Case Study Description of Caterpillar in Europe: Inventory Reorder Policies
This exercise is designed to introduce students to (Q,R) inventory reorder policies, where Q is the order size and R the reorder point. The exercise is motivated by the issues faced by Caterpillar (CAT) in managing its parts warehouse in Europe. The Caterpillar example is based on information obtained from their website, but the numbers utilized in the exercises and assignment are fabricated to achieve the pedagogical objective.
Swot Analysis of "Caterpillar in Europe: Inventory Reorder Policies" written by Michael T. Pich, Ludo Van Der Heyden includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Reorder Caterpillar facing as an external strategic factors. Some of the topics covered in Caterpillar in Europe: Inventory Reorder Policies case study are - Strategic Management Strategies, Operations management and Technology & Operations.
Some of the macro environment factors that can be used to understand the Caterpillar in Europe: Inventory Reorder Policies casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies,
increasing energy prices, wage bills are increasing, etc
Introduction to SWOT Analysis of Caterpillar in Europe: Inventory Reorder Policies
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Caterpillar in Europe: Inventory Reorder Policies case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Reorder Caterpillar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Reorder Caterpillar operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Caterpillar in Europe: Inventory Reorder Policies can be done for the following purposes –
1. Strategic planning using facts provided in Caterpillar in Europe: Inventory Reorder Policies case study
2. Improving business portfolio management of Reorder Caterpillar
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Reorder Caterpillar
Strengths Caterpillar in Europe: Inventory Reorder Policies | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Reorder Caterpillar in Caterpillar in Europe: Inventory Reorder Policies Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Reorder Caterpillar in the sector have low bargaining power. Caterpillar in Europe: Inventory Reorder Policies has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Reorder Caterpillar to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Reorder Caterpillar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Reorder Caterpillar has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that Reorder Caterpillar has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Reorder Caterpillar has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Reorder Caterpillar has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Reorder Caterpillar has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Caterpillar in Europe: Inventory Reorder Policies Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Reorder Caterpillar is present in almost all the verticals within the industry. This has provided firm in Caterpillar in Europe: Inventory Reorder Policies case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Technology & Operations industry
– Caterpillar in Europe: Inventory Reorder Policies firm has clearly differentiated products in the market place. This has enabled Reorder Caterpillar to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Reorder Caterpillar to invest into research and development (R&D) and innovation.
Innovation driven organization
– Reorder Caterpillar is one of the most innovative firm in sector. Manager in Caterpillar in Europe: Inventory Reorder Policies Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Reorder Caterpillar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Reorder Caterpillar has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Caterpillar in Europe: Inventory Reorder Policies - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Reorder Caterpillar are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Reorder Caterpillar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Reorder Caterpillar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Caterpillar in Europe: Inventory Reorder Policies | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Caterpillar in Europe: Inventory Reorder Policies are -
Slow to strategic competitive environment developments
– As Caterpillar in Europe: Inventory Reorder Policies HBR case study mentions - Reorder Caterpillar takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Reorder Caterpillar, firm in the HBR case study Caterpillar in Europe: Inventory Reorder Policies needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Reorder Caterpillar has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Reorder Caterpillar has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Reorder Caterpillar needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Products dominated business model
– Even though Reorder Caterpillar has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Caterpillar in Europe: Inventory Reorder Policies should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Caterpillar in Europe: Inventory Reorder Policies, is just above the industry average. Reorder Caterpillar needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Reorder Caterpillar supply chain. Even after few cautionary changes mentioned in the HBR case study - Caterpillar in Europe: Inventory Reorder Policies, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Reorder Caterpillar vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael T. Pich, Ludo Van Der Heyden suggests that, Reorder Caterpillar is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Caterpillar in Europe: Inventory Reorder Policies has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Reorder Caterpillar 's lucrative customers.
High cash cycle compare to competitors
Reorder Caterpillar has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Caterpillar in Europe: Inventory Reorder Policies | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Caterpillar in Europe: Inventory Reorder Policies are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Reorder Caterpillar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Reorder Caterpillar to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Reorder Caterpillar can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Reorder Caterpillar has opened avenues for new revenue streams for the organization in the industry. This can help Reorder Caterpillar to build a more holistic ecosystem as suggested in the Caterpillar in Europe: Inventory Reorder Policies case study. Reorder Caterpillar can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Reorder Caterpillar can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Reorder Caterpillar in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Loyalty marketing
– Reorder Caterpillar has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Reorder Caterpillar can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Reorder Caterpillar can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Caterpillar in Europe: Inventory Reorder Policies, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Reorder Caterpillar can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Reorder Caterpillar is facing challenges because of the dominance of functional experts in the organization. Caterpillar in Europe: Inventory Reorder Policies case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Reorder Caterpillar can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Reorder Caterpillar can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Reorder Caterpillar can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Caterpillar in Europe: Inventory Reorder Policies External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Caterpillar in Europe: Inventory Reorder Policies are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Reorder Caterpillar will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Caterpillar in Europe: Inventory Reorder Policies, Reorder Caterpillar may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Reorder Caterpillar
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Reorder Caterpillar.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Reorder Caterpillar can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Caterpillar in Europe: Inventory Reorder Policies .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Reorder Caterpillar in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Shortening product life cycle
– it is one of the major threat that Reorder Caterpillar is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Reorder Caterpillar can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Environmental challenges
– Reorder Caterpillar needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Reorder Caterpillar can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Reorder Caterpillar business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Reorder Caterpillar demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Reorder Caterpillar high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Caterpillar in Europe: Inventory Reorder Policies Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Caterpillar in Europe: Inventory Reorder Policies needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Caterpillar in Europe: Inventory Reorder Policies is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Caterpillar in Europe: Inventory Reorder Policies is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Caterpillar in Europe: Inventory Reorder Policies is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Reorder Caterpillar needs to make to build a sustainable competitive advantage.