CATERPILLAR INC'

1
CATERPILLAR INC.

• Olav Larsen
• Velia Jaramillo
• Octavio Gomez
• Christopher Nwihim
• Eric Berry
• Raul Salas

2
Caterpillar History

• Founded in 1925 as Caterpillar Tractor Company
  (Cat) by Benjamin Holt and Daniel Best
• The crash of 1929 hit Cat hard, but not as hard
  as many others Orders from the Soviet Union
• During late 30s Sales increased as President
  Roosevelt started the huge road building programs
• In 1931 Cat perfected the tractor engine
• WWII Contributions many and varied
• Postwar period Cat experienced enormous growth
  due to massive rebuilding campaigns (Europe and
  Japan)
• Continued globalization
• Realized losses from 1982 to 1984 - Reexamine its
  activities Implemented a new set of strategies

3
Mission Statement

• Caterpillar will be the leader in providing the
  best value in machines, engines and support
  services for customers dedicated to building the
  world's infrastructure and developing and
  transporting its resources. We provide the best
  value to customers.
•   Caterpillar people will increase shareholder
  value by aggressively pursuing growth and profit
  opportunities that leverage our engineering,
  manufacturing, distribution, information
  management and financial services expertise. We
  grow profitably.
•   Caterpillar will provide its worldwide
  workforce with an environment that stimulates
  diversity, innovation, teamwork, continuous
  learning and improvement and rewards individual
  performance. We develop and reward people.
•   Caterpillar is dedicated to improving the
  quality of life while sustaining the quality of
  our earth. We encourage social responsibility.

4
Environment

• Fortune 100 company
• One of 30 companies in the DJIA index
• Caterpillar specializes in the manufacturing of
  heavy vehicles for construction, agriculture, and
  mining

5
Environment Cont.

• Customers
• Engineering firms
• Construction companies
• Mine operators
• Product line
• Earthmovers
• Road building machines
• Mining related equipment

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POTENTIAL ENTRY OF NEW COMPETITORS

• New Companies entering the heavy machinery
  industry are not considered a major threat.

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COMPETITORS

• Komatsu
• CNH
• Cummins
• John Deere

8
2003

•  

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EXTERNAL ENVIRONMENT

• Slow down in growth
• Customer Loyalty
• Bargaining Power
• Dollar Value

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INTERNAL ANALYSIS

• MANAGEMENT
• MARKETING
• PRODUCTIONS/OPERATIONS
• RESEARCH AND DEVELOPMENT
• COMPUTER INFORMATION SYSTEMS
• FINANCIALS

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INTERNAL ANALYSIS

• MANAGEMENT
• -Glen Barton CEO
• Major emphasis on employee performance.
• 69,000 Employees Worldwide.
• MARKETING
• Very specialized segment not really to the
  general public.
• Now pushing smaller machinery.
• PRODUCTIONS/OPERATIONS
• CAT Rental Power
• 23 Distribution centers in 12 countries/13 in US.
• 1600 Dealerships in 200 countries.

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INTERNAL ANALYSIS

• RESEARCH AND DEVELOPMENT
• 4 MILLION EACH WORKING DAY
• COMPUTER AND INFORMATION SYSTEMS
• CAT BOAST THE BEST AND FASTEST COMPUTER NETWORK
  IN THE INDUSTRY
• LINKS FACTORIES,DISTRIBUTORS,AND DEALERS

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FINANCIALS

• LIQUIDITY RATIOS 2002 2001 2000 COMP
• CURRENT RATIO 1.29 1.3 1.4 1.82
• QUICK RATIO 1.05 1.02 1.11 1.3
• LEVERAGE RATIOS 2002 2001 2000 COMP
• TOTAL DEBT .83 .81 .82 .84
• PROFITABILTY RATIOS 2002 2001 2000 COMP
• PROFIT MARGIN 3.9 3.9 5.2 2.29
• ROA 2.41 2.61 3.4 1.6
• ROE 14.6 14.36 18.4 7.8

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Strengths Weaknesses

• Strengths
• Holds large portion of market share
• Growth through production not acquisition
• Distribution system
• High brand recognition
• 6 SIGMA

• Weaknesses
• Recent employee reduction
• Miscommunication between foreign and domestic
  managers

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Opportunities Threats

• Opportunities
• Expansion in third world countries
• Market sales overseas offer potential
• Tax breaks for better emissions
• Hydrogen fuel and solar turbine

• Threats
• Economic recession
• Tougher emission laws
• Low investment in Research and Development

16
Strategy Formulation

• Retrenchment of Latin America
• New Product Lines aimed at Smaller Machinery
• Reposition Company Focus into Asian Market
• Increase Research and Development

17
Strategy Formulation

• Retrenchment of Latin America
• Political Instability
• Economic Recession
• Devaluation of Currency
• Establish New Small Machinery Product Lines
• Large Market
• Low Barriers To Market Entry
• Diversify Product Lines
• Strengthen Brand Loyalty

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Strategy Formulation

• Reposition Company Focus into Asian Market
• Low Asian Market Share
• Recent Joint Venture with Mitsubishi
• Population Density
• Infrastructure Development
• Mining Potential
• Current U.S. China Relations
• Increase Research Development
• Current Joint Venture with Fuel Cell Energy Inc.
• Stiffer Emission Laws
• Demand for Alternative Sources of Fuel

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Vision Statement

• Be the global leader in customer value.

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End Game Strategy Retrenchment in Latin America

• Advantages
• Reduce costs by downsizing employees, cutting
  benefits, and eliminating unnecessary expenses.
• Raise cash by leasing off some of the facilities
  that exist and selling machinery.
• Reduce inventory will eliminate overhead costs,
  storage and warehousing costs.
• Disadvantages
• Employee lay-offs will have to provide money for
  retraining and unemployment benefits.

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• Space Matrix
• Internal Strategic position
  External Strategic Position
• Financial strengths (FS)
  Environmental Stability
• Return on investment 5
  Rate of Inflation
  -3
• Working Capital 5
  Technological Changes
  -2
• Cash flow 4
  Competitive Pressure
  -2
• Leverage 3
  Price range of competing
  products -3
• 
  Political
  instability -4
• 
  Potential for war
  -4
• Competitive Advantage (CA)
  Industry Strength
• Market Share -1
  Growth Potential
  6
• Product Quality -1
  Profit Potential
  5
• Customer Loyalty -2
  Financial Stability
  5
• Technological know-how -2
  Technological know-how
  4
• Control over suppliers and
  Productivity, Capacity Utilization
  5
• Distributors -3
  Resource utilization
  4

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Product Market Strategies

• Asia- Market penetration with more sales
  personal, increase advertising, and better
  relations with the governments and contractors in
  the region.
• United States- Product Development with new
  riding lawn mowers and related items using
  better service through maintenance programs at an
  economical price.

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Diversification Strategies

• Concentric Diversification - adding the direct
  fuel cell power generator into the market with a
  joint venture with Fuel Cell Energy Inc.
• ACERT- Advanced Combustion Emissions Reduction
  Technology.

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THANK YOU,
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QUESTIONS?