PRESENTED BY:

Neha Parekh (13301)

Madhuri Kudekar (13309)
Shraddha Temgire (13320)
Vijay K Bokde (13338)
Apoorva Daydar (13341)
Shantanu Tupe (13349)
Lt.Col. Mangesh Wankhede (13361)
Lt.Col. Vijay Khedekar (13362)


World EME Industry in 1981
About CAT
CATs strategy till 1980s
Competition
Need for new strategy
PESTEL Analysis
Michael Porters Five Forces Model
SWOT Analysis
Suggestions and Key Learning
AGENDA
1981, the construction industry along with EME usage
represented nearly 70% of the total dollar sales
Excavators, bulldozers, graders, loaders of highway
tractors and haulers
EME demand was doubling throughout 1973-1980s
Mining/ construction industry 60% of EME market
Low cost labour method created competition
EME industry focussed on improvements to existing
products


WORLD EME INDUSTRY IN 1981
Based in Peoria, Illinois
Two divisions
1) Earth moving and construction machinery and
related equipments
2) Engines for construction and power generating
systems.
Largest manufacturer of EME- Large geographical base
and broad product line
Great success due to world war II triple sales

ABOUT CAT
Extending its market globally plants in over 8
countries
Providing high quality extensive product line backed by
efficient service
Self-sustaining Dealership Network
100 % ownership of its subsidiaries
Recognizing post-war opportunities
Manufacturing excellence & Quality Control
Uniform pricing strategy
Hired employees mostly from the US

CATS STRATEGY TILL 1980s
53%
15%
10%
6%
7%
5%
4%
Market Share (%)
Caterpillar
Komatsu
J.I. CASE
FIAT-ALLIS
JOHN DEERE
INTERNATIONAL HARVESTER
CLARK EQUIPMENT
COMPETITION
TOTAL ACCOUNTED FOR MORE THAN 90% OF THE SALES.
Worldwide demand had doubled
Intensity of competition increased
LDCs increased their rate of construction activity
Saturation in domestic market
World contractors were becoming better placed than
US contractors to perform contract
Hardships due to enormous labour union strikes

NEED FOR NEW STRATEGIES
Healthy environment in home country, USA
World War 2 provided heavy growth opportunities for EME
Industry.
Entry in Japan was under strict constraints: Caterpillar -
Mitsubishi alliance was delayed till Komatsu was in strategic
alliance with Cummins over licensing.
Governments of Countries like India, African nations stressed
on partial manufacturing within national borders.
Joint Ventures: Caterpillar established subsidiaries in host
countries to get best deals with Governments to reduce their
tax liabilities.
Political
Joint Ventures and Risk Reduction Subsidiaries with
100% or maximum possible ownership
Higher wages of Employees and Workers in developed
markets reduced the Profit margins for Organization,
further pushing organizations to raise premium in
Pricing.
Excessive Inventory Storage had associated carrying cost
which further pushed price higher.




Economical Environment
Depleting market in Middle East. Softening of Oil Prices
led to low construction activity.

Global Debt Crisis of 1981. LDCs Mexico, brazil,
Argentina, Nigeria facing liquidity crunch.

Fed Reserve Policy leading to higher interest rates
affected the Construction industry.

Strengthening USD, adverse for Exports from US.
Economical Environment
Developing Countries and specifically the African
nations were more Labor oriented.

Organizations stressed high on loyalty were considered
Conventional in operations.

Ghetto creations( Clubbing housing and working
localities) observed.

Management- Labor Relations in Organizations were
challenged.


Social Environment
During War, US military standardized usage of CAT
equipments.
Technology development and increase in Automation -
Result: electronically controlled equipment.
Post war, US military left heavy machinery in countries
while their return. This led to locals learning usage and
maintenance of Cat machinery.
However Caterpillar was mocked to have laid back
Technology as compared to Komatsu.


Technological Environment
Opportunities seen in ASEAN, Australia, Japanese
markets.

LDCs required extensive infrastructure however faced
financing problems.

Other MNCs ready to take dealership of CAT in and
outside US. Ex: Unilever in Africa.


Ecological Environment
USFCPA: US Foreign Corrupt Practices Act- Prohibited
Caterpillar from unethical activities like Bribery.

Different Nations varied on the Legal standards adopted
for Business. Joint Ventures with percentage of
Ownership was point of focus.

Tax policies depended on ownership and Investments.

Legal Environment
MICHAEL PORTERS FIVE FORCES
MODEL
Rivalry
High
Threat of
new
entrants
Low
Bargaining
power of
buyers
Moderate
Threat of
substitute
products
Low
Bargaining
power of
suppliers
Moderate
SWOT ANALYSIS

STRENGTHS
Dealership network
Broad product line
Large Geographic
Base
Operational efficiency
High quality products


WEAKNESS
Fewer markets
Few global managers
High Overheads and
setup cost
Labour Relations

OPPORTUNITIES
Emerging
markets
Diversification

THREATS
Competition
Uncertain Economic
environment
Currency
fluctuation
Improve labour relations and maintain harmony with
the united auto workers union.

Use different marketing channels.

Set up manufacturing plants in emerging economies to
reduce transportation costs and thus to reduce the
price.
SUGGESTIONS
Hire local employees with local knowledge to work in a
particular country.

Concentrate on growing markets far east, Australia,
ASEAN countries, South Korea, Japan and Taiwan

Full capacity utilization of existing plants to reduce
overheads

SUGGESTIONS
Increase emphasis on mining side of the business.

Support customer relationships through repair and
maintenance scheduling.

Provide rental and lease facilities for equipment.

Develop relations with other manufacturers and
equipment designers
SUGGESTIONS
THANK YOU!