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Case Study: Caterpillar Inc.: George Schaefer Takes Charge History Of Caterpillar, Swot Analysis, Competitive Environment, Proposed Options, And Recommendations For Growth

2372 words - 9 pages

HistoryNothing is more familiar on a construction site than the bright yellow heavy equipment manufactured by Caterpillar, Inc. Caterpillar Inc., headquartered in Peoria, Illinois, has dominated the world in earth moving, construction, and materials machinery for more than 50 years. Their global dominance; however, created a stagnant and risk averse environment. Komatsu, a leading Japanese competitor, had gained market share by offering low cost, high quality options in a variety of product lines while Caterpillar was busy raising prices in their existing product lines at an average of 10% per year. Caterpillar executives ignored the threat and continued to support its historical management values; some of which included statements such as: "we maintain a strong corporate culture via 'internal staffing'", and "we maintain sufficient international manufacturing presence to avoid being shut out ." Poor economic conditions and overly aggressive expansion and modernization plans hit Caterpillar hard in the 80's. Profits were down and Caterpillar lost $1 billion in a period of three years. This necessitated the closing of several plants, and a complete revitalization of the expansion plan. To jumpstart Caterpillar's sluggish reactions to these factors, George Schafer took the reigns as the new CEO in 1985.Schafer continued the cost cutting measures his predecessor implemented; conversely he began to focus on new initiatives to bring Caterpillar out of its downward spiral. Schafer focused on Caterpillar's core businesses, introduced new product lines, and launched a new manufacturing strategy. In addition to the new operational direction, Schafer also began to revamp the organization by changing the corporate culture, creating employee involvement programs and leveraging the power of many individuals versus a select few as done in the past.Management of the CompanyHistorically, the management of the company was founded on a strict, hierarchical organization dominated by the executive office. Prior CEO's set the vision and strategy for Caterpillar and typically went unchallenged. In addition, Caterpillar was managed in functional product silos and adamantly believed in the "promote from within" policy. This created an environment of knowledgeable and loyal employees; however, it also fashioned an environment lacking genetic diversity, creativity, and imagination.Schafer sought to change Caterpillar's management foundation. Schafer stated that "We need movers, shakers, decision makers...Above all, we need leaders who set high standard for themselves and their people ." Schafer appointed unlikely candidates to top posts to help turn Caterpillar into an agile and flexible organization. Employees were empowered and decision making moved down the chain of command. Schafer also realized the importance of building close relationships with those on the front line and that a happy employee was the cornerstone of Caterpillar's success. Although not particularly...

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