1. What are the dynamics of competition in the heavy construction equipment industry?
Students should respond to this question by suggesting as list of factors:
? The need to establish economies of scale helps reduce cost; capturing a large market share was therefore essential.
? The low volume of global sales intensifies competition.
? Fierce worldwide competition drives firms to seek alliances with global competitors.
? The heavy reliance on outsourcing reduces costs.
? Sales of parts and components are more profitable and less cyclical than sales of original equipment.
? Equipment users in developing countries keep their machines in service much longer than users in the U.S., Europe, and Japan, and therefore the potential for profits (resulting from the ongoing sales of replacement parts and components) is considerably higher in developing countries.
? A widespread distribution and service network is critical for effective competition because machines operate in tough environments, break down frequently, and as a result, "downtime" is very costly.
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2. What were the sources of Caterpillar's spectacular success up to the early 1980s ?
Students may suggest the following points:
? Cat's joint ventures with global competitors such as Mitsubishi Heavy Industries
? Cat's excellent reputation as a supplier of high quality equipment
? A marketing organization based on a stable, longstanding, independent dealer network that was stra ...