To What Extent Was Market Maturity the Cause of Caterpillar Restructuring? Critically Examine the Extent the New Strategy Transformed Market, Productive and Financial Performance.

To what extent was market maturity the cause of Caterpillar’s restructuring? Critically examine the extent the new strategy transformed market, productive and financial performance.

During the late 1980s and the early 1990s Caterpillar Inc. (CAT), a $30 billion colossal in the earth-moving equipment (EME), engines and power systems, underwent a significant restructure. This was because in 1982 CAT posted its first annual lost of its 50-years history. The industry-wide downturn was partly the result of the cyclical nature of the construction equipment industry but also the consequence of an increased foreign competition fuelled by a strong dollar. The inflation and the market maturity combined turn CAT’s markets into attractive new opportunities for competitors, especially for the Japanese Komatsu. In response, Cat launched a $1.8 billion manufacturing modernization program called Plant With A Future (PWAF). The aim of this is essay is therefore to evaluate to what extent Caterpillar underwent restructuring because of market maturity. Also, restructuring transformed the market, the productive and financial performance of the company. Accordingly, how CAT opened to diversification, how it improved its productivity through lean production and the “Assembly highway”, and what implementation the use of the Return on Assets (ROA) bought to the company is going to be analyzed.

Before analysing to what extent market maturity bought to Caterpillar’s restructuring, it is important to define this concept. The maturity point is reached in markets that have a cyclical pattern where demand is determined by the replacement of the existing product. Accordingly, if costumers decide to postpone their replacement purchase, the consequence is a fall in retail sales. Problems associated with mature markets therefore 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 in...