Komatsu Case

In 1985, what were the issues and problems confronting Komatsu and what should the company have done about them?

Problems confronting Komatsu:

• Very high 4th quarter loss (251 Million) and total year loss of 428 million.

• EME demand saturated in developed countries.  Finance considerations play significant part in buying decision of developing countries.

• Severe competition. CAT had highly established dealership network in Americas and Europe.

• Existing perception among competitors that Komatsu was mainly competing on price.

• Stagnant world demand.

• Gaps in over seas distribution network especially when compared to CAT. Many dealers went bankrupt recently.

• Only 5% market share in US in spite of promising growth in Europe Asia and Australia.

• Manufacturing mainly based on Japan leading to highly centralized production. Changing political and social, dynamics  pose a high risk. Competition CAT has plants around the world.

• EEC Commission violations.

• Adverse exchange-rate movements.

Proposed Solutions:

• Counter-act stagnated growth through globalization strategies.

• Look at options of being more flexible:

? Multiple manufacturing plants across the globe, similar to that of CAT.

? Create a Komatsu exclusive dealer - distribution network

? Local Joint ventures in developing countries

• Product line extension of lower priced heavy equipment for LDCs only.

• Improve service capability offering fast, high-quality service.

Multiple process and centralized management style seems to be stifling innovation across the board.  Komatsu should look at more decentralized approach especially in service.

Group Post:

In 1985, what were the issues and problems confronting Komatsu and what should the company have done about them?

Problems confronting Komatsu:

• Very high 4th quarter loss (251 Million) and total year loss of 428 million.

• EME demand saturated in developed countries.  Finance considerations play significant part in buying