Essay about Caterpillar

1755 Words Mar 29th, 2011 8 Pages
‘Mature product markets drove Caterpillar’s restructuring during the 1990s’. Critically examine this statement.

With 2004 sales revenue in excess of $30 billion and profits of $2.03 billion Caterpillar is the worlds leading manufacturer of construction, mining and earth moving equipment. Caterpillar operates in three key areas; machinery, engines and more recently financial products. Mature product markets are an aspect of all product lifecycles once the initial rapid growth stage is complete sales will continue to rise but however at a much slower rate. Problems associated with mature markets include; slower cost recovery, increased risk of competitors capturing market share and the threat of products moving into the decline stages
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This could have negative effects on investment due to shareholders perceptions of the information. Caterpillar have also made good use of their substantial brand name to diversify into clothing and other accessory goods, this was a considerable excess with their products becoming considerably fashionable allowing for them to charge higher prices. They also made new attempts to move into foreign markets to increase export sales, this has been increasingly successful for them due to increased demand from countries such as China and Brazil where increased levels of construction have led to increased demand for Caterpillars product lines. This has also led to an increase in overseas production over the late 1990s which in some countries should have led to savings in labour expenses and higher profit margins.

There are several other factors that could be said to have driven Caterpillars restructuring in the 1990s. The first factor to examine is workforce relations, in the late 1980’s and early 1990s Caterpillar was involved in a long five year industrial dispute. This need to control high labour costs and build company-employee relations could well have been one of the influencing factors in the caterpillars restructuring. The move to increased

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