Solved

WWYD Caterpillar Caterpillar Dominates the Construction and Earth-Moving Equipment Industry

question 54

Multiple Choice

WWYD Caterpillar Caterpillar dominates the construction and earth-moving equipment industry. However, Caterpillar has not been able to master the cyclical nature of its industry. When the heavy machinery industry booms, no one keeps up with demand. Caterpillar doubled its workforce the last time global demand surged. But when the industry goes bust, factories are closed and tens of thousands of employees are laid off. So, in sudden downturns, Caterpillar learned to switch from selling new equipment to refurbishing used equipment, which is a profitable way to offset the boom-and-bust cycle to some extent. The second way Caterpillar has dealt with sudden swings was to try to predict when they occur. The problem, though, was that while it could generally predict when a shift in sales would occur, Caterpillar couldn't predict the severity . As a result, the last time a severe downturn occurred, Caterpillar laid off 35,000 managers and workers out of 120,000 worldwide. While almost all companies cut expenses, pay, and jobs during severe economic downturns, few companies suffer the severe upturns and downturns that Caterpillar encounters in its business. In a very broad sense, Caterpillar's inability to manage these deep, quick upturns and downturns means that its business is "out of control." To be more precise, Caterpillar swings from dramatically outperforming it goals (during good times) to being dramatically below goals (during bad times) . Guiding everyone in the company were three key goals. First, maintain cash flows and earn a profit, even if Caterpillar was a smaller company than before. Second, maintain Caterpillar's credit rating. This was key to being able to handle the sudden recoveries or upturns that often followed Caterpillar's downturns. Third, keep paying the company's stock dividend, so that investors would not lose faith in Caterpillar, and thus decrease its ability to raise capital, which would hurt its ability to expand. Caterpillar accomplished all three.
To get the company in control, new CEO Doug Oberhelman developed Caterpillar's "trough strategy." Caterpillar's "trough teams" used a 13-point list of priorities to maintain focus, such as cash flows, the health of their dealers and suppliers, and the like.
A related approach is Caterpillar's "lane strategy," in which Caterpillar tells customers that there are four "lanes" of products they can order. "First lane" products contain the most common and popular options and packages (similar to buying a car) , whereas "fourth lane" products are highly specialized and customized. First lane products are delivered quickly, whereas fourth lane products take six months and cost more. The advantage for suppliers is that most of Caterpillar's customers choose first lane products. That, in turn, helps Caterpillar's suppliers know exactly what they need to produce.
The core of Oberhelman's strategy is for Caterpillar's customers to make "more money using our equipment rather than anybody else's." While Caterpillar's equipment is more expensive than the competition's, after factoring in maintenance, down time, operating costs, how long the product will last, and what you can sell it for when done, Caterpillar's products are a value in the marketplace. And when Cat machines break, or need parts or service, Caterpillar's dealer network is there to meet customers' needs. CEO Oberhelman says, "Our dealers--that has been the source of our Cat brand advantage more than most people really understand." Refer to WWYD Caterpillar. What is cybernetic about the control of an industrial process?

Definitions:

Body Fluids

Liquids within the bodies of living organisms that carry nutrients and waste, including blood, saliva, urine, and sweat.

Moderate Intravenous Sedation

A medical procedure that involves administering sedatives through the vein to achieve a moderate level of sedation.

Diagnostic Procedures

Tests and examinations conducted to identify the cause of an illness or disorder.

Specialized Form of Angiography

A medical imaging technique designed to visualize the inside, or lumen, of blood vessels and organs of the body, with particular interest in the arteries, veins, and the heart chambers.