Caterpillar had been on a growth tear for 15 years. As the largest and most geographically diverse heavy equipment maker, it was best positioned to weather a slow economy. And although Caterpillar did ok throughout 2008while the recent economic crisis remained largely centered in the United States, it took a blow once the recession spread worldwide and institutions everywhere just stopped building things. For Caterpillar, annual revenue toppled 37 percent in 2009 (from $51 billion to $32 billion), while profits spiraled downward 75 percent. Caterpillar responded by dramatically cutting costs. It has also rolled out promotional incentives similar to those offered by automotive manufacturers in order to spark sales. By mid-2010, as some important economic sectors began to recover, Caterpillar’s sales and profits also rebounded. But like most other companies, Caterpillar is still wanting for a slower than-expected economic turnaround to materialize.
- Given the nature of the demand for its products, is there anything that Caterpillar could do to maintain or increase revenues in a down economy?
- As a corporation that fuels the economy to some extent is there anything that Caterpillar could do to facilitate a global economic recovery?
Case Study # 2
The first Starbucks location opened in 1971. The name is inspired by Moby Dick’s first mate. This name and the mermaid logo were inspired by the love of the sea, from Starbucks original location in Seattle Washington in the heart of Pike Place Market. Starting as a single shop specializing in high quality coffee and brewing products the company grew to be the largest roaster in Washington with multiple locations until the early 80’s. In 1981, current CEO Howard Schultz, recognized a great opportunity and began working with the founder Jerry Baldwin. After a trip to Italy to find new products, Schultz realized an opportunity to bring the café community environment he found in Italy to the United States and the Starbuck’s brand we know today began to take form.
Selling espresso by the cup was the first test. Schultz left Baldwin to open his own Italian coffee house Il Giornale which found outrageous success and in 1987 when Starbucks decided to sell the original 6 locations, Schultz raised the money with investors and purchased the company and fused them with his Italian bistro locations. The company experienced rapid growth going public in 1992, and growing tenfold by 1997, with locations around the United States, Japan and Singapore. Starbucks also began expanding its brand. According to George Garza in his article the history of Starbucks the following product lines were added: • Offering Starbucks coffee on United Airlines flights. • Selling premium teas through Starbucks’ own Tazo Tea Company. • Using the Internet to offer people the option to purchase Starbucks coffee online. • Distributing whole bean and ground coffee to supermarkets. • Producing premium coffee ice cream with Dreyer’s. • Selling CDs in Starbucks retail stores. Starbucks uses minimal advertising and has grown on word of mouth and brand recognition. According to Garza by 2004 Starbucks had reached 1,344 locations.
- Please explain how can Starbucks maintain a competitive advantage over the competitors?
- Which target marketing strategy best describes Starbucks efforts? Please support your point using examples?
- How does Starbucks use its variety of products to build relationships with the right customers?
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