globalization of komatsu - strategic management cases
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Globalization of KomatsuDigging Out of Trouble
Presented ByAraro JirehAry Andana
Bambang Wijarnako
Exc. 33 A - MMUGM - Jakarta
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2Globalization of Komatsu
The Content
Komatsu at a GlanceKomatsu’s Business FocusKomatsu’s PerformanceStrategies for Competing in International MarketsConclusion
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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
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Globalization of Komatsu 5
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
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Globalization of Komatsu 6
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
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Globalization of Komatsu 7
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
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Globalization of Komatsu 8
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.
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Globalization of Komatsu
• Geographic Expansion• Internal Restructuring
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Komatsu’s Business FocusGlobalization - Satoru Anzaki (1995 – 2001)
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Globalization of Komatsu
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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Komatsu’s Business FocusGlobalization - Satoru Anzaki (1995 – 2001)
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Globalization of Komatsu
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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Komatsu’s Business FocusGlobalization - Satoru Anzaki (1995 – 2001)
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Globalization of Komatsu
• Company Restructuring• Globalization Efforts
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Komatsu’s Business FocusGlobalization - Masahiro Sakane (2001 - 2007)
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Globalization of Komatsu
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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Komatsu’s Business FocusGlobalization - Masahiro Sakane (2001 - 2007)
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Globalization of Komatsu
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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Komatsu’s Business FocusGlobalization - Masahiro Sakane (2001 - 2007)
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Globalization of Komatsu
• Global Growth Efforts• Strengthening Organizational and Leadership
Capability
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Komatsu’s Business FocusGlobalization - Kunio Noji (2007 - 2010)
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Globalization of Komatsu
Global Growth EffortsEncouraging the change in geographic mix
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Komatsu’s Business FocusGlobalization - Kunio Noji (2007 - 2010)
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%
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Globalization of Komatsu
Strengthening Organizational and Leadership Capabilityo Raising internal awarenesso Conducting presentations of “ the Komatsu Way”
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Komatsu’s Business FocusGlobalization - Kunio Noji (2007 - 2010)
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Globalization of Komatsu
Strengthening Organizational and Leadership Capability
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Komatsu’s Business FocusGlobalization - Kunio Noji (2007 - 2010)
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
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Globalization of Komatsu 20
Komatsu’s PerformanceNet Sales
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Globalization of Komatsu 21
Net IncomeKomatsu’s Performance
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Globalization of Komatsu 22
Sales by RegionKomatsu’s Performance
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Globalization of Komatsu 23
Top 10 Market Share 2009 – Global Construction Machinery IndustryKomatsu’s Performance
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Strategies for Competing in International Market
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25Globalization of Komatsu
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
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26Globalization of Komatsu
Strategies for Competing in International Markets
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
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27Globalization of Komatsu
Strategies for Competing in International Markets
Strategic Options for Entering International Markets
Export Strategies
Licensing StrategiesFranchising Strategies
Acquisition Strategies
Greenfield Venture Strategies
Alliance and Joint Venture Strategies
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28Globalization of Komatsu
Strategies for Competing in International Markets
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
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29Globalization of Komatsu
Strategies for Competing in International MarketsThe Three Main Strategic Approach for Competing Internationally
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Conclusion
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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
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32Globalization of Komatsu
Thank You
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33Globalization of Komatsu
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