. With this in place, the success of a strategy is pegged on the capacity to allocate sufficient resources. The primary objective of Caterpillar Inc. is to satisfy the needs of its diverse customers. The company applies the operating and execution model, focusing investments on the areas of business that bring maximum value (Caterpillar Inc., 2018). The company collects facts and data to identify the industry with the most outstanding consuming value. Consequently, resources are allocated to the areas that are likely to give Caterpillar Inc. a competitive edge and most profits. The operating and execution model used by Caterpillar Inc. is effective since it verifies effectiveness before execution.

Summarize Caterpillar Inc.’s organizational structure.

Caterpillar Inc. is governed by a board of directors that constitutes 11 members. The number helps the company benefit from the diversity in experience of the members while retaining individual responsibility. The chairman of the board also doubles as the company’s chief executive officer (CEO). Further, the company has 15 vice presidents, with each of them assigned a division to oversee (Caterpillar Inc., 2018). The elaborate governance structure streamlines key decisions made in the company.

Much of the company’s revenue originates from its machine sales. Additionally, licensing deals with global partners also generates a significant portion of its revenue. The company’s machines are quite distinctive, with the yellow colour and logo. So widespread is the company’s reach that its machinery is present in stores across the globe. In 2018, for instance, the company was ranked 28 out of 150 regarding the global licensing status (Caterpillar Inc., 2018). A strong network means more sales, which translate to revenue.

Another old-age strategy that influences the company’s success is the strong distribution network. The company has a vast network of dealers, some of whose roots date back to 1925. The partnership with the Yancey brothers is one of Caterpillar Inc.’s longstanding dealership agreements. The dealership has 168 dealers operating in 193 countries. Surprisingly, the mega dealership employs more people than Caterpillar itself (Caterpillar Inc., 2018).

Determine whether Caterpillar Inc.’s organizational structure is considered a traditional organizational structure or a Holacracy.

Caterpillar Inc. follows a holacracy organizational structure. There are five presidents distributed across the company’s regions of presence. The regional presidents are responsible for overseeing the organization’s operations in their respective regions. Some critical decisions regarding the company’s operations are left to the regional managers. However, the company’s CEO supervises and coordinates the regional presidents. Also, there is an independent committee made up of outsiders. The primary objective of the outsiders is to ensure regional subsidiaries align with the company’s objective. The committee reports to the head office in case of mismanagement. Caterpillar Inc. adopted the decentralized governance system to create innovative ideas and client appeal.

Justify why it’s important for Caterpillar Inc.’s leadership team to study and understand the company’s internal and external environments.

Understanding a business organization’s internal and external environment is a key success factor in all business organizations. By studying both environments, an organization is better placed to understand the business, allowing for the proper execution of strategies to give a business a competitive edge over rivals (Shatilo, 2020). Studying a business environment also involves understanding the weaknesses and strengths of the company. A good case example illustrating the importance of studying the external environment of a business applies to Caterpillar Inc. Initially, Caterpillar Inc. used to have a centralized organizational structure, with critical business decisions having to be made in the central office. The operational approach came with some weaknesses. For instance, subsidiary managers operating in Africa had to seek approval from the main office before extending a discount to customers. However, this has changed as the company adopted holacracy in its governance structure. The model allows regional presidents to make such critical decisions instead of having to consult the main office. The end goal of assessing the external and internal environment is to understand client needs and the operational environment within which the business operates.

Evaluate Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments.

One of the core strengths of Caterpillar Inc. that boosts its position in the market is the quality of its products. The company is known for making high-caliber machinery that is better than competitors’ products. Caterpillar Inc.’s distribution network also offers it a competitive edge. That is so because the company has a strong market base, hence can afford to make downward price adjustments to attract more customers. The company has also made some clients its brand ambassadors, and they help spread the word regarding the company’s existence, thus raising revenue.

Recommend strategies in operational changes to support Caterpillar’s strategic plan, future business decisions, and improvement in business performance.

In light of Caterpillar’s business assessment and the external and internal environment analysis, the company should adopt product differentiation. The company can invest in research and development to manufacture unique products that appeal to customers. Currently, there is no significant difference between Caterpillar Inc.’s products and those manufactured by competitors, hence limiting its market base.

Another key strategy to enhance revenue is through investing in upcoming economies. Developing countries tend to have high growth rates; hence, focusing on developing economies economies will make economic sense. India and China present more market opportunities for Caterpillar Inc. to explore.

References

Caterpillar Inc. (2018). Caterpillar | About the Company. Caterpillar.com. https://www.caterpillar.com/en/company.html

Shatilo, O. (2020). The Impact of External and Internal Factors on Strategic Management of Innovation Processes at Company Level. Ekonomika, 98(2), 85–96. https://doi.org/10.15388/

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

---

Review the following terms and concepts discussed this week to prepare for this assignment:

organizational structure
organizational culture
inertia
Holacracy
PESTEL model

Create a Word doc and title it Strategic Management Research Journal Part 3.

Write a 525- to 700-word response to the following prompts in your journal entry:

Assess whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness.
Summarize Caterpillar Inc.’s organizational structure.
Determine whether Caterpillar Inc.’s organizational structure is considered a traditional organizational structure or a Holacracy.
Justify why it’s important for Caterpillar Inc.’s leadership team to study and understand the company’s internal and external environments.
Evaluate Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments.
Recommend strategies in operational changes to support Caterpillar’s strategic plan, future business decisions, and improvement in business performance.