Caterpillar Case Study Essay Example | Topics and Well Written Essays - 1000 words

Caterpillar Case Study - Essay Example The major problems that it faces are from the low-cost indigenous products which are aggressively marketing their products especially in places like China and Russia. Low priced locally manufactured products are the main competition that the company faces. The brand equity of its product makes it difficult to lower the prices of its core product line. The company is thus faced with several perspectives which may or may not jeopardize the market position of its popular and core products. To remain in the competition, it can either lower the cost of its main product line permanently or it can bring down the prices temporarily or it can introduce a new LEA (less expensive alternative) with a product that is different or locally manufactured or refurbished and sold under its brand umbrella with caterpillar standard service. The company faces the dilemma of whether the market status of its core product would be cannibalized in the price war or an alternate product line would help meet the competition in a more healthy manner while retaining its market position vis-Ã  -vis its core products. If the company permanently lowers the prices of its main product line, it faces a loss of credibility globally and eventually a huge profit margin which may prove disastrous for the company image and challenge its position as a global leader. Temporarily lowering the prices would have the same consequences as the previous ones. The company is thus left with the option of introducing a new low priced product line to meet the challenge of the local products. The third alternative needs to be investigated deeply because of several hidden problems like cost differentiation between its premium brand and LEA and between LEA and local product and how far down it can be lowered with relation to the local goods.