Komatsu

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GLOBALIZATION OF KOMATSU: DIGGING OUT OF TROUBLE

1. A Brief Introduction to Komatsu: Summary
Komatsu was founded in 1921 in Osaka, Japan as a manufacturer of mining equipment. During World War II they added agricultural machinery and military equipment to their product line. It was a company focused on quality, and they continued to introduce new technologies in their manufacturing processes. After the war, Japan focused on recovering in different industries such as: manufacturing, mining and construction. In a few years the country surpassed its pre-war economic status and Komatsu benefited greatly from this growth in the local economy. During1963, the Japanese government decided to open the doors to foreign investors in the industry of Earth Moving Equipment. This is when Caterpillar penetrated the Japanese market, but it did so through a joint venture with the local brand, Mitsubishi. This strong venture raised the standards of quality, making Komatsu fight for its position in the industry. However, Komatsu did feel strong, and with the growth of the domestic market slowing down, they decided to expand its business to other countries. Komatsu began branching out to other parts of the world, but they were working with nonexclusive dealerships since their competitors had strong contracts with the other dealer networks (Jao, 2010).

Two manufacturing plants opened to distribute to their markets in the United States and the United Kingdom. The manufacturing plants did not adapt to the local needs, and after the quick increase in value of the yen, Komatsu began raising its prices dramatically. An international business division was created to continue their expansion, and in 1988 they signed a joint venture with Dresser Industries, making them the second-largest manufacturer of construction equipment in the United States.

Komatsu’s struggle for success outside of Japan led them to create a division to help their international business, promoting joint ventures to become more glocal. The firm continued to focus on competitive growth and made their biggest operational bases in Japan, Europe and the United States more autonomous. Despite all of these efforts, Komatsu was not adapting well and even in large ventures such as that with Dresser Industries, Komatsu suffered great losses. This destructive tendency had to be addressed and a new strategy was created: Growth, Global and Groupwide. The firm pushed for an increase in sales and more autonomous regional production. Komatsu’s range of products continued to diversify and after their joint venture with Applied Materials Inc from the USA, Komatsu became a strong electronics firm. Komatsu expanded quickly into the Asian market, but their entrance was met by the economic crisis in 1997 and the lack of demand led to millions of losses (Kelly, Kevin. 1991).

Komatsu needed to regroup, so factories began to consolidate and close others down. They sold their stake in the venture with Applied Materials Inc. This led to the reduction of the board members, as well as the workforce. They began renting smaller equipment as part of their recovery strategy and later launched the Dantotsu Strategy. This incorporated a line of products that had highly differentiating features, superior to any of their competitors.

Their recovery was well under way and a restructuring of their geographic mix led to change of focus from the Japanese and North American markets towards the emerging markets in other parts of Asia, Latin America, Middle East and Africa. Their plants were integrated through an ERP planning system that has allowed them to better control their manufacturing and sales, as well as their planning and logistics.

Despite Komatsu’s successful strategies of recovery, and their striving for cultural diversification within the organization: the global financial crisis that started in 2008 has decreased the demand for their products. This created considerable losses in 2010...
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