Caterpillar Inc.

Core competencies

Prahalad and Hamel (1990 ) define core competencies as those capabilities which are central to an organization 's achievement of a sustainable competitive advantage . For the capability to be termed as a core competence , it has to meet four criteria as spelled out by the VRIO framework . It must be valuable , rare , inimitable , and the organization must be sufficiently organized to exploit it . While Caterpillar Inc has a very broad product line and wide geographical spread , this can be easily replicated by its rivals through a deliberate strategy of market

development and product diversification . Its supply chain capabilities can also be easily replicated through undertaking demand and supply chain integration activities such as maintaining low inventory levels and adopting flexible manufacturing systems . Its main core competencies therefore are its innovation capabilities , its superior financial position , and its superior customer service

Strategy

Strategy formulation has been described as taking place at three levels the corporate level , business level , and the functional level . Robbins and Coulter (2005 ) identify three types of corporate strategies . These include growth , retrenchment , and stability strategies . Traditionally Caterpillar has pursued the growth strategy which involves aggressively expanding into new markets and introducing new products so that by 2008 it had more than 300 products . Apart from its domestic US market , it has spread to most countries in Asia Pacific , Africa , Europe and Middle East , and Latin America

However , prompted by the increasingly cyclical nature of the industries across which it operates as well as the recent global economic recession , the firm put brakes on its growth strategy and pursued a retrenchment strategy instead . This was characterized by cost reduction initiatives , closure of underperforming business units , and employee layoffs (Caterpillar Inc , 2009 . According to its annual report , the firm 's trough planning ' initiative has involved

Scaling down the...