Caterpillar Globalization Drivers
Caterpillar Inc.: Drivers and consequences of globalization
Introduction of the company
Caterpillar Inc. is a major manufacturer of natural gas & diesel and deals in industrial gas turbine, mining equipment and construction equipments. Different plants of Caterpillar Corporation are located at more then 50 places in the U.S and 65 places across the world (Caterpillar Inc., 2008). It is one of the largest manufacturers of world and deals in different technical instruments like machines, generators, OEM solution, engines and various other instruments, which are highly technical in nature. As the product category and product line of caterpillar is very wide, it is easy for it to attain the goals and objective according to the schedule (Caterpillar Inc., 2008).
Caterpillar Corporation has a prominent access at all the continents as it has a worldwide distribution of its dealers. It has its plant at more than 300 locations in more than 40 nations. It shows its worldwide manufacturing track, which is very influential (Caterpillar Inc., 2008). This world wide presence of the company helps it in retaining a large base of its customers as well as to face the challenge of its competitors successfully. This established caterpillar from the title of good to a great corporation. It is one of the best market leaders in the equipment construction industry (Caterpillar Inc., 2008). Adoption of world wide distribution system serves as a competitive advantage for Caterpillar Corporation in the early phase of its development but its competitors are not so much competent to adopt the concept of distribution.
International operations of Caterpillar Corporation
As Caterpillar has its presence worldwide, it can be said that Caterpillar Corporation is a global strategic player. For the last 80 years, the role of Caterpillar is very important in developing the infrastructure of world. Revenue of Caterpillar Corporation was reported about $36.34 billion in 2005. 20% increment in its revenue was reported as compared to the previous year. U.S. is the generic country of caterpillar but maximum portion of its sales and revenues is generated from outside the U.S.
The data shows that global operation of Caterpillar Corporation is really strong (Corporate Overview, 2008). Distribution channel of Caterpillar Corporation is practically very powerful, which plays an important role in developing its different competitive advantages across the world. Maximum dealers of caterpillar are self directed, are from nearby domains and very much competent to develop harmony with their customers (Corporate Overview, 2008). The stockholders of Caterpillar are more profitable in terms of return on stock. Strategic outlook of company is the most important factor as it plays a major role in the development and growth of the company as well as its shareholders (Corporate Overview, 2008).
Drivers of Globalization
There are many issues, which are resulting as the driver of the globalization and are playing important role in the globalization of products and services. Internationally, the important issue is the decreasing and lowering of the trade and investment hurdles. Globalization can be defined as the process of making transformation of some things or phenomena into global ones (What is Globalization? 2008).
It can be described as a process by which the people of the world are interconnected into a single society and operate together. It can be defined as the process of a combination between economic, technological, sociocultural and political forces (What is Globalization? 2008). The drivers of globalization are market drivers, competitive drivers, cost drivers, technological drivers and political drivers. The impact of these drivers on Caterpillar Inc. is as follows:
Market drivers: The market drivers include the common customer needs, global customers, market channels and transferable marketing. As domestic markets of the Caterpillar Inc. are becoming more and more saturated, the opportunities for growth are limited (Bauernfeind, 2005). To overcome this situation, Caterpillar Inc. can use the technique of the global expanding. The common customer needs and the opportunities to use global marketing channels and transfer marketing are the incentives to choose internationalization (Bauernfeind, 2005).
Competitive drivers: the global competitors, sourcing efficiency and costs differ from country to country and company to company. The global companies can take advantage of this fact. The competitive driver to globalization is the opportunity for the Caterpillar Inc. The competitive environment for Caterpillar's business consists of global competitors, regional competitors, and specialized local competitors (Bauernfeind, 2005). With the global market, inter-firm competition increases. The Strong interdependences among countries and high trade and FDI actions support this.
Technological Drivers: Technology has shaped and set the foundation for modern globalization. The new innovations in the transportation technology have overturned the operations in the Caterpillar Inc. The important developments among these are the use of technology in the manufacturing of diesel & natural gas engines and gas turbines. Advances in information technology have dramatically transformed the economic life of people and business.The inventions in these areas are enabled at highly effective computing and at a low-cost level (Bauernfeind, 2005). The rapid growth of the Internet is the latest technological driver that creates global ebusiness and e-commerce in the Caterpillar Inc. In addition, component suppliers like Delphi Automotive Systems, Bosch GmbH, Denso and Stanadyne Automotive play more visible roles as technology drivers, partners and key suppliers to the businesses of engine (Bauernfeind, 2005).
Risks associated with global investing
Globalization opens the doors for business in many countries and proves its importance by showing the increasing entry of the businesses of the developing countries into developed countries through the pathway of mergers and acquisitions, but it also has a set of risks associated with it as it generates a new set of global competitors.
Caterpillar Incorporation is a major manufacturing player and has a world wide distribution channel (Cherunilam, 2003). But its increasing investment, which is of global nature, is also creating the risk of managing the huge amount in an effective way. Risk can have adverse effects on the business of Caterpillar Incorporation in different ways like change in political and economical conditions, currency fluctuation and change in foreign taxation (Cherunilam, 2003).
Other estimated risks which caterpillar corporation can face in future are:
- Message conflict: When the message is wrongly interpreted, it will result in to confusion of messages from the home country to other countries.
- Overemphasizing the brand: When the brand is oversimplifying, it will create an environment of discouragement.
- Media selection: Wrong media selection may also result in to a failure of message communication, which can create a blunder and huge loss of resources simultaneously.
- Failure of modulation: Failure in evaluating the performance metrics, which is generally based on the local elements, may also be responsible for the failure of business in that particular country.
- Underestimation of investment: Investment, if not estimated properly and effectively, may result in to a great loss of capital resources of the Caterpillar Incorporation.
- Management control: If management is not so effective in controlling the business outside the home country, it will also create problems for the Caterpillar Incorporation.
- Recourse utilization: If resources are not utilized in an effective way, it will result in to a loss of the valuable resources of the company (Swystun, 2008).
Importance of cultural sensitivity and ethics in global business
In the formation of international marketing strategies, the cultural issues play a key role. The companies must remain sensitive to these concerns when preparing to do business overseas. To broaden the scope, the company should offer foreign language courses and cultural sensitivity training to the employees (Cultural sensitivity in business, 2008). It is widely accepted that culture is considerably affecting international marketing decisions, practical concepts but the companies are lacking in achieving cultural sensitivity in international marketing.
Cultural sensitivity is also important because it helps a person as well as company to become a multicultural worker (Cultural sensitivity in business, 2008).With the help of this, an individual is convinced that all cultures are equally good and enjoys learning about other cultures. The advances in transport and communications technology combined with the development of a world economy in the global businesses have resulted in an arrival of people from different nations, cultures, languages and backgrounds (Cultural sensitivity in business, 2008). There are many employees of the Caterpillar Inc. who agree that the intimacy has led to a greater understanding and as a result, the cultural differences are in fact diminishing. The diverse culture also helps in leading the business and minimizing the grievances (Cultural sensitivity and global leadership skills, 2001).
Ethics are the principles, practices, and philosophies that guide the business people in their day to day business decisions. Ethics is rapidly becoming an important subject for the people involved in global business (Mathew, 2000). A business has the impersonal characteristic that demands both a special strategy and an understanding of special ethics. It is the study of how personal moral norms apply activities and goals of a commercial enterprise. It is not a separate moral standard, but the study of how the business context poses its own unique problems for a moral person who acts as the agent (Mathew, 2000).
There is an increasing awareness around the world about the ethical practices in business. When an organization operates globally, it is crucial for it to focus on ethical issues (Importance of ethics, 2003). A significant change is occurring in considering business ethics as central to managing organizations. Companies are formulating value based globally-consistent codes for ethical understanding and appropriate decision making at all levels even as they face immense external challenges (Importance of ethics, 2003).
Thus, it is concluded that globalization, if properly utilized by the Caterpillar Inc., can make substantial contribution to the economic development of the nation. It increases the level of competition. The productivity of the company grows more quickly when countries produce goods and services in which they have comparative advantages. The liberalization and the global competition in the caterpillar Inc. enhance the customer choice and consumer surplus. It is important for the company to develop the cultural diversity and ethics so that more and more objectives are achieved. It is essential for the company to increase the cultural diversity and maintain the social responsibility in order to achieve the objectives and the targets.
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