Executive Summary

This report is an endeavor to analyze the case, Komatsu Limited from Human resource,

Marketing, Operations and Finance point of view.

We have first dealt with the business landscape that gives us a sneak peek through Komatsu’s

timeline. We get an insight of how the idea of Komatsu was conceptualized and what are the

challenges faced by it today.

Later we have examined the Strengths, Weakness, Threats and Opportunities of Komatsu in the

construction and EME industry amidst the various environmental factors.

Based on the weakness of Komatsu we have suggested some recommendations. These

recommendations have been studied from the Human resource, Finance, Operations and

Marketing perspective.

Then we have moved on to Industry analysis. Following this we have the main issue that

Komatsu is facing and what are our recommendations which are based on elaborate logic and

reasoning.

At the end we have suggested some recommendations for Corporate, business and functional

strategy. And with this we have concluded.

Business Landscape

Komatsu Ltd. was founded by Mr. Takeuchi in the year 1921 in Osaka, Japan. Its main goals

were “overseas orientation” and “user orientation”. It started off as a producer of mining

equipment then ventures in to other equipment manufacturing sections. The company started

making steel castings and was first one to manufacture the agriculture tractor in the year 1931.

During the Second World War Komat6su produced Bulldozers, tanks, howitzers etc. Komatsu’s

products did not meet the international quality standards so it was unable to persuade dealers to

sell its products and had to set up its own branches of sales office.

In 1963 the Japanese Ministry of International Trade and Investment decided to open the EME

(Earth Moving Equipment) industry to foreign capital. This would lead to exchange of technical

knowhow for access to Japanese market. Mr. Kawai decided that to compete with the world

leader in EME industry, Komatsu needed knowledge of latest technology and improved high

quality products. Komatsu began “Project A” in 1964 which aimed at upgrading medium sized

bulldozers. For this reason the company entered in to a licensing agreement with International

Harvester, Bucyrus-Eric and Cummins Engine, but it had to pay heavy price for this, not only in

financial terms but also had to restrict its exports. Thus the company started its own Research

and Development (R&D) Centre in 1966. Here they launched the Total Quality Control (TQC) to

ensure highest quality in every aspect of Komatsu’s operations. Using this TQC system the

company produced high quality products and reduced it warranty claims by 67%. During the

early 1960, Komatsu started opening a market in Eastern Bloc countries and started promoting

trade relations with China and USSR.

In 1967 Komatsu Europe was established as the European marketing subsidiary. In 1972 it

launched another “Project B” with an aim of expanding its overseas market. It also established a

presale service department in 1974 that provided assistance from the earliest planned

development stage in the Less Developed Countries and also started to set up its dealer networks.

With all these efforts the sales rose to 55% (1975) from 20% (1973). By 1976 the Japanese

markets were saturated with Komatsu and Mitsubishi-Cat holding 60% and 30% of the market

share respectively, so Komatsu decided to improve the competitiveness of its products.

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They launched a four- part cost reduction plan. They were:

1) V-10 Campaign- reduce cost by 10%

2) Reduce the number of parts by over 20%

3) Value Engineering and gain Economies of Scale

4) Rationalization of manufacturing system.

In 1977 Japanese yen started appreciating, so manufacturing was responsible for obtaining a cost

structure. To have a strong foothold in the market, Komatsu strengthened its dealer and service

network. In 1981 the company launched EPOCHS (Efficient Productions Oriented Choice

Specifications). The aim of this project was to improve production efficiency without reducing

the number of product specifications required by the market. By 1983 Komatsu became an

“Integrated” and “Concentrated” production system. The company also introduced PDCA (Plan,

Do, Check and Act). All this ensured that the company produces high quality products and owns

a chunk of market share. With all these improvements the company became the second largest

producer of EME and wants to sustain it.

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Industry Analysis:

Industry Rivalry: High

Komatsu is the second largest player in the world EME industry with a market share of 60% in

Japan and 25% worldwide. Caterpillar is the major competitor with a market share of 43%

worldwide. It faced competition from other established global players like J.I.Case, John Deere,

Clark Equipment and Fiat-Allis. Along with these global players it also faced competition from

specialized local players in Europe and North America.

Instability in the economy causes the overcapacity in the industry and leads to a fierce

competition which results in price wars and favourable terms for the buyers.

Komatsu has focused on lower prices and higher quality of its products to maintain the

competitive position in the market.

Threat of Substitutes: Low

The threat of substitute products is minimal. There isn’t any other product that can perform the

same functions at a comparable cost. Human labour is the only possible substitute but it requires

a lot of time to perform the same function.

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Buyer’s Power: Medium

Presence of a good number of local firms along with Komatsu and other global players give the

customers quite a bit of choice for purchasing the equipment rendering the buyer power to be

medium. To attract the customers, Komatsu has priced its products 30-40% below the similar

cat’s equipments and Komatsu has a broad product line with number of variants. Komatsu has

always focused on quality through TQC, technology and long term customer relationship which

offer substantial savings to the customers. So Komatsu has positioned itself as a reliable source

in the minds of the customers.

Supplier’s Power: Low

The suppliers have a little influence on Komatsu as it is a vertically integrated player. Komatsu is

the largest producer of the steel casting in Japan. Komatsu manufactures diesel engines, presses,

machine tools, solar batteries and iron casting which are major raw materials for Komatsu’s

products. Vertical integration has helped Komatsu to price its products at lower prices.

Threat of new entrants: Low

EME manufacturing business not only requires huge capital investment and R&D expenditure

but the new brand must offer brand equity by differentiating its products from the other players

already in the market. This poses huge entry barriers in EME industry so threat of new entrants

in this industry is very low.

SWOT

Internal Environment

Strengths

Low labor costs and high productivity labor force was its biggest asset. (Komatsu

employees earned only 55% of the wages paid to Cat employees)

Its effort to produce new & differentiated products helped it to build a network of

exclusive distributors overseas.

They worked closely with suppliers (Komatsu trained them in adopting its TQC system)

It cultivated cordial relationship with governments in third world countries.

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Its position as the second largest EME producer along with its pricing which was 10 -

15% lesser than that of CAT (lower labour costs) helped them in getting contracts.

Twin orientation towards vertical integration & consumer satisfaction.

System of TQC,PDCA and management by policy contributed to company performance

and employee development

Weaknesses

Despite having a strong market in Japan, Komatsu had a very small dealer network in

other countries.

Komatsu did not promote itself when it diversified abroad.

Initially had narrow product lines because of which many were not willing to become

their exclusive dealers.

Central production strategy of Komatsu exposed it to risks from fluctuating exchange

rates and increased logistical costs of shipping heavy equipment which could result in the

loss of its competitiveness.

External Environment

Opportunities:

Komatsu could exploit the opportunities in developing countries like India, China, Korea,

Middle East etc which would provide the infrastructure projects.

Joint venture and acquisition programs with local players in countries where the host

governments have special treatments for local players. Komatsu has responded to the

demands of local governments by commencing assembly operations in Brazil and

Mexico. In Indonesia, Komatsu has a market share of 70% in EME business as a result of

JV with a local partner.

Komatsu should focus on Asia and Oceania as Komatsu’s sale has been increasing in

these areas significantly. (Refer Annexure)

Increasing construction activity due to growing population: Population rise will

significantly impact the construction industry. The company has a strong presence in the

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construction equipment market and is well positioned to take advantage of the

opportunity to grow in this segment.

Threats

During early 1980s, the Construction industry in US had faced a major downturn. It poses

a potential threat on EME Industry as construction industry represents 60% of EME

Industry’s market.

The market of EME industry in developed countries is reaching at saturation point which

decreases the demand for the products. It would result in fierce competition and could

threaten Komatsu’s growth. Komatsu was actually losing its market share in American

market.

Komatsu majorly relied on independent and non exclusive dealers for sale of its products.

Economic instability creates demand-supply imbalances which would stagnant the

demand and could harm the growth of Komatsu.

Exchange rate fluctuation poses a major threat to the Komatsu. In the fall of 1977,

Japanese yen began appreciating against dollar. The appreciation in domestic currency

makes the products expensive in the international market which encourages buyers to

shift to other markets.

Trade policies of other nations could affect the revenues of Komatsu. As EEC was

considering the imposition of countervailing duties on the Komatsu’s products because

these products were considered to be dumped.

Distinctive Competencies of Komatsu

The following distinctive competencies helped Komatsu to achieve operational effectiveness

and shrink the gap between itself and Caterpillar:

Labor cost advantage

Clarity of vision and goals which was shared by the whole organization

Value Engineering

Good labor relations

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Key strategies of Komatsu

1960s

1. Issue: Acquisition of technology from abroad.

Analysis: Post world war, the quality of products manufactured by Komatsu was found to be

half of that of international standards. Due to this, in early 1960’s the company entered licensing

agreements with IH, Bucyrus – Eric and Cummins. The cost of access to technology was high

and the agreements also laid certain restrictions on Komatsu in terms of exports. This led to

Komatsu setting up its own R&D lab in 1966. This sequence of events, in the end, helped

Komatsu to build its own R&D centers, it later set up four more, thereby building world class

products. Once the company was self-sufficient it was able to terminate the licensing contracts

with the previously mentioned companies.

2. Issue: Improve the product quality within the company.

Analysis: In the late 1950’s post-war reconstruction started in Japan. During this period, the

products manufactured by Komatsu were found to be low in quality which led to customer

complaints. Due to which Komatsu decided to implement the TQC (Total Quality Control)

concept in its manufacturing process. Since the TQC concept was applicable to all the activities

of the organization, the overall performance of the employees improved. It also led to

improvement in the performance and quality of the products. The company also won the Deming

Prize for quality control in 1964.

3. Issue: Delaying Caterpillar’s entry into Japan.

Analysis: The Japanese Government realized that the standard and competitiveness of the

companies in the EME industry was low. To improve this, Japan decided to open up the market

for foreign investment. Caterpillar immediately tried to use this opportunity to enter Japan.

Komatsu realized that it was not ready to compete with Caterpillar’s products and therefore with

the help of MITI it delayed Caterpillar’s project in Japan for 2 years. During this period, it

prepared itself to compete with foreign companies.

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4. Issue: Two phases of Project A.

Analysis: The Company aimed at building world class products for its domestic market.

Therefore Komatsu encouraged its employees to focus on building better products and to ignore

costs. Two years later, the products were found to be of better quality, reliability and durability.

The second phase aimed at reducing cost for each and every activity that took place in the

organization. Activities like design, assembly and production were scrutinized and costs

allocated to such activities were brought down. These two phases helped the company move

forward and increase its domestic market share to 65% between the years 1965- 70.

1970s

1. Strategy: Expansion abroad.

Analysis: Until the 60’s, Komatsu did not have enough contacts abroad. Their exports were

based on inquiry on certain parties abroad and entering into contract with them. The CEO’s son

Ryoichi understood the issue and travelled abroad to countries like USSR, China to improve the

company’s trade relations.

Komatsu entered the North American market by setting up business units there. It identified its

competitor, Caterpillar, and launched limited product lines and priced those 30% below

Caterpillars products.

As already mentioned, Komatsu did not have enough dealer contacts abroad because of this they

maintained huge inventories for different service parts. The inability of Komatsu to get the best

dealers was because of Komatsu being a late mover to North America, the presence of strong

competitors for different product lines and the agreements that the dealers had with these

companies that restricted them to enter partnership with Komatsu or any other company.

2. Strategy: Launch of Project B focusing on exports.

Analysis: This project was similar to Project A. Here different products that had a huge market

abroad were identified to be improved in terms of design, technology etc. Employees were

encouraged to bring the products to world standards and then the cost reduction activities were

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carried on. This not only helped them to better their market position abroad but also reinforce

their domestic position.

3. Strategy: Penetrate the markets of LDCs.

Analysis: Komatsu identified the industrializing nations like Asia and Latin America. It

established Presale service departments in these countries. This move helped Komatsu in

educating the LDCs for activities like planning for projects; conducting feasibility studies etc so

that their practices and products could be easily sold there later. It helped them to increase their

overall ratio on exports and gain a strong foothold in LDCs by moving in early. It also helped

them in long term as their sales in Asia increased from 11.2% in 1977 to 30.5 in 1983.

4. Strategy: Launch of four-part cost-reduction plan (V-10 campaign).

Analysis: During the late 70’s the market situation was not favourable for Komatsu’s growth and

demand for the construction equipment worldwide was falling. Due to this, Komatsu introduced

a cost reduction plan that aimed at reducing costs by 10 % while maintaining the same quality,

reducing the number of parts, value engineering and rationalizing the manufacturing system.

This move helped them to reduce costs and increase its market share as this was the time the

demand for Caterpillar’s products were reducing. From 1976, the market share of Komatsu

constantly increased where as Caterpillar’s market share kept fluctuating and by 1984 Komatsu’s

market share increase to 25% from 11% whereas Caterpillar’s reduced to 43% from 56%.

5. Strategy: A pessimistic approach to address the Yen’s appreciation over dollar.

Analysis: In 1977 Yen’s value appreciated over dollar from 290 to 240. So, Komatsu set a worst

case exchange value of 180 and asked its management to develop manufacturing and other

activities accordingly and make profits in this scenario. The company’s V–10 campaign helped

Komatsu in achieving cost reduction and with the weakening of Yen in 1978 the company

addressed this issue effectively.

In this era, Komatsu also increased its product lines. Benefitting from the R&D lab that it built

earlier, Komatsu was able to build innovative products like amphibious bulldozer and radio-

controlled bulldozer etc.

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1980’s

1. Strategy: Licensing agreements with Bucyrus-Erie and International Harvester.

Analysis: Komatsu’s progress was being impeded by its narrow product line. So in order to

develop into a full line manufacturer it entered into licensing agreements with Bucyrus-Erie and

International Harvester even though it restricted their freedom to export. Also, dealers were

reluctant to become exclusive citing its narrow product line.

Effect: Komatsu immensely benefitted from the technical know-how obtained from these 2

companies. Not only did it get all the data which it wanted but also bought half of International

Harvester’s interest in loader business. This helped Komatsu to emerge as a full line competitor

and export its products worldwide thus strengthening its position globally.

2. Strategy: Reorganization of its worldwide distributor network.

Analysis: To compete against industry giants like Caterpillar, there was a necessity for Komatsu

to strengthen its dealer network to increase its visibility and ability to provide customer service at

par with the best in the industry.

Effect: After Komatsu had emerged as a full line competitor and promoted heavily about its full

line capability and product reliability, it strengthened its presence abroad by establishing regional

centers for parts distribution and service and making available Japanese engineers to help dealers

with repair problems.

3. Strategy: Launch of “Efficient Production Oriented Choice Specifications (EPOCHS)”.

Analysis: This was done in order to meet the dual goal of local adaptation of the products and

improve production efficiency. As the share of exports increased, there was an increased demand

for the adaptation of its products according to the local working conditions, legal requirements,

field service management etc.

Effect: It led to the development of standardized core module for major products and the

products was then modified according to the local market needs. This approach helped Komatsu

to build products according to the user needs without giving away its cost advantage. Due to this

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its products were preferred above that of Caterpillar’s (e.g. Australian mining industry) which

helped it in increasing its market share and inching closer to its main competitor, Caterpillar.

4. Strategy: Commitment to research and development

Analysis: Komatsu’s endeavour to trounce its competition (mainly Caterpillar) required it to

introduce new and better products which required setting up of research and development

facilities. Its commitment can be seen by its expenditure on R & D as a percentage of sales

which at 5.3% was much higher than the industry average. It opened product development plants

and research facilities in four major plants.

Effect: In the International Construction Equipment Exposition it was able to display prototypes

which were better than the top-of-the-line products of the industry leader Caterpillar. This

brought worldwide recognition to Komatsu and it was now seen as a serious player which could

bring out innovative and cost effective products.

5. Strategy: Launch of the “Future and Frontier (F&F)” project.

Analysis: It was part of the company’s focus on the future and encouraged the employees to

come up with suggestions to meet the needs of the present and future customers. It was an

initiative to differentiate itself and stay ahead of its competition by anticipating the changing

trends in the business environment.

Effect: It led to development of new and diverse products like welding robots, heat pump etc. It

entered into a joint research agreement with Cummins Engine for sharing information of the fuel

efficient engines indigenously developed by Komatsu. It was able to develop breakthrough

technology in Cast iron alloy used in the manufacturing of diesel engines and became one of the

top manufacturers of arc-welding and material robots. Thus by constantly focusing on future,

Komatsu was able to successfully diversify its portfolio through ‘Related Diversification’.

6. Strategy: Good networking and Strong relationships.

Analysis: Komatsu kept on increasing its global foot print through joint ventures (in Mexico)

and opening 20 overseas offices, 8 marketing subsidiaries and 160 distributors abroad. This

helped the company provide strong dealer network and good quality customer service to its

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clients due to which it could strengthen its relationships with its customers especially the Eastern

Bloc.

Effect: As a result, there was a backlog of orders from Siberia and also it was able to procure

Cat’s contract in Russia. It further entered into a contract to develop Russian made Scrapers

using Japanese components and a collaboration with Russia for other products as well. This

helped Komatsu in reducing its dependency on the local Japanese market and further expanding

its exports globally.

7. Strategy: Continuous emphasis on quality through TQC and PDCA.

Analysis: Komatsu was aware of its products being inferior to Caterpillar and recognized the

need to drastically improve its quality in order to establish itself as a true global player. This was

done through adopting practices like TQC and PDCA in all the activities being carried out from

the shop floor to the top management. It included these practices in its policy so that it becomes a

part of life in the company. It also encouraged its suppliers to adopt these practices and helped

them in its implementation free of cost.

Effect: It won the Japan quality control prize which was considered as the world’s supreme

quality-control honour and also twice won the gold medals from Union of Japanese Scientists

and Engineers. This emphasis on quality helped Komatsu to differentiate itself from its

competitors by enabling it to provide twice the warranty as compared to others and also

achieving a reduction of 67% in warranty claims. It was thus able to provide first-rate quality

products at prices lesser than its competitors.

8. Strategy: Close eye on its competitors.

Analysis: Komatsu considered Caterpillar as its main competitor and wanted to trounce it from

its top position. It continuously monitored the activities in Caterpillar’s headquarters Peoria.

Effect: This enabled it not to become complacent and be always on its toes trying to find

methods to be better than caterpillar and achieve its long term objective of becoming the industry

leader.

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Key Issues and Recommendations

Marketing Perspective

1) Key Issue: Komatsu’s small dealer network abroad.

Analysis: Despite having a strong market in Japan, Komatsu had a very small dealer network in

other countries. This can be attributed to various factors like Caterpillar’s first mover advantage

in many countries where it had a very wide and exclusive dealer network, Komatsu’s narrow

product lines because of which many dealers were not willing to become their exclusive dealer

and some of Komatsu’s dealers filing for bankruptcy. All these factors not only deterred the

company’s strategy to expand its dealer network but also for its promotional activities.

Recommendations: Caterpillar right from the beginning understood the need for maintaining

good relationship with dealers. That’s the reason Caterpillar’s number of dealers, sales

percentage of dealers and benefits offered to dealers were nowhere close to Komatsu’s. If the

company is not able to acquire the main dealers who have a good presence in the market, the

company should keep acquiring small dealers on a regular basis so that their sales through this

channel increases. Also, they should open their own exclusive stores in key strategic locations so

that they can save on training costs of dealers, establish direct source of communication with

customers, identify new needs and constantly improve on the current products.

2) Key Issue: Komatsu’s narrow product lines.

Analysis: Earlier when Komatsu started in Japan, its products were found to be of poor quality

because of which they had to set up service points to address the defects in their products. They

identified this as a weakness and entered into licensing agreements for certain technologies and

set up a single R&D centre. This was a main reason for Komatsu’s inability to compete with

Caterpillar’s different product lines and get main dealers etc.

Recommendations: Merely setting up R&D centres and increasing the product lines will not

help as the external environment had changed post 1980. Komatsu should first identify which are

the markets where there is scope in the near future, for ex, the Asian countries have been

showing good progress and have good potential in the future. Then, it should come up with

innovative products for which there is a need in those markets. Increasing the product lines in

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such markets will help Komatsu to get new dealers and thereby increase sales and market share

in those countries.

3) Key Issue: Lack of promotional activities.

Analysis: Komatsu did not promote itself when it diversified abroad. Only when it started

increasing its product lines it started to advertise in trade magazines and participate in expo’s

showcasing its variety in products.

Recommendations: Caterpillar’s extensive dealer networks and service policies provided the

customers with assurance on quality, service and value for money. These factors helped to

promote the brand Caterpillar. The best way for Komatsu to market its brand is through ‘word of

mouth’ and ‘improved service’. For this it has to enhance its relationship with its current dealers,

make them feel part of Komatsu and through them communicate what Komatsu stands for. The

effect of this act will help when a customer comes to purchase from a dealer, as there will

definitely be better communication, more emphasis on the core strengths of Komatsu and the

benefits that the customer would get choosing Komatsu over other products. Service centres

represent the company’s importance to customer from a customer’s perspective. Proper

communication, timely service and quick replacements will enhance the brand value.

Financial Perspective

From the early 1970s to 1984, Caterpillar has steadily been losing market share while Komatsu

has been gaining market share, as a result of which it was able to corner 25% of world EME

market by 1984 when compared with Caterpillar’s 43%. One key reason for this shift is that

Komatsu was able to price their products by 30% to 40% below similar Cat equipment.

Komatsu gained cost advantages due to superior production techniques, lower cost of raw

material like steel which cost up to 30% lower in Japan than in US and a huge labour cost

differential of more than 45% with Cat.

In 1977 when the Japanese Yen appreciated rapidly, the management adopted a policy change

whereby manufacturing was to achieve a cost structure that could be profitable even at a worst-

case scenario of yen/dollar exchange rate reaching 180.

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Key Issue: Yen had seen large fluctuations from 1971 to 1978, which created a huge obstacle for

the export division.

Recommendations: These fluctuations can serve as a huge risk as Komatsu is centrally sourced,

thereby creating inroads in profitability. The problem occurs because of dollar denomination of

products and services, however company can hedge itself with forward contracts to avoid

currency fluctuation problem.

Operations Perspective

Issue: Production plants only in few developing countries which renders it inflexible to changes

in economic environments in global markets.

Recommendations: In order to be more responsive to its customer needs and reduce the time

required to introduce new products, Komatsu has to augment its presence in more countries. It

can enter new markets through licensing arrangements, acquisition of local players or wholly

owned subsidiaries. To manufacture new product lines through existing production lines, flexible

manufacturing should be used at all facilities.

HR Perspective

Strengths:

1) Komatsu had good labour relations: This improved the efficiency of the workers. Mr.

Ryoichi Kawai believed that the employees had monetary as well as other needs like

conducive working environment etc. So he tried to please his employees and conveyed to

them that they were the company’s greatest assets and was valued. He made them feel they

were making great contribution to the company which indeed was true.

2) Comparatively Lower wages: the average wages paid by Komatsu to its workers were less

than that paid by Caterpillar, but still there were harmonious labour relations because the

workers were satisfied and happy to work with Komatsu. No labour unrest.

3) PDCA and management by Policy: Plan, Do, Control and Action was a management cycle

which started with the long term plans announced by the top management team and the

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company president’s policy statement issued at the beginning of the year. This was also

referred to as Management by Policy. By this system the company ensured that the

employees knew the basic policies, values and the company’s targets extremely well.

The PDCA and Management by policy made the goals very clear to the employees, thus

providing them with guidelines to work and improve their productivity. They could make use

of the learning curve and innovate to keep the company competitive.

4) Excellent leader – Ryoichi Kawai

He inspired the people to do better. The goals and objective at each step or project were

very clear and the employees knew what was expected out of them. This has helped them

to improve market share and reduce costs.

Challenges Faced by Komatsu

Stagnant demand from developed countries would lead to fierce competition in the

markets of developing countries.

Central production strategy of Komatsu exposed it to risks from fluctuating exchange rates

and increased logistical costs of shipping heavy equipment which could result in the loss

of its competitiveness.

Rise in trade friction between the European Community and Japan. A dumping case had

been filed against Komatsu in Europe and there was a threat of imposition of duties which

would again harm its competitive pricing.

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Recommendations:

Komatsu needs to be more flexible and use different locations for sourcing key

components and machines in order to cut costs. Despite regional options being available a

large number of components were being sourced only from Japan.

The company can opt for currency futures and options which will reduce the foreign

currency risk substantially.

To have an advantage against its competitors, Komatsu can adopt ‘Flanking’ strategy. It

can be the first to enter foreign markets where there the established players are not much

interested and enter into strategic alliances with the local firm or establish its own

facility.

It needs to continue its low prices (Low labor costs and high productivity labor force),

maintain cordial relations with officials of various governments in the wake of more

demand by state authorities, and bring out more variants in each product category before

its rivals.

In order to protect itself from the loss of trade happening due to friction between Japan

and Europe it should concentrate more on markets of developing nations and middle-east

countries where it has lesser market share.

Komatsu should continue acquiring small dealers on a regular basis so that their sales

through this channel increases.

Komatsu should open their own exclusive stores in key strategic locations so that they

can save on training costs of dealers, they should establish direct source of

communication with customers and identify new needs and constantly improve on their

current products.

To protect itself from duties in Europe, it should enter into Joint Ventures with European

companies.

Komatsu should promote its brand through ‘word of mouth communication’ by building

good relationships with dealers as this would result in better communication of the brand

Komatsu from dealers to customers and ‘improved service’ at different service points.

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Annexure

Komatsu’s sales by Geographic region: (percentage wise)

1977 1978 1979 1980 1981 1982 19830

10

20

30

40

50

60

70

Japan

Asia and Oceania

America

Europe, Middle East and Africa

Sales by Geographic Region

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