2017 year, Caterpillar’s performance rose, the market value exceeded 100 billion US dollars, about $ 101.3 billion. Caterpillar, whose share price has doubled in two years, exactly what happened?
What’s the future trend of what kind of expectations?
In view of the existence of these questions, from the following aspects to analyze.
1) Caterpillar Achieve Significant Growth: Benefiting from China Infrastructure, North American Oil and Gas, and Global Mining Business Growth
In the third quarter of 2017, revenue of Caterpillar’s construction engineering segment increased 31% and 57% respectively in North America and Asia-Pacific regions; Benefit from the gradual recovery of global mining, the company resource plate (mining machinery) in Europe, Africa and other places more than 60% growth rate.
2) Three major advantages to help market leadership
As the world’s leading manufacturer of construction machinery and mining equipment, Caterpillar’s biggest competitive advantage is product quality, economies of scale and over the years the accumulation of efficient supply chain. By applying the Lean Six Sigma strategy in product development, manufacturing and product support, Caterpillar products outperform the industry average for quality and reliability.
Caterpillar’s world-class distribution network and supply chain complement its competitive advantage, enabling it to meet different customer needs while increasing production.
At the same time, with economies of scale, Caterpillar can sell high-quality products at competitive prices, improving customer loyalty and opening up space for future growth.
In addition, Caterpillar has also frequently finalized supply agreements with strategic partners, which has consolidated its market leadership.
For example, China National Energy Investment Group previously signed a five-year strategic cooperation framework agreement with Caterpillar to provide mining equipment sales and leasing, technical applications, product support, etc. to CES in the future for Caterpillar and its local agents Service made a master plan.
3) Efficient management efficiency
Douglas O’Brien, CEO since 2010, has led Caterpillar to an accelerated growth phase. Through the implementation of cost-efficiency and lean manufacturing programs, the company’s global manufacturing and operations have been optimized.
In October 2016, Ambrosia succeeded CEO. Announced a new strategy to guide the company’s decision making process with a message-oriented approach (Operations & Implementation Model) and ultimately achieve sustained, profitable growth.
According to the announcement issued by Caterpillar, the above strategy should achieve three goals:
Enhance your company’s strengths with its core competencies in operational excellence – safety, quality, lean manufacturing, and competitive cost principles;
Expand your company’s solutions to deliver integrated and differentiated solutions that help your customers succeed.
Increase company reliance on services, focus on digital solutions and the aftermarket to increase customer loyalty and further enhance the company’s relationship with its customers.
4) Financial indicators
Caterpillar’s success is also reflected in the financial indicators. The company used large sums of debt to finance M & A deals, and later used share repurchases and related strategies to cushion the detrimental effects of mergers and acquisitions.
Cost control measures, Caterpillar’s costs and gross margins gradually stabilized. This is in line with the goals of the company’s new strategy.
5)Trend analysis
In the United States, the reduction of unemployment, the growth of GDP, the expansion of capital expenditures and the proactive fiscal policy have all created good conditions for the development of the industrial sector.
In addition, both PMI and ABI indices show that the demand for residential projects in 2017 has risen sharply, which indicates that the growth of residential construction in the future will be very strong.
Internationally, emerging markets have huge potential for growth. In the case of Caterpillar, a less-than-expected product such as rail drills will help reduce costs for the company. In addition, although the macroeconomic conditions in China have led the world to expect a slowdown in emerging market growth in 2018, the demand from the global middle class will continue to support the Company’s business.
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