1. Presented by: Mozart Team Spring 2008 MGT 693

2.  Company History & Background  CAT’s Strategy  SWOT Analysis  Competition  Industry Analysis – Porter’s 5 forces  Recommendations  CAT Today Caterpillar Tractor Co.MGT 693

3.  Headquartered in Peoria, Illinois  Started out in farm equipment  Late 1920’s moved to EME (earth-moving equipment)  1941 to 1944 sales tripled due to WWII  Bulky equipment left behind after the war  Company has only experienced a loss one time Caterpillar Tractor Co.MGT 693

4.  Multinational company  Designs, markets and manufactures EME and engines  Cat is world’s largest EME manufacturer  In 1981 it was estimated that 57% of the sales were overseas  68% of these sales were made in the USA  Parts revenue is about 35% to 45% Caterpillar Tractor Co.MGT 693

5.  Management takes a long term approach to business  High quality products  Effective service  Strong brand value and brand loyalty  Company was always on the defense – mostly self-reliant  Key Success Factors:  Cost competitiveness through high volume production  Reliability backed by a stockpile of spare parts  Service delivery through a widespread network of independent distribution agents  Localized ability to customize . Caterpillar Tractor Co.MGT 693

6.  129 overseas dealerships  87 US dealerships  Manufacturing consistencies  Make 90% of components and parts  Profit margins higher on parts and attachments  Differentiation advantage  Low dependence on debt  High Labor costs  High inventory  1970’s continued to expand plant facilities  Consistent price structure Caterpillar Tractor Co.MGT 693

7.  Diversification  Several countries still growing- ASEAN  Economic environment  EME was operating at 60% of capacity Caterpillar Tractor Co.MGT 693

8.  7 manufacturers of the EME account for 90% of the dollar sales worldwide  Smaller companies use the flank attack  CAT loosing its market share Caterpillar Tractor Co.MGT 693 Market Share of Major EME Producers

9.  Rivalry  Increasing rivalry with diverse competitors  Strong Brand Identity  High switching costs and Barriers to exit  Threats of New Entrants  High barriers to entry  Govt policies  Economies of scale  Extensive dealership network Caterpillar Tractor Co.MGT 693

10.  Low threat of substitution  Balanced supplier power  Backward integration  Substitute inputs  Balanced buyer power  Low bargaining power  Price sensitivity  Brand Loyalty Caterpillar Tractor Co.MGT 693

11.  Lower capacities on existing factories  Continue diversification strategies  Go back to basics and offer smaller products  Continue with partnership agreements especially in growing economies  Extend dealerships in Asia & MiddleEast  Establish EME rental or lease systems  Educate labor unions about Caterpillar’s current challenges and short-term plan Caterpillar Tractor Co.MGT 693

12. Caterpillar Tractor Co.MGT 693 1983- 1985 CFSC & product line expansion 1990 Plants modernized & BU restructured 2001-2005 QA & CSR measures 2008 CAT well on its way to realize its Vision 2020 1986 Caterpillar Inc. was formed. 1997 Acquires UK based Perkiin Engines 2006 CLS in Shanghai Updated Code of conduct & Enterprise Strategy

13. Caterpillar Tractor Co.MGT 693  In 2005, Forbes had listed Caterpillar as the best- managed industrial corporation in America  CAT expects record results in 2008.  CAT’s current CEO, Jim Owens attributes this to “.. the way Caterpillar reshaped its DNA, permanently changing the culture and capabilities of the enterprise. Caterpillar focused on its decision rights, organizational structure, motivating factors and metrics and measures - the four essentials of organizational DNA”.

14. Caterpillar Tractor Co.MGT 693