Capstone [case study: Caterpillar, Inc.]
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Authors
Dietrich, Serena
Issue Date
2011
Type
Capstone
Language
en
Keywords
Business administration
Alternative Title
Abstract
Caterpillar, Inc., is a well established, publicly traded company that has adapted well to the change in demand for its products, competition, and greatly expanded target market opportunities. The company was nighly profitable during its first fifty years, but experienced a downturn in the 1980s, a period marked by a disconnect between the company's product line and pricing, and demand from its custimer base. After a "strategic makeover" initiated by Caterpillar's CEO, the company rapidly returned to profitability and has continued strong sales during the recent economic downturn.
With mature and popular iroduct lines, increasing sales, and empowered divisional leaders, Caterpillar is an industry leader with a reputation for ethical business practices, admirable sustainability conventions, and concern for its people. Still, the company faces challenges including a lack of free trade agreements with major trading partners, mounting deficit levels, the U.S. tax code, and the 2010 healthcare reform bill. The uncertainty in the U.S. tax code adds unpredictability to Caterpillar's short and long-term strategic planning, particularly in the company's plans for expansion and major new projects. Caterpillar may choose a conservative, passive approach to the tax code debate, and simply wait and see what solution is eventually reached; this approach is not compatible with expansion plans for 2012. The company could also partially hedge against a negative outcome by investing only in those projects with the largest return on investment. Caterpillar may also proceed with all of its 2012 projects, while also investing heavily in lobbying efforts and an expanded marketing campaign. This approach, characterized as "Build, Lobby, and Market," presents the most risk, but the potential positive impact to Caterpillar's Triple Bottom Line, coupled with the company's strong financial position, make it a logical recommendation.