Caterpillar Inc. operates in more than 180 countries worldwide and generates over half its annual sales outside the United States. It follows a global strategy by having centralized design control to ensure interchangeable parts that fit equipment globally. This allows Caterpillar to achieve economies of scale and exploit worldwide sales volume and the existing market for parts revenue. While a global strategy has benefits, the best approach is usually a combination of global integration and domestic adaptation to address shortcomings of either strategy alone.
1. Assignment 4
Is the company pursuing a global strategy or a Multi-country strategy?
Caterpillar Inc., had been become a “major American manufacturer of earth-moving,
construction, agricultural, and materials-handling equipment” (Encyclopedia Britannica, 2015). In
determining if Caterpillar’s strategy is global or multi-country it is important to note the difference
between these two strategies. “A multidomestic strategy is one which a company varies its product
offering and competitive approach from country to country in an effort to meet differing buyer needs and
to address divergent local market conditions. A multidomestic strategy represents a think-local, act-local
approach to international strategy” (Thompson, Peteraf, Gamble, & Strickland, 2012, p. 195). “A global
strategy contrasts sharply with a multidomestic strategy in that it takes a standardized, globally integrated
approach to producing, packaging, selling, and delivering the company’s products and services
worldwide. It represents a think-global, act-global approach” (Thompson, et al., 2012, p. 195). The chart
below shows the differences between a purely domestic strategy and a purely globalized strategy.
(Difference, 2015, ¶ 6).
2. “Caterpillar currently operates in more than 180 countries worldwide and in 2014, generated
more than half its annual sales outside the United States. Operating on a global scale requires us to work
within a variety of different cultures, governmental systems and economic environments”
(Caterpillar.com, 2015). Since Caterpillar follows a globalized strategy the all parts that are manufactured
worldwide include “central design control ensures that these parts are interchangeable and that they will
fit on any appropriate Caterpillar, regardless of its country of origin. This is a global strategy because
each country’s operation is viewed as part of a single worldwide plan” (Difference, 2015, ¶ 22). By
utilizing a globalized strategy Caterpillar became a “direct participant in local economies [and] the
company achieved lower costs without sacrificing local product flexibility” (Hout, Porter, & Rudden,
1982, ¶ 23).With their parts being interchangeable Caterpillar has been able to achieve “economies of
scale” Caterpillar has also been able to exploit “both its worldwide sales volume and its existing market
for parts revenue. Competitors [were unable] to match its costs of profits and therefore could not” (Hout,
et al., 1982, ¶ 45) compete with Caterpillar in the same level.
While using a globalized strategy has a lot of benefits and has helped Caterpillar become a global
leader in their industry, “the best approach is usually neither purely domestic nor purely global but a
combination of both. This becomes most apparent when we see the shortcomings of single-mindedly
pursuing an international strategy based on either global integration alone or domestic adaptation alone”
(Difference, 2015, ¶ 25).
3. References
Caterpillar.com. (2015). 2014 Sustainability Report: Focus Areas. Retrieved from
http://reports.caterpillar.com/sr/directory.php#/directory/focusAreas
Difference, D. (2015). Differentiate Domestic Strategies from Global Strategies. Retrieved from
http://www.yourarticlelibrary.com/difference/differentiate-domestic-strategies-from-global-
strategies/43657/
Encyclopedia Britannica Inc. (2015). Caterpillar Inc. American Manufacturing Company. Retrieved from
http://www.britannica.com/topic/Caterpillar-Inc
Hout, T., Porter, M.E., Rudden, E. (1982, Sept.). How Global Companies Win Out. Harvard Business
Review. Retrieved from
https://hbr.org/1982/09/how-global-companies-win-out
Thompson, A.A., Peteraf, M.A., Gamble, J.E., & Strickland III, A.J. (2012). Crafting & Executing
Strategy: The Quest for Competitive Advantage 19e. New York, NY: McGraw-Hill/Irwin.
![“Caterpillar currently operates in more than 180 countries worldwide and in 2014, generated
more than half its annual sales outside the United States. Operating on a global scale requires us to work
within a variety of different cultures, governmental systems and economic environments”
(Caterpillar.com, 2015). Since Caterpillar follows a globalized strategy the all parts that are manufactured
worldwide include “central design control ensures that these parts are interchangeable and that they will
fit on any appropriate Caterpillar, regardless of its country of origin. This is a global strategy because
each country’s operation is viewed as part of a single worldwide plan” (Difference, 2015, ¶ 22). By
utilizing a globalized strategy Caterpillar became a “direct participant in local economies [and] the
company achieved lower costs without sacrificing local product flexibility” (Hout, Porter, & Rudden,
1982, ¶ 23).With their parts being interchangeable Caterpillar has been able to achieve “economies of
scale” Caterpillar has also been able to exploit “both its worldwide sales volume and its existing market
for parts revenue. Competitors [were unable] to match its costs of profits and therefore could not” (Hout,
et al., 1982, ¶ 45) compete with Caterpillar in the same level.
While using a globalized strategy has a lot of benefits and has helped Caterpillar become a global
leader in their industry, “the best approach is usually neither purely domestic nor purely global but a
combination of both. This becomes most apparent when we see the shortcomings of single-mindedly
pursuing an international strategy based on either global integration alone or domestic adaptation alone”
(Difference, 2015, ¶ 25).](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)