At the end of July this year, Caterpillar Inc. (CAT), the world's largest construction and mining equipment giant, released its financial report. Aside from the global sales decline, Caterpillar's growth in the Chinese market was very notable. A year-on-year growth rate of 22% in the first half of the year made many construction machinery peers sit up and take notice. In China's most fiercely competitive 20-30 ton hydraulic excavator segment, CAT took first place on the rankings. What kind of strategy has enabled Caterpillar to achieve such good results during an industry downturn? According to Chen Qihua, Caterpillar Global Vice President and Chairman of Caterpillar (China) Investment Co., Ltd., this is mainly due to Caterpillar's excellent business operating model.

 First, Caterpillar attaches great importance to developing and building corporate culture and to cultivating localized Chinese team leaders. Caterpillar puts talent development and Chinese team building first. At present, Caterpillar has more than 20 manufacturing plants in China, two-thirds of which are led by Chinese teams, and within three years this is to reach 90%. In this process, Caterpillar values diversity. As a multinational company developing in China, shaping corporate cohesion is very important. Caterpillar's corporate culture is integrity, teamwork, pursuit of excellence and courage to commit. This is implemented across all of Caterpillar's operating divisions in China and is shared with dealers, suppliers and partners, which is very important. When the industry is at its most difficult, Caterpillar can work together with dealers and suppliers through thick and thin, jointly discussing how to reduce costs and improve service quality to get through the trough, and providing them with Six Sigma and Caterpillar Production System Blackbelt (CPS Blackbelt) training services. At the same time, Caterpillar has very high requirements for product quality, but this precisely enhances suppliers' corporate strength. Whether the industry is at a peak or a trough, they maintain policy consistency and establish long-term close strategic partnerships with each other.

Second, during the industry trough, Caterpillar did not stall in R&D and new product launches but accelerated them. Caterpillar's Xuzhou large excavator plant is proceeding as planned, including the new wheeled excavator project, which is also advancing normally. With the acceleration of national urbanization and new rural development, urban transportation construction and shantytown renovation projects, wheeled excavators will inevitably become a trend, and later they will also be exported to other countries. The Phase III expansion of Caterpillar's Wuxi R&D Center was fully completed in 2012 and has exceeded 780 people. It has world-class engine testing laboratories and first-class new product simulation laboratories, and the Phase IV project is also underway.  Caterpillar's global R&D investment reached US$2.5 billion in 2012, equivalent to nearly US$10 million in R&D expenses per working day. Therefore, Caterpillar has consistently used innovation and technological progress to bring more value to customers through its products and services.

 Third, by creating personalized products, Caterpillar has always emphasized and focused on customers' real needs. The Cat 306E and 307E mini excavators that rolled off the line in the first half of the year are products tailored for Chinese customers by local Chinese and global R&D engineers at Caterpillar's Wujiang plant over 18 months. The two new models feature efficient production operations while also improving fuel efficiency. Their products have been recognized by a broad range of users for their good quality and strong targeting.

 In addition, Caterpillar provides financial assistance to customers in extremely difficult circumstances through its own finance company. Caterpillar's financing process can ensure a high degree of risk control and provide customers with better financing services. In the mining equipment field, we have provided mining equipment key accounts with various forms of support including funding, and even deferred financing repayments to reduce customers' operating costs. These are important forms of help for every customer; without them, customers' cash flow chains might break. At the current stage, Caterpillar is honing its internal strengths during the market trough, including further advancing operations and production, carrying out Six Sigma project improvement activities, reducing costs and improving quality. These projects have also been extended to dealers and suppliers. More than 20 Caterpillar blackbelts help suppliers promote Six Sigma in activities such as safety, quality, cost reduction and inventory management reduction, providing help and support. It can be said that no other company has devoted such great support to suppliers in China as Caterpillar has. Conversely, while suppliers feel Caterpillar's tangible support, their positive energy effect also boosts Caterpillar's development. There are many successful cases in this regard, such as how enterprises started from zero and eventually became global suppliers to Caterpillar, and some have even been written into Harvard University teaching cases.

 The strong measures taken by Caterpillar, from product R&D to production operations, including its suppliers and dealers, continuously pursue excellence in every link of the value chain, making Caterpillar's business operating model excellent and highly competitive. It is precisely because it has done these things that Caterpillar's business has maintained continuous growth and can achieve sound and sustainable development no matter how the industry fluctuates. Back then, the Ministry of Machine-Building Industry even set up a special "Caterpillar Office" to introduce Caterpillar's technology. Practical verification has shown that it is not only technology; Caterpillar's excellent business operating model is also well worth studying seriously.

  Editor: Wu Yue