Komatsu vs CAT STRATEGY PPT at IIM L HIMANSHU ARORA

KOMATSU LIMITED

Gnana Kumar . G (IPMX07018)

Himanshu Arora (IPMX07021)

Kshitij Goswami (IPMX07025)

Mahanand Upadhyay (IPMX07026)

Piyush Agrawal (IPMX07039)

Suparna Verma (IPMX07060)

Vivek Menon (IPMX07070)

Presented by

HISTORY OF EME

The EME industry began in the late 1800’s with the development of steam powered equipment

The demand for EME depended on the increase at which machines were substituting manual labor.

Demand was higher in developed countries (US) Demand structure changed due to the changing oil

demands within the Middle Eastern countriesThis lead to an increase with construction activity

EME INDUSTRY

Excavators, bulldozers, graders, loaders off highway tractors and haulers

EME demand was doubling throughout 1973-1980’s

Mining / Construction industry -60% of the EME market

Low cost labor method created competitionEME Industry focused on improvements for existing

products

KOMATSU HISTORY – 1960’S & 1970’S

1960’s Low quality products

Entry of Mitsubishi – CAT JV

Launched Project A, TQC

First quality, then cost reduction

1970’s Focus on export to China, Europe, and

LDCs.

Opened Komatsu USA.

Launched Project B – Large Bulldozers.

Innovation – Large dump trucks, Radio controlled bulldozers.

Four part cost reduction strategy.

KOMATSU HISTORY – EARLY 1980’S

1980’s

Bought technologies from technologies supplier.

Expansion of subsidiaries, over see offices & distributors internationally.

Increased expenditure in advertising campaign through special trade magazines in USA.

Program EPOCHS - Efficient Production-Oriented Choice Specification

Future & Frontier Project – Arc welding robots, heat pumps.

SOURCES OF “CAT” SUCCESS IN EME INDUSTRY

Differentiation strategy

Extending its markets globally- plants in over 8 foreign countries

Providing high-quality, extensive product line backed by efficient service

100% ownership of its subsidiaries (resists joint ventures)

Recognizing opportunities in external environment (postwar opportunity)

CHANGES IN COMPETITIVE ENVIRONMENT

Worldwide demand has doubled- expanding markets globally

Intensity of competition increased. Understand these markets needs and wants better.

(Competitive analysis)Less developed countries were increasing their

rates of construction activity

New opportunities to target new customers

Financing problems with LDC

CHANGES IN COMPETITIVE ENVIRONMENT

Construction in the U.S is decreasing-less U.S dominated and less concentrated in the U.S

Advanced developing countries are entering the industry and increasing competitive competition

World contractors are becoming better placed than U.S contractors to perform contract

Foreign companies are more flexible and easier to form joint ventures with

KOMATSU CURRENT STRATEGY

Overseas market focus and User oriented products

Joint Ventures to gain hold of technology

High Focus on Quality products

Centralized Production with very limited manufacturing outside Japan

Maintain good relations with Union and focus highly on Individual Job satisfaction

Pre-Sale Service in Less Developed Countries

KOMATSU COMPETITIVE ADVANTAGE

Diverse Market Products ranging from sea water bulldozers to radio controlled equipments

and robotics.

High Quality Products by continuous improvement and implementing TQC

High Labor Productivity

Low Cost High Quality Products that provides 10% more value in 10% less price compared to CAT

Four Part Cost reduction strategy

Adapting to changing market dynamics

SWOT ANALYSIS

Strengths

• Operational Efficiency• Wide Product Base• Low Cost Labor• Better control on Supply

Chain

Weaknesses

• Legal Proceedings• Weak Distributor

Network• Less Flexibility

OPPORTUNITIES

Emerging Markets Inorganic Growth Facility Expansion

THREATS

Environmental Regulations Currency Rates

PORTER’S “FIVE FORCES” STRATEGY

LOW TOMODERATE

LOW TOMODERATE LOW

LOW TO MODERATE

MODERATE TO HIGH

Opportunities and threats

External Analyses’ Outcomes

By studying the external environment, firms identify what they might choose to do.

Positive Neutral NegativeDemographic

Age üRising Affluence ü

Socio culturalEnvironmental concern ü

Political/LegalProtected Mkts ü

Political Environment/Lobbying üTechnological

Innovation/New Product design by competitor

ü

Green Technology üEconomic

High Interest Rates üCurrency Fluctuations ü

GlobalizationIncreasing Global Trade ü

Emerging Economies ü

Positive Neutral Negative

Demographic

Ageü

Rising Affluence ü

Socio cultural

Environmental concern ü

Political/Legal

Protected Mkts üPolitical Environment/Lobbying ü

Technological

Innovation/New Product design by competitor

ü

Green Technology ü

Economic

High Interest Rates üCurrency Fluctuations ü

Globalization

Increasing Global Trade üEmerging Economies ü

Internal Analyses’ Outcomes

By studying the internal environment, firms identify what they can do

Unique resources, capabilities, and competencies(required for sustainable competitive advantage)

Components of Internal Analysis

3–20

Value Chain Analysis

• Allows the firm to understand the parts of its operations that create value and those that do not.

• A template that firms use to:– Understand their cost position.

– Identify multiple means that might be used to facilitate implementation of a chosen business-level strategy.

3–21

Value Chain Analysis

Value Chain Model

Firm Infrastructure (General Management)Human Resource Management

Technology Development

Procurement

Inbound Logistics

Operations

Outbound Logistics

Sales & Marketing

Service and Support

PRIMARY ACTIVITIES

SUPPORT ACTIVITIES

Custom

er

Value

Cust

omer

Valu

e

Margin

Mar

gin

Strong Control over Supply Side

High Process Efficiency

High Cost due to centralized production system

Developing network

Establishing a network

Value Chain Model

Firm Infrastructure

Human Resource Mgmt

Technology DevelopmentProcurement

Inbound Logistics

Ops. Outbound Logistics

Sales & Marketing

Service and Support

PRIMARY ACTIVITIES

SUPPORT ACTIVITIES

Custom

er

Value

Cust

omer

Valu

e

Margin

Mar

gin

Mgmt focus on export

Strong Integrated Culture

Strong Focus on R&D

Good Control on Supply side

Value Chain & Value System of Komatsu

Inbound

Logistics

Operations Marketing ServiceOutbound

Logistics

Low Cost RM, Backward Integration ,Suppliers

Operational Efficiency, R&D, Strategic Alliances

Transporters, Shipping across the globe. Dealer Network,

Regional Warehouses, Dealer Workshops, Distributors, Service

Centers

CURRENT STRATEGY VS

FUTURE STRATEGY

Ryochi Kawai ‘s slogan of Maru C Encircle Caterpillar- Analyse CAT’s products, strategies, read company related news etc.

Kawai warned about sense of complacency- success today does not necessarily imply success tomorrow

Encircle Caterpillar as strategic intent sets up an urgent challenge. It creates a misfit between resources and goals.

SCENARIO ANAYLSIS

Scenario 1 Improving the competitiveness of its machinery by:Reduction of costs by 10%Reduce the number of parts by 20%Redesign the products to gain economies in material or manufacturingRationalization of the manufacturing system

Scenario 2 Komatsu should obtain global sourcing arrangements through: Wholly owned subsidiary – May be established in a country with low-cost labor tto supply components to the domestic plant, or the subsidiary may produce a product not made in the domestic market.Overseas joint venture – Established where labor costs are lower than those in the domestic market to supply components to the domestic manufacturer.

Scenario 3 Create Strategic Intent for the future: Strategic intent envisions a desired leadership position and establishes the

criterion the organization will use to chart its progress. The process is one in which leadership team transform themselves and culture of their organizations through a creative commitment to radically different future. Leading from the premise of a strategic intent requires one to think and plan backwards from that envisioned future in order to take effective action in the present.

RECOMMENDATIONS

Strike strategic partnerships and develop relations with manufacturers in US, Europe & LDC to get access to markets.

Increased emphasis on mining side of the business because of the fact that emerging markets will require coal and other resources. New

Products & solutionsVenture into financing & leasing of EME’s specially in LDC

Expand their dealership facilities into the Asia and Middle Eastern markets. Support customer relations through repair & maintenance

schedulingDiversify into related businesses like railways, marine & heavy

machinery, electric engines, robotics & semiconductors.

Excel at Product Development – quality, emissions, growth markets and next generation products

THANK YOU