Business Strategies of World’s Successful Companies: Caterpillar Inc.’s Winning Business Strategies

By | February 13, 08

Business Strategies of World’s Successful Companies: Caterpillar Inc.’s Winning Business Strategies

Only a small family business in 1883, but through a strong desire to provide the best value in machines, engines and support services for its customers, has grown to becoming the world’s largest manufacturer of earthmoving machinery.

Business Strategy 1: Business Is About Providing Solutions

It will be a big mistake for you as a business owner or aspiring entrepreneur to see your business in another light other than to help a group of people solve a particular problem. And what a bigger mistake it would be if you think having a business is simply an opportunity to make money.

Of course the money will come, but only if the business first and foremost sees itself as a problem solver, and therefore provides the needed solution for its target market.

When the Holt brothers set up the Stockton Wheel Company In 1883, it was to season woods in a way that would prepare them for use in the arid midlands of California and deserts of the West.

Again, the enormous success of the small family business came when in the early 1900s the Holt brothers decided to solve a huge farming problem which hampered the efficiency of farmers around Stockton, California. Their land was boggy and usually become impassable when wet.

The brothers solved this problem and allowed planters to get back thousands of acres of land that were previously considered waste when they became the first in 1904 to manufacture the first caterpillar-style tractor that was successful.

Business Strategy 2: To Be At the Top Is To Be Better Than Everyone Else

I haven’t seen a business owner who wouldn’t love to have their product being the consumer’s first choice in the market.

However, you don’t occupy this position by chance, but by consciously developing and delivering better quality product.

Having launched the caterpillar in 1904, the company went ahead to perfect it in 1906, which then became immediately highly demanded because it could work on grounds which all other machines could not.

Business Strategy 3: Your Distribution Channel Is Equally Instrumental To Your Success

Even if you have the best quality product in the market, but is not getting to the people who really need it, you will definitely be short of realizing your sales potential. This is why you must give adequate attention to how your products are distributed.

What is your distribution strategy? Is it effective? Does it need a change? And how can you improve and get the best from it? These are some questions you may need to answer to ensure your product distribution does not undermine your business success.

Caterpillar’s distribution strategy in the 1920s was to open dealership both locally and internationally. And to ensure the dealers were responsive to customers’ needs, caterpillar demanded that dealers keep large inventory of spare parts and employ a large service personnel.

Business Strategy 4: Make Sure To Legally Register Your Inventions

In the tough and competitive business world, it is not uncommon to have certain companies knowingly or unknowingly duplicating others’ creations or inventions and thereby depriving them of huge revenue continuously. To protect your inventions against infringement and be able to demand compensation when your rights have been violated, you must quickly register them with the patent/copyright office. Failure to do this might even cause you to lose ownership of the invention if someone else runs ahead to register it before you.

In 1978, Goodyear Tire & Rubber Company started selling a radial earthmoving tire that had a close similarity with Caterpillar’s beadless-tire technology. This product was high in demand because it was more durable and cost consumers less than the one before it.

Fortunately, because the caterpillar company had secured the patent to it’s beadless-tire technology, it was able to claim damages against Goodyear Tire & Rubber Company in 1981 and ensured it got royalties whenever Goodyear produces it.

Business Strategy 5: Seek Ways to Produce At the Lowest Cost Possible

In order to remain competitive and profitable, you must watch your cost of production and operation. Producing and operating at a lower cost without affecting the desired quality of your products will enable you pass on good value to your customers at a low price, and also move up your profit margin.

In an attempt to survive the recession of 1982 which hit Caterpillar seriously hard, causing sales to drop to $6.5 billion that year, Caterpillar made a key strategic decision in February of 1985. The company moved its production and purchasing functions overseas – Scotland or Japan – to tap in on the high value of the dollar overseas. This business strategy, no doubt was one of the things that brought the company back to profitability.

Business Strategy 6: Procuring Facilities That Can Increase Your Efficiency Will Surely Pay Off

Time is as important as any other resource needed to keep your business going. This is why smart and successful business owners pay particular attention to the time used in accomplishing a given task. And to maintain efficiency in their business they continually purchase tools and machinery that can enable them to perform more speedily – they see any money spent on acquiring modern facilities as investment rather than normal expenditure.

Another key strategic decision Caterpillar made in the aftermath of the 1982 recession was to pursue a $600 million factory-modernization program to automate as many manufacturing processes as it could so as to be highly efficient and be able to compete effectively in the market place, especially against the highly automated and efficient Komatsu.

When the project was completed in 1993, there was a remarkable improvement in the company’s work processes which also led to great increase in the company’s profit by 1994.

Business Strategy 7: How Many New Products Did You Launch Last Year?

Without doubt, a business strategy of successful companies is to ensure continual new product development and launching. Having several products in the market gives you multiple revenue sources.

Between 1991 and 1994 alone, Caterpillar Inc. increased its new product introductions from 24 to 53, leading to record sales of $11.62 billion in 1993 with record profits of $652 million, while in the following year sales was of $14.33 billion and profit $955 million on sales.


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