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Caterpillar's Restructuring for Growth

Caterpillar was losing market share to Japanese competitors due to slower development times, lower productivity, and higher costs from its functional organizational structure with centralized decision-making. It restructured into product divisions with cross-functional product teams to speed development, increase productivity 30%, and decentralize marketing decisions. The restructuring helped Caterpillar regain its reputation and market share by adopting techniques like the Japanese model of having multifunctional teams and decentralized control.

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Praveen Trivedi
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909 views8 pages

Caterpillar's Restructuring for Growth

Caterpillar was losing market share to Japanese competitors due to slower development times, lower productivity, and higher costs from its functional organizational structure with centralized decision-making. It restructured into product divisions with cross-functional product teams to speed development, increase productivity 30%, and decentralize marketing decisions. The restructuring helped Caterpillar regain its reputation and market share by adopting techniques like the Japanese model of having multifunctional teams and decentralized control.

Uploaded by

Praveen Trivedi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

A New Caterpillar

Emerges

Submitted by: SLG 5 Section C

Niraj Narendra Shirsat 2010152


Pankaj Arora 2010153
Pankhuri Pandey 2010154
Paul Mampilly Augustine 2010155
Praveen Trivedi 2010156
Preetkamal Kaur 2010157
Priyam Gupta 2010158
CATERPILLAR : Construction
Equipment Company

 Had a reputation for low cost of manufacturing


along with excellent distribution & after sales
services.

 Intense competition from Japanese


manufacturers.

 Losing out on reputation and market share


JAPANESE WAY
Low cost of manufacturing due

 Cross-functional teams: relied heavily on teams of


people from different functions for product development

 Decentralized control: very decentralized in their


decision making process, decisions in hands of people
most familiar with the product

 Updated factories :Latest techniques in robotics, JIT


inventory, flexible manufacturing technology
OLD ORGANIZATIONAL
STRUCTURE
 Company was organised based on functional basis.

 Decision-making process was highly centralized


 Department heads such as manufacturing made decisions and
sent them down the hierarchy.

 No use of latest techniques in robotics, just in time


inventory systems and flexible manufacturing
technology.
PROBLEMS

The result was Slow


development
time

Eroded
Lower
Caterpillar’s
productivity market
share.

Higher
costs
RESTRUCTURING : DONALD V.
FITES
4 centralized support divisions & 14 product divisions were
created
• Each was a profit centre with responsibility for profits & losses, and return-on-
investment goals.

Cross functional teams introduced with each product


development team
• Each division had cross-functional product teams responsible for
• marketing, product design & manufacturing to increase productivity.
• Requiring marketing, engineering & manufacturing to work together reduced
product development time by 50%.

Marketing decisions were decentralized to the regional level for


rapid response time.

Manufacturing upgraded its facilities, used product teams, and


increased productivity 30%.
Gains from restructuring
 Full advantages of
 Product teams: from functional basis to product basis. Product
team structure in which cross functional teams are responsible for
all aspects of product performance results in efficient production
with better product quality at lower cost

Decentralized decision making: though it continued to


have centralized R&D & purchasing

Plant modernization resulted into 30% productivity


increase.
Thank you

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