Caterpillar (CAT) Marketing Mix
Caterpillar Inc (NASDAQ: CAT) is the leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives formed in 1925 after the merger of Holt Caterpillar Co. and C.L. Best Tractor Co. The company is headquartered in Deerfield, Illinois, United States. Its large and global dealer network serves customers across 192 countries throughout the world. The flagship brand of Caterpillar Inc is Cat. Other brands in its portfolio include Progress rail, Solar Turbines, Perkins, and SEM. Caterpillar offers machines, engines, components, services, and solutions to meet the needs of a large variety of customers across various industries. The company operates across three main industry segments that include construction industries, resource industries, and energy, and transportation industries.
Caterpillar’s distribution network includes 161 independent distributors who sell Caterpillar products across the world in 192 countries. The company employed 97,300 people in 2020. The total number of Caterpillar products operational across the world in 2020 was 4 million. The company has built more than 20 million engines. Apart from physical products, Caterpillar also offers a nice range of financial services. It generated $41.7 billion in revenues in 2020. Like several other large companies worldwide, Caterpillar’s business was also impacted significantly by the COVID-19 pandemic. Its sales and revenue remained 22% lower in 2020 compared to the previous fiscal. The pandemic apart from hurting demand and disrupting the supply chain affected Caterpillar’s business negatively in many more ways.
Read more about Caterpillar Inc in this marketing mix including the four P’s.
|Industries served||Construction and mining equipment maker|
|Headquarters||Deerfield, Illinois, U.S.|
|CEO||D. James Umpleby III|
|Year-end 2020 Sales & Revenues:||$41.7 B|
|Total Assets||$78.3 B|
|R&D Expenses||$1.4 B|
|Competitors (Construction Industry)||CASE (part of CNH Industrial N.V.), Deere Construction & Forestry (part of Deere & Company),Doosan Infracore Co., Ltd., Hitachi Construction Machinery Co., Ltd., Hyundai Construction Equipment Co., Ltd., J.C. Bamford Excavators Ltd., Kobelco Construction Machinery (part of Kobe Steel, Ltd), Komatsu Ltd.,Kubota Farm & Industrial Machinery (part of Kubota Corporation), and Volvo Construction Equipment (part of the Volvo Group).|
|Competitors (Energy & Transportation)||Cummins Inc., Deutz AG, INNIO, Rolls-Royce Power Systems and Wärtsilä Corp|
Caterpillar Inc offers a very large product portfolio that is organized into two main categories. The first category is machine, energy, and transportation and the second category includes the financial products of Caterpillar Inc. The first category includes the aggregate total of Construction Industries, Resource Industries, Energy & Transportation, and All Other operating segments and related corporate items and eliminations.
The second category of financial products includes Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Insurance Holdings Inc. (Insurance Services), and their respective subsidiaries.
Caterpillar has segmented the first category into three segments on the basis of the industries it serves. These segments are 1. Construction industries 2. Resource industries 3 Energy and transportation.
The construction industries segment of Caterpillar Inc primarily caters to customers involved in infrastructure, forestry, and building construction. It sells most of its machines in this category to heavy and general construction, rental, quarry and aggregates markets, and mining.
Here is a list of machines and related parts and work tools included in the Construction Industries product portfolio:
- asphalt pavers
- backhoe loaders
- knuckleboom loaders
- small and medium track-type tractors
- motorgraders track-type loaders
- cold planers
- wheel excavators
- compact track and multi-terrain loaders
- road reclaimers
- compact, small and medium wheel loaders
- mini, small, medium and large excavators
- site prep tractors
- utility vehicles
- forestry excavators
- skidders feller bunchers
- skid steer loaders
The resource industries segment of Caterpillar Inc mainly caters to the customers in the mining, heavy construction, quarry and aggregates, waste, and material handling applications. The company offers a large range of products and services to deliver comprehensive solutions for customers in the mining industries. It makes high productivity equipment for surface and underground mining operations. The equipment Caterpillar makes for Resource industries is used by customers industry-wide to extract and haul copper, iron ore, coal, oil sands, aggregates, gold, and other minerals and ores. Apart from equipment, Caterpillar also makes technology products and services to provide its customers fleet management systems, equipment management analytics, and autonomous machine capabilities.
Following machines and related parts are included in the Resource Industries product portfolio of Caterpillar Inc.
- electric rope shovels
- longwall miners
- soil compactors
- large wheel loaders
- machinery components
- hydraulic shovels
- off-highway trucks
- autonomous ready vehicles and solutions
- rotary drills
- articulated trucks
- select work tools
- hard rock vehicles
- wheel tractor scrapers
- hard rock continuous mining systems
- large track-type tractors
- wheel dozers
- large mining trucks
- landfill compactors
Energy and transportation:
The energy and transportation segment of Caterpillar Inc offers products and services to customers in oil and gas, power generation, marine, rail, and industrial applications, including Cat machines. This segment’s product portfolio of Caterpillar Inc includes reciprocating engines, generator sets, marine propulsion systems, gas turbines, and turbine-related services, the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies, diesel-electric locomotives and other rail-related products and services, and product support of on-highway vocational trucks for North America.
Here are the products and related parts in this segment’s product portfolio:
- reciprocating engine powered generator sets
- reciprocating engines supplied to the industrial industry as well as Caterpillar machinery
- integrated systems used in the electric power generation industry
- turbines, centrifugal gas compressors and related services
- reciprocating engines and integrated systems and solutions for the marine and oil and gas industries
- remanufactured reciprocating engines and components
- diesel-electric locomotives and components and other rail-related products and services
Financial Products Segment:
The financial products segment of caterpillar Inc is operated by Cat Financial, Insurance Services, and their respective subsidiaries. Cat Financial is Caterpillar Inc’s wholly-owned subsidiary. It mainly offers retail and wholesale financing for Caterpillar products to customers and dealers globally.
Retail financing mainly includes financing of Caterpillar, machine, equipment and engines.
Apart from that, Cat Financial also offers financing for vehicles, power generation facilities, and marine vessels that, in most cases, incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term trade receivables from Caterpillar.
Cat Financial has been in existence for more than 35 years and most of its business is conducted in the North American region.
Formed in 1925, Caterpillar Inc has its headquarters at Deerfield in Illinois, United States. The company has offices worldwide in various locations. It has a large and global distributor network.
According to the Caterpillar INc 2019 annual report, 46 of its dealers were located inside the United States and 119 were located outside the United States. The company sells reciprocating engines mainly through its dealer network and to other manufacturers for use in their products. Some of the reciprocating engines that its subsidiary Perkins Engines Company Limited manufactures are also sold through its worldwide network of 67 dealers covering 178 countries.
Apart from that, Caterpillar sells its FG Wilson branded electric power generation systems, manufactured by its subsidiary Caterpillar Northern Ireland Limited through its global network of 150 distributors covering 109 countries. The company also sells some of its large, medium-speed reciprocating engines, under the MAK brand through a global network of 20 distributors covering 107 countries. The majority of Caterpillar dealerships are independently owned and operated but the company owns a dealership in Japan that covers almost 80% of the Japanese market. The rest of the Japanese market is covered by the other three independent dealerships.
The company has established manufacturing facilities in various corners of the world. A large number of these facilities are located inside the US at locations including:
Arkansas, Georgia, Illinois, Kansas, Minnesota, North Carolina, South Carolina, Texas, Wisconsin, Alabama, California, Indiana, Kentucky, and Oklahoma.
Outside the US, Caterpillar has established manufacturing facilities in the following countries:
Brazil, China, France, Hungary, India, Indonesia, Italy, Japan, Mexico, Netherlands, Poland, Thailand, United Kingdom, Germany, Russia, Mexico, Australia, Czech Republic, Sweden and Republic of Singapore.
Prices in the heavy equipment manufacturing industry are decided by several factors including productivity of the equipment, quality of raw material used, quality of products, manufacturing and operational expenses, and the level of demand among the other factors. Innovation is also an important factor that affects pricing and demand. In some industries and geographical areas, the customers are less price sensitive since they focus more on the productivity of the equipment rather than the prices.
Caterpillar is an industry leader in its segment and it charges premium prices for its products. Despite its premium prices, its products are highly popular globally and Caterpillar Inc is a well known name because of the quality of its products, their productivity, and the company’s focus on innovation. Apart from that, the company has also differentiated its products from rivals’ to offer its customers products that are superior in terms of productivity and performance. So, the premium prices of the products do not have a negative impact on its sales and revenues. Caterpillar offers advanced and superior quality equipment compared to most of its rivals in the global market.
Competition has intensified in the 21st century in the heavy equipment industry. As a result, the focus of companies on marketing and branding has grown. Companies like Caterpillar and its rivals are using digital technology for branding and promotions. In the heavy machinery industry, sales depend to a large extent on branding and reputation. Caterpillar has established itself as a leader and an innovative brand in the industry. Its focus has remained on innovation and the brand has won a significant market share in the heavy equipment industry. However, while brand image and equity matter in this industry, customer relationships and promotional strategy are also important to maintain demand and sales.
As an industry leader, its name is considered synonymous with productivity and performance which is a major factor driving sales and revenue for the company.
Caterpillar uses digital channels and social media for promotions and customer engagement. It uses social media channels like Facebook and YouTube for promotions and engagement. It promotes its technologies and equipment on these channels. However, in the case of the heavy equipment industry, technology and product quality are key factors driving brand image and due to its heavy focus on these things, the company has sustained its leadership position well in the industry.