Komatsu Surpassing Caterpillar

1. Komatsu focused on catching up and surpassing Caterpillar. What are the pros and cons of basing your company strategy on a competitive battle? Give specifics on what happened to Komatsu due to this focus.

Pros: In order to stay competitive in the market, the company has to evaluate several factors that drives the sales of its products. In the case of Komatsu, there were several advantages:

• The machinery that was not necessarily at par with the quality standards, Komatsu had to change their policy of ensuring that the product it developed was of higher quality to match with Caterpillar and increase efficiency to ensure it can meet the demand and maintain the market share. Comprising on either of those factors (quality or efficiency) would mean that the competitor would tap into their market share

• Competition is a major driver for a company to be innovative and come up with strategies that will keep your sales steady, if not increasing. Komatsu did so by implementing process and policy changes that not only controlled the top line quality, but also ensure that this change was implemented at every level of the organization. Additional checks and balances were put in place to ensure process improvements were taking place at each level of production to increase efficiency and maintain the quality standards thus increasing market share from 50% to 65%

• Komatsu was able to centralize the manufacturing into a highly reliable, durable and efficient process that helped achieve Global Expansion by decreasing dependency on domestic sales and becoming cost effective in the market

Cons: Competition can be the driver to “up” your game, but can also limit your thoughts on opportunities that you may be giving up on whether it is in terms of new products, innovation or external factors that may impact your sales

• While Komatsu was able to make process improvements and raise the quality, they only focused on the products that were directly in competition with Caterpillar. Doing market research, identifying the changing trends and the needs of your customers were not put into perspective. It limits your ability to think “outside the box”.

• In order to maintain the market share and the constant goal of beating Caterpillar, several external factors were ignored. Focusing only on one goal can cloud the judgement. For example, instead of trying to increase sales in an already challenged market where the demand for the product was stagnant, Komatsu could have focused on strategies to cut costs in other areas (such as shifting production oversees).

2. Analyze Komatsu’s 3 C’s at the end of the case: company (capabilities, competences, competitive advantages, products, resources, management, etc.), customers (current, potential, light users, heavy users, etc.) and competitors. What are their strengths and weaknesses?

Strengths: Going into the 90s, the company’s focus was changed, and the biggest drivers of this change were the external factors: market demand, changing business needs, improved products that were more efficient and lower in cost, as well as the need for diversification.

Customer: Komatsu was able to identify the need to tap into the non-construction market in order to diversify its risk and develop products that were more cutting-edge technology and in-demand.

Company: It went from autocratic top-down management style to a more integrated approach where open dialogue was