A Publication of WTVP

In business, we are always looking for new customers. So
when you consider that 95 percent of the world’s potential customers
live outside the United States, it’s hard to imagine that anyone
would not embrace today’s global economy.

But globalization and free trade often face strong opposition.
Many see the global economy as a threat that takes jobs away from
Americans. In 2007, Newsweek writer Robert J. Samuelson captured the
sentiment well. “It’s our versatile villain. We blame it for all manner of
grievances: lost jobs, greater inequality, shoddy goods.”

However, the facts show that free trade not only grows jobs, but
the economy as well. Consider this: without international trade, one in
five U.S. jobs would be lost. That’s because 31 million American workers
depend on trade for their livelihoods. In 2007, Americans produced
$13.8 trillion worth of goods and services. Of this, $1.64 trillion—11.7
percent—went overseas. Just look at what U.S. workers manufactured
and exported to other countries in 2006:

The list goes on and on. Just because many products today are
manufactured in China and other parts of the world doesn’t mean
we’ve stopped producing much-needed goods in the United States.
Free trade policies keep U.S.-made goods in demand around the
world and U.S. workers employed.

The benefits of global trade are clear. So now companies have
to focus on how to compete in this new global economy. It’s not
easy—there are no hard and fast rules. But in 83 years of operation—
and nearly six decades operating as a global company—Caterpillar
has learned a few key themes important for anyone who wants to
compete globally.

Be ready to change and innovate
Competing on a global scale means staying on your toes. With
increased competition, we have to look for ways to differentiate our products and services. The good news is that tough competition
is one of the best motivations to innovate. When companies from
around the world are competing in your market, you’re challenged to
look for ways to improve your product and processes. Innovation is
clearly a positive effect of competition, allowing us to produce more
and offer lower prices.

Innovation is key to Caterpillar’s success. We’re always looking
for new applications for our products and technologies. For example,
energy-related products and services account for over one-fourth
of our business, so we’re uniquely positioned to provide solutions
throughout the energy value chain. In addition to our core businesses,
we are finding new, innovative approaches—like conversion
of waste gases such as landfill methane into useful energy—to meet
the world’s growing energy and environmental challenges. By using
innovative technologies and being open to change, we’ve found a
whole new use and market for our product.

Get the right people in place
The workforce of today looks quite different than the workforce of
yesterday. Today’s leaders are characterized by agility, language and
cultural proficiency, and the ability to function across multiple product
lines, markets and national boundaries.

As leaders we must develop new strategies for finding, attracting
and bringing on board the workforce of the future. That includes
global recruiting efforts that cast the net more broadly for qualified
candidates. Likewise, today’s employees need a new set of skills,
talents and training to succeed in an increasingly global, competitive
and high-tech economy.

Diversity is key to these efforts—and not just diversity as we
typically think of it, in terms of race, gender and ethnicity. We need employees with a variety of backgrounds and experiences. We need
people with global, external and cross-functional experience who
bring us innovative solutions and new approaches to decision-making—
people who can make us more successful.

Caterpillar continues to strengthen our focus on diversity around
the world. In addition to a corporate diversity council, we’ve created
regional councils in EAME (Europe, Africa and the Middle East), the
Americas and Asia Pacific. These regional councils are charged with
helping us reach our Vision 2020 goal to “function as a local business
everywhere we serve customers.” That means Asian leaders in Asia,
European leaders in Europe, Latin American leaders in Latin America—
and employees everywhere who can relate to local customers,
dealers, suppliers and governments.

Know your customer
It’s not enough to have the best, most innovative products. You have
to know what your customers want. The products you sell in Chicago
will not necessarily sell in Shanghai. For example, in the U.S., cell
phones need to have a camera, an MP3 player, Internet and texting
capabilities. But in emerging markets, users might just want to make
a call and may not be willing to pay for other features.

When dealing with the global economy, market research is more
important than ever. It’s also helpful to have people on the ground
in the locations where you do business. They know the market, the
government regulations, the local customs, and most importantly,
the people. That local knowledge is invaluable.

At Caterpillar, in key markets we have a country manager who
oversees our portfolio of businesses. This manager helps integrate
the strategies of all our divisions operating in that country, helping to
ensure our products and services meet the country’s specific needs.
In addition, the country manager is responsible for human relations
strategies and external relations within the country. Having a single
person speaking for Caterpillar within the country helps establish a
local presence for the company.

Level the playing field
In order to compete effectively in the global economy, we need a
level playing field, with the same access to foreign markets that other
countries have here. To do this, the United States not only needs to become a more active participant in the global economy—we also
need to play a real leadership role in championing the expansion of
trade agreements and foreign investment.

Free trade agreements meet plenty of opposition, but for American
companies to be successful around the globe, we need equal and
fair access to export markets. Unfortunately, in many places, American
companies must overcome high tariffs and other trade barriers. At the
same time, some of our foreign competitors benefit from favorable
terms because of agreements their governments have negotiated.

In markets where the United States has secured free trade agreements,
American companies have seen tremendous growth. For
instance, since the implementation of the North American Free Trade
Agreement (NAFTA), Caterpillar’s exports to Canada and Mexico
have increased 300 and 473 percent, respectively. Job growth has
gone hand in hand with export growth, resulting in Caterpillar’s U.S.
employment increasing 33 percent in the years since the agreement’s
passage. Employment in Canada and Mexico, where Caterpillar
has had a manufacturing presence for nearly 30 years, has also
increased—by nearly 8,000 workers in Mexico and 700 in Canada.

Despite political rhetoric to the contrary, NAFTA has been a winwin-
win. It’s been good for the three nations’ economies, for companies
like Caterpillar, and for our American, Mexican and Canadian workers.

Don’t lose yourself
Although it’s important to adapt to different markets around the
world, it’s equally important, perhaps more important, to make sure
your company stays true to its core values and culture. It’s important
not to lose what makes you unique and what has made you successful
in the past. True, you will have to adapt and make changes along
the way, but don’t lose yourself.

At Caterpillar, common processes, and most importantly, common
values link all of our employees around the world. Despite our
differences—in geography, culture, language and business—we
are one Caterpillar, one company united by common principles
and a shared commitment to the highest standard of conduct. With
employees and operations around the world, it’s important to make
sure everyone is working as one team, sharing common values and
driving toward the same strategic goals.

These are just a few high-level themes for competing in the
global economy. The competition will keep evolving, and there are
always more lessons to learn. But there’s no going back. Just as we’ve
embraced the benefits of competing in the global economy, we’ve
also embraced the challenges. And we’re ready to continue to innovate
and change so we can deliver the products and services that will
help our customers succeed. iBi