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Caterpillar Compititor

Caterpillar is the world's largest manufacturer of construction equipment. It has strong competitive advantages including its reputation for high quality and safety, massive scale and global presence, investments in research and development, and strong dealer distribution network. However, it also faces disadvantages such as high dependence on heavy machinery sales, low product diversification, debt obligations, and inventory turnover issues. Caterpillar needs to look beyond heavy equipment into new product domains to address these disadvantages and challenges from growing competition.

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A.Rahman Salah
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199 views2 pages

Caterpillar Compititor

Caterpillar is the world's largest manufacturer of construction equipment. It has strong competitive advantages including its reputation for high quality and safety, massive scale and global presence, investments in research and development, and strong dealer distribution network. However, it also faces disadvantages such as high dependence on heavy machinery sales, low product diversification, debt obligations, and inventory turnover issues. Caterpillar needs to look beyond heavy equipment into new product domains to address these disadvantages and challenges from growing competition.

Uploaded by

A.Rahman Salah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Caterpillar’s competitive advantages


and disadvantages

Caterpillar Inc. is an American company that is engaged in the design, development,


manufacture, marketing, and sales of machinery, engines, and insurance to customers. It was
founded by C.L.Best in April 1925 and is currently headquartered in Deerfield, Illinois. It has
become the world’s largest manufacturer of construction equipment. It is also involved in the
marketing and licensing of a line of clothing and shoes under its name. Let us discuss
Caterpillar’s competitive advantages and disadvantages

Caterpillar’s competitive advantages include its strong dealer distribution network; its


significant investment in research and development which resulted in its high potential
in digitization and automation; its massive scale and volume which is denoted by its
presence in many countries in the world; and its reputation for high quality and safety.
Its disadvantages include its debt obligations, its high dependence on heavy equipment
and low diversification, and its decreasing revenue and eventually, decreasing profits.
Read on to find a detailed analysis of the same.

Competitive Advantages of Caterpillar Inc.

1. Reputation for high quality and safety standards: Caterpillar is well known for its
high-quality products all over the world. The safety standards it follows in its work
sites as well as the inclusion of various safety features in its products have helped
Caterpillar build a strong brand image in this direction.
2. Massive scale and volume: Caterpillar is a huge company, employing a huge
number of people in various countries across the world. It also holds large-scale
assets of high value which can be used to improve business growth in the future.
3. Investment in research and development: Caterpillar invests in research and
development quite as much as many others in this category and this would help the
company further its potential in the fields of industrial automation and digitization
which are very likely to make a significant impact on the growth of businesses in
almost every field, due to the recent developments as part of Industry 4.0.
4. Strong dealer distribution network: Owing to its years of presence in the
construction and mining equipment business, it has managed to build a strong
distribution network of dealers in over 180 countries across the world. This would
help the company increase its revenue due to rising urbanization (especially in Asia),
which requires the use of heavy machinery that Caterpillar designs and manufactures.
Competitive disadvantages of Caterpillar Inc.

1. High dependence on heavy machinery: Most of Caterpillar’s revenue comes from


its construction and mining machinery sales, which are mostly business-to-business
(B2B) deals and not business-to-consumer (B2C) ones. This makes it difficult for the
company to get new prospects in the form of customers and it largely depends on its
old clients who have been placing orders with Caterpillar for decades. And, the loss of
a few such customers greatly impacts the total revenue collected by the company.
2. Low diversification of its products: In addition to the points covered in the previous
paragraph, the verticals in which Caterpillar sells products are very few, which include
bulldozers, excavators, engines, and other agriculture and forestry-related equipment.
There are many other players in the market, such as Komatsu, John Deere, etc., that
supply these products along with many others. 
3. Debt obligations: In general, for any organization or corporation, decreasing
revenue, which causes a decrease in profits, leads to mounting debts. Many a time,
this works against the company and sometimes may lead to drastic consequences if
the strategy is not changed accordingly. This is one of the limitations that Caterpillar
also faces due to ambiguity arising from trade war escalations, economic crises, etc.
4. Inventory turnover issues: The reduction in the number of takers of Caterpillar’s
equipment leads to the stocking up of inventory, which results in the escalation of
storage costs. Not only does the revenue decrease, but also the expenditure increases
in such cases. This is another problem that affects most manufacturers of heavy
equipment and Caterpillar is no exception.
Conclusion

Caterpillar is one of the world’s major suppliers of construction and mining equipment, and
agriculture and forestry-related heavy machinery, but the competition has grown much in
these sectors by this century. Although Caterpillar has been one of the oldest such companies
and commands much respect and trust among its customers, it is high time that it starts
looking for other product domains and tries to develop novel products. 

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