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Table of Contents 1. Introduction 22 .Company History ....23. CATs Organizational Purpose .. 33.1Company Discription.44. CATs Strategic Position ... 64.1PESTEL Analysis 64.2SWOT Analysis ...104.3PORTERS FIVE FORCES Analysis .125. 11 years performance result..146. Cat Financial Announces 2014 Year-End Results147 .Key Success Factors .218. Competitor Analysis 229. Strategic Direction .. 239.1Market Development ...239.2Caterpillar as an Innovator ...239.3Direction Technology ...2410. CATs Corporate Strategy Analysis ...2411. Strategy Into action .... .2511.1CAT strategic Vision ..2611.2Key Strategic Changes .. .2612. Recommendations .. .2713. References .. .29

1. Introduction This report presents the in-depth insights in formulation of strategies and their implementation by CAT inc. as of today standing as worlds largest Earth moving machinery manufacturer. With their product lines expanding from construction equipments, diesel and natural gas engines, and industrial gas turbines, Financial sector, Retail Industry and many more.

2. Company HistoryCaterpillar Incorporation or also known by their short form CAT started out their journey in 1859(Caterpillar.com, 2014). It all started with the American dream of 3 brothers Charles, Williams and Ames Holt figured a problem for farmers to have to transport their grains to the more cleaner storage and best observed by such innovative mind Holt introduced his first cleaner in mindset to clean the grains by machine while harvesting them by eliminating the costly time required to transport them to another location.. And By 1863 Holt had found a way to put together a company which is todays Caterpillar Inc (Caterpillar.com, 2014). Further Holt brother founded Stockton Wheel Company and this expanded venture manufactured wooden tires which marked the firms first experiences with manufacturing vehicular products which would set company core strengths in years to come. Holt brother further focused their attention on another farming problem of their truck being heavy and they were getting stuck in the fertile soil and for that Holt introduced the most innovative design in vehicular industry of the 20th century which he called Platform wheel engine (Caterpillar.com, 2014), In 1904 Charles Clemens, company photographer noticed the trucks crawled like caterpillars and hence there was the moment that named what today stands as Caterpillar Incorporated. Later, British military decided they could haul goods with Tractor Bulldozer when World Was I broke down. British government later on decided to use Caterpillar Tracks on tanks when they noticed their durability. Tractor Bulldozer was considered so much useful that it was listed among the top 4 machines which won war in the Pacific along with Submarine, Radar and airplanes. Caterpillar was growing mainly because of the War and within moments of companys major growth World War I was over, this lead caterpillar to a major recession phase because their major contracts relied on Military contracts which were put on hold causing caterpillar to victimize the loss of 1 million dollars a day pushing them to cut cost on employment (Ukeassays.com, 2014) To survive Caterpillar implied various strategies. they accommodate their clients going through the recessions they created easier payment methods such as Caterpillar Leasing Company, Caterpillar Financial Services Corporation, which offered equipment financing options (Braciszewski et al., 2010)

3. Caterpillars Organizational Purpose Company Values Integrity, Excellence, Teamwork, Commitment and sustainability (Caterpillar.com, 2014)Mission Enable economic growth through infrastructure and energy development, and to provide solutions that support communities and protect the planet (Caterpillar.com, 2014) 3.1 Company DescriptionCaterpillar, Inc. is engaged in the manufacturing of construction & mining equipment, diesel & natural gas engines, industrial gas turbines and diesel-electric locomotives. The company provides technology for construction, transportation, mining, forestry, energy, logistics, electronics, financing a...ProfitabilityGross Margin26.36Operating Margin12.21Pretax Margin9.21Net Margin6.70Return on Assets4.36Return on Equity19.68Return on Total Capital6.45Return on Invested Capital8.03Capital StructureTotal Debt to Total Equity234.59Total Debt to Total Capital70.11Total Debt to Total Assets46.39Long-Term Debt to Equity165.91Long-Term Debt to Total Capital49.59

Source Caterpillar.com, 2014)Vision A world in which peoples basic needs, such as shelter, clean water, sanitation, food and reliable power fulfilled in an environmentally sustainable way and a company that improves the quality of environment and communities where we live and work (Caterpillar.com, 2014).

Core Strategy To provide work environments, products, services and solutions that make productive and efficient use of resources as we strive to achieve our vision (caterpillar.com, 2014).

4. CATs Strategic position 4.1 PESTEL ANALYSIS

Political FactorsEconomic Factors

Worldwide political awareness.Bureaucracy issues Politics and tax policiesTrade policies

Growth RateInflationMonetary PoliciesExchange Rates

Social FactorTechnological Factor

Health ConsciousnessEducation LevelAttitudes towards green policyEmphasis on safety

Infrastructure LevelTechnological ChangeCommunication LevelInternet Infrastructure

Environmental FactorsLegal Factors

Climate ChangePollution and Waste Management Attitude towards Ecological productsRecycling

Consumer ProtectionE-commerce FactorsHealth and safety lawCopyright, Patents Law

(Source Jurevicius, 2014)

Political Factor Internet has brought a lot of change and awareness all thought Caterpillar has seen the technological change it must be aware of the consumer awareness on technology. Trade Policies are one of the most important factor in political scenarios, caterpillars business expands from country to country and they must always be prepared for these policies changing or vice versa.

Environmental Factor Growth Rate is a crucial factor to look upon because Indiais expected to grow at 6.3 per cent this year and 6.5 per cent in 2016 by when it is likely to cross China's projected growth rate (The Economic Times, 2007). Exchange rates are varying day by day and its like the never ending battle against the countries to remain at the top and as a global business planner it should be aware of these fluctuations in advance.Social Factors People are aware and are becoming health aware everyday and for proactive business decision its strategy toward heavy machinery producing toxic gases may affect the brand value.

Technological Factor From the day Caterpillar was founded it has proved to be a technological advanced organization but the scope is increasing day by day and keeping up with the technology is a hard strategy as evolution is technology is in a rapid phase even more when the company initially started. Internet and e-commerce have become a daily need and caterpillars dependence in only few sectors such as heavy machinery and the strategy must be re-thought.

4.2 SWOT ANAYSIS StrengthWeakness

Market Leader with the highest amount of market shares.

Growth strategy through production rather than acquisition.

Outsourced distribution links all over the world.

Highly recognized brand identity,Oldest in the manufacturing of heavy machinery.

6 sigma methods first user.Lack of communication between managers around distribution channel.

Employees reduction strategy backfires with lack of trust within the organization.

OpportunitiesThreats

Expansions in developing countries such as Pakistan, Nepal, Bhutan etc.

Market share growth from expansion interests potential.

Research in hydrogen fuel and turbines Shows potential growth strategy.

Recent joint venture and acquisition opportunities.

Global Market Low investments in Research and development since follow much outsourcing.

Economic recession as of 2008 which nearly killed the organization.

With power comes responsibility and will to follow them as more hardened emission laws are being executed.

Long term debt issues

Independent Dealers and Dealers confidence issues.

Source - (shen, 2015)

4.3 PORTERS FIVE FORCES MODEL ANALYSIS -

Threat of new entrants Threat of new entrants in not much of a threat to Caterpillar because of its long history in its field and being the world leader in its market segment as this market segment requires huge investment and resources and investors would be hesitant to invest when they know such high amount of competition is available. Rather than focusing on threats to new entrants Caterpillar should focus on competing current rivals such as Komatsu and others market share holders.

Intensity of competitive rivalry Caterpillar being a market leader with maximum shares in their pocket but have a very competitive rivalry against Komatsu and Hitachi and others and in any case if caterpillar get stuck with bad business strategy their market segment could be easily over taken by other competitors and Komatsu had proved to be a worthy rival from the beginning of 1960s.

Threat of substitute Threat of substitute product is very high since their rivals Komatsu, Hitachi have been in constant race to win CATs market share providing customer with better ended products with lower rates than Caterpillar, hence CAT must generate strategies to cut down their manufacturing cost with had been effected with the distribution channels the company is following. CATs high end products may not be suitable lower developing markets hence CAT has a strong possibility of substitute products.

Bargaining power of customers The bargaining power of customers in very moderate because CATs strategy with the independent dealers across the world and the pricing is done according to the market.

Bargaining power of suppliers Like the bargaining power of customers this section is also moderate as because their raw materials are heavy and cost very expensive to build and increase in supply rates may prove to be big issue for the organizations final pricing hence with close relation with their outsourced dealers and manufacturers CATs bargaining power of suppliers in moderate.

5. 11 Year Performance Result

6. Caterpillar Financial Services Corporation 4Q 2014 Earnings Release January 27, 2015 FOR IMMEDIATE RELEASE Cat Financial Announces 2014 Year-End Results Full-Year 2014 vs. Full-Year 2013 Cat Financial reported revenues of $2.89 billion for 2014, an increase of $100 million, or 4 percent, compared with 2013. Profit after tax was $535 million, a $22 million, or 4 percent, increase from 2013. The increase in revenues was primarily due to a $110 million favorable impact from higher average earning assets, partially offset by a $20 million unfavorable impact from lower average financing rates. Profit before income taxes was $753 million for 2014, compared with $694 million for 2013. The increase was primarily due to a $49 million favorable net impact from higher average earning assets and a $40 million improvement in net yield on average earning assets, partially offset by a $38 million increase in provision for credit losses (largely a result of the absence of a favorable adjustment that occurred during the fourth quarter of 2013). The provision for income taxes reflects an annual tax rate of 28 percent for 2014, compared with 25 percent for 2013. The 2013 annual tax rate of 25 percent excludes a benefit of $7 million, reflecting the impact of the American Taxpayer Relief Act. The increase in the annual tax rate is primarily due to an unfavorable geographic mix of profits from a tax perspective. Retail new business volume for 2014 was $12.68 billion, a decrease of $414 million, or 3 percent, from 2013. The decrease was primarily related to lower volume in Mining and Asia, partially offset by increases in North America. At the end of 2014, past dues were 2.17 percent, compared with 2.81 percent at the end of the third quarter of 2014 and 2.47 percent at the end of 2013. Write-offs, net of recoveries, were $99 million for 2014, compared with $124 million for 2013. Full-year 2014 write-offs, net of recoveries, were 0.35 percent of average annual retail portfolio, compared with 0.46 percent in 2013. -2- (more) At year-end 2014, Cat Financial's allowance for credit losses totaled $401 million or 1.36 percent of net finance receivables, compared with $387 million or 1.33 percent of net finance receivables at year-end 2013. The overall increase of $14 million in allowance for credit losses during the year reflects a $9 million increase associated with the higher allowance rate and a $5 million increase in allowance due to an increase in the Cat Financial net finance receivables portfolio. The higher allowance rate reflects an allowance increase tied to adverse political and economic developments in several markets that we currently serve, partially offset by write-offs taken in 2014. Fourth-Quarter 2014 vs. Fourth-Quarter 2013 Cat Financial reported fourth-quarter 2014 revenues of $703 million, a decrease of $8 million, or 1 percent, compared with the fourth quarter of 2013. Fourth-quarter 2014 profit after tax was $108 million, a $50 million, or 32 percent, decrease from the fourth quarter of 2013. The decrease in revenues was primarily due to a $23 million unfavorable impact from lower average financing rates, partially offset by a $14 million favorable impact from higher average earning assets. Profit before income taxes was $166 million for the fourth quarter of 2014, compared with $204 million for the fourth quarter of 2013. The decrease was primarily due to $23 million higher provision for credit losses (largely a result of the absence of a favorable adjustment that occurred during the fourth quarter of 2013) and the absence of a $17 million currency gain that occurred during the fourth quarter of 2013. The provision for income taxes reflects an annual tax rate of 28 percent in the fourth quarter of 2014, compared with 25 percent in the fourth quarter of 2013. The increase in the annual tax rate is primarily due to an unfavorable geographic mix of profits from a tax perspective. During the fourth quarter of 2014, retail new business volume was $3.31 billion, a decrease of $330 million, or 9 percent, from the fourth quarter of 2013. The decrease was primarily related to lower volume in Mining, Asia and Europe, partially offset by increases in North America. We are pleased with the overall performance of our business during 2014 including continued strong portfolio health during the year, said Kent Adams, president of Cat Financial and vice president with responsibility for the Financial Products Division of Caterpillar Inc. With our ongoing focus on expanding our ability to serve customers globally through financial services excellence, we remain well-positioned to serve the needs of Caterpillar, Cat dealers and our growing customer base worldwide. -3- (more) For over 30 years, Cat Financial, a wholly owned subsidiary of Caterpillar Inc., has been providing financial service excellence to customers. The company offers a wide range of financing alternatives to customers and Cat dealers for Cat machinery and engines, Solar gas turbines and other equipment and marine vessels. Cat Financial has offices and subsidiaries located throughout North and South America, Asia, Australia and Europe, with its headquarters in Nashville, Tennessee. Caterpillar contact: Rachel Potts, 309-675-6892 or 309-573-3444, Potts_Rachel_A@cat.com -4- (more) STATISTICAL HIGHLIGHTS: FOURTH-QUARTER 2014 VS. FOURTH-QUARTER 2013 (ENDED DECEMBER 31) (Millions of dollars) 2014 2013 CHANGE Revenues $ 703 $ 711 (1)% Profit Before Income Taxes $ 166 $ 204 (19)% Profit After Tax $ 108 $ 158 (32)% Retail New Business Volume $ 3,308 $ 3,638 (9)% Total Assets $ 35,176 $ 35,114 % FULL-YEAR 2014 VS. FULL-YEAR 2013 (ENDED DECEMBER 31) (Millions of dollars) 2014 2013 CHANGE Revenues $ 2,885 $ 2,785 4 % Profit Before Income Taxes $ 753 $ 694 9 % Profit After Tax $ 535 $ 513 4 % Retail New Business Volume $ 12,676 $ 13,090 (3)% -5- Caterpillar Public Release # CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this earnings release may be considered "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements may relate to future events or our future financial performance, which may involve known and unknown risks and uncertainties and other factors that may cause our actual results, levels of activity, performance or achievement to be materially different from those expressed or implied by any forward-looking statements. From time to time, we may also provide forward-looking statements in oral presentations to the public or in other materials we issue to the public. Forward-looking statements give current expectations or forecasts of future events about the company. You may identify these statements by the fact that they do not relate to historical or current facts and may use words such as "believes," "expects," "estimates," "anticipates," "will," "should," "plan," "project," "intend," "could" and similar words or phrases. These statements are only predictions. Actual events or results may differ materially due to factors that affect international businesses, including changes in economic conditions and disruptions in the global financial and credit markets, and changes in laws and regulations (including regulations implemented under the Dodd-Frank Wall Street Reform and Consumer Protection Act) and political stability, as well as factors specific to Cat Financial and the markets we serve, including the market's acceptance of our products and services, the creditworthiness of our customers, interest rate and currency rate fluctuations and estimated residual values of leased equipment. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. Moreover, we do not assume responsibility for the accuracy and completeness of those statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our amended annual report on Form 10-K/A for the fiscal year ended December 31, 2013 and similar sections in our quarterly reports on Form 10-Q, that describe risks and factors that could cause results to differ materially from those projected in the forward-looking statements. Cat Financial undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

7. 7.Key success factors -

Manufacturing and distribution

Marketing and Brand nameKey Success Factors

Quality and durability

LogisticsSource - (Weems et al., 2014)

One of Caterpillars noticeable long term strategies was Manufacturing and distribution, as Caterpillar does most of its manufacturing from off sourced manufacturing houses allowing total control over the quality of the product and Caterpillars international distribution network are handled by independent dealers hence making it easier to communicate.

8. Competitor Analysis

CAT

Case/New/Holland

Volvo

Deere and Komatsu

Capital40.11 B2.37 B18.53 B971.73 M

Employees7,9202570081,0803.0 K

Quarterly revenue growth17.20%-0.40%13.0%22.60%

Revenue35.21 B12.54 B29.05 B592.72 M

Source - (Young, 2005)

9. Strategic Direction 9.1 Market Development Caterpillar being the world leader in their industry new entrant threat is very low and with only few competitors in market Caterpillar should be more focused on market development rather than other strategic development, Komatsu have proved to be a worthy competitor from the past decades with their innovative strategic choices and high investment in resource and development for technological advancement.

9.2 Caterpillar as an Innovator CATs Innovation strategy dated back to the visions of Holt brothers, the entrepreneurial instincts of Holt brothers visualized what we know as Caterpillar Inc. today. CATs overall business scenario of Manufacturing, Distribution, Marketing and pricing and with their executives of each section reporting to the president of the company their strategy of distributing the work force and implications lead Caterpillar from a dead company to the list of fortune 500 companies presently. For them to tackle back the recession company implemented most of their strategy as not good business decisions but as functional decisions.

9.3 Technology Caterpillar has been a technological advancement leaper since from their beginning days Holt adopted technology to make farming easier by marketing innovative products such as Caterpillar wheel structure, to first grain cleaner in the world, CAT implemented various technologies throughout its development phases and relations with Ford in 1970 CAT figured out manufacturing smaller diesel engines can be profitable (Caterpillar.com, 2015). Further after their named changed from Caterpillar Tractor Company to Caterpillar Inc. CAT focused their future strategies into Technology advancement for automated manufacturing process and modernization for keeping up with their major competitor Komatsu. Caterpillar then focused expanding their businesses from heavy machinery to retail to financial sector to technological devices such as smart phones.

10. CATs Corporate Strategy Analysis Caterpillar having a long history of ups and downs their corporate strategy has been slowly built keeping in mind the significant market share by making entry and dealing with extremely competitive rivals such as KOMATSU. Caterpillars corporate strategy focuses on Growth, cost reduction, product support, quality and reliability, people, emerging markets and 6sigma just to name a few among many(Young, 2005).1. Growth Currently CATs growth strategy is focused on Asia pacific markets because of high growth potentiality in developing countries where heavy building machinery are the most. According to the Caterpillar corporate strategy the Asia/Pacific region has; 42% of the worlds population, 44% of the worlds coal reserves, 62% of the worlds iron ore, and 40%+ of the worlds gas production (Young, 2005). Caterpillar need to ensure that these developing countries are economically booming and they need to build and that is when CAT needs to maintain their heavy machinery suppliers since the most of their revenue is depended on heavy machinery and building machinery.

2. 6 Sigma method - is a methodology to reduce defects and eliminate waste through the use of statistical analysis, quality tools and a structured approach to project management and to reduce costs and generate growth while providing high-quality product or service which exceeds customer expectations (Young, 2005)

Also, Caterpillar states that since they implemented 6sigma the companys results far exceeded the companys aggressive goals and was the key enabler of significant improvement in core operating costs. Using this strategy company was able to cut their costs by 23% from 2000 to 2003 and 35+% from 2003 to 2006 and also improved services from 94%-96% from 2000-2003. (Caterpillar Inc., 1996)

11.Strategy into Action 11.1 CATs Strategic Visions Caterpillar as a strategic company looks into their future and they released a detail plan for 2020 The strategy update includes a vision of the future where they focus on quality, production capability and cost (Caterpillar.com, 2015)Caterpillar is the recognized leader everywhere it does business. Our products, services and solutions help our customers succeed. Our distribution system is a competitive advantage. Our supply chain is world class. Our business model drives superior results. Our people are talented and liveOurValues inAction. Our work today helps our customers create a more sustainable world. Our financial performance consistently rewards our stockholders. Goals for the next five years are focused in three areas (Inc., 2015): Delivering superior results Developing the best team of people Becoming the global leader everywhere we do business

11.2 Key Strategic Changes

1. Outsourcing Caterpillars recession was causing them to suffer losses ranging to 1 million dollar per month, and a raw estimation of $430 million dollars previously, During this period February 1985 George A. Schaefer was named chairman and CEO of Caterpillar, and Donald V. Fites was named president(Caterpillar Inc., 1996). Schaefer was a visionary leader and envisioned that CAT can get out of this recession they majorly shifted their production and distribution channels overseas and believed because of high value of Dollar overseas were important for company survival.

2. Factory Modernization - And secondly, Caterpillar embarked on a $600 million factory-modernization program(Caterpillar Inc., 1996)and the idea behind this strategy was It would reduce permanently the labor force needed to make tractors by automating as many manufacturing processes as possible(Caterpillar Inc., 1996)During that year Caterpillar approximated a employee cut down of almost 2300 workers. This strategy would help in outsourcing and bring direct competition with Komatsu which was Caterpillars most feared Competition because of their avaibility of modern highly automated manufacturing Plants. Later in 1986 CAT announced their named changing from Caterpillar Tractor Company to Caterpillar Inc. (Caterpillar Inc., 1996)

12. Recommendations Caterpillar is a strategic organizations but continually fails to recognize technological factors in their way, as of 2015, green concepts have been around for a while and global warming issues are bothering organizations to change their strategy from time to time. As being a global leader my suggestions to Caterpillar are to keep constant focus on research and development as this function have been very inactive form past decade of their establishment Bio-diesels concepts have been introduced for a while now caterpillar must focus on more green related issues because this may bring huge problems to company because customers are aware of health due to drastic change in IT through World Wide Web and internet. Furthermore CAT should research and develop more green products to compete in todays market.Caterpillar should also focus on global relations (Young, 2005). As globalization is taking place virtually to fully understand their worldwide customers CAT should research in global markets. Furthermore, Caterpillars outsourcing strategy is going out of date and hence CAT should focus on establishing local manufacturing plants around the globe to further reduce production cost and compete with their most feared competitor KOMATSU. Product Diversification plays important role in todays market, a major suggestion to Cat would be to diversify their products, recently global downtown lead to downturn in caterpillars sale by 25% and since their major income is depended on only heavy machineries, diversifying their investment to different scenarios can be profitable.And finally, to have a strong hold upon their current market shares continuously research and development must be initiated. As being the market leader in their products, competitors give out strong reply to Caterpillar such as from KOMATSU and HITACHI. Caterpillar must focus on using their current company strengths such as brand name, company history, customer satisfaction, and maximize business competencies. And always keep in mind to not lose their current market share and thrive toward gaining more as their vision states being the best in everywhere they do business.

13. References Braciszewski, S., Humphrey, B., Loos, K., Martyn, J., Oza, M. and Stankevicius, M. (2010).Case Study on Caterpillar Inc. "An evaluation of current and future potentiality of Caterpillar. 1st ed.Caterpillar Inc. (1996). In:Caterpillar Inc. International Directory of Company History, 1st ed. International Directory of Company Histories.Caterpillar.com, (2015).History. [online] Available at: http://www.caterpillar.com/en/company/history.html [Accessed 24 Jan. 2015].Caterpillar.com, (2015).Vision, Mission, Strategy. [online] Available at: http://www.caterpillar.com/en/company/sustainability/vision-mission-strategy.html [Accessed 12 Nov. 2014].Inc., C. (2015).Caterpillar Announces Updated Strategy. [online] Prnewswire.com. Available at: http://www.prnewswire.com/news-releases/caterpillar-announces-updated-strategy-95850204.html [Accessed 30 Jan. 2015].Jurevicius, O. (2015).PEST & PESTEL Analysis | Strategic Management Insight. [online] Strategicmanagementinsight.com. Available at: http://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html [Accessed 25 Jan. 2015].

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