2. Focus on
Construction
Industries
The world’s leading manufacturer of
construction & mining equipment, diesel
and natural gas engines, industrial gas
turbines and diesel-electric locomotives.
Construction equipment business is categorized into 3 divisions:
• Earth moving divisions
• Excavation divisions
• Building construction products
Source : Caterpillar Company Published Documents
5. Construction Equipment – Opportunity Ahead
• The construction equipment market is projected to grow at a
CAGR of 4.8%, during 2019 to 2026 from an estimated USD
128.46 billion in 2018 to USD 186.42 billion by 2026.
• The competition is intensify from Local emerging Market
Competitors
• Shift in demand growth to Asia Oceania
Source : Fortune Business Insights
6. Caterpillars Target
1. Maintain the leadership
title in construction
equipment market and
grow at a CAGR of 7%
(above industry growth
of 4.8%)
2. Compete with Local
merging market
competitors and
maintain leadership in
Asia Oceania region
3. Maximize revenue from
Asia Oceania region
Caterpillars Current
Revenue by Geographic Region
7. Caterpillars Competitive Advantage
The company derives its competitive strength from its
• Established brand name
• Dominant market position
• Portfolio of profitable products
• Geographical reach
• Strong dealer network & logistics
8. Change in Market Driver Dynamics
What Caterpillar should do differently?
10. Prevent Surprises -Risk Identification & Mitigation Plan
Caterpillar Risks
A. MACROECONOMIC RISKS
A1. Sensitive to global and regional economical conditions
A2.Fluctuations in demand due to commodity price changes
A3. Changes in government monetary or fiscal policies
B. OPERATIONAL RISKS
B1. Pressure on pricing due to competitive environment
B2. Unexpected events could increase cost of doing business (SOC)
B3. Increased IT threats pose risk to product and services
C. FINANCIAL RISKS
C1. Disruption in financial market could affect liquidity in value chain
C2. Failure to maintain credit rating -> increase borrowing cost (SOC)
D. LEGAL & REGULATORY RISKS
D1. Stricter environmental laws levy high compliance cost (SOC)
D2. International Trade Policies (FTA’s etc.)
Risk Analysis - Systematic assessment of probable future event risk, estimation of cost & benefit
Risk
Management
Process
Recognizing the threat, making it a priority in the organization, and actually mobilizing
the resources required to stop it.
11.
12. Competitive Dynamics – Competitor Analysis
20%
30%
40%
50%
60%
70%
80%
90%
100%
Market Share Employees Revenue (in US
$, b)
Gross profit Net income Gross Margin Net Margin
Caterpillar
Hitachi
Deere
XCMG
Caterpillar Hitachi Deere XCMG
Market Share 17.80% 4.10% 4.90% 3.90%
Employees 1,02,300 2,95,941 73,489 14,318
Revenue (in US $, b) 54.70 8.81 37.30 6.22
Gross profit 17.20 2.39 10.23 1.04
Net income 6.1 0.206 2.36 0.286
Gross Margin 31.44% 27.13% 27.43% 16.69%
Net Margin 11.15% 2.34% 6.33% 4.60%
John Deere is perceived
as one of Caterpillar's
biggest rivals.
John Deere generates
68% of that of
Caterpillar's revenue
13. Analysis - Competitive Behavior for Caterpillars Action
Hitachi Deere XCMG Remarks
Competitive Behaviour
Awareness P P P
Motivation O P P Hitachi has no motivation as its focus is on
improving efficiency
Capability O P P Hitachi net margins are low, hence not have the
capability. XCMG and Deere have capability
Action and Response
Likelihood O P P XCMG would most likely to respond as
compared to Deere
Speed Low Medium Fast
Hitachi has high turnaround time and is stuck
with operational efficiency issues.
Type New Product
New Product +
Service Change
Pricing
Magnitude Low Impact Medium Impact High Impact
XCMG is very competitive and No 1 construction
company in china for last 29 years
Scope Medium
Less similar
products
High
Deere and caterpillar product lines are not too
similar. Deere has other tractor, farming business
Location In Japan In US In China
Each of the company would respond if attacked
in their core market area
John Deere is perceived as biggest rival due to market and resource similarity
14. Competitive Dynamics - Predict Competitor’s Response
Hitachi Deere XCMG Remarks
Competitive Behaviour
Will rivals see actions P P P
The actions by Caterpillar would be visible
Will rivals feel
threatened
O P O
Hitachi has a relatively loyal customer (Japanese )
XCMG would - if CAT is aggressive in China
Will response be a
priority
O P O
Hitachi would not respond as it is not doing well,
XCMG -> if its dominance in China is threatened
Can rival overcome
organizational inertia
O P P
XCMG has minimum inertia w.r.t to Deere
John Deere along with XCMG are believed to respond to any competitive actions by
caterpillar.
XCMG would particularly respond if its dominance in china is under threat.
16. Actionable Points
Stabilizing input costs – Reducing SOC
Innovation within the Industry and Driving productivity
Integrating Machinery with IoT
Expanding into technology products
Management Operation Efficiency Optimization
Asset Intelligence
Better Pricing Strategy – (Increase customer WTP)
Green Construction Industry
Construction Demand
Provide Integrated solutions
17. Actionable Points – Specific to Asia / Oceania Region
Collaborate instead of competing head on
Target unattended customer segments
Prevent price war through
Revealing strategic Intentions
Compete on product quality
18. 7 Ways for achieving faster than Industry growth
• Take Your Strengths to New Segments
• Find New Clients – Product and Geographic Expansion
• A Little More Risk, A Little More Reward – Innovative Product
• Engage Employees in Revenue Generation and Cost Reduction
(Motivate Them)
• Explore New Technologies
• Expand Your Network
• Take an Objective Look at Your Brand
