2. About the Earth Moving Equipment (EME) Industry:
• EME industry is majorly dominated by North American brands, CAT having 43%
market share in 1984.
• Buying behaviour of EME is up front bidding of both machines and spare parts.
• In early 1980s contract signed by U.S. construction company fell to $115 billion
from $170 billion in 1983.
• In 1981, dollar appreciated by 40%, pushing exporting companies into loss.
• In 3 years overseas construction contracts dropped by 45% of U.S. construction
companies.
• In 1983, major European competitor faced bankruptcy.
• In 1982, CAT introduced Cost reduction program, involving reduction of wage
differential of industry from 45% to 10-15% resulting labour relation deterioration.
• In 3 years, Cost reduction program led to 14% reduction in cost.
3. About the Company:
• Komatsu was founded in 1921 with its headquarter in Tokyo
• In 1983, It consolidated net value of $3.2billion, 81% sales from
EME.
• Key management perspectives:
• Overseas Orientation
• User Orientation
+1921- Founded by Mr.
Takeuchi
1931- Produced
Agriculture tractor in
Japan
1941-1944
Key producers of tanks
and bulldozers
1950 – Post
war
reconstruction
of Japan
4. In 1960s:
Market Scenario:
• MITI introduced FCI in EME industry.
• CAT – Mitsubishi joint venture
Strategy:
• Acquisition of Advanced technology from abroad
• Improvement of product quality
• Licensing arrangement with International Harvester and Bucyrus Erie in U.S.
• Total Quality control
• 1964 – Project A : Quality improvement in medium sized bulldozers
Management: Yashinari Kawai President
Result:
• Market share – from 50 to 65%
• Warranty claim reduced by 67%
1961- Launched
Total Quality
Control
1964 – Project A
launched and
change in
leadership
1966- First R&D
lab established
5. In Early 1970s:
Market Scenario:
• EME was leading to saturation in Japan market
• Middle east construction was booming
Strategy:
• Pricing less than 30 – 40 % CAT equipment.
• Launch of project B – Quality improvement of Large sized bulldozers
• Penetrate LDCs market
• Provided an Presale Service department in LDCs.
Management:
Aggressive expansion in abroad
Result:
Komatsu Export to total sale ratio increased from 20 to 55% in 5 years
Market share – 11.6%
1972 – Launch
of Project B
1976 –
Komatsu had
60% market
share
1976 -1981
Focussed on
Product
Diversification
1979 –
Launched
project F&F
1981 –
Launched
EPOCHS
6. In late 1970s:
Market Scenario:
A. Worldwide demand for construction equipment was slowing down
B. In 1977, Japanese Yen was getting stronger against most major currencies.
Strategy:
A. Four part cost reduction plan
V10 campaign
Reducing number of parts by 20%
Value Engineering
Rationalisation of manufacturing systems
B. Policing of using pessimistic internal Yen-Dollar exchange rate of 180 to make cost structure efficien
Product development program was accelerated
Management:
Improve Competitiveness of products
Result:
Number of products increased from 46 to 77
Introduction of electronic technology in its machinery
Introduced radio controlled and under water bulldozer
Market share – 14.8%
7. In 1980:
Market Scenario:
EME market was divided into 2 parts:
Commercial Market: For Developed countries
Bidding market : Developing countries and Erratic Demand
Period of recession during 1980.
Strategy:
A. To become a full line manufacturer with Extensive Sales and service network.
B. Got out of licensing agreements
C. Established its own technology
D. Purchased IH for $52 million
E. Japanese engineers were available at each distribution centre to help the dealers.
F. Launched a new product EPOCHS
J. Equipment were geographically customized
K. 4 -5% investment in R&D
L. Launched Future and Frontiers.
M. Joint research agreement with Cummins engine to cut the fuel cost by 40%
Management: Stronghold in Commercial market
Result:
160 distributer in foreign countries and extensive sales & service network in domestic market
Production was fully integrated
Market Share - 15.2% in 1980 and 25% in 1984.
8. In 1984:
Market Scenario:
60% market share in Japan
US economic recovery was on the
Strategy:
PDCA- Plan, Do, Check, Act
They diversified production capacity in Brazil and Mexico
Management: Intertwined system ofTQC, PDCA and Management by policy
Result:
Market share increased by 10% in 4 years.
Awarded Japan quality control prize
9. Way forward:
Market Scenario:
Komatsu is world’s 2nd
largest EME company.
Cat unprofitable for 3 years.
Management ideology: Competition with Cat
Strategy:
Maru-C ( Encircle Caterpillar)
Monitors events in Peoria and US
Keep an eye on the in-house letters to employees, news reports etc.
