Global Goals and Efficiency
To determine the effectiveness of Caterpillar Inc.’s strategies. It is necessary to determine the organization’s goals, which it seeks to meet, and a plan to achieve them using available resources. Due to limited resources, efficiency is determined by the company’s competitive advantage, which increases through strategic decisions (Rothaermel, 2017). The company has a global goal of doubling its engineering, energy, and transportation (ME&T) services sales to $28 billion by 2026 from our 2016 baseline. They define service as the value that is provided to customers after the purchase of equipment in order to provide an excellent customer experience. Caterpillar Inc. applies the Operating & Execution model, according to which it allocates resources to those lines of business that bring the company more growth and profit (Caterpillar’s strategy, 2022). The company’s strategy includes improving customer service and product quality and expanding the range (Caterpillar’s strategy, 2022). Because Caterpillar’s strategy is consistent with its goals, it can be considered effective.
Caterpillar Inc.’s Organizational Structure
Caterpillar thrives on a decentralized management system, so the organizational structure is considered holacracy. The company is constantly improving its personnel policy, using various developing technologies. All decisions are made through a holarchy of managed groups, not a management hierarchy. Caterpillar has five group managers led by the company’s chief executive officer. Interestingly, Caterpillar has an independent board of directors. The five senior managers play the role of overseeing the twenty-five vice managers. Those, in turn, perform various duties in the sectors of geographic regions, various facilities, service centers, and marketing regions (Finance, 2021). Thus, a Holacratic company is divided into minor divisions designed to ensure efficiency, simplicity, and speed of decision making, thereby reducing complexity. This organizational structure makes it easy for the company to achieve its goals.
Importance of Internal and External Environments
Management of Caterpillar Inc. must study and understand the internal and external environment of the company, as the company does not operate in a vacuum. Any changes in these conditions may change the company’s strategy to maintain its competitive advantage. A firm’s internal environment consists of its core competencies, resources, and capabilities, and organizations need to be aware of them to survive and succeed (Rothaermel, 2017). Caterpillar management must understand the company’s strengths to use them to meet challenges and maintain a competitive advantage.
Competitiveness of the Company
Caterpillar is one of the largest companies in its sector. Caterpillar has increased its presence in many areas in recent years. For example, Cat Financial reported 2021 sales of $2.56 billion, up $12 million from 2020 (Cat financial announces 2021 year-end results, 2022). Profit for 2021 was $505 million, up $212 million (or 72 percent) from 2020 (Cat financial announces 2021 year-end results, 2022). Perhaps this is the merit of the company’s effective management, which finds it difficult to cope with changes in the external environment. Despite more or less stable profitability and the company’s stability among competitors, Caterpillar has been hit by a massive COVID-19-related crisis.
Recommended Strategies for Operational Change
Caterpillar may try reorganizing the management structure; realign units across the organization to a different structure that will further increase productivity and reduce complexity. In addition, the company should focus on more demanded production areas or introduce a new product to expand the offer and attract more customers. That would support its strategic goal of future growth and market expansion. It will also guide its future business decisions and improve the company’s business performance while maintaining its competitive advantage.
References
Rothaermel, F. T. (2017). Strategic management. McGraw-Hill Education.
Finance. (2021). Caterpillar announces new organizational structure for mining and customer and dealer-facing divisions. afazuddin. Web.
Cat financial announces 2021 year-end results. (2022). Caterpillar.
Caterpillar’s strategy. Caterpillar. (2022).