After entering Chinese market, Caterpillar brought in their advanced operational concept and marketing thoughts while competing with the construction machinery enterprise in domestic market, pushing forward the faster development of construction machinery market in China.

Against the background that the Central China Economic District grew to be a strategic development district in China, several World Top 500 Enterprises including Caterpillar saw the commercial opportunities acutely in this District.

Caterpillar (China) Investment Co., Ltd. (Caterpillar China), the most famous equipment supplier in the field of global earthmoving machinery industry as well as one of the World Top 500 Enterprises attended the Expo Central China 2011 held from September 26 to 28. Jin Liwen, the Chairman of the Board of Caterpillar China made an address on the expo. “Henan is a large province of equipment manufacturing industry, owning numbers of leading enterprises such as Pingdingshan Coal Mine Machinery Co., Ltd., Zhengzhou Coal Mining Machinery Group Co., Ltd., CITIC (formerly China International Trust and Investment Corporation) Heavy Industries Co., Ltd. and Zhengzhou Yutong Heavy Industries Co., Ltd. Besides the equipment manufacturing lines, Caterpillar have the plan to invest more on the new energies, including the exploration and usage of coal mine methane.”

•Rapid Expansion as Giant Enterprise

It might be due to the limitation of the industrial features, Caterpillar was still relatively unfamiliar to Chinese customers. Timothy Elder, the General Manager of Caterpillar China once said:” In China, everyone knows that Coca Cola is a giant enterprise. But Caterpillar has a larger scale, and we just stand in a field that is not so familiar to the masses. We believe that Caterpillar will become a ‘star’ in such as an agricultural country as China.” 

Early in 1975, Caterpillar began the business in China, and invested to construct plants in China in 1976. The company started to lay their business out in China from the first deal—the order of petroleum drilling equipments. From 1994 to 2009, Caterpillar set up five production bases of engines, four production bases of equipments and two production bases of spare parts successively in Xuzhou, Guangzhou, Wuxi, Tianjin, Suzhou and Shanghai.
　　
On April 27, 2011, the First Tractor Co., Ltd. (YTO) officially signed a long-term strategic cooperation agreement with Caterpillar China in terms of forging business. It was anticipated that by the year 2015, the forging business affiliated to YTO would get the revenues of foreign trade up to RMB 200 million Yuan depriving from the cooperation with Caterpillar. 

In fact, the cooperation between YTO and Caterpillar started from 2002, and rapidly moved to the normal development routes since 2007. The products on the supply order increased to more than 50 forging parts at present from the single kind of chain wheel. The General Manager of YTO, Liu Jiguo told the media that the signature of the long-term strategic cooperation agreement between YTO and Caterpillar was an important milestone on the developing way of YTO to learn the international advanced management, fasten the transformation of the enterprise and upgrade the industrial structures, “it is also the crucial result for YTO to practice the concept of Zero Deficiency for Quality and Standard Internationalization.”
　
At the 6th Expo Central China, the experts from Henan Province said that equipment manufacturing industry was the pillar industry in Henan, and the mining and hoisting machinery industry also had the advantages in domestic China with a greater developing momentum. They believed that the introduction of Caterpillar’s advanced concept of sustainable development and the latest technology for manufacturing high-end equipments would promote the transformation process of local economy.

•Noticeable Merging and Acquisition Mode

Since Caterpillar entered Chinese market, the company had formed force competition with the domestic construction machinery enterprises on one side, and also brought in advanced operation concept and marketing thoughts on the other side, bringing along the rapid growth of the construction machinery market in China.
　　
However, the merging and acquisition mode for development that the foreign enterprises chose in the past years should be alerted by the professionals in the construction machinery industry. Beginning from the 1980s, Chinese manufacturers signed contracts on technology transfer and started to produce licensed products from Caterpillar, mainly including the technology transfer of loaders and bulldozers. At present, this still benefited LiuGong and XGMA as the leading enterprises in China. Since 1990s, Caterpillar speeded up the business expansion in China, and established co-funded enterprises with Chinese companies successively. Co-funded enterprises were just the prelude of Caterpillar to enter Chinese market, and the company had more plans and strategies in the future.
　　
The experts from Institute of Industrial Economy, Henan Provincial Academy of Social Sciences offered an explanation. “Many foreign-funded enterprises would apply strategies for merging and acquisition when entering Chinese market, and they moved toward their goal of holding the stocks through increasing the investment and expanding their shares,” they said.

In 1994, Caterpillar and Shangchai established an engine company, which finally turned out to be bankrupted after the loss in successive three years. Later in 1995, Caterpillar worked together with the largest construction machinery manufacturing enterprise in China—Xuzhou Xugong to establish Caterpillar Xuzhou Co., Ltd., but finally Xugong was forced to withdraw the business at the end of 2008.

The spokesperson of Xugong explained the reason. “When Caterpillar began to earn money on spare parts, the co-funded company had a great deficit for three years. Caterpillar asked to increase the investment, while Xugong that had no money to invest had to sell their 24.4% of the stocks. Caterpillar then had the co-funded company by nearly 85% of the stocks, and Xugong was forced to withdraw their business after losing their product line of excavators with the highest profits.”

Moreover, the remanufacturing technology of Caterpillar was more noticeable. They considered the return and reuse of the products when designing, and resumed the products to a “new” state in the factory, reducing the demand on the raw material to be minimum, which not only saved the costs of the customers, but also was good for environmental protection.
　
“Remanufacturing business had become one of the core competitive advantages of Caterpillar, which could make use of 45.4 million ton of scrapped irons. During the emergence of Central China, Caterpillar would cooperate with more companies in Henan to search for win-win during the transformation progress,” Lin Jian’an, the professor from Tsinghua University Teaching Center, Henan.

About Caterpillar:

For more than 85 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2009 sales and revenues of $32.396 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services.