globalization of komatsu - strategic management cases

Globalization of KomatsuDigging Out of Trouble

Presented ByAraro JirehAry Andana

Bambang Wijarnako

Exc. 33 A - MMUGM - Jakarta

2Globalization of Komatsu

The Content

Komatsu at a GlanceKomatsu’s Business FocusKomatsu’s PerformanceStrategies for Competing in International MarketsConclusion

Globalization of Komatsu 3

Komatsu at a Glance

Komatsu Corporate Profile

Established on May 13, 1921

Headoffice located in Japan

Main Business: Manufacture and sale of construction and mining equipment, utilities, forest machines and industrial machineryKomatsu Group consists of Komatsu Ltd., and 182 other companies, which consist of: Consolidated Subsidiaries: 146Companies accounted for by the equity method: 35Komatsu Ltd: 1

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Komatsu’s Business Focus


Komatsu’s Business FocusDomestic Focus (1921 – 1964)

1921: Started out as specialized mining equipment manufacturer

1930s: Expanded its operations into agricultural machinery & subsequently provided military equipment during world war II 1947 – 1964: shifted the emphasis towards applying new technology to civil engineering and towards manufacturing construction in Japan. Consequency: Improve Product Quality!

To support that program, in 1961: Launcehd a company wide quality control programme

Komatsu Domestic Focus


Komatsu’s Business FocusDomestic and Export Phase (1964 – 1982)

Management succession from Yoshinari Kawai to Ryoichi Kawai

These strategies run succesfully, proved by increasing 50% sales and 65% domestic market share

Komatsu Domestic & Export Phase

Implementation Management by Policy, which focus on these following strategic priorities: • Upgrade Product Quality by obtain international certification for Komatsu Product • Enhance Efficiency: scutinizing all aspects of production & launched “World A” campaign

Focus on export and product growth: • 1975: export 50% of sales• 1982: export 75% of sales


Komatsu’s Business FocusInternationalization (1982 – 1989)

1982: Shoji Ogawa took over operational leadership

Internalization Phase

Shoji Ogawa strategy: centralized international production facilities, cost cutting, and aggressive export sales

US economic recession & declining in construction market demand happened which led to price war

In the late 1980s: Nogawa established two key overseas production plants: Tennessee and Newcastle

Diversification: expanding the geographic into non construction machinery production to reduce


Komatsu’s Business FocusRegionalization and Localization (1987 – 1995)

1988: Masao Tanaka appointed as CEO

Tanaka strategies: end price discounting, high sales-pressure practices, increase regional capacity by having autonomous bases of operations, including finance, manufacturing and sales in the three core markets: Japan, US and Europe Tanaka replaced by Tetsuya Katada who introduce further local participation in the different subsidiaries to raise their effectiveness in their respective geographical contexts.

Katada created 3 G strategy: Growth, Global, Groupwide to gain double sales in the next five years. He also implemented Localizing Management and Product Diversification strategy.

Globalization of Komatsu

• Geographic Expansion• Internal Restructuring

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Komatsu’s Business FocusGlobalization - Satoru Anzaki (1995 – 2001)


Geographic Expansiono Asian market (Singapore and Indonesia)o Joint ventures

Mannesmann Demag AG Modular Mining Systems, Inc. Larsen & Toubro Ltd.

Not successful on asian market expansion.• Global demand declined, 25% (1997) to 15% (1999).• Japan’s share declined from 30% to 20%.• Net income loss ¥ 12.3 billion (1999).

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Internal Restructuringo Consolidating factorieso Reducing the number of board directorso Diversifying top management on International Advisory

Board (IAB)

Successful, but still suffered on domestic market and product demand to getting worse. Net loss of ¥852 billion ($710 million).

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• Company Restructuring• Globalization Efforts

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Komatsu’s Business FocusGlobalization - Masahiro Sakane (2001 - 2007)


Company Restructuringo Reducing the workforce by 10%o Consolidating businesses and affiliated companies (Japan

and abroad)o Developing the promotion of human resource

development throughout Komatsu’s global operations.

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Globalization Effortso Expanding Geographicallyo Expanding core construction and mining equipment,

“Global Cycling System for Construction Equipment”.

Successful. Increasing net income from ¥3,009 billion (2003) to ¥114, 290 billion (2006).

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• Global Growth Efforts• Strengthening Organizational and Leadership

Capability

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Komatsu’s Business FocusGlobalization - Kunio Noji (2007 - 2010)


Global Growth EffortsEncouraging the change in geographic mix

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Change in Komatsu's Geographic Mix 2004-2008 Percentage

Change

Region 2004 2008 Japan 30.2% 15.2% -49.7%North America 21.2% 15.6% -26.4%Europe & CIS 16.0% 21.9% 36.9%Asia & Oceania 12.0% 16.7% 39.2%China 8.7% 9.3% 6.9%Middle East & Africa 6.7% 11.6% 73.1%Latin America 5.2% 9.7% 86.5%


Strengthening Organizational and Leadership Capabilityo Raising internal awarenesso Conducting presentations of “ the Komatsu Way”

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Strengthening Organizational and Leadership Capability

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Seven Ways of Komatsu

Five Principles 1. Vitalize the functions of 1. Commitment to the board of directors. quality and reliability 2. Take the initiative in 2. Customer oriented communicating with all our stakeholders. 3. Comply with the rules of 3. Defining the root the business community. cause 4. Never put off responses 4. Workplace (genba) to risks. philosophy 5. Keep thinking about your 5. Policy deployment

successor.

6. Collaboration with

business partners

7. Human resource

development

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Komatsu’s Performance


Komatsu’s PerformanceNet Sales


Net IncomeKomatsu’s Performance


Sales by RegionKomatsu’s Performance


Top 10 Market Share 2009 – Global Construction Machinery IndustryKomatsu’s Performance

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Strategies for Competing in International Market


Strategies for Competing in International Markets

Five Major Reasons Why Companies Entering Foreign Markets

To gain access to new customers

To achieve lower costs through economies of scale, experience, and Increased purchasing powerTo further exploit its core competency

To gain access to resources and capabilities located in foreign markets

To spread it business risk across a wider market base



Why Competing Across National Borders Makes Strategy Making More Complex

Cross-country variation in Factors that affect industry Competitiveness

Locating value chain activities for competitive advantageThe impact of government policies and economic conditions in host countriesThe risks of adverse exchange rate shiftCross-country differences in demographic cultural and market conditions



Strategic Options for Entering International Markets

Export Strategies

Licensing StrategiesFranchising Strategies

Acquisition Strategies

Greenfield Venture Strategies

Alliance and Joint Venture Strategies



The Three Main Strategic Approach for Competing Internationally

Multi-domestic Strategy – Think Local, Act Local

Global Strategy – Think Global, Act Global

Transnational Strategy – Think Global, Act Local


Strategies for Competing in International MarketsThe Three Main Strategic Approach for Competing Internationally

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Conclusion

Globalization of Komatsu31

Conclusion

Macro environment determine business focus and corporate strategy

The Komatsu’s reasons in expanding into foreign market :• Gain access to new customer• Achieve lower cost and enhance competitiveness• Spread business risk across wider market base

Strategic option used by Komatsu for entering International Market :• Export Strategies• Acquisition Strategies• Alliance and Joint Venture Strategies

Strategic approach used by Komatsu : Global Strategy

Komatsu’s strategy could not handle financial crisis and global recession very wellLack of diversity on “Senior Leadership Team”

Different leaders had different strategy


Thank You


Strategies for Competing in International MarketsThe Diamond of National Advantage

DEMAND CONDITIONS

Home market relative size;

domestic buyers’ needs

FIRM STRATEGY, STRUCTURE, and

RIVALRYDifferent styles of management and

organization; degree of local

rivalry

FACTOR CONDITIONS

Availability and relative prices of input (e.g.

labor, materials)

RELATED & SUPPORTING INDUSTRIESProximity of

Suppliers, end user and complemen-

tary Industries