Komatsu: Ryoichi Kawais Leadership Harvard Case Solution & Analysis

Komatsu: Ryoichi Kawai’s Leadership


            During the 1980’s, the industry faced various economic threats and challenges in the form of recession in the United States.Consequently, the growth in infrastructure and development, construction projects, dam buildings and housing development declined particularly in the developing countries. Due to the fact, the construction companies had an extremely negative effect within the industry.Decrease in the commodity prices, debt financing issues, borrowing and recession also impactonthe developing countries, particularly in Africa and Latin America. Komatsu founded in 1921 as an established producer of mining equipment. The firm’s basic vision and philosophy focused on enhancing export activities. The Chief Executive Officer of the Komatsu, Mr. Takeuchi focused on two major areas i.e. an overseas orientation and a user orientation. During the 1930’s, the company produced Japan’s premier agricultural tractor, later on after the second world war, Komatsu established as a significant producer of tanks, bulldozers, howitzers, etc.

            Kawai’s had several goals and objectives for the company to compete with the other dominant players in the industry especially Caterpillar. Kawai’s leadership based on two objectives, acquisitions of latest technologies from outside the globe and another was based on improving the product quality standards within the organization. In order to ensure quality standards, Kawai implemented various programs for the betterment of the Komatsu. The launch of TQC (Total Quality Concept)facilitated the company to increase the product quality and standards. The management of the Komatsu realized the significance of the business expansion at the beginning of the 1970’s.

Critical Issues

Though the company was the second largest EME at the global level, there were numerous challenges and problems they faced within the industry that needed to beconsidered. One of the major challengesfor the Komatsu was to compete with the Caterpillars network at global level including the Japanese market.Komatsu has to set their goals and objectives to compete against Caterpillars in order to increase the market share. The company’s management started to develop positive relationships with various countries, mainly concentrating on the third world countries. The company needed to develop an effective dealership network, which increased the company’s dependence on the nonexclusive dealerships. As a result of this, Komatsu performance effected in the form of lesser contracts than Caterpillar. The Komatsu main focus was to challenge the Caterpillar global dealer network that was a major component for gaining a competitive advantage for the Caterpillar.It is because ofthe dealershipswere autonomous and locally owned. Komatsu faced an immense competition from the Caterpillars network because of the worldwide services of equipment, service and strong financial background offered services in more than 200 countries.Caterpillar rental services also pose a major threat for the Komatsu in order for it to expand the business and strengthen the customer base.

During 1976, the Japanese market was extremely concentrated, and Komatsu took a full advantage of it by decreasing the market share of Mitsubishi-Cat joint venture with roughly 30 percent. Komatsu realized that they faced an enormous competition from the Caterpillar and are still able to capture a 60 percent market share within Japan.In order to compete with the Caterpillar, the company decided to practice revitalization. Komatsu actively participated within the Japanese industry, but now thinking about global expansion to capture other markets.Another problem that Komatsu faced was the lack of control over suppliers that needed to be sorted out. Komatsu had to reorganize its relationships with suppliers. During the 1980’s, Komatsu has begunto restructure its distribution network at global level in order to strengthening the sales offices with more dealers services similar to Caterpillars. Consequently, Komatsu had eight marketing subsidiaries worldwide and more than 20 global offices and around 160 distributors in foreign countries. Apart from all these efforts, Kawai identified that the company’s 56 dealers in the U.S were fewer as compared to the Caterpillar distribution network.

Komatsu mainly targeted the Japanese industry as their products manufactured in 14 different plants out of which 13 of them were in Japan. The company entirely owned Brazilian subsidiary products and manufactured medium-sized bulldozers for other countries including Brazil. As a result of it, the company gained 49 percent ownership in Mexico for the manufacturing of large-scale bulldozers in the region and other neighboring countries. To compete successfully with Caterpillar and Mitsubishi, Kawai kept emphasizing on the research and development to gain competitive advantage. Concern regarding the construction industry remains for the Komatsu at global level; the company’s management started to tackle the issue to find business opportunities. The company launched a project “F and F” (Future and Frontiers) with an aim to add new products and identify new markets in the industry. The company’s research and development department played a key role in the diversification process, and it resulted in a massive increase in the number of qualified research professionals...................

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Key roles Ryoichi Kawai in creating a company that is able to challenge industry leader Caterpillar. Rewritten version of the previous case. "Hide
by Christopher A. Bartlett Source: Harvard Business School 18 pages. Publication Date: September 7, 1989. Prod. #: 390037-PDF-ENG

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