Nothing is more familiar on a construction site than the bright yellow heavy equipment manufactured by Caterpillar, Inc. Caterpillar Inc., headquartered in Peoria, Illinois, has dominated the world in earth moving, construction, and materials machinery for more than 50 years. Their global dominance; however, created a stagnant and risk averse environment. Komatsu, a leading Japanese competitor, had gained market share by offering low cost, high quality options in a variety of product lines while Caterpillar was busy raising prices in their existing product lines at an average of 10% per year. Caterpillar executives ignored the threat and continued to support its historical management values; some of which included statements such as: "we maintain a strong corporate culture via 'internal staffing'", and "we maintain sufficient international manufacturing presence to avoid being shut out ." Poor economic conditions and overly aggressive expansion and modernization plans hit Caterpillar hard in the 80's.
Profits were down and Caterpillar lost $1 billion in a period of three years. This necessitated the closing of several plants, and a complete revitalization of the expansion plan. To jumpstart Caterpillar's sluggish reactions to these factors, George Schafer took the reigns as the new CEO in 1985.
Schafer continued the cost cutting measures his predecessor implemented; conversely he began to focus on new initiatives to bring Caterpillar out of its downward spiral. Schafer focused on Caterpillar's core businesses, introduced new product lines, and launched a new manufacturing strategy. In addition to the new operational direction, Schafer also began to revamp the organization by changing the corporate culture, creating employee involvement programs and leveraging the power of many individuals versus a select few as done in the past.
Management of the Company
Historically, the management of the company was founded on a strict, hierarchical organization dominated by the executive office.