Caterpillar: making money by moving mountains 2

     Caaterpillar engages in many forms of international business. It is an exporter, sending its well-known yellow eath moving equipment to virtually every country in the world. It is an importer, purchasing parts from Asian, European, and North Ameican suppliers. Cat is an international Investor, owning and operating factories on six continents. It also is an international borrower, seeking short-term and long-term capital from investors and banks throughout the world. The company is involved in the international licensing of technology, both in purchasing the right to use innovative technologies developed by foreignfirms and in selling the use of its own technologies to other foreign firms. It also franchises the rights to sell its equipment to 59 U.S dealers and 123 foreign dealers.

     Of cours, given the fierceness of international competition, Caterpillar's future is no more assured than that of any other global enterprise. Its archival, Komatsu Ltd., enjoyed lower labor costs during the 1980s and a reputation for producing innovative, high-quality products. In the early 1980s, Komatsu undercut Cat's prices to U.S. customers by as much as 40 percent, causing an 11 percent erosion in Cat's domestic market share. Slashing its own prices, Cat stopped the market-share losses, although its profitability suffered. The rise in the value of the  yen from 1985 to 1995-it reached a peak of 80 yen to the dollar in April 1995-helped Cat by eroding Komatsu's cost advantage. Unfortunately for Cat, the yen fell 44 percent in value over the next 40 months, reaching a low of 144 yen to the dollar in August 1998: advantage Komatsu. A decade later, the situation reversed once again. The falling value of the dollar_- in August 2008, one dollar brought only 106 yen- made life easier for Caterpillar and more difficult for Komatsu. Because these exchange rate changes continueally affect the price competitiveness of Cat's product, Cat's manager know they must accelerate their drive to become more cost-efficient in the face of Komatsu's competition.