Fortune Ranking-59[1]

Inter-brand Ranking- 72[2]

As a leader in Construction & Mining Equipment manufacturing, Caterpillar Inc. is an example
of Competitive Organization Excellence. It is gives high returns to its stakeholders but at the
same time also gives equal focus on honoring Partnerships and creating value for its People. As a
leader of 90 years, it has created a niche for itself in Fortune 500 Group. Caterpillar is not just
setting the benchmarks for others but also reviving & diversifying the whole corporate
ecosystem in with its innovative strategy.
Caterpillar has been in business since 1925. They are functional in more than 180 countries and
have more than 300 products which span across various domains like commodities (mining, oil
and gas); infrastructure (heavy construction, rail, paving, quarry and aggregate); and building
construction (residential, commercial, standby power, industrial engines and forestry). Their
major focus is oriented towards the industries that provide high long term economic values.
The company has witnessed the Great Depression, World War, Recession and much more but it
has always reinvented itself at the time of crisis by following a mix of strategies depending on
the Market Conditions & Regions. There are few effective strategies which Caterpillar Inc
usually follows.
Competitive Organizational Excellence
Caterpillar is consistently delivering the best results over the past decades surpassing all its
competitors in different markets and segments- be it Komatsu in Mining Equipment, John Deere
in Farm & Forestry Products or JCB in Constructor Segment, Caterpillar has been the front
runner on all fronts. Dedicated commitment to the stockholders forms the edifice of this tall
tower. Innovation and R&D are the bricks and concrete; and a motivated team glorifies the
aesthetics. The vision statement (Exhibit1) is the driving force for its Operational Goals, and it
has remained focused & lean so as to create maximum value for its Customers and Shareholders.

Factors Affecting the Operational Excellence

1. Organizations External EnvironmentThe global economy and local markets are never the same, but Caterpillar adapted to the
changes and delivered in the worst of the situations. Since its major clients are from the
mining and oil exploring domain, Caterpillar Inc.s major product lines are affected by the
fluctuations in Commodity Market and Crude Oil Prices.
Furthermore, continuous changes in emission norms push Caterpillar to continuously change
its technology and come up with cleaner and efficient machines.
The changing taxation policies and federal laws force it to rethink its Strategy to optimize for
revenues and profits. Prospective mergers and acquisitions are purely based on the market
sentiments and deriving value.
There are few competitors in each segment owing to the very nature of the Industry but one
need to have deep pockets and a motivated team to survive the prevailing weakness in
Commodity Markets.
As Caterpillar Inc. serves customers in 180 countries, it has a vast integrated network of
Suppliers, Manufacturers, and Dealers. Caterpillar invests in dealers to reduce the aftersales
load, and simultaneously it invests in the key suppliers to build loyalty and reduce lead time.
Caterpillar has forged MoUs with different private and public entities to form the longlasting relationships and to secure the profits.

2. Organization Structure (Exhibit 2)

Caterpillar Inc. has followed a mix of mechanistic and organic Organization design
depending on the Product & Services it offers and on the changing markets. The whole intent
is to reduce Span of Control and improve Cross-divisional participation through Liaisons
and Task Forces.
Currently, it is following the Hybrid Structure to leverage the horizontal coordination for
learning and specialization for efficiency. The organization is spearheaded by The Board of
Directors & Chairman (Exhibit 3) and is divided into four major Divisions depending on
the markets they serve-Resource Industries, Construction Industries, Engines and Corporate
Services. Each division is headed by Group President, which is subdivided into Functional
and Geographical Units led by Vice Presidents. Each Vice President leads a group of
Managing Directors who are responsible for their Specialized Sub Units.
The units in Corporate Services cut across the other divisions by providing Services in R&D,
Finance, Sales, Human Services, Legal Supply Chain, Procurement, and Logistics. This
ensures the equal participation from each division in decision making and creating value for
the stakeholders.

3. Strategy-

Caterpillars Strategy is based on two major pillars- value creations for its Customers and
maximum return for the Shareholders. It has been practicing different strategies depending
on the market and geographical regions. It can be classified as Customer-Oriented which
follows the Business Model of Seed, Grow & Harvest (Exhibit 4). It engages itself with
customers through a regular feedback mechanism. Voice of the customer is paramount, and it
believes in forging a long-lasting relationship with customers. This is important as major
source of revenue for Caterpillar Inc. is its post sales services.
Another aspect of its strategy is Differentiation- it is flexible in its structure and relies
majorly on Horizontal Coordination. It is continuously engaged in Innovation and providing
best services to its customers. It invested nearly 2 Billion USD in R&D and filed 1700
patents in 2015. It doesnt fear in taking risks and rewards creativity and innovation in all
fields. In markets, where it is coming with new products, it follows the role of an Analyzer
where it practices efficient production and tight cost control. It analyses the market and its
competitors and then takes actions. Despite three years of weak sales, it distributed high
dividends to its shareholders through Lean & Cost Effective Management and Restructuring.

4. People- Employee growth and competency development is a major factor which has resulted
in continuous high results. Regular feedback and one-on-one with Managers bring out the
best in the individuals. Few important practices are Transparency- Lucid Appraisal and Rating Mechanism
Rewards & Recognitions- Every employee is justly rewarded for his achievements, his
efforts are recognized and given due credit for it.
Employee Opinion Survey- It is the most critical survey which covers every aspect of
an individual employee. The results are not just shared with the Managers to help them
improve their workplace ecosystem and its progress is also monitored. Its forms a major
Action Item in the managers and HRs annual evaluation.

Diversity & Inclusion- Cross regional teams are formed amongst the employees.
Moreover, Heritage Walk and Sectional Outings are regularly organized to keep employees
tempo high.
Compensation- The compensation and annual hike provided by Caterpillar Inc. to their
employees are always above the industry standards.
Social Security Schemes- Numerous policies are in place to assist employees in their
social security.

Competency Development- It has signed MoUs with various reputed Universities and
Training Agencies to help employees reach their desired technical and non-technical
competency levels
Values in Action- Ethos of Caterpillar (Exhibit 5) They were one of the worlds first
companies to publish worldwide a code of conduct in 1974. Being such an old brand, one of
the major elements that comprise their legacy are their values. To sustain in the market for

about a century, the adherence of employees to the companys values is necessary. The
values caterpillar follows are:
Integrity
Commitment
Excellence
Teamwork
Sustainability

Exhibit 1: Vision, Mission and Goals of Caterpillar

Sources: www.caterpillar.com
Exhibit 2: Caterpillar Structure

Exhibit 3: Caterpillar Organogram

Exhibit 4: Caterpillar Business Model

Exhibit 5: Caterpillars Values

References:
1. http://beta.fortune.com/fortune500/caterpillar-59
2. http://interbrand.com/best-brands/best-global-brands/2015/ranking/caterpillar/
3. http://caterpillar.com