Caterpillar Company’ Internal Analysis

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  1. Introduction
  2. Company SWOT
  3. Summary of the Strengths and Weakness
  4. Value Chain Analysis
  5. References

Introduction

Internal analysis is carried out to highlight the key strengths, weaknesses, threats, and opportunities of a company. Besides, internal analysis encompasses a comprehensive review of the internal environment of a company in terms of efficiencies, performance, and capabilities.

Internal or micro environment analysis is significant in placing a company within its abilities and areas that need to be improved to ensure business sustainability. Among the key tools for carrying out internal analysis include SWOT and value chain.

This paper attempts to explicitly carry out internal analysis of the Caterpillar Company, which is based in the US and operates within the Construction Machinery and Equipment industry. The analysis will also reveal any bottlenecks that are likely to affect smooth flow of the performance projections of the Caterpillar Company.

Company SWOT

Strengths Weaknesses
  • The company has already established in the heavy machinery market and is already into the trade and has previous experience besides offering the best quality among its competitors in the global and US construction machinery and equipment industry.
  • The company has good terms with its dealerships and can deliver high quality marketing services at a reasonable price for its machinery brands.
  • The company has established a cult like customer loyalty brands that have become a status statement in the construction machinery and equipment industry since the CAT brand is associated with quality and durability.
  • The stable and management team comprising of directors and several managers is instrumental towards providing necessary support and guidance in provision of heavy machinery and reviewing current operational strategies in line with the demands of their clients.
  • The Caterpillar Company also enjoys a wide network with over 45 branches and subsidiaries in the US and several representative offices in different regions outside the US. This is important in attracting more customers in those regions where the company is yet to reach full potential. Besides, the numerous branches have improved its products visibility and accessibility.
  • Caterpillar Company has been able to increase its level of sales and profits through increased consumer proximities, clear differentiation, and segmentation of its brands, through the internationalization of its business models and expansion of dealership businesses.
  • The company sells its products at higher price than the average market price of its main competitors such as Komatsu.
  • The company has to contend with more or less similar design despite constant technological growth since most of its products have perfect substitutes in the market.
  • The company market niche is relatively narrow since it concentrates only on heavy construction and agricultural machinery.
  • The Caterpillar Company has more presence in the US than other parts of the globe. Specifically, unlike its main competitors, the company has few branches outside the US. Thus, Caterpillar does not enjoy the substantive demand in the global market as its customer catchment area is restricted to the boundaries of the US.
  • Caterpillar has high inventory cost since it has many production plants across the US. Managing these plants may not be sustainable in the long run if the annual turnover reduces. As a result of this weakness, the company has not been able to efficiently penetrate the small business segment in the US within its Business-to-Business model of operation.
  • Caterpillar’s focus on quality machinery products has compromised its ability to incorporate views of a section of its consumers. A section of the potential consumers feels that the company should produce reasonably priced and quality machinery for the low end construction and agricultural market.

Summary of the Strengths and Weakness

As analyzed above, the Caterpillar Company has embraced the significance of SWOT. The company has been in a position to swing these forces and manipulate them into advantages through offering competitive prices, expansion, diversification, and cutting a market niche.

The main benefits that the company offers to its customers are the customized heavy machinery products and free service advice for every product. These benefits are aligned to the customers’ requirements such as affordable services, reliability, and professionalism. Besides, the customers are accorded individualized attention which meets their expectations (Johnson, Whittington, & Scholes, 2011).

However, the company has weaknesses such as inability to diversify, relatively high prices, and existence of perfect substitute products from its major competitors such as Komatsu.

Value Chain Analysis

Primary Activities

The value chain of Caterpillar Company comprises of four stages which are knowledge acquisition, storage, dissemination, and application. The Caterpillar Company relies on data mining for creation of knowledge.

It uses data mining techniques and software to obtain customers information and use this data in modifying the products to suit the demands of the clients (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011). Knowledge storage takes place in different ways.

It can either be in soft or hard copies. Through storage of the knowledge in the company’s data base, the Caterpillar Company has accurate market intelligence. This ensures that it has the best sources for business decisions.

Dissemination of information need should be properly managed so that correct information is directed to the market about the Caterpillar Company’s products. As part of knowledge application, the Caterpillar Company has adequate information on market surveys and customer information (Witcher & Chau, 2010).

Supply Chain Management (Inbound Logistics)

Efficiency in the supply chain is very critical in the spheres of quality assurance as part of the company’s operations management strategy. Customers across the globe are keen on efficiency and quality of services they receive from companies and would quickly change preferences on the basis of perceived quality.

It is necessary that businesses ensure that efficiency and quality in service delivery is the baseline of their operations (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011). With reference to the Caterpillar Company, the supply chain is managed through balancing the control systems, structure, and scope to ensure sustainability in the raw materials and logistical support.

In order to achieve a sustainable level of efficiency, the aspect of cost, dependability, speed, quality, and flexibility are incorporated through value delivery, value addition, and creativity within the automated supply chain (Johnson, Whittington, & Scholes, 2011).

Strengths

The supply chain management system of the company has efficiency strategies such as proper control system, accurate benchmarking, and use of statistic tools to minimize errors in the system modeling for controlling flow of raw materials and logistical support.

Caterpillar Company is a fundamental example of a company that has continued to embrace quality operations management model that supports communicational culture, efficiency, and optimal resource use as part of efficient and rational decision making structure (Johnson, Whittington, & Scholes, 2011).

Weaknesses

The supply chain management system is centralized and very bureaucratic. Therefore, the flow of logistics from one department to another department remains inconsistent.

Operations (Production)

Although operations strategy experience constant metamorphosis as a result of short term, midterm, and long term goal planning, no company can operate efficiently without quality system functioning.

With reference to the Caterpillar Company, the operations strategy has been modified to ensure flow in the production process across its different plants (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011).

Besides, standard operations strategy system for the company acts as the engine that supports implementers of the current production strategy in order to comprehensively verify rationale for supporting current, predicted, and actual results for every step of the production model.

Strengths

The operations strategy system tracks input and output ratio and measures intrinsic efficiency of the employee and manager in line with set targets. The company has endeavored to create a decentralized production support system.

The decentralized system has incorporated planning, development, implementation, and discovery (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011).

Since operations management system determines success of business decisions, the company has introduce a micro auditing unit for internal production decision making rather than depending majorly on macro market environment.

Weaknesses

The production system at the Caterpillar Company is not flexible to fluctuations in the operation functions. Since the production process operates of a preset blue print, it is very difficult to introduce any modification in the operation process.

Summary of the supply chain audit

The Caterpillar Company is focused on supplying its consumers with premium machinery products that suit their needs and experiences. The company’s strategy for ensuring smooth supply chain actualization involves research and creation of an informed and practical operations and supply chain plan.

As a matter of fact, operations management at the company is scientific and controlled by the internal goal of efficiency in the supply chain and production processes.

Within the comprehensive supply chain management strategy of the Caterpillar, the aspect operations strategy have embraced business processes such as acquisition of raw materials, handling, purchasing, and shipping after packaging (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011).

The Caterpillar Company’s commitment to high ethical values is demonstrated through the value network and chain. The company value chain commences with the development of products through own factories, independent manufactures and acquisition of licensed accessory supplies from partners.

As a global company, the Caterpillar Company management considers standardized and system supported supply and production process as success factors (Nexis, 2015).

Minority of the company’s full line products are supplied by independent and commissioned producers while majority are produced by the company’s own factories.

The high self-production is significant for the Caterpillar Company as it covers the portion of its traditional heavy machinery product range which enables the company to gain expertise and optimize on both the product quality and availability (Escrig-Tena, Bou-Llusar, Beltran, & Roca-Puig, 2011).

As opposed to its competitors, which produce their products from central points, the strategy of Caterpillar to spread production points around the world consolidates its supply networks and strengthens its long-term partnerships.

Moreover, the spread of the sourcing volume across the global network of suppliers spreads risks and makes the company independent of any single sourcing location and manufacturer.

From the manufacturing and supply points, the Caterpillar products are distributed either through company’s own dealer stores or through independent dealers across the globe (Johnson, Whittington, & Scholes, 2011).

References

Escrig-Tena, A., Bou-Llusar, C., Beltran, M., & Roca-Puig, V. (2011). Modeling the implications of quality management elements on strategic flexibility. Advances in Decision Sciences, 1(1), 1-27.

Johnson, G., Whittington, R., & Scholes, K. (2011). Exploring strategy (9th ed.). Alabama, Al: Prentice Hall.

Nexis, L. (2015). Business and management strategy. Chicago, Ch: Glo-Bus Spring.

Witcher, B., & Chau, V. (2010). Strategic Management: Principles and Practice, Alabama, Al: Cengage Learning.

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