The Caterpillar Company

The Caterpillar Company

This corporation is one of the fast growing since its inception in 1925 resulting of merger with the Holt manufacturing company. This company survived to its current market position due to the minimum competition it faced during its formation and it became the pioneer manufacturer of construction equipment of that period. Most of its products found demand during the two great world wars II and I with a further boost from the era of American construction which expanded its market and increased its revenue income. Caterpillar steadily moved in terms of performance and won contract to supply construction equipment too some of the leading construction firms of that period. It continuous smooth operation went on through the 50s to 70s due to the world war that increased the demand for its tools and the mass construction in the United States. Its market size began to shrink there after due to the end of the war where its products were highly used and the slump in construction activities in The US. This set it to stagnate in terms of sales and subsequent growth towards maturity.

It’s worth to note the significance of an organization that is said to operate in a mature market since its products market seems to be saturated and cannot grow any more. It is in this respect that cyclic demand can also be seen to be a market in which the demand changes due to external factors that influence the production and sale of the given product. Caterpillar went through this situation.

Efforts of a company to survive by boosting its products demand during cyclic and mature market constitute restructuring. Organizational restructuring therefore seeks to alter the performance of the firm positively. In that respect, this work seeks to look into restructuring in terms of the cyclic and mature market which Caterpillar Company had gone through. For it to regain its market power, it had to re-strategize through various fronts. It is significant to find out what this restructuring is and the reason behind its occurrence in the mature and cyclic market. Besides, it is imperative that the implications of the restructuring process and whether it has positively altered performance. A number of ways were available for the company’s idea of restructuring. There was this traditional approach which entails merger and acquisition by various modes like spin-offs, inter corporate sell-offs, leverage buy-outs e.t.c. The traditional method of restricting the firm seeks to maximize the wealth of shareholders. Other forms of corporate restructuring exist in the form of right sizing which constitutes outsourcing of value creation activities. Management incentive is a restructuring scheme based on the share options factor. Financial engineering via share buy-backs is also a method of restructuring backed up with debt for equity substitution.

In respect to value, merger of firms was very common and this is the period within which caterpillar was started. As caterpillar sought to merger, the divergent views on restructuring was the challenge with some faction of the management thinking that it was good while others antagonized any perceive viability of the idea. After weighing options, it was realized that the best option was to consent takeover. The challenge posed by this was the gradual observation of dwindling profit for the combined companies and the shareholders were said to be the winners. Critical analysis of the restructuring issue showed that the gains would only be achieved organizational efficiency. As the company’s management attempted to uplift the performance of the firm, there was opposition for the restructuring policy. However, the literatures on the importance of restructuring pointed out that this approach lead to better use of the company assets and maximized returns on shareholders’ value. This was particularly fuelled by the threat of restructuring to the incumbent management team who had invested on non-viable projects and unprofitable planning that worsened the efficiency of the firm. The debt factor was vital in putting pressure on the managers to work hard and achieve targets and this substantially propelled caterpillar to its current market rating. Caterpillar has managed to secure greater international recognition after improving on its employee treatment policies and emphasis on quality customer care and tailor-made products. The company has also done a number of structural changes in terms of research and development in order to improve their service delivery. It is notable that macro-phase of the restructuring is beneficial in social distribution of assets for better managers. As part of restructuring, the company has taken up global marketing strategy to overcome the cutthroat competition that has resulted from globalization.

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