Caterpillar Expands Footprint in Japan with Eye on Growth

Caterpillar Japan, the subsidiary of construction and mining equipment major Caterpillar (NYSE:CAT), has acquired a 100% stake in Caterpillar Tohoku, an independently owned and operated company providing sales, rental, service and aftermarket support for Caterpillar machines in the six Japanese districts of Aomori, Iwate, Miyagi, Akita, Yamagata and Fukushima. This is in line with Caterpillar’s long term vision of having a dealer network which serves as a competitive advantage for the company.

See our full analysis for Caterpillar

[trefis_slideshow ticker=”CAT” rhs=”3″]

Caterpillar has narrowed its focus on Japan as the country is embarking on an extensive period of rebuilding infrastructure after the devastating earthquake it suffered last year. According to a presentation by Tokyo based construction equipment major, Komatsu, the sale of construction machinery makers at an aggregate level in Japan has gone up by 32% in the fourth quarter of last year.

With this acquisition, Caterpillar will look to restructure its dealer network in the country. The focus will be put more on the Tohuku territory where people have suffered maximum damages from the Great East Japan Earthquake and tsunami. This acquisition will also help Caterpillar provides its customers with an integrated set of products, services and solutions while leveraging its own global offerings of products and services to meet their business needs. All the subsidiaries of Caterpillar Tohoku and its employees will be assimilated in Caterpillar Japan.

This acquisition fits in nicely with Caterpillar’s endeavor to ensure that its costumers make more money with Caterpillar compared to any of Caterpillar’s competitors. The integration of its various products and services will help Caterpillar pass on the cost savings arising of synergy to its customers. Caterpillar will also benefit from the loyal customer base of Caterpillar Tohoku which in the past 40 years of its existence, has developed some extremely valuable relationships and goodwill in its regions of operation.

Understand How a Company’s Products Impact its Stock Price at Trefis