This 6 page paper responds to a Harvard Case Study. This essay provides a synopsis and discussion of the situation the company faced in the 1980s beginning with a brief history of the company and the management decisions that led them to such problems. The discussion includes the new type of management style Schaeffer brought to the company, the new manufacturing approach implemented and the search for new markets. Bibliography lists 2 sources.
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values and principles from the beginning, such as quality and durability of their equipment, building long-lasting trusting relationships with their customers, excellent customer service, a strong corporate culture and a
well-controlled organization environment. Decisions were made at the top by the six persons in the executive office but when the company had a strong CEO, the final decision was always
made by him. It was top-down management. While they prided themselves on their corporate culture, the fact was that managers were fearful of making any kind of mistake. As a
result, lower managers tended to shift difficult decisions to a higher level manager. They would not even discuss any point with their boss unless they were absolutely certain they were
right. The company had become so sure of themselves, they committed serious mistakes. In their arrogance and over-confidence, between 1973 and 1983, they increased the prices of their products by
10 percent per year. They did this in spite of a competitor that was growing fast - Komatsu, a Japanese company. Although sales had peaked in 1978, the company
continued to increase plant capacity. The company had an unwritten principle of promoting from within the company, in 1981, the average employee had been employed with the company for
22 years. In 1982, however, the bubble began to burst. The world went into a serious recession. To compound this event, the company suffered a 205-day strike by UAW
workers. Caterpillar was faced with an employee compensation package for their employees that was 90 percent higher than Komatsus package. Komatsu was able to offer lower prices and Caterpillars sales
dropped in half. By 1985, Komatsu took 25 percent of the world market. In an effort to control costs, Caterpillar closed six plants. Between 1981 and 1984, they reduced personnel