Motivations for International Strategy

Caterpillar, Inc. has a presence on 7 continents throughout the world.  This enables them to reach a much larger consumer base then if they just operated in the United States.  There are two main motivations for Caterpillar, Inc. deciding to go international.  The first one is to increase their market size.  When Caterpillar, Inc. first started, they were operating in just the United States.  It was very costly to ship their products overseas.  Now they have production facilities throughout the world that allow them to reach a much larger consumer base.  They are able to send earth-moving machines and forestry products to the mining and logging operations in Asia.  They are able to more easily reach their consumers worldwide by have a global presence.  The second motivation for going international is the reduction of costs.  These costs include shipping the products, as well as producing them.  By using offshoring, Caterpillar has been able to reduce the costs associated with producing their various products.  There is cheaper labor in Asia and other world markets, and Caterpillar has been able to utilize that by offshoring their production facilities.  These two motivations go hand-in-hand because by offshoring to try and reduce costs associated with producing the products they have been able to increase their market size by having these production facilities close to the global markets that would utilize their products.  Going international has been a major source of growth and a key part of why Caterpillar is as successful as they are today.
                              

  

Corporate-Level Strategy

 

At Caterpillar, Inc., their corporate-level strategy is a diverse business model.  They are involved in many different areas, and each helps aid in the success of the other.  They are involved in construction and mining equipment, diesel and natural gas engines, as well as industrial gas turbines and diesel-electric locomotives.  They have been able to diversify their business model enough to please the many different consumers they have, but have their diversification close enough to be able to aid each industry they compete in.  They manufacture diesel and natural gas engines, and those engines are used in their heavy machinery and are sold on a separate basis.  By being a diversified company, Caterpillar has been able to expand throughout the world.  They are diversified enough to manufacture turbines for farmers on the prairie, and engines for locomotives that move the machines they manufacture around the United States.  Their diversified businesses have been able to be intermixed within each other.  Their locomotive engines power the trains that haul the machines across country, and the diesel engines are used to power the heavy machinery they manufacture.  They have created a business strategy that allows their various units  to complement each other and at the same time be a separate entity of the corporation.

                          

Business Strategy

Caterpillar, Inc. uses a differentiation strategy as their business strategy.  They differentiate themselves by having a large dealer network that spans the United States as well as the rest of the globe.  No one company in their industry has as strong of a dealer network as Caterpillar does.  To make that dealer network better another aspect of Caterpillar's differentiation strategy is the wide variety of products that they offer their customers.  They offer over 25 brands and 13 product lines that range from earth moving equipment to turbines.  Being able to have a wide variety of products and brands to offer consumers and a dealer network that spans the globe, has allowed Caterpillar, Inc. to use the differentiation strategy to their advantage.  They have effectively used this strategy and it has made them the number one company in their industry.  

                                                   

Market Value and Book Value

                                            

The market value for Caterpillar, Inc. is $74 billion and the book value is $13 billion.  The ratio of market to book value is 5.7.  These numbers indicate that there is a large amount of intellectual capital at CAT.  At Caterpillar there is $61 billion of intellectual capital present.  This is a huge part of the success of Caterpillar.  They invest large amounts of their time and effort into designing new products as well as redesigning existing products in order to keep their position as number one in their industry.  A large portion of this intellectual capital is provided by the human capital that is present at Caterpillar, Inc.  The employees of CAT bring lots of individual capabilities, knowledge, experience, and unique skills that are used on a daily basis, no matter where in the company these employees fall.  The HR department of Caterpillar plays a huge role in recruiting and hiring these star employees.  They integrate Team Caterpillar into each one of them and instill the virtues of engagement, leadership, and service excellence into each employee.  The employees are able to enhance their skill set by attending Caterpillar University.  Caterpillar University is a place where employees become experts in the area they work in.  If you are a mechanic, you learn how to work on excavators or combines.  If you are a sales representative, you learn better ways to interact with customers and a variety of sales pitches.  You also become an expert on the products you are trying to sell.  Another great aspect of Caterpillar University is the social capital that it provides to the company.  Employees are able to socialize and become good friends with the fellow employees that are attending Caterpillar University.  This creates a sense of belonging and strengthens Caterpillar as a whole.  It also builds an atmosphere where employees are proud of where they work and happy that a great company offers such a wonderful program.  The human capital and social capital at Caterpillar truly enhance and play a big part in the large amount of intellectual capital that the company has.