SWOT Analysis / TOWS Matrix for Caterpillar Inc BDR (Brazil)
Based on various researches at Oak Spring University , Caterpillar Inc BDR is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, etc
Introduction to SWOT Analysis of Caterpillar Inc BDR
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Caterpillar Inc BDR can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Caterpillar Inc BDR, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Caterpillar Inc BDR 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 Inc BDR can be done for the following purposes –
1. Strategic planning of Caterpillar Inc BDR
2. Improving business portfolio management of Caterpillar Inc BDR
3. Assessing feasibility of the new initiative in Brazil
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Caterpillar Inc BDR
Strengths of Caterpillar Inc BDR | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Caterpillar Inc BDR are -
Effective Research and Development (R&D)
– Caterpillar Inc BDR has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Caterpillar Inc BDR staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Caterpillar Inc BDR 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.
Highly skilled collaborators
– Caterpillar Inc BDR has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Caterpillar Inc BDR have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Caterpillar Inc BDR is present in almost all the verticals within the industry. This has provided Caterpillar Inc BDR 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.
Low bargaining power of suppliers
– Suppliers of Caterpillar Inc BDR in the sector have low bargaining power. Caterpillar Inc BDR has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Caterpillar Inc BDR to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Caterpillar Inc BDR has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Caterpillar Inc BDR to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Caterpillar Inc BDR is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure of Brazil is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in industry
– Caterpillar Inc BDR has clearly differentiated products in the market place. This has enabled Caterpillar Inc BDR to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Caterpillar Inc BDR to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Caterpillar Inc BDR has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Caterpillar Inc BDR 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 Caterpillar Inc BDR in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Caterpillar Inc BDR is one of the leading players in the industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Caterpillar Inc BDR has one of the best training and development program in industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses of Caterpillar Inc BDR | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Caterpillar Inc BDR are -
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 Caterpillar Inc BDR supply chain. Even after few cautionary changes, Caterpillar Inc BDR is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Caterpillar Inc BDR vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Caterpillar Inc BDR has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Caterpillar Inc BDR should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Caterpillar Inc BDR needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at Caterpillar Inc BDR can leverage the sales team experience to cultivate customer relationships as Caterpillar Inc BDR is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Caterpillar Inc BDR is dominated by functional specialists. It is not different from other players in the industry, but Caterpillar Inc BDR needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Caterpillar Inc BDR to focus more on services in the industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Caterpillar Inc BDR, it seems that company is thinking out the frontier risks that can impact industry. 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.
High cash cycle compare to competitors
Caterpillar Inc BDR 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.
Low market penetration in new markets
– Outside its home market of Brazil, Caterpillar Inc BDR needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Caterpillar Inc BDR is just above the industry average. It 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.
Interest costs
– Compare to the competition, Caterpillar Inc BDR has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Caterpillar Inc BDR 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 operating costs
– Compare to the competitors, Caterpillar Inc BDR has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Caterpillar Inc BDR lucrative customers.
Caterpillar Inc BDR Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Caterpillar Inc BDR are -
Developing new processes and practices
– Caterpillar Inc BDR can develop new processes and procedures in 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Caterpillar Inc BDR can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Caterpillar Inc BDR 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. Caterpillar Inc BDR 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Caterpillar Inc BDR can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Caterpillar Inc BDR 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 industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Caterpillar Inc BDR 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 Caterpillar Inc BDR 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.
Buying journey improvements
– Caterpillar Inc BDR can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. It 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Caterpillar Inc BDR can use these opportunities to build new business models that can help the communities that Caterpillar Inc BDR operates in. Secondly it can use opportunities from government spending in sector.
Leveraging digital technologies
– Caterpillar Inc BDR 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Caterpillar Inc BDR is facing challenges because of the dominance of functional experts in the organization. Caterpillar Inc BDR can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Caterpillar Inc BDR has opened avenues for new revenue streams for the organization in industry. This can help Caterpillar Inc BDR to build a more holistic ecosystem for Caterpillar Inc BDR products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Caterpillar Inc BDR can use the latest technology developments to improve its manufacturing and designing process in sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Caterpillar Inc BDR External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Caterpillar Inc BDR are -
Consumer confidence and its impact on Caterpillar Inc BDR 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 industry and other sectors.
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. Caterpillar Inc BDR 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.
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.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Caterpillar Inc BDR can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents Caterpillar Inc BDR with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Caterpillar Inc BDR business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Caterpillar Inc BDR 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 industry.
Environmental challenges
– Caterpillar Inc BDR 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. Caterpillar Inc BDR can take advantage of this fund but it will also bring new competitors in the industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Caterpillar Inc BDR 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 Caterpillar Inc BDR prominent markets.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Caterpillar Inc BDR needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Caterpillar Inc BDR has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Caterpillar Inc BDR needs to keep up with the evolution of technology in the 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.
Increasing wage structure of Caterpillar Inc BDR
– 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 Caterpillar Inc BDR.
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 Inc BDR Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Caterpillar Inc BDR 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 Caterpillar Inc BDR 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 Caterpillar Inc BDR 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 Inc BDR 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 Caterpillar Inc BDR needs to make to build a sustainable competitive advantage.