ARTICLE: "Behind Caterpillar's Big Scoop in China: Patience, persistence, and transfer of technology yield a coveted acquisition," by Dexter Roberts, BusinessWeek, 22 December 2008.
Caterpillar has made a lot of money off China's infrastructure build-out so far, and aims to capture a bigger chunk of that growing pie in the future.
So it basically takes the advice I've been peddling for a while: get into the game, learn the landscape, and buy in on something local to take fuller advantage. Unlike a firm in the national security realm, Caterpillar has got no problem with such a tack regarding China.
The story tells how Caterpillar buys Shandong SEM Machinery last Feb just before its 50th birthday (meaning it's a post-revolution firm). Caterpillar CEO Jim Owens says, "Thanks to the people of SEM, Caterpillar has been able to play an ever-growing role in China's growth."
This was a real coup. China typically wants to build up its own national blockbuster firms, so Caterpillar spent years talking Beijing into this purchase. Owens has been traveling to China since 1983!
The "two-tiered strategy" is described as such: use SEM at lower end to boost Caterpillar sales at upper end.
This is an old trick of Western companies: a high-end version buys its low-end competitor.
So Caterpillar, with both US plans to boost infrastructure and China's sheer requirement, has a bright future.
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