SWOT Analysis for Caterpillar Inc.
MBA5101
Christi Warthan
Columbia Southern University

SWOT Analysis for Caterpillar Inc.

Introduction: This will be a Strength, Weakness, Opportunities and Threats (SWOT) analysis on Caterpillar Inc. From the inception of the company in 1925 Caterpillar has been a pioneer in the industry and today is a global corporation that is one of the most widely recognized in the world.

Strengths: One of the biggest strengths that Caterpillar has going for it is brand name recognition. There are few places on planet Earth that you can go and not find a piece of Caterpillar equipment. That name is also synonymous with quality. Another one is the wide product range it has and services. With a distribution chain that is global, the company is able to produce and supply those quality products to just about anywhere. With nearly $11 billion in sales and revenue last physical year the company is able to achieve a strong line of acquisition too. According to the company website Caterpillar.com, they current holds more than 15,000 active patens and have more than 108,000 full time employees. The strength of any company is its work force and Caterpillar is no exception. They currently employ over 11,000 engineers and over 350 Ph-D level scientist that are working to provided new innovation and technologies. Another benchmark for the company is its efforts to achieve sustainability. “A leader in remanufacturing technologies and processes, Cat Reman returns products at the end of their lives (called 'core') to same-as-new condition and helps reduce owning and operating costs by providing our customers same-as-new quality at a fraction of the cost of a new part.” (http://www.caterpillar.com/).

Weaknesses: According to Caterpillars own retail statistics they are down across the board in every market and product for the last quarter of 2015. They categorize the retail into several segments; Machines Retail Statistics Total, Resource Industries, and Construction Industries. The loses are the largest in Latin America with 38%, 44% and 34% respectively. Asian markets are not much better with 21%, 48% and 9% respectively. Their Energy & Transportation Retail Statistics are equally lacking with Power Gen and Industrial down 22%, Transportation was hit hard down 58%, and finally Oil and Gas were down 32%. It does not take a degree in finance to realize that the company cannot continue to sustain these types of loses (http://www.caterpillar.com/en/investors/financialInfo/dealer-statistics.html). The company is facing some competition in places like the Asian market and Latin Americas economy as a whole has been dropping. European markets are another concern with the continued financial problems there as well. If Caterpillar is going to overcome these issues they are going to have to fine new innovation, either through its own development or by acquisitions. It is clear that the current inventory is not meeting the mark.

Opportunities: The global growth in the construction market is projected to grow from $8.5 trillion in 2015 to $10.3 trillion by 2020 according to the PR Newswire website. “The construction industries in the Middle East and Africa region are predicted to be the fastest growing in 2016-2020, overtaking the Asia-Pacific region, which held the top spot in 2011-2015.” (http://www.prnewswire.com/). By placing a focus on and in the growing markets of Africa and the Middle East, Caterpillar could recapture market shares and turn around declining retail sales. They could also redirect some of its resources that are located in the crumbling Euro market to cut loses and capitalize on the other nation’s growth. Mining as an industry suffered huge losses last year and 2016 is not projected to be much better. Until the markets strength mining will continue to “bump along the bottom” (Mining.com). Mining.com also states that the down turn is due in large part to oversupply and weak markets. Innovation is a key factor in the opportunity ring for Caterpillar. With sustainability on the lips of nearly every large corporation, Caterpillar should continue its push to look for new and innovative ways to help them become an industry leader. Maybe look for a greener solution in overall product development. The company could also increase revenues in such areas as growth and expansion. Increasing the competitive advantages over its closes rival Joy Global is another way.

Threats: Caterpillar has a large market share of the mining industry and with the projected slump in mining operations, they stand to lose additional revenue there. There is also the competition of Joy Global. These two are closely connected when it comes to the market. Neither company had a great last quarter and now both have announced layoffs and plant closures. Then there are the ever present Asian markets which have been known to “borrow” technology from competitors, make just enough design changes to be able to legally call it their own and then bring the product to market at a, sometimes greatly, reduced price. Another issue for the company is the strength of the dollar. According to Investpedia.com “In particular, the weak euro has had a dramatic impact on Caterpillar, with Europe providing almost a quarter of the company's total revenue. Weak currencies in the Asia-Pacific and Latin American regions have also played a role in keeping growth down.” The falling price of gas and oil are hitting them as well. According to the same article in Investopedia, “In the eyes of one Caterpillar executive, "the impact of substantially lower oil and gas prices is the most significant reason we're expecting lower sales in 2015," with about half of the company's anticipated 9% revenue drop coming from oil.” (Investopedia.com).

References:
(2015, March 20) Caterpillar Faces These 3 Major Threats. Investopedia. Retrieved from URL http://www.investopedia.com/stock-analysis/032015/caterpillar-faces-these-3-major-threats-cat.aspx
Jamasmie, Cecilia (2015, Dec 22) What to expect for 2016: Top predictions for the mining industry. Mining.com Retrieve from URL http://www.mining.com/what-to-expect-for-2016-top-predictions-for-the-mining-industry/
Retrieved from URL http://caterpillar.com/
Retrieved from URL http://www.caterpillar.com/en/investors/financialInfo/dealer-statistics.html
(2015, Feb. 17) Global Construction Market Worth $10.3 Trillion in 2020. Retrieved from URL http://www.prnewswire.com/news-releases/global-construction-market-worth-103-trillion-in-2020-50-largest-most-influential-markets-292235961.html