Business 11th Edition by William Pride,Robert Hughes ,Jack Kapoor

Exercise 3

Caterpillar Helps the World Build
From tractors to turbines, marine engines to mining equipment, Caterpillar makes the heavy equipment that powers progress and helps the world build. Formed in 1925 from the merger of two tractor manufacturers, Caterpillar has grown from its headquarters in Peoria, Illinois, into a successful $32 billion corporation with 110 factories and business operations in 23 countries. It also offers financing, insurance, and other services for dealers and business customers that buy its industrial products.
Caterpillar's sales contribute to the global economy by creating jobs for 94,000 in the company (including 44,000 employees located in North America) as well as for tens of thousands of workers employed by its network of suppliers and dealers. At the same time, Caterpillar's sales are affected, in large part, by local, regional, and international economic conditions. When the economy is expanding, customers such as construction firms need earthmoving equipment to tackle major projects, such as new housing, highways, pipelines, and mass transit systems. They also need demolition equipment, which Caterpillar makes, to clear the way for new projects.
During recessions, however, companies and governments often postpone or go slow on these types of projects, which in turn dampens demand for earthmovers and similar machinery. Still, Caterpillar has profited from the ongoing building boom in developing nations, where many infrastructure improvements move ahead regardless of what's happening in the rest of the world. These days, 69 percent of its sales come from outside the United States, up from 53 percent of sales just five years ago. Not surprisingly, Caterpillar's main competition in the global marketplace comes from multinational giants, such as Komatsu (based in Japan), CNH Global (based in the Netherlands), and Volvo (based in Sweden).
Before Caterpillar builds a new factory, it carefully researches the market. Recently, for example, it undertook a study of regional and global demand for excavating equipment. Although Caterpillar already operates excavator factories in the United States, Japan, and six other countries, it may open a new U.S. plant to serve all of North America if demand is strong enough. Instead of importing some models from its factory in Japan, as it does now, Caterpillar would make those products in the U.S. plant and have the Japanese facility make models that sell well in Asia.
Stepping up to sustainability, Caterpillar is going green on a global scale. It is constantly improving the efficiency of its products, reducing its use of power, doing more to recycle materials and cut waste, and finding new uses for old products. The company also offers training to help customers cut the amount of fuel they need to power their Caterpillar equipment, which saves users money as well as helps conserve scarce resources.
As a good corporate citizen, Caterpillar makes donations to non-profit organizations that support educational, health, and human services projects. It also contributes to environmental conservation organizations that protect natural resources and enhance sustainability around the world. Through the Caterpillar Employees United Way Appeal, the company and its employees make yearly donations to United Way groups in their local communities.
Caterpillar's managers and employees are required to follow the company's worldwide code of conduct in all their business dealings with suppliers, dealers, customers, and competitors. The code sets high standards for honest, ethical behavior; outlines how Caterpillar deals with potential conflicts of interest; and strictly forbids the use of "improper payments" such as bribes and kickbacks. Here's how the company sums up its commitment to being a responsible business: "We are global citizens and responsible members of our communities who are dedicated to safety, care for our environment, and manage our business ethically." 20
What factors in the business environment appear to have the most influence on Caterpillar's ability to continue its business success? Explain.