Caterpillars International Strategy

cats International dodging qats International StrategyThe domain of outside(a) business theory contains an overpowering array of perspectives and dimensions. International business (IB) definitions and assumptions ar as diverse and question adequate to(p) as their sources. Approaches to IB defecate constructed the fundamental perspectives as universe spheric or giving medicational, further the content of these argonas ar immense. The expatiatement of the world-wide approach, or more correctly labelled as large (Rugman and Hodgetts 2000. pp. 24), has new-madely evolved in the 1990s as a result of the mixed transcriptional orientated approaches, contrastingly labelled as micro. This preaching takes the form of analysing quat in the world-wide business atomic number 18na by highlighting anaesthetises and theories that relate initially to the wider macro environs, then specifically towards cat-o-nine-tails as an organisation.The selected definition of IB for th e basis of this discussion has been taken from an opening statement. This universe transactions taking place crossways national boarders (Rugman and Hodgetts 2000 pp. 5). This ingenuous statement is considered adequate to incorporate its entirety, as yet the intuition of the multi dimensional perspectives and their interrelatedness removes to be comprehended. The aim of this discussion is to formulate the planetary system of kat by using its context as a platform for applying germane(predicate) literature. quat historyFor clarity suits it is considered indispensable to offer a brief introduction to hombre. They have been established in the construction equipment manucircumstanceuring for over 75 years and recorded $20.45 one thousand thousand turnover in 2001 ( one-year report 2001). Their main increases atomic number 18 divided as machinery with 58% of sales, engines with 33%, and financial products with 9%. The mission statement of hombre is to be the global l eader in client value this all the way indicates the attention to a high quality of attend as macrocosm their competitive edge. This service is integrated by a sophisticated net of 1840 locations across all six continents, of these computerized tomography has foreign direct enthronement (FDI) in 255 locations. The corporate dodge for the future is to bolster their leadership in the commercialise through initiatives labelled by Data monitor (2003) and the annual report (2001) as universe profitable growth, championing ceaseless quality improvement, crisply reducing address, and form an integrated e-business. In attempting to understand the reality of cat-o-nine-tailss outline, theories atomic number 18 applied to offer explanations behind the corporate publishings.The life-sustaining success factors associated with Caterpillar are primarily their h3 stake this is then supported by interlocking and service capabilities that represent reliableness and consistency. Caterpillar is overly renowned for product innovation they have continually innovated which has contri scarcelyed to the brand and reputation. The multinational market responds to authoritative brand vales because the reputation of the application requires trust and relationships.The macro factors present are unlimited in the contemporary dynamic world moreover the classic perspectives are grammatical constructiond as shapemental, sparing, technological and social. The elements of these perspectives are selected according to the grandeur for Caterpillar t herefore they are discussed in this context with reference to germane(predicate) literature.The political climate is continuously being genuine and negotiated amongst the nationalities that exercise power. The current instabilities are dominated by the differences in opinion over the heaven conflict and the Iraqi situation. As Caterpillar is active across the globe, its trading operations would ask to be sensitive ly applied so that the local governments are appreciated. The situation of Caterpillar is slightly precarious due to the fact that in political terms, the the Statesns are seen as the bullying nation, which is a mentality that conceptionlly Caterpillar would like to distance themselves from. On the former(a) hand, the American political objective may provide an opportunity as reconstruction and early(a) Caterpillar products may set more or less an increase in demand as a result of the speculated war (eg. tank engines and construction products). This circumstance for Caterpillar represents a relations nightmare because in the billet country it would claim to report support in line with the public opinion, and in the legions countries it may arrive at from addressing the local perspective. E.g. the activities in China would be alter as to address the sensitive issues to ensure sustainability, rather than inhibiting ill feelings from enforcing the American way. Global politic al situations are important to Caterpillar because they could gain first mover advantage by moving into new-fashionedly opened markets much(prenominal) as China.The extent that a region is privatised or Lasses-faire is of interest to Caterpillar because it would aid the process of negotiating a relationship. It would be skillful for Caterpillar to hack out management to both foreign governments or foreign organisations.IB massively influences the macroeconomic environment. The recent conception is that IB is predominately concentrated around three regions rather than integrating the world. This can be seen through the development of trade blocs that raises IB amongst its members. The most operative query into this economic environment highlights the deuce-ace perspective as being dominant. The triad perspective as explained by Rugman (2001) states that the world economy and FDI is base around Europe, America and Japan, this overly extends to FDI clusters, to wit Easte rn Europe, Latin America and the Pacific rim, that are supported by the dominant triad member. The maturation of this economic environment has matured into a three way economic power base that contributes pregnantly to the adopted internationalist system. The decisions drawn from Rugmans (2001) research appear to dismiss the argument of a global strategy because an organisation like Caterpillar would only have to accommodate the triad perspectives as opposed to incorporating worldwide responsiveness.The analysis of the macroeconomic environment also includes a consideration of the currency markets, and in particular the value of the US buck against Caterpillars large foreign investments. Caterpillars largest FDI is in Japan accordingly the continual decrease in the economy influenced the strategic decisiveness to operate financially in the Japanese market kinda of exposing themselves to exchange rate risk. In suppositious terms this strategic termination is known as curre ncy diversification (Rugman Hogetts 2000 pp. 203). On the other hand Caterpillar has a favourable wedge from the sales in other currencies, primarily trading with Euros and the Australian sawbuck against the weaker US Dollar.The macro social issues relevant to Caterpillar are set as originating from the animosity felt by the east towards the west. These issues include the apology of the east in adopting the western way, this then extends into the business sector where an international business strategy involves a high degree of managing through different social contexts. This is supported by Gesteland (1999 pp. 27) who demonstrates the concept of deal first or relationship first. A relevant example of this in terms of Caterpillar is highlighted by Peppas (2002. pp. 52), which suggests that differences were free-base in terms of attitude towards a tag of ethics. Caterpillar places a heavy bias towards its encrypt of conduct, but is this sufficient to address social issues i n international business. At present these publications are non enough, as pointed out by Mokhiber and Weissman (2002 pp. 12). This opinion labelled Caterpillar as a bad apple because its D-9 bulldozer is used by Israeli military to pass on out its programme of home destruction, this is flat in uniform with the code of conduct (2000 pp. 2) which states that it uses our strength and resources to improve, and in some cases rebuild, the lives of our neighbours.a nonher(prenominal) important social issue involves the rate of investment into the developing world. The recent trend has been to transfer manufacturing to developing countries, which has stimulated construction and booming economies. This suggests that the international market place is dynamic and evolving, which should influence Caterpillar to adapt in emerging markets and control in mature ones. This idea is also interrelated with the triad perspective, it could be advised that Caterpillar enter the clusters with triad a lter strategies, then get ahead segmented alterations in response to market conditions. With this idea incorporated at heart the strategy, it would combine the economies of scale benefits through behind the scenes standardisation, and benefit from local responsiveness by empowering each of the triad bases.The technological environment is particularly significant for Caterpillar to consider. Not only does Caterpillar have to continually improve the current products but it would also be right to innovate new products to overcome original construction problems. This is highlighting the need to be more advanced than the challenger, when Caterpillar enters a market it must(prenominal)(prenominal) ensure that the product passs are compatible with the geological and business needs. For example track driven vehicles are more appropriate than tyres for workings on loose sand. Caterpillar must also undertake a immense cod of technological developments in order to identify issues su ch(prenominal) as alternative power, through to advantages identified in the logistical operation. A recent technological innovation has been the Advanced Combustion Emission Reduction engine room (ACERT) in short this is a more environmentally friendly engine. on with product development and product innovation, Caterpillar must also be aware of opportunities to diversify. The most recent example of this is where Caterpillar introduced financial products to encourage a struggling economy to buy Caterpillar products.Caterpillars international strategy operates within an environment that is affected by the macro factors. These factors are treasure in a global context and are normally contumacious thus their management involves negotiations rather than influencing and controlling. The strategic decisions that affect the effectiveness of Caterpillar are mainly catered towards the micro train factors. Meaning the micro level factors are at work within wider macro issues. The disc ussion here extends to the most important micro factors that Caterpillar must consider when structuring their international strategy. The factors in brief are controversy, structure and logistics, polish, and merchandise. Each of these factors is discussed using relevant theories in the context of Caterpillar and its environment.Competition within the construction equipment industry (CEI) can be described using the industry life rhythm method and the five forces analysis (Porter 1985). The CEI is arguably beginning to mature internationally because the competition has been shaken down to leave only 27 organisations that are considered study competitors across all product areas (Datamontior 2003 pp. 13). This information excludes the financial products because these are for the most part dependent on the machines and engines. Due to the maturing nature of the industry, it implies that the customers will be buy out customers as opposed to new. This increases the value of the re lationship and importance of having a h3 brand. Caterpillars rig is one of leadership through product quality and support help this directly builds the good perception of Caterpillar in the minds of the customers.The components of the five forces clay sculpture (Porter 1985) illustrate the competitive environment of the CEI. The rivalry amongst existing firms reflects the increasingly internationalised nature of the market. The basis of competition is held in the ability to offer a great range of equipment, and build confidence through meeting changing needs. The strategy employed by Caterpillar involves creating extra value by offering an extensive range with a accompaniment service that provides an excuse for reward prices. The main competitors for the heavy equipment market include Komatsu Ltd, Kubota Corporation and Mitsubishi Heavy Industries Ltd. These are the most hefty competitors whose strategy also includes creating value and charging premium prices. It is illustri ous that two triad areas, namely Japan and the US, predominantly contest the piece of music of this market. Although it is conceded that European competitors are significant in the industries architecture. To some extent, the internationalisation of the industry has provided a situation that can arguably be labelled as an oligopoly (Grant 2002 pp. 71), meaning there are a few organisations that are powerful enough to be deemed sustainable. once again this is more evidence that the industry is maturing, therefrom influencing Caterpillars strategic decisions.The other main product of Caterpillar is their engine. The main competitors within this industry are identified, amongst others, as Rolls Royce, Ford Motor Company and Hino Motors Ltd. These competitors are of similar size and employ a strategy of offering reliability and supporting services. still it is noted that Ford and Hino Motors do cut costs and charge cheaper prices, but they still maintain the view of being the leader s. Again the geographic base of these organisations supports the triad perspective introduced by Rugman (2001). The basis of competition is the development of quality in terms of reliability and consistency it is also an advantageous position to offer a wide range in products. Caterpillar currently offers around twenty different kinds of engine (Caterpillar crossroad Line 2002), there are also many variances that can be offered within these product ranges. Caterpillar is also recognised for its detailed service an example of this is that they had temporary power established at ground null hours after the September 11 events.Rugman (2001) demonstrates organisational structure theory as a series of alternative options. This approach offers a clear indication of strategies available, however it is implied that the alternatives are one-way avenues, when in fact a holistic view of organisational structure would include the facility of a hybrid approach. A significant limitation to Rugm ans (2001) approach is that it failed to recognise the decision makers predisposition. Whether an organisation is categorised as either ethnocentric, polycentric, regiocentric, or geocentric (Pearlmutter 2001, Rugman 2001) would influence the extent to which it could execute a structure. Can a alone integrated international electronic network structure be effective if extreme ethnocentric directors excessively control it? The volume Caterpillars board of directors are American, but the boards predisposition is known only by evidence in the companys structure. Caterpillars operations include a dealer network that is claimed to be an important competitive advantage, the dealer network comprises of relationships with local outlets totally integrated with private locations involving large amounts of FDI. This is arguably grouped as a transnational network structure, but it obviously operates to an extent with governance from the home country. To maximise efficiencies and quality of service then the structure may need to consider the triad perspective mentioned earlier. The strategy could involve different approaches relating to sensitivity, but also incorporate the logistical economies of scale and scope.In addition to the transnational network structure, Caterpillar is pursuing alliances, most recently with Ford. The aim for this partnership is to develop supply chain software ground on their experience in the vehicle parts market. The American perspective dominates this strategic decision concerning the structure of Caterpillar therefore if the alliance proves profitable then they are likely to integrate it universally. However this perspective may not be profitable in other cultures, which suggests that different locations are equipped to go down what to integrate and how.Current research by Miller and OLeary (2002) evaluated the performance of Caterpillar factories. The conclusions supported the argument of common manufacturing recommendations, these be ing the trend of computerisation, multi skilling, and the cost increase of an sudden approach. This new factory architecture represents the absence of control, this may be beneficial in the developed American labour market, but this would not be advisable in bureaucratic cultures such as the Chinese. Further American research is provided by Rao, Scheller-wolf, and Tayur (2000), here they intended to make recommendations for the development of a rapid response supply chain for the compact equipment. These recommendations included priming theories such as the network theory, inventory theory and simulation theory, to reason their novel features like the duel nodes of supply, which is to benefit dealer replenishment and customer demand in terms of service speed. The point stressed from such articles is that they are only valid to the specific environment, in terms of structuring internationally then these issues would need to be addressed in each geographical location, and this woul d be unique in each case. on that pointfore the construction of an international structure is dependent on the location it chooses.Internally Caterpillar has developed a universal approach of how to operate. They have labelled this 6 Sigma. 6 Sigma is about success about being better than weve ever been. Its about getting there faster (www.caterpillar.com/about), the fact that Caterpillar implement this universally suggests that there is an ethnocentric orientation towards the international management.The micro factor of international culture is a consideration that involves negotiation in order for an organisation to be efficient. Organisational culture on the international stage can be viewed as an extension from the four primary attitudes outlined earlier (Perlmutter 2001, Rugman 2001), these attitudes govern the perceptions of how a company organises its activities. Rugmans (2001) ideas outline the important issues of culture as being language, religion, values and attitudes, manners and customs, material elements, aesthetics, education and social institutions. Although the attitudes of the organisations decision makers are catered for, it is felt that this is the starting point when evaluating an international culture. The unconscious attitude of decision makers will directly affect the extent to which they can implement a strategy such as polycentric. For a pure international strategy, not only do the cultural differences need to be understood, but also the drivers that influence the culture. This opinion is supported by research undertaken by Gulbro and Herbig (1999), this conclusion states that firms must be better prepared, must improve their knowledge of the other side and its culture. This implies that cultural management is a process of negotiations rather than the encouragement of a one best way approach. Gulbro and Herbig (1999) emphasised the need for organisations to assume from studies that show how different cultures are, therefore this wo uld provide the resources to negotiate effectively the desired business activities. Research into Australian construction companies in Malaysia by McGrath-Champ and Carter (2001 pp. 20) found that HR policies and corporate culture are used as selling devices, not solely for management strategy. The theory formed from this research highlighted the fact that IB in developing economies needs to provide better insights into the role of the house servant market. It is argued that international business is not simply driven by cost or quality but the success the transactions it has within a host country (McGrath-Champ and Carter 2001 pp.). Caterpillars use of internal and external marketing attempts to communicate culturally consistent kernels. Caterpillar regularly produces documents and articles such as the code of conduct, corporate support programs, a magazine, and network and product information. This is evidence that Caterpillar attempts to interact with stakeholders such as the communities, customers, dealers and employees.Another suggestion that Caterpillar manages culture effectively is the resolution of the six-year strike with the United Auto Workers (UAW). However it must be highlighted that it wasnt effective management that created the dispute, or dragged it along for six years, but since its settlement Caterpillar has recorded increasing profits year on year. However an argued reason for this by chance the weak dollar and h3 growth abroad, therefore these markets are in earlier in their life cycles which would suggests that problems may hoist in the future. Hopefully experience shall instruct Caterpillar to observe the problems at an early stage. Ba Banutu-Gomez (2002) provides an indication of how to manage culture in developing countries. His recommendation implies that the management of international culture requires a h3 commitment to a high standard of conduct. Managing in this kind of situation requires being able to design and implement a bottom up system, which involves a bipartite exchange. (Ba Banutu-Gomez 2002 pp.39).Similar to Rugmans (2001) highlighted issues Hofstede (1991) identified four dimensions of work related cultural differences, namely power distance, uncertainty avoidance, individualismcollectivism, and masculinityfemininity. This research is an extensive piece based on questionnaires it provides validity in terms of its thoroughness and its aim is to help managers to identify how to create global competitiveness from diversity (Hoeklin 1994).Caterpillars cultural situation involves the problematic issue of combining the culturally diverse network into an efficient information sharing system. The documentation to signify cultural attention is at a thin level the vast majority of the corporate marketing is of a in truth directive nature. For example we are placing renewed emphasis on worthy a continual learning organisation at Caterpillar, using 6 sigma as the way we work (Annual Report 2001 pp. 5) . The 6 sigma itself is a continuous improvement programme designed by Americans to implement internationally, this obviously does not recognise the needs to negotiate and exchange for maximum productivity and innovation, instead of enforcing a single way.The microenvironment involving marketing tactics is fairly consistent end-to-end its international markets. The products that are offered are broadly the same apart from simple language adaptations and alike. The important international marketing issue is the content of the supporting service this would need to communicate in a way that is consistent with local perceptions. The constant problem for Caterpillar is learning what to communicate and where, therefore it is obvious that it should adopt a polycentric approach as identified earlier. For implementing such a strategy techniques such as Yip and Masdens (1996) Global cast management have been proclaimed. Benefits associated with this technique includeEstablishing links acros s regions that carry over time to build institutional relationshipsGood service confidential information to reputable benefits that can be transferred to new strategic regions or industries. (Yip and Marsden 1996 pp. 38)There is evidence of this within Caterpillars strategy because firstly, they produce supplier communications guidelines. This maybe against cultural theory but nevertheless they are an attempt to establish a link within regions. The strength of the Caterpillar brand has been apply by extending it to products associated with the core brand values, such as heavy footwear, garb and watches. This strategy is confirmed with Chernatory, Halliburton, Bernath (1995 pp.20), where their approach argued that international branding should be based on the core essence of the brand, in terms of its added values and positioning. However it must be recognised that the associated values may need to be refined when marketing in more sensitive markets.With the product being largely standardised and economies of scale being utilised, then the marketing and operate operations need only to appreciate the local values, instead of marketing a differentiated product. Caterpillar largely promotes a consistent message of reliability, expertise and value for money these are the underlying assumptions that are committed to the Caterpillar brand. Internal marketing could involve more negotiations through arrest local cultures, although this may unconsciously happen it does not get promoted through the documentation.In summary Caterpillars international strategy has evolved within a market environment that demands reliability and dynamic customer requirements. Therefore their international strategy is a unique response that matches the capabilities with customer demands. The current direction of the strategy is to recalibrate our focus (Annual Report 2001 pp.2), meaning to concentrate on successful products and either retain or achieve leadership. Caterpillar does, and should continue to innovate in terms of products and logistics to maintain opportunities for leadership. The brand values provide a critical advantage in supporting the services because the interrelated nature of this allows prosperity. Caterpillars brand management and marketing internationally is effective in communicating the values, but it has been hinted here that the fundamental values may be ideal for the American market, but not necessarily maximising in foreign markets. Caterpillars logistical network involves vast amounts of investment of money and time therefore it poses as a significant barrier to entry. The critical aspects of this network are the working relationships. Caterpillar manages these by documenting the ideal personality of a networked company. However, it is concluded that Caterpillar has ethnocentric characteristics, which may be inefficient by suppressing the domestic firms. The structural design of Caterpillar resembles that of a transnational network co mpany, this network covers a large proportion of the globe, but the development of the structure extends from a triad perspective due to early investments in Japan and Europe. A condemnation of this suggestion is that Caterpillar have sufficient power to influence networked companies, therefore it could be argued that there is evidence so suggest that it undertakes a global area structure. This is based on the opinion that they have a bureaucratic nature, which works against the network structure fundamentals.The competitive forces of the environment, namely the need for reliability and support service, would suggest that the network structure is more appropriate. Caterpillars ability to develop and produce products is a major advantage, but to create total ascendance of the construction industry, their logistical network would need continual maintenance. The resulting recommendation is to encourage an emergent approach that encourages communication and business development within the network.