Management and Joint Ventures
Komatsu Ltd.: Project Gs Globalization
EXECUTIVE SUMMARY
Komatsu Ltd. is operating in challenging market conditions that are made more complicated by the centralized production and operations strategy and the variability of the currency markets, particularly the value of the Japanese Yen. To combat these challenges, Komatsu has replaced CEOs, changed their corporate focus from “Beat Cat” to the three “G”s – “Growth, Global, Groupwide”. Key issues identified in the case are Komatsu’s approach to international expansion, organizational structure and localizing management, and product diversification. Komatsu was at crossroads on how to most efficiently and effectively leverage cost savings and expertise in local markets, from production to sales & marketing, and still maintain their reputation of product quality. They were in need of an organizational restructuring that would support this new international business model, which also included ensuring key management would be heavily involved in this new expansion. At the center of all of this, Komatsu was also diversifying its product lines and growing revenue from non-construction/mining businesses. How can Komatsu achieve its Three “G”s focus given these challenges?
Our proposal covers three possible strategies that Komatsu could leverage to improve operations and business performance, in light of the aforementioned challenges. First, to better control its international expansion, Komatsu can shift its expansion strategy from joint ventures to mergers & acquisitions. This will help achieve management control that is currently struggling, but will be an expensive and time-intensive option. Second, to protect its core business and take advantage of innovation and new products, Komatsu could execute separate and different international strategies for its core business and its new business – acquisitions for its core business and joint ventures for its new business. This would be
EXECUTIVE SUMMARY
Komatsu Ltd. is operating in challenging market conditions that are made more complicated by the centralized production and operations strategy and the variability of the currency markets, particularly the value of the Japanese Yen. To combat these challenges, Komatsu has replaced CEOs, changed their corporate focus from “Beat Cat” to the three “G”s – “Growth, Global, Groupwide”. Key issues identified in the case are Komatsu’s approach to international expansion, organizational structure and localizing management, and product diversification. Komatsu was at crossroads on how to most efficiently and effectively leverage cost savings and expertise in local markets, from production to sales & marketing, and still maintain their reputation of product quality. They were in need of an organizational restructuring that would support this new international business model, which also included ensuring key management would be heavily involved in this new expansion. At the center of all of this, Komatsu was also diversifying its product lines and growing revenue from non-construction/mining businesses. How can Komatsu achieve its Three “G”s focus given these challenges?
Our proposal covers three possible strategies that Komatsu could leverage to improve operations and business performance, in light of the aforementioned challenges. First, to better control its international expansion, Komatsu can shift its expansion strategy from joint ventures to mergers & acquisitions. This will help achieve management control that is currently struggling, but will be an expensive and time-intensive option. Second, to protect its core business and take advantage of innovation and new products, Komatsu could execute separate and different international strategies for its core business and its new business – acquisitions for its core business and joint ventures for its new business. This would be
References: 1. “Komatsu Ltd. Profile”, Answers.com (sourced from Hoover’s) http://www.answers.com/topic/komatsu-ltd-adr 2. Osenga, Mike, “October surprise: major Cat reorganization: new China division formed; excavation to be based in...”, Diesel Progress North American Division, http://www.allbusiness.com/construction/construction-materials-components/11704481-1.html - Accessed on March 2, 2009