Strategic Management Research Journal Part 4

Strategic Management Research Journal Part 4

Identify Caterpillar Inc.’s Short-term and long-term goals

Caterpillar Inc’s short-term goals were to improve sales and increase operational efficacy. Sales were affected in 2020 by the COVID-19 pandemic due to a reduction of construction, mining, energy, and transport activities that reduced the demand for machinery, parts turbines, and engines which are Caterpillar’s primary product offerings. Caterpillar implemented sales and operational planning processes (S & OP), which helped align dealer activities with customer demand in response to reduced sales. SS

Additional efficiency measures were taken in austerity to protect Caterpillar’s working capital position in the wake of reduced revenues, such as freezing salary increases and reducing discretionary expenses (Caterpillar 2021). Caterpillar also adopted Lean processes to efficiently manage costs through an uncertain business environment (Ostaev et al., 2019). Caterpillar increased flexibility in the short term to meet the fluctuating demand levels over the pandemic (Caterpillar 2021). 

Long-term goals

Like other international firms, Caterpillar’s long-term goals included diversifying product offerings to customers (Verbeke & Yuan 2020). The pandemic intensified the need for global organizations to be more dynamic in their products to become more resilient in the pandemic. For example, Caterpillar launched GX excavators in China. This was a further investment towards reinforcing Caterpillar’s already significant network of independent dealers. Caterpillar also launched a new CAT GC generator offering outputs of between  33-1100 kVA, a new product line targeting retail electric power customers to compete for long-term (Caterpillar 2021). 

Evaluate how mergers and acquisitions in the last 3-5 years have contributed to Caterpillar Inc.’s performance and affected its organizational goals

Acquisitions provide organizations with platforms to actualize their strategic goals. Caterpillar’s financial statement shows that the organization has acquired other firms that enable it to compete on many fronts, diversify product offerings, and fulfill its commitment to a global customer base. Caterpillar Inc’s most notable acquisitions are those of Weir Group’s Oil and Gas division. The strategic decision was designed to diversify product offerings by strengthening the excellent exploration service. Caterpillar was strategically placed through its machinery; the group president stated that combining Caterpillar’s engine with Weir Oil and Gas pressure pumping would create additional value for the customers. Caterpillar also acquired ECM S.p.A which provides technologies for maintenance, security, control, and improvement of railway systems. 

Determine the most critical merger or acquisition that has contributed to Caterpillar’s performance and success in achieving organizational goals

The most significant acquisition was ECM spa which provides signal solutions and advanced technologies to secure control and improve railway infrastructure (Caterpillar 2021). This was a critical acquisition because it increased Caterpillar’s reputation, global presence, and product portfolio (Matarazzo et al ., 2018). The balance sheet effect of ECM spa contributed to the reported goodwill as of the end of 2019, which was $18 million. The acquisition was ratified by Caterpillar’s subsidiary Progress Rail, a global presence. The synergy between ECM spa and Progress rail ensures that Caterpillar’s international presence goes beyond Italy, where ECM spa is primarily based (Caterpillar 2021). 

Evaluate the effectiveness of Caterpillar’s operational plan for global strategies (international, multi-domestic, global-standardization, or transnational)

The acquisition supports Caterpillar’s operational plan for global strategies. Caterpillar also looked to increase focus on strengthening relationships with international dealers. In addition to Progress Rail, Perkins Engines, another subsidiary, has operations in 178 countries (Caterpillar 2021). Caterpillar has a presence in 192 countries through its dealerships and distributors. Caterpillar Northern Ireland Ltd.’s global network spreads over 109 countries, while Mak -Caterpillar distributes to 130 countries (Caterpillar 2021). Caterpillar has become the world’s leading machinery, energy, and oil machinery and technologies giant through dealerships and subsidiaries. 

References

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

Matarazzo, M., Lanzilli, G., & Resciniti, R. (2018). Acquirer’s corporate reputation in cross-border acquisitions: the moderating effect of the country image. Journal of Product & Brand Management, 27(7), 858–870. https://doi.org/10.1108/jpbm-10-2017-1640

Ostaev, G., Tihonova, A., Rylova, N., Tihonova, M., Malikova, A., Karimova, N., & Sokolova, I. (2019). Lean production management: Accounting and cost control in processing enterprises of the consumer cooperation system. Amazonia Investiga, 8(23), 830-841. Retrieved from https://amazoniainvestiga.info/index.php/amazonia/article/view/938

Verbeke, A., & Yuan, W. (2020). A Few Implications of the COVID‐19 Pandemic for International Business Strategy Research. Journal of Management Studies, 58(2), 597–601. https://doi.org/10.1111/joms.12665