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Komatsu Case Analysis

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Komatsu Ltd is a Japanese company established in 1921 as a specialized producer of mining equipment that expanded into different types of heavy machinery but would ultimately become associated with construction equipment. Through their journey to become the world’s leading premier construction equipment manufacturer I examine how changes in the industry, domestic markets, and foreign exchange affected the company. I analyze the different strategies, leadership styles, and policies implemented by each leader throughout the years to confirm if their actions supported the overall goal of the company. In my summation I’ve concluded that of the following critical issues the strategy of each president had a major influence on the company’s growth.

Critical Issues:

Strategic Problem – Nogawa Era focused more on cutting costs and aggressive sales.

Management Problem – Nogawa was an autocratic micro-manager whose resistance to change affected the company. Tanaka seemed unsure of himself and needed to have the input of other managers to discuss the company’s future.

Operational Problem – Under the Tanaka Era he responded to the competitive crisis before focusing on the larger strategic goal of product diversification and internationalization.

Product Problem – Komatsu held a market share of 50% despite the low quality. Product diversification.

Financial Problem – Net income dropped 55% in 1987 from 1985.

Strategic Problem – Although, he didn’t want to change the policies of Kawai; Nogawa should have changed his strategy to shifting production overseas and reducing Komatsu dependence on the construction industry.

Management Problem – Because of Nogawa’s autocratic style and Tanaka participatory style along with their strategies made them unpopular with the employees. I would have chosen a leader with a growth strategy and democratic style because employees feel as though they can contribute to improving the company.

Product Problem – The TQC process had been implemented in 1961 and was successful during that era. PDCA was implemented under the Kawai era and there should have been an improvement to the quality initiative with every president.

Financial Problem – The financial issue would have been obsolete had there been a better strategy during the Nogawa era.

1. How was Komatsu able to evolve from a $169 million company with low quality products to become a real challenge to Caterpillar by the early 1980s? How would you evaluate Mr. Kawai’s performance?

* Through the program initiated by his father, Kawai implemented processes to improve the quality of the products.

* The PDCA was the process of control that ensured progress was being made. * Projects A,B,C,D focused on improving the performance of specific products.

* Projects were an immediate success.

* Market share increased from 50% to 65% by 1970. * Cat’s 1982 annual report opens with the competition a Komatsu bulldozer.

* Kawai was a great leader who saw issues before they arose.

2. Why did performance deteriorate so rapidly in the mid-1980s? What grade would you give to Mr. Nogawa’s term as CEO?

* Growing challenges facing the industry.

* Nogawa began his leadership as demand decreased. * The value of yen surged from ¥239 per dollar to ¥169 per dollar.

* Nogawa’s management style.

* He was reluctant to change policies from the previous era. * Unpopular, autocratic, micro-manager. * As conditions worsened he focused on cutting costs and aggressive sales.

Nogawa would get an F during his term as CEO. He wasn’t a forward thinker and thought relying on the same business model from the Kawai era that the company would keep growing despite the economy.

3. How appropriately did Mr. Tanaka deal with the problems he inherited? What is your evaluation of his brief tenure as CEO?

* He laid the groundwork for fair competition in the domestic market.

* He responded quickly to the worldwide price wars. * Mr. Tanaka ended price discounting and aggressive sales in order to gain market share. * He pursued internationalization and product diversification more than Nogawa.

* The company began regionalizing production in Europe and in the U.S. * In 1988 Komatsu enters a joint venture with Dresser and become Komatsu Dresser Corp, or KDC.

Mr. Tanaka made good decisions that helped stabilize the market while increasing profits at Komatsu during his brief tenure.

4. How effectively did Mr. Katada take charge? How would you assess his new vision for the company? His new strategy? His new cultural and behavioral objectives? What grade would you give him for his performance?

* He challenged organizational processes.

* TQC no longer the center of the management process.

* He proposed a new slogan and strategic goal for the company.

* Growth, Global, Groupwide reflected a challenge that focused beyond beating Caterpillar.

* He sought to reform the bureaucratic and rigidly structured company.

* Project G was committed to return the company to growth. * By the mid- 1990s the nonconstruction part of Komatsu accounted for 50% of its sales. * Katada began referring to the company as a total technology enterprise.

Mr. Katada did a remarkable job restructuring Komatsu and the strategic goal of the company.

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