Caterpillar
‘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 of the product lifecycle. When entire product markets go into maturity there is little room for growth through innovation as the market is already saturated and therefore even new product lines may struggle. However as in all technology based industries it is important to maintain research and development expenditure in order keep up with competitors and maintain a competitive advantage. Possibilities for growth become considerably limited, options include moving into new markets and strategies to attempt capture competitors market share. This puts an increasing importance on brand names; in the case of Caterpillar they have the advantage of an extremely well established and worldwide known brand name.
In times of recession such as those of the 1980s it is often the construction industry and therefore those connected industries such as the construction equipment manufacture industries that are the first and often worst affected industries. This coupled with the mature product market led to declining sales in the early 1980s. They therefore were required to find new markets for their products or to diversify into new business areas. Another major problem faced by Caterpillar was their high labour costs; this was due to
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 of the product lifecycle. When entire product markets go into maturity there is little room for growth through innovation as the market is already saturated and therefore even new product lines may struggle. However as in all technology based industries it is important to maintain research and development expenditure in order keep up with competitors and maintain a competitive advantage. Possibilities for growth become considerably limited, options include moving into new markets and strategies to attempt capture competitors market share. This puts an increasing importance on brand names; in the case of Caterpillar they have the advantage of an extremely well established and worldwide known brand name.
In times of recession such as those of the 1980s it is often the construction industry and therefore those connected industries such as the construction equipment manufacture industries that are the first and often worst affected industries. This coupled with the mature product market led to declining sales in the early 1980s. They therefore were required to find new markets for their products or to diversify into new business areas. Another major problem faced by Caterpillar was their high labour costs; this was due to