Strategic Management Journal- Caterpillar Inc. key Performance Indicators
Caterpillar Inc. key Performance Indicators
Caterpillar is the world’s largest producer of mining and development hardware, modern gas turbines, and petroleum motors. Caterpillar is using appropriate measures to verify its strategic effectiveness. Caterpillar has relied on three key performance indicators; efficiency ratio, the revenue of products, and the actual spending vs. budget spending. The efficiency ratio evaluates whether the production output within a certain period consumed more direct labor than required (Mat, Trujillo, and Mylopoulos, 2017). This is essential in measuring the efficiency and productivity to measure the actual labor hours for production.
The revenue of products is essential in measuring the sales that are being generated from a specific product, thus determining the success of the product in the market (Mat, Trujillo, and Mylopoulos, 2017). Measuring the actual cost to the budgeted cost is essential in monitoring the expenses, thus enabling the company to reduce its costs. Caterpillar is relying on the data-driven methodology to monitor the success and effectiveness of their business. This involves relying on the company data to evaluate the efficacy and make data-driven decisions. The undertaking method of caterpillar has been focused around answers that enable the clients to fabricate a superior world as well as allow convey active development of the investors. Caterpillar is focused on understanding the client requirements and together accomplices, administrations, and industry-driving items that are focused on operational greatness: quality, security, as well as aggressive and lean cost discipline to foster a favorable position.
Organizational Structure at Caterpillar Inc.
Caterpillar has a divisional organizational structure. This type of structure entails groups of functions within the organization being divided into different divisions that have necessary functions and resources that support the product line. The company has divisions that have been reorganized in the organization to lower complexity and foster efficiency. This has enabled the company to deliver its goals quickly since decision making has been distributed through organized teams rather than hierarchy management. The simple organizational structure has ensured the development of their design and productivity. This is whereby the directions and decisions of the company do not rely on one individual (Ahmady et al., 2016). In this case, the company relies on a team at each level who work together to make the business decisions. These divisions have been created with reference to the type of service and product products.
Caterpillar’s organizational structure is similar to the holacracy organizational structure. Ideally, the holacracy structure is a method of decentralized governance and management in which decision making and authority are distributed to self-organizing teams rather than relying on the management hierarchy. For instance, Caterpillar has an independent board of directors that is independent and accepted by the members outside the organization. The company does not rely entirely on the management and has a short chain of command with managers in a different line of products. The decentralized structure aims at satisfying the needs of the people and getting closer to the clients.
Importance of Caterpillar Inc.’s Leadership Studying and Understanding the Company’s External and Internal environments.
The internal and external environment are considered as the factors that influence the operations of the organization. The business needs to react to anything that is impacting their operations. The internal environment consists of the elements within the business, such as management, employees, and corporate culture (Rothaermel, 2016). On the other hand, the external environment consists of the factors outside the business but influence the organization such as politics, economy, and legal factors. Understanding the external and internal environment is important in shaping the operations and the future of the business.
Caterpillar needs to learn its business environment their competitors, the legal issues that are influencing its operations, the employee issues, and their culture in order to offer solutions to various problems within their operations. How the leadership understands the business environment influences their business decision and thus impacting how the business will operate and meet their objectives. The leaders need to understand how the business environment is shifting and how these changes impact the business. For instance, understanding economic activity enables them to measure their product efficiency and understand when people purchase their product.
Caterpillar Inc.’s Competitive Position
Caterpillar has maintained its position as one of the leading businesses in the heavy equipment and construction market. The company has followed its mission of high quality and durability to address the needs of the environment and community. Caterpillar has had a positive pattern in the development market. The company has made strategies and structures that address the company’s problems.
Caterpillar has utilized intensive growth approaches to market development and market penetration to beat its competitors (Lynch and Haskins, 2019). The company lowered some of its external dangers by expanding the business. They have also relied on motivating forces to retain gifted workers. Threats have been lowered through generating reasonable items and modifications concerning their customer demands. The company has also paid attention to the utilization of resources and sustainability to avoid wastage that may hinder the company from progress.
References
Ahmady, G. A., Mehrpour, M., & Nikooravesh, A. (2016). Organizational structure. Procedia-Social and Behavioral Sciences, 230, 455-462.
Lynch, L. J., & Haskins, M. E. (2019). Caterpillar Inc. Taps the Chinese Bond Market. Darden Case No. UVA-C-2418.
Mat, A., Trujillo, J., & Mylopoulos, J. (2017). Specification and derivation of key performance indicators for business analytics. Data & Knowledge Engineering, 108(C), 30-49.
Rothaermel, F. T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.