Caterpillar Inc. (Caterpillar) is a construction and mining equipment manufacturer and provider of associated services with a worldwide reputation. It has universal organizational goals applicable to both domestic and international markets and uses the targeted approach to merger and acquisition practice (M&A). In this regard, Caterpillar serves as a perfect example of how contemporary companies should conduct business to withstand competition and achieve worldwide renown and prosperity.
Caterpillar’s Organizational Goals
Caterpillar Inc has a set of transparent, clearly defined short-term and long-term organizational goals. The company’s short-term goals include service growth, offerings expansion, operational excellence, and sustainability (Caterpillar, n.d.). Caterpillar defines services as the value, insights, and solutions it provides its customers. Through services, the company reduces customers’ owning and operating costs and delivers revenue to shareholders (Caterpillar, n.d.). In this context, offerings expansion implies attending to the growing spectrum of customer needs. Apart from that, the company polishes its operating cycle to adhere to safety and quality standards. Finally, at every step, Caterpillar attempts to implement an environmental-friendly framework to meet climate-related objectives. These short-term goals lead to a long-term goal of profitable growth, which will allow future investments in products, services, and the company as a whole.
M&A Impact on Caterpillar’s Performance
Being born of a merger, Caterpillar has a long history of acquiring other companies. In total, it has acquired 38 companies, 4 of which were acquired in the last five years (Caterpillar M&A summary, n.d.). By doing so, the company was mainly able to improve its service diversification and growth goals through increased vertical integration. It addresses contracting friction through the connection of companies that previously worked in associated fields, allowing them to focus on product innovation (Agarwal & Jung, 2020). Undoubtedly, vertical integration does increase costs; however, it also provides Caterpillar with greater control over product reliability and functionality.
Caterpillar’s Most Critical M&A
The most critical acquisition by Caterpillar is the acquisition of Bycyrus International Inc. According to Mergr, it has been Caterpillar’s largest acquisition in the company’s history (Caterpillar acquires Bucyrus, n.d.). Bucyrus International used to be a manufacturer of large-scale excavation equipment for surface-mining purposes and other earth-moving operations. Its acquisition was motivated mainly by potential growth and business opportunities (Welling & Gabelli, 2019). The combination of the Bucyrus’ responsiveness and speed with the process execution and discipline of Caterpillar resulted in a deal with more benefits and value compared to either company working separately. For instance, Caterpillar’s purchasing capabilities, global manufacturing, and supply chain allow for lower owning and operating costs and improved service quality (Caterpillar, n.d.). Among other benefits are higher equipment and aftermarket parts sales and support, greater reliability, and lower product cost due to the use of Caterpillar components and engines in Bucyrus products.
Caterpillar’s Operational Plan and Global Strategies
Caterpillar’s multi-country strategy emphasizes building the company’s brand name in foreign markets. For instance, according to Goods et al. (2021), in 2019, “Caterpillar had a workforce of 102,300, 101 manufacturing plants, 165 dealers selling equipment in 190 countries, and sales revenue of over us$55b” (p. 126). In this regard, Caterpillar’s short-term objectives can be considered greatly efficient in increasing the company’s global presence. Focusing on product and service quality and diversification gives the company a competitive edge while positively contributing to the brand’s image.
The adherence to universal principles in its short- and long-term goals and understanding of market structure principles allowed Caterpillar to achieve its current prosperous state. The company utilizes transparent short-term goals to achieve long-term profitable growth. It invests in vertical market integration, acquiring respective companies in the process. Since its goals are universal, the company’s brand is accepted and respected worldwide, proving Caterpillar’s business decisions’ efficiency.
Agarwal, A., & Jung, A. (2020). The long and successful history of nascent acquisitions suggests caution in rethinking antitrust enforcement. SSRN. Web.
Caterpillar. (n.d.). Caterpillar’s Strategy. Web.
Caterpillar acquires Bucyrus International. (n.d.). Mergr. Web.
Caterpillar mergers and acquisitions summary. (n.d.). Mergr. Web.
Goods, C., Herod, A., Ellem, B., & Rainnie, A. (2021). Warring Brothers: Constructing Komatsu’s and Caterpillar’s Globalization. Tempo Social, 33, 123-142. Web.
Welling, K. & Gabelli, M. (2019). Merger masters: Tales of the arbitrage. Columbia University Press.