Strategic Management Journal Part 3

Strategic effectiveness in an organization refers to the thinking and acting that an organization embarks on towards the achievement of its goals. A company needs to review the effectiveness of a strategy by examining how it relates to the objectives, plan of achievement, and means to be in use. In this regard, Caterpillar Inc. proves to be in check with its strategy as it uses the Operating & Execution model (O&E). O&E refers to a strategic framework that helps in identifying areas that create or eat up value. According to the company, O&E model enables it to use data and facts in evaluating industries that are more attractive and the requirements to win (Caterpillar, 2022). This helps the firm build on its competitiveness by identifying areas that create value and allocating resources to them.

Caterpillar Inc.’s organizational structure is simple, decentralized, and well positioned for better service to its customers. It has divisions that reduce complexity and ensure that the company can design, engineer, produce, and sell all its machinery products, products in financial and insurance, and engineered products effectively (Caterpillar, 2022). To sum up, governance in this company is guided by the board of directors and the international management team, whose main role is to oversee governance policies, actions, and performance in the company. The company has adopted a holacracy structure. A holarcracy structure is one whereby governance is characterized by power distribution among distinct and self-organizing circles or groups (Farkhondeh & Müller, 2021). Decentralization in the company makes it more of a holacratic structure. The company has been using evolving technology to make constant improvements to its organizational structure and decisions in this company are made through a holarchy of groups.

Looking at the role of leaders, it is important that leadership in Caterpillar Inc. understands its internal and external environments. Leaders have a role to address the stability of an organization through better planning (Sivarat, et al.,). Consequently, any internal or external change may affect them positively or negatively, and therefore may require the company to conduct changes in its strategy to maintain its competitive advantage. Internal factors that the company needs to address includes change in leadership and change in employees. Whereas the internal environment affects the performance of the company, the external environment impacts its ability to remain competitive in an industry (Wiagustini & Wistawan, 2021). For instance, Caterpillar Inc. must pay attention to any competitor’s technological advancements which may outperform their products and weaken their position in the market. Furthermore, it may also need to be vigilant about other marketing moves, new product launches, and political and economic threats. The firm may address such threats by using its opportunities like new customer behaviour and stable cash flow.

To improve the performance of the company, Caterpillar Inc. may employ some new strategies and make changes in its operations that are in line with the achievement of market expansion and sustainable growth. One of the strategies the company may use is product development through the use of its expertise. The company may also increase its investment in research and development to extend its product line. To accomplish this, it may need to hire new product engineers. This would therefore address the competitor threat in technological advancements and also improve the company’s competitive position. Additionally, the firm may consider a reduction in greenhouse emissions by using renewable sources of energy. This will help manage the strict environmental regulations. Lastly, the company may open a new plant or enlarge the manufacturing capacity of its existing plants. This would increase production and help in meeting the high demand.

References

Caterpillar.com (n.d). Caterpillar’s strategy. https://www.caterpillar.com/en/company/ strategy-purpose/strategy.html. (Retrieved September 22, 2022, from https://www. caterpillar.com/ en/company/strategy-

Farkhondeh, M., & Müller, B. (2021). Holacracy: A New Way of Organizing? Management Revue, 32(4), 302-317. 

Sivarat, N., Thamma, P., & Kenaphoom, S. (2021). Full Range Leadership Concepts. Ilkogretim Online, 20(3).

Wiagustini, N. L. P., & Wistawan, I. M. A. P. (2021). INTERNAL AND EXTERNAL ENVIRONMENT AS A PERFORMANCE PREDICTOR FOR MIDDLE SMALL INDUSTRIES. Academy of Strategic Management Journal, 20, 1-9.