1. Running head: CUMMINS, INC. BUSINESS ANALYSIS PART ONE 1
Cummins, Inc. Business Analysis Part One
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MGT 521
February 5, 2000
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2. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 2
Abstract
Cummins, Inc. is a multi-national company with approximately 40,000 employees worldwide
and ranks 186th on the Fortune 500 listing (CNNMoney, 2011). Cummins had 2010 net income
of $1.04 billion (Cummins, 2011). Cummins directly benefits the state and local economies, not
only by the products and services available but also through the location of a Cummins
manufacturing plant in Mineral Point, Wisconsin. This local connection creates interests and a
desire to further investigate Cummins. This paper reviews the strengths, weaknesses,
opportunities, and threats (SWOT analysis) that Cummins must be aware of and focus on to be
successful. This paper reviews key stakeholder groups with discussion on how Cummings is
meeting the needs of the individual groups or examples of shortcomings. The goal of this paper
is to look at Cummins from the perspective of a mutual fund manager to see if Cummins is a
company in which to invest. With the initial SWOT analysis and evaluation of stakeholders,
Cummins appears to be a worthy investment.

3. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 3
Cummins, Inc. Business Analysis Part One
Cummins, Inc. (Cummins) ranks 186th on the 2011 Fortune 500 listing (CNNMoney,
2011). Cummins interests me as they have a large manufacturing plant in the service area of the
hospital where I work. Cummins designs, manufactures, distributes, and services diesel and
natural gas engines, electric power generation systems, engine-related component products,
exhaust after treatment, fuel systems, controls, and air handling systems. It sells its products to
original equipment manufacturers, distributors, and other customers worldwide. Cummins serves
its customers through a network of more than 600 company-owned and independent distributor
locations and more than 6,000 dealer locations in more than 190 countries and territories
(CNNMoney, 2011). The company has four complementary operating segments: Engine, Power
Generation, Components, and Distribution. Founded in 1919, Cummins headquarters are in
Columbus Indiana (CNNMoney, 2011). Cummins employs approximately 40,000 worldwide
and had 2010 net income of $1.04 billion (Cummins, 2011). I will be analyzing Cummins over
the next three weeks to see if as an investment banker, I would recommend investing.
Strength, Weakness, Opportunities, and Threats (SWOT Analysis)
Cummins is a huge industry that has four distinct divisions. The four divisions are
worldwide manufacturing operations with similar strengths, weaknesses, opportunities, and
threats.
Strengths
Strategic joint ventures and alliances. Cummins has a number of joint venture
agreements and alliances with business partners around the world. The company's joint ventures
are either distribution or manufacturing entities. Although each distributor is a separate legal
entity, each business is the same as that of its owned distributors. The company's licensing

4. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 4
agreements with partially owned and independent distributors are generally three-year terms and
restricted to specified regions. Manufacturing joint ventures allow the company to reduce capital
spending, increase market penetration in geographic regions, streamline its supply chain
management, and develop technologies. Cummins’ strategic joint venture agreements and
alliances enable penetration into new markets, develop new products, generate manufacturing
efficiencies, and operational efficiencies.
Comprehensive products and services. The company operates four business segments:
distribution, engine, components, and power generation. These segments, organized according to
the markets and products each segment serves and allows management to focus its efforts on
providing enhanced service to a diverse customer base. Comprehensive services and products
reduce Cummins business risks, provide cross selling opportunities, and offers opportunities in
new as well as existing markets.
Strong research and development capabilities. From its inception Cummins has been
associated with technological innovations. Cummins is a leading company in the world in
developing technologies to reduce diesel engine emissions. Cummins is one of the first diesel
engine manufacturers to have an engine certified by the Environmental Protection Agency
(www.datamonitor.com, 2011). Cummins’ research and development (R and D) program
focuses on innovations, product improvements, and cost reductions. In FY 2010 Cummins
invested $402 million in R and D (www.datamonitor.com, 2011). The company plans to
continue to make investments to improve its current technologies, to continue to meet the future
emission requirements around the world and improve diesel engine fuel economy. Strong R and
D capabilities allow Cummins to attain competitive advantage over its peers, maintain
technological edge over its competitors, and to stay ahead of industry trends.

5. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 5
Other strengths. Cummins has a strong commitment to sustainability and corporate
responsibility, employee diversity, multinational manufacturing base, and strong global demand
for products.
Weaknesses
Heavy dependence on few suppliers. The company engages in long-term contracts with
a limited number of suppliers for obtaining raw materials and manufactured components. In FY
2010, around 65% of the company's total types of parts in its product designs were sourced from
single suppliers (www.datamonitor.com, 2011).
Unfunded pension obligations. Cummins has significant unfunded pension obligations.
With the volatility in the financial markets in FY2010, the company underfunded pension
obligations by $204 million (www.datamonitor.com, 2011). Unfunded pension obligations will
force Cummins to make regular cash contributions to bridge the gap between pension assets and
liabilities, putting pressure on the liquidity position of the company.
High indebtedness. At the end of 2010, Cummins total debt was $709 million,
compared with $637 million at the end of 2009 (www.datamonitor.com, 2011). The increase in
total debt was principally from borrowing and acquisitions in Brazil. Cummins also had interest
expense of $40 million in FY2010 (www.datamonitor.com, 2011). Continued high debt and
interest expense may hamper its credibility in the market and would have an adverse impact on
its liquidity position.
Opportunities
Growing global demand for diesel engines. The world diesel engine demand is
forecast to expand over 3% per year through 2012 (www.datamonitor.com, 2011). Growth in
regional markets created rising demand for diesel engines in China, India, and South Korea. In

6. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 6
Eastern Europe and Latin America, demand for diesel engines is forecast to grow about 4% per
year through 2012 (www.datamonitor.com, 2011). Cummins designs, manufactures, distributes,
and services a wide range of diesel engines. Growing diesel engine market represents an
opportunity for Cummins to capitalize on this market and to expand its revenues and profits.
Positive outlook of the global truck market. The global trucks market forecast is for
steady growth in the future. The light commercial vehicles segment was the market's largest in
2009, generating total volumes of 9.69 million units and the market expects to rise to 16 million
units by the end of 2014 (www.datamonitor.com, 2011). A reinvigorated trucking industry and
recovering economy will increase demand for heavy and medium-duty trucks in the near future.
Cummins produces a wide range of engines for heavy duty, medium duty, and light duty trucks.
Therefore, growth in the global truck market provides an opportunity for Cummins.
Moderate growth for global automobiles industry. The global automotive industry
has problems with production overcapacity, high inventory, and low profitability in response to
the economic slowdown. The industry expects recovery in the coming years. India and China
represent the most important growth markets for the ailing global auto industry. The Indian new
cars market expects to rise from 1.9 million units in 2009 to 3.3 million units by the end of 2014
(www.datamonitor.com, 2011). Similarly, the Chinese new cars market expects to increase from
9.8 million units in 2009 to 21.2 million units by the end of 2014 (www.datamonitor.com, 2011).
A growing automobile market is likely to drive demand for Cummins' products. The company’s
position allows them to tap the opportunities arising from these growing automotive markets.
Establishment of manufacturing facility in Turkey. Cummins is increasing its efforts
to increase penetration in existing geographic markets as well in new markets. A multi-phased
manufacturing site in Turkey plans to begin production in 2012 (Cummins, 2011). The facility

7. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 7
will export a majority of the products made in Turkey to customers across the world. This
facility enhances the geographical reach of the company and helps it to serve its European
customers more efficiently.
Other opportunities. Position as a leading multinational manufacture with strong R and
D allows Cummins to capitalize on markets in developing nations, worldwide tightening of
emission standards, and increased demand for standby power generation.
Threats
Intense competition. Cummins operates in highly competitive markets. Cummins
competes worldwide with a number of other manufacturers and distributors that sell and produce
similar products. Its products primarily compete on the basis of speed of delivery, performance,
quality, fuel economy, price, and customer support. Intense competition across the four business
divisions of the company could force it to reduce prices, which may in turn affect the bargaining
power and strain its margins.
Government regulation. The company's engines are subject to extensive statutory and
regulatory requirements governing noise and emissions. Cummins made and continues to make
significant capital and research expenditures to comply with these regulatory standards.
Developing engines to meet changing government regulatory requirements with different
emission requirements and implementation timelines, makes developing engines efficiently for
multiple markets difficult and could result in substantial additional costs that may be difficult to
recover. In some cases, Cummins has to develop new products to comply with new regulations,
particularly those relating to air emissions. The successful development and introduction of new
and enhanced products to comply with new regulatory requirements are subject to other risks,

8. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 8
such as delays in product development, cost over-runs, and unanticipated technical and
manufacturing difficulties.
Other threats. Environmentalist, high labor costs in some countries, civil unrest, and war
are other concerns for Cummins.
Stakeholders
The shear size of Cummins does lead to a large number of stakeholders. Key stakeholder
groups are stockholders, employees, retires, suppliers, partners, customers, environmentalists,
government officials, and society.
Stockholders
Cummins looks to meet the need of each in different ways. Stockholders have an
expectation that Cummings will be a good investment. Financial reports have been strong with
record quarters budgeted for 2012 (Cummins, 2011). Stock value increased 231.12% over five
years with a 36.43% increase over the last 53 weeks and a dividend yield of 1.33% (CNNMoney,
2011).
Employees
With close to 40,000 employees in 190 countries (Cummins, 2011), Cummins has a
challenge meeting the diverse needs of this stakeholder group. Cummins has invested heavily in
the diversity of its workforce and management. They provide good paying jobs in the countries
they operate and have comprehensive training programs for management to improve
understanding of cultural differences. For six consecutive years, Cummins received a perfect
rating from Human Right Campaign for its corporate equality initiatives and nondiscriminatory
polices (Cummins, 2011). For the fourth year in a row, the national group on health named
Cummins to the list of Best Employers for Healthy Lifestyles (Cummins, 2011).

9. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 9
Retires
Former employees are another key stakeholder group. Cummins is currently not fully
meeting the need of this group because of the current underfunding of the corporation’s pension
obligations. The weak financial markets have left many organizations with shortcomings in
retirement funds and Cummins needs to outline a plan for correction.
Suppliers
Cummins uses world wide suppliers. They meet the elemental need of suppliers, by
purchasing their products. This provides other business with growth opportunities. Cummins
also invests heavily in working to diversify its suppliers. This allows them to have improved
knowledge of the markets they serve and added influence in the countries they operate in.
Partners
Cummins has various partners in both manufacturing and distribution, but most notable
are the 6,000 dealerships of Cummins products. They also have multiple joint ventures where
Cummins is the sole provide of components of large vehicles.
Customers
The key stakeholder groups are the customers. If there is no one interested in purchasing
a product, the company will not stay in business. Cummins has customers all over the world.
They meet the needs of the various customers by providing reliable products that the customer
wants. Cummins products have long warranties, dependable reputations, meet or exceed
governmental standards, cost effective, and efficient.
Environmentalists
Cummins dedicates significant resources to corporate responsibility. For the last four
years Cummins is on the FTSE4Good Index for its environmental record ("Cummins Receives

10. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 10
Recognition for Its Ethics and Social Responsibility," 2010). 2010 WorkBoat’s Environmental
Management Plan award went to Cummins for successfully implementing environmentally
sustainable practices into its maritime operations (Buls, 2011). Cummins also won Indiana’s
2010 Governor’s Award for Environmental Excellence (Cummins, 2011).
Government Officials
The multinational nature of Cummins creates a unique stakeholder group of the people
who create the laws in the different countries Cummings operates and sells products. Cummins
needs to be aware and informed of pending regulatory issues and customs of government
operations all over the world. Cummins has created multiple joint ventures and alliances to help
navigate the political and cultural climates encountered if the process of doing business.
Society
Cummins puts a premium value on supporting universal human rights. For six
consecutive years, Cummins has been on the Dow Jones Sustainability Index for its
environmental, economic, and corporate responsibility measures (Cummins, 2011). In 2011,
Cummins was also names one of the World’s Most Ethical Companies by Ethisphere Institute for
its ethical leadership ("Cummins Receives Recognition for Its Ethics and Social Responsibility,"
2010). Corporate responsibility magazine has named Cummins as on of the 100 Best Corporate
Citizens for 11 of the past 12 years (Cummins, 2011).
Business Analysis Part One Summary
The SWOT analysis identified that the key strengths of Cummins are in strategic
alliances, comprehensive products, comprehensive services, strong research and development.
Cummins also has strong opportunities for growth when looking at global demand for their
products. Cummins also does a good job at meeting the needs of the various stakeholder groups.

11. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 11
This reinforces the view that Cummins is a good investment decision as the risks from the
exposed weaknesses and threats are minimal in comparison to the strengths and opportunities. I
an amazed that a company with such a global reach has a manufacturing plant so close to where I
live. I look forward to my continued analysis of Cummins over the next few weeks and do
believe that personally it was the right company to analyze. Data reviewed to date is supportive
of the notion that Cummins would be a good company for investment by a mutual fund. The
work next week should reveal any financial concerns.

12. CUMMINS, INC. BUSINESS ANALYSIS PART ONE 12
References
Buls, B. (2011, January). Environmental Award Winners Announced at IWBS 10.
WorkBoat.com. Retrieved from http://workboat.com/newsdetail.aspx?id=4295000468
CNNMoney. (2011, May 23). Fortune 500. Retrieved from
http://money.cnn.com/magazines/fortune/fortune500/2011/full_list/101_200.html
Cummins Receives Recognition for Its Ethics and Social Responsibility. (2010, March 26).
Reuters. Retrieved from http://reuters.com/article/2010/03/26/idUS195121+26-Mar-
2010+BW20100326
Cummins.com. (2011). Investor and Media Fact Sheet. Retrieved from
http://cummins.com/cmi/navigationAction.do?nodeId=10&siteId=1&nodeName=fact+sh
eet&menuId=1002
www.datamonitor.com. (2011, June). Cummins, Inc. SWOT Analysis. Retrieved from
http://ehis.ebscohost.com/eds/pdfviewer/pdfviewer?sid=e9c02c90-df8a-4549-977f-
636dd966e979%40sessionmgr113&vid=3&hid=121