Caterpillar: making money by moving mountains 1

Given the fieceness of international competition, caterpillar's future is no more assured that that of any other global enterprise.

Caterpillar, Inc., headquartered in Peoria, lllinois, is the world's largest producer of heavy earthmoving and construction equipment, with a 30 percent share of the global market. The company's complex involvment in international business is typical of most major firms today. Cat, as the company is widely known, manufactures engines and earthmoving, constructions and materials-handling equipment at over 100 factories spread over 23 countries. About 49 percent of its 95,000 employees work outside the United States. More than half of its 2006 output of $41.5billion was purchased by foreign customers: $10.5 billion as exports from the United States and the reminder as output from cat's 60 overseas factories. Caterpillar is no newcomer to international production. It stablished its first oversease factory in the United Kingdom in 1951. Its 1963 joint venture with Mitsubishi Heavy Industries was one of the first such investments by a U.S. firm in Japan. In 1998 it purchased Perkins Engines, a British producer of small-to medium-sized diesel engines, which had been a primary supplier of such engines to Cat. Caterpillar has leveraged the Perkins acquisition to develop new products or the small and compact construction equipment market and for the agricultral market.
          Because downtime on a critical piece of equipment can halt construction, success in this industry depends on equipment reliability and after-sales support.

Caterpillar has two competitive advantages that have enabled it to dominated the international heavy-equipment market:

1. A commitment to quality that makes the caterpillar brand name a symbol of tough, realible products.

2. An effective network of 182 dealers worldwide who sell and service caterpillar's products.
   
        The importance of these two elements has been summed up by John Bibby, a typical Cat customer, who runs John Bibby Backhoe Hire, an excavating firm in a Melbourne, Australia, Suburb. Bibby is a small operator-he owns only one piece of equipment-so when his backhoe is not operating, his business is essentially shut down:

       It was embarrassing before I got my Cat machine because something would break down every week. Now, that kind of thing just doesn't happen very often...and when it does, they send somebody out straight away and the blokes fix it right up. I'm happy with the parts you can get and the avaibiality of them. And I know a lot of the boys now. You know, once you're in a good thing, you don't want to get out of it.