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School Project.

Discussion in 'Heavy Equipment & Pavement' started by K c m, Nov 28, 2005.

  1. K c m

    K c m LawnSite Senior Member
    Posts: 618

    Hello Guys my name is Rob and I mainly post on the mowing forum. But i am asking you guys for a little help. For my Microeconomics class I have a project which will involve some of your imputs. THe project consists of 20 pgs of Financials and background on Caterpiller equipment. Now I have almost all of it completed but with some of your opinions i can earn a whole letter grade higher as said in the guidelines. So if you have a few minutes could you respond back (there wont be any financial stuff) before wed?

    How does the firm compete with others in the industry? (Comparason of quality service etc)
    -are they price competetive
    -Are they using product differentation?
    -are they cooperating on some issues but competing on others?
    -Are new products being introduced frequently?
    -are smaller firms competeting?
    -are other firms cutting costs
    -International competition giving Cat problems?
    These has already been addressed in my paper using the books version of "oligolopy" and some attributes and research. BUt i would like to know from some of you guys who are in the business and who have to make decisions for the good of your business and the overall bottom line.

    anything else you could add would be greatly accepted. IM at a high c+ right now and this would bump me up to a B+ so be specific and I thank whoever takes time to help me out. Thanks guys. :waving:

  2. Scag48

    Scag48 LawnSite Fanatic
    Posts: 6,067

    I'll give this a shot...

    -Cat is not very price competitive, they are some of the most expensive machines in their class, but that's not why we buy them.
    -They advertise extensively, more than Deere in some magazines, but they usually advertise heavily for either very large equipment (dozers) or compact equipment (skid steers, mini ex, multi terrain loaders).
    -Product differentiation varies. They work on innovations that most other companies follow later down the road. In my book, Cat innovates about half of the new features that operators look for in other brands.
    -New products come out from Cat as frequently as any other brand, the release of products doesn't occur more frequently than anyone else.
    -Smaller firms don't even compete with Cat. Small brands like Mustang, Scat Trak, etc. don't even compare.
    -Other firms do cut costs
    -International competition hasn't plagued Cat, Cat thrives in more countries than any other brand.

    Hope that helped. Good luck!

    UNISCAPER LawnSite Bronze Member
    Posts: 1,426

    answers are under the line questions.

    How does the firm compete with others in the industry? (Comparison of quality service etc)

    Caterpillar is and has been for the last 30 years the standard of the industry. the only competition they have is from those who feel inferior machinery (Komatsu,Deere, Hitachi etc) is better because it is cheaper. Cheap price rarely ever means better, it just means cheaper as you get far less for far less. On the one and only time we ever ran a machine from the land of the rising sun (Komatsu) initially it cost $27,000.00 less upon purchase. Over the 3 year course we had the machine, it lost $127,000.00 in billable working hours due to being down and having to wait for service, parts of both. No demo machine was offered but they did offer a deal on a short term rent. So, we lost more than we ever gained.

    On use of a recent machine, we lost a drive motor seal and there was a service truck sitting in the lot of where we worked in 35 minutes. the machine ran 2 hours later. When a Kubota on the same site went down, they waited 1 1/4 days for a service tech to fix the problems.

    Are they price competitive

    when you consider billable hours and down time, they are second to none. As I mentioned in the first question. You must consider billable hours in this business, especially if your company is relatively small in comparison to the heavy iron companies. Consider if a small firm looses machine time even for a day, it would be the equivalent of a huge firm loosing billable hours on every machine they own. Cat simply gets that concept where other don't have a clue and are mostly concerned about new sales and turn over.


    I frankly read more ads from competitors machines to see what their spin on things are. Cat does it's share of advertising, but they don't need to advertise to us. Our rep is on the phone every few months to see how things are going, unlike other companies who sell you the machine, send you a card on Christmas and wait.

    -Are they using product differentiation?

    In many cases, they don't have a product that is that much different than the others. They have features within the machines that are considered subtly different, yet so unique one can call them revolutionary. Funny how I see a feature on a Cat machine and next thing you know the entire industry is racing to see how they can add that feature without adding the exact same thing.

    -are they cooperating on some issues but competing on others?

    I'm not sure what you mean by this question, and if you can be more specific, I'll be glad to answer.

    -Are new products being introduced frequently?

    Yes. Especially in their newest venture market, compact equipment. Pilot controls for example, which initially were someone else's invent, were placed in Cat compact equipment. Even though they were in that one brand initially, now that Cat has them, everyone has to add a variation in their machines. In part because it was Cat that did it, and more largely in part because they make sense over the antiquated controls in competitors machinery.

    -are smaller firms competing?

    If you mean smaller firms by smaller equipment firms, they try. In the case of smaller firm such as ASV or Mitsubishi, Cat owns a 25% partnership in them, and has had a 61% joint venture partnership with Mitsubishi heavy industries since 1969. If they can't beat Cat, they will be joining them at one point.

    -are other firms cutting costs

    This relates back tot hat age old adage, you get what you pay for. Machine costs less, service is the first thing they tank. Service means as much as product reliability.

    -International competition giving Cat problems?

    International competition is giving everyone in any American industry problems. Though there are those who argue the globalization of manufacturing is a good thing, in the wake of rising economies such as China, in the wake of nations such as Japan who refuse to allow proportionate American firms on their soil, I don't agree with the whole global thing at all.

    Once again, those "international' firms don't have a clue what service is about., All they push is product, push it cheaply, and push as much of it as people are stupid enough to buy. I look at track records and performance of equipment we have had over the 30 some odd years I've been in this business. When I see the red ink created by the one time we strayed from Cat, I am not willing to gamble on inferior products.

    There is one other thing to add. Look at the complexity of Caterpillars stock portfolio. Look at it's history then look at the so called competitors. It is pretty easy to see that if you are banking with someone, Cat offers allot more stability than any other firm out there.

    I hope this helps with your paper.
  4. Squizzy246B

    Squizzy246B LawnSite Senior Member
    Posts: 837

    Just to add to Bill's comprehensive reply; Caterpillar has two significant advantages that money cannot buy:

    1.) The Cat brand is iconic..I read somewhere that it is in the top five worldwide for brand recognition

    2.) Legendary reputation...People in earthmoving largely trust Cat to produce a never ending repertoire of rock solid equipment. Its just what they automatically expect. This reputation has been forged the hard way and in a truly worldwide fashion. For a long time, in many countries, there was Cat or there was nothing.

    In the mining industry there is business rules about equipment..there is Caterpillar or there is risk taking. What Bill said about down time should not be underestimated.

    These days there are a lot of machine lines where the competion is (performance wise) very close too or, in some cases, even outperforming Cat. However, its not just the machine and the bells and whistles you are buying. The service and support factor is foremost in many equipment decisions.
  5. K c m

    K c m LawnSite Senior Member
    Posts: 618

    thank you very much guys.

    "-are they cooperating on some issues but competing on others?

    I'm not sure what you mean by this question, and if you can be more specific, I'll be glad to answer."

    Meant like pepsi and coke how they have agreed on a price equilibrium that is consitant with output and profit. Scag 48 said it all when he said nothing else compares.

    If anyone else has anything to say say it cause its due friday.

    I will post my paper when im done so you guys can read it. :cool2:
  6. Tigerotor77W

    Tigerotor77W LawnSite Bronze Member
    from Germany
    Posts: 1,891

    Thanks, Rob... I'd love to read it when it's finished! *High five*

    And actually, I'm kind of curious to hear the other side of things. It's pretty easy for me to sing praise of Cat, but how about the people who have had horrific experiences with their equipment -- the stories that Deere and Komatsu like to bloat?

    UNISCAPER LawnSite Bronze Member
    Posts: 1,426

    Now I get it. Well, look once again at Cat stock. Giving stuff away to gain market share like the Japanese tried in the auto and steel industry in the 70's does not make your bottom line look like Cats does now.
  8. K c m

    K c m LawnSite Senior Member
    Posts: 618

    HAy guys thanks for all your help it earned me a B+ in my final grade thank god! ha. THe total amount of pages was well above 30 which means everything was explored. However he wanted me to talk in the 1st person? wierd.

    Thanks again guys

    ps. i doctered up a few responses :D
  9. Scag48

    Scag48 LawnSite Fanatic
    Posts: 6,067

    Good to hear! Glad things worked out!

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