The Forbes
article “Big Fat Caterpillar Tries to
Bulldoze Big Labor: We Should Cheer it on” addresses Porter’s 5 Forces Model
the bargaining power of suppliers. In this case, the suppliers are the union labor
force for Caterpillar. Caterpillar machinists, specifically the hydraulic
component workers in Joliet, Illinois went on strike due to “unfair labor
practice complaints” because of contract agreements to freeze highly paid
workers and veteran employees pay for 6 years, increase health care premiums, and
decrease a one time bonus1,3. Despite the strike, the employees at
Caterpillar make 34% above what the market bears for the machinists2.
In the last year, Caterpillar created 6000 new jobs in the United States2.
The workers claim that Caterpillar has made $4.9 billion in profits last year
and executive compensation sharply increased, leaving the workers that actually
make the products uncompensated2. Notwithstanding the strike,
Caterpillar was able to bring in extra labor force to work during the strike,
which allowed production to continue, which showed the companies unwillingness
to further negotiate with the employees.
This article is important as it
relates to Porters 5 forces theory of bargaining power of suppliers. For many
decades in the United States, unionized labor had a large amount of bargaining
power in wages and compensation with companies. As the world becomes more
globally competitive there is a lot of pressure to decrease prices to compete
with firms that have a cheap non-unionized labor supply. The bargaining power
of unions are not longer able to “[bring] the company to its knees by striking
this key internal supplier Forbes”1 because firms are able to move
operations abroad to decrease costs and competitiveness creating a change in
bargaining power for unions. Unions are losing power due to the threat of
global labor supply and the changing business environment in which companies
are not willing to concede to the big unions anymore. Companies and unions all
over the United States are watching to see who surrenders are in the battle
between the machinist union and Caterpillar2. The implications of this battle spread way
beyond just the manufacturing industry into any company that has hourly highly
unionized labor force. It sets the precedent for upcoming labor union battles
possibly decreasing the bargaining power of unions and changing the way the
supply of union labor is handled in the United States. Practicing managers
should remain very aware of the changing powers of unions and how employees
handle dissatisfaction with working conditions and compensation.
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