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 - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, technology disruption, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy,
digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
Superior customer experience
– The customer experience strategy of Reorder Caterpillar in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Organizational Resilience of Reorder Caterpillar
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Reorder Caterpillar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Ability to recruit top talent
– Reorder Caterpillar is one of the leading recruiters in the industry. Managers in the Caterpillar in Europe: Inventory Reorder Policies are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Operational resilience
– The operational resilience strategy in the Caterpillar in Europe: Inventory Reorder Policies Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Technology & Operations field
– Reorder Caterpillar is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Reorder Caterpillar in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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 decision making process
– As mentioned earlier in the report, Reorder Caterpillar has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Reorder Caterpillar even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Caterpillar in Europe: Inventory Reorder Policies HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Reorder Caterpillar has relatively successful track record of launching new products.
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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Caterpillar in Europe: Inventory Reorder Policies, it seems that the employees of Reorder Caterpillar don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Reorder Caterpillar is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Caterpillar in Europe: Inventory Reorder Policies can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Caterpillar in Europe: Inventory Reorder Policies, it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Reorder Caterpillar can use these opportunities to build new business models that can help the communities that Reorder Caterpillar operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Reorder Caterpillar in the consumer business. Now Reorder Caterpillar can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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.
Using analytics as competitive advantage
– Reorder Caterpillar has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Caterpillar in Europe: Inventory Reorder Policies - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Reorder Caterpillar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Buying journey improvements
– Reorder Caterpillar can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Caterpillar in Europe: Inventory Reorder Policies suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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 -
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Reorder Caterpillar in the Technology & Operations sector and impact the bottomline of the organization.
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.
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.
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 .
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.
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 .
Technology acceleration in Forth Industrial Revolution
– Reorder Caterpillar has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Reorder Caterpillar needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Reorder Caterpillar can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
