Strategic Management Research Journal Part 3

Assess whether Caterpillar Inc. is using the appropriate measures to verify its strategic effectiveness

Caterpillar assess its strategic performance by measuring its performance indicators against its competitors. The 2020 report reveals that Caterpillar strives to outdo its competitors based on product performance, customer service, quality, and price (Caterpillar 2021). Caterpillar also measures effectiveness based on its ability to sourcing models to meet operational needs and spend to avoid oversupply, which would lead to wastage or undersupply, which would expose Caterpillar to disruptions. Caterpillar also vets its strategic partners for financial viability, ability to adjust production levels, business continuity, and quality to reduce risks. Caterpillar considers patents and trademarks critical components of its strategic effectiveness. The above measures provide adequate evaluation for strategic evaluation since they are all round and focus on stakeholders (customers, suppliers) and business processes.

Summarize Caterpillar Inc.’s organizational structure

Caterpillar is headed by a group chairman and departmental presidents. The departments are divided functionally instead of regionally despite Caterpillar having a global presence. There are currently 8 presidents who head core divisions such as financial services, energy and transport, human resources, and legal services (Caterpillar 2022). Below the presidents are vice presidents who are also assigned functional responsibilities. 

Determine whether Caterpillar Inc.’s organizational structure is considered a traditional organizational structure or a Holacracy

Organizational structures determine the running of organizations. Structures determine the levels and forms of authority, the flow of information, and influence levels of several groups. (Rothaermel 2021) defines holacracy as a structure where influence and authority are distributed to self-organizing employee groups. In traditional organization structures, power increases hierarchically. Such a definition and the levels of power demonstrate an organization with a traditional organizational structure.

Justify why it’s important for Caterpillar Inc.’s leadership team to study and understand the company’s internal and external environments

Environmental factors determine business operations. The environment affects critical factors such as the competitors, customer and marketing activities, government and regulation, technology, social responsibility, employee and talent acquisition, and economic and financial outlook. The management needs to understand the environment to craft strategies that ensure it competes worthily. For example, in its 2020 report, Caterpillar notes that its competition on the global scale is CASE, Deere, Hitachi, Komatsu, and Volvo (Caterpillar 2021). Caterpillar notes that one of the reasons for the diversification of product offerings is to compete better on a global scale (Caterpillar 2021). Operating on a global scale requires compliance to avoid legal risks and their financial and reputational implication; management, therefore, needs intricate evaluation of compliance risks. In the internal environment, employees are considered key crafters and implementors of the organization’s strategic and sustainability missions. A good understanding of the environment allows the corporate management to make a critical decision that affects business continuity, growth and profitability, stakeholder relations, and brand perception and image. 

Evaluate Caterpillar Inc.’s competitive position and how they have responded to shifts in the external and internal environments

Caterpillar’s competitive position is strengthened by its global outlook and its diverse network of dealers (Caterpillar 2021). Caterpillar Inc was concerned about the reduced revenues, considering its impact on the organization’s financial position; and how it could affect operations. Caterpillar also noted a change in demand due to uncertainty caused by the pandemic. Caterpillar responded to changes by increasing its reliance on technology, operational efficiency to reduce costs, and diversifying product offerings to customers (Caterpillar 2021). From an internal perspective, Caterpillar had to freeze salary increases in the short term to protect working capital position in the covid era. Short-term benefits replaced the salary increases. 

Recommend strategies in operational changes to support Caterpillar’s strategic plan, future business decisions, and improvement in business performance

Caterpillar’s response to the environment should meet the three most pertinent challenges: lack of insight on changes in customer demand, lack of adequate operational efficiency, and lack of diversity in its product offerings. Caterpillar should leverage technology,big data, and business analytics to achieve more accurate demand forecasts (Iftikar & Khan 2022). This way, Caterpillar can know beforehand when demand is likely to reduce for its products and adjust its marketing and product offerings to hedge against revenue losses. Caterpillar can leverage technology, automation, artificial intelligence and adopt lean processes to increase operational efficiency (Elapanda et al.,2020). Automation increases operational accuracy. Artificial intelligence allows the organization to visualize the entirety of its processes and determine where inefficiencies occur to better plan corrective measures. Caterpillar has already taken significant strides in product offerings through investments in mergers and acquisitions. Caterpillar can reduce its reliance on machinery and focus on other areas such as construction technologies and software to support its machinery segment. 

References

Caterpillar. (2022). Company Governance : Officers. Caterpillar.Com. Retrieved 2022, from https://www.caterpillar.com/en/company/governance/officers.html

Caterpillar Inc. Annual Report 2020. (2021). Caterpillar.Com. https://reports.caterpillar.com/ar/2020_Caterpillar_Annual_Report.pdf

Iftikhar, R., & Khan, M. S. (2022). Social Media Big Data Analytics for Demand Forecasting. Research Anthology on Big Data Analytics, Architectures, and Applications, 902–920. https://doi.org/10.4018/978-1-6684-3662-2.ch042

Elapanda, S., Adinarayana Rao, U. V., & Sravan Kumar, E. (2020). Application of Artificial Intelligence in Improving Operational Efficiency in Telecom Industry. International Journal on Emerging Technologies, 11(3), 65-69.