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Caterpillar is using the appropriate measures to verify its strategic effectiveness as evidenced by its continued position as the global leading producer of heavy equipment. With revenues of over fifty billion in 2019 and a corporate commitment to evolution to green concepts within its industry footprint the future projects to be bright. Caterpillar is focused on providing products that are needed around the globe for its construction partners, whether for private businesses or for governments. Their emphasis on maintaining their competitive advantage centered through economies of scale, product quality, ability to leverage transportation network and inventory advantages will further strengthen their market position moving forward.
The organizational structure of Caterpillar Inc. is difficult to describe since it is a huge company with diversified product offerings from heavy equipment used for mining and construction to large engines to finance and insurance holdings. According to www.bonestrooblog.wordpress.com, “Caterpillar mainly operates in three product segments, Construction Industries, Resource Industries, and Energy and Transportation Industries” and also has a Financial Products segment. It appears that Caterpillar utilizes a matrix organization structure which is a combination of functional organization structure and divisional organization structure. The strength of the matrix organization structure is efficiency and effectiveness in a turbulent industry with a multinational presence. A matrix organization structure creates a scenario where it is common to have two bosses with one being functional and the other being of a project orientation. Matrix organizational flow favors a twelve-member Board of Directors comprised of the leaders of many independent industry leaders. A chief executive officer manages five division presidents providing direction to vice presidents who direct functional managers and project managers who lead a multi-dimensional staff to form a decentralized team. The company changed organizational structures in 2015 to become more responsive to customers.
Wikipedia defines Holacracy as “a method of decentralized management and organizational governance, which claims to distribute authority and decision-making through a holarchy of self-organizing teams rather than being vested in a management hierarchy.” Since Caterpillar Inc. embraces a decentralized organization structure it would be considered to be an Holacracy.
It is imperative for Caterpillar Inc.’s leadership team to understand internal and external environments to navigate a turbulent industry and respond with maximum efficiency and effectiveness so resources can be shifted to capitalize on opportunities and address threats. Internally, having the ability to add or shelve projects quickly in response to shifting priorities is an advantage of the team structure at Caterpillar. The external business environment is also important for Caterpillar since adjustments for economic conditions and other factors beyond the control of the company can have a detrimental impact on profitability if timely adjustments are not made.
Caterpillar Inc. operates from a competitive position of strength in a turbulent industry. Being a global company with a wide range of diversified products creates versatility for Caterpillar Inc. and assures it of maintaining a position of dominance in its markets due to possessing a competitive advantage created by economies of scale, an advanced inventory and distribution network, a strong supply network, and a loyal customer base built over ninety years of operation.
Caterpillar Inc. operates from a competitive position of strength in a turbulent industry. Being a global company with a wide range of diversified products creates versatility for Caterpillar Inc. and assures it of maintaining a position of dominance in its markets due to possessing a competitive advantage created by economies of scale, an advanced inventory and distribution network, a strong supply network, and a loyal customer base built over ninety years of operation.
Caterpillar Inc. has experienced unprecedented success in an extremely competitive industry by allocating assets to its divisions with the highest profitability potential. By analyzing internal and external environments to determine areas of greatest growth potential can allow the company to predict future opportunities and buy down the risk of threats to its dominant position. Continued strategic planning to enable an increase in research and development to continue to lead the industry in product differentiation will bode well for continued success. A laser focus on increasing affiliations in Asia, and specifically China and India, will create the most potential since these countries show the greatest growth potential supported by government sponsored construction projects.
