Professional Documents
Culture Documents
Instructions
After reading the case, please answer the questions on the following pages. To
encourage conciseness, I have indicated the space limits for each question, along
with the preferred format for answering the questions.
You should submit the written assignment before the class period, as this will help
us maximize the benefits of any in-class discussion.
Group 5
Aishwarya Kondapalli
Yufei Zhao
Sisi Du
Luis Carlos Jesurum
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 1 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 2 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
I. 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? (25 points)
Based on his fathers steps right after CAT announced its entry into the Japanese market, Kawai built on
his legacy by further implementing strategy aimed directly at leveling Komatsus product quality to those
of CATs. This involved acquiring and developing technology that allowed Komatsu to considerably
increase product quality, double its warranty period, all while lowering claim rates by two-thirds. By
rapidly implementing these managerial decisions, Komatsu retained and even increased its market share
to 65% by 1970. Kawais ability to quickly adapt to changing conditions also allowed Komatsu to ride
economic downturns effectively.
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 3 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
II. Why did performance deteriorate so rapidly in the mid-1980s? What grade would you give to
Mr. Nogawas term as CEO? (25 points)
Answers:
In the mid-1980s, the performance of Komatsu deteriorated drastically due to two major reasons: falling
market condition and unsuccessful management strategy. In 1982, after Shoji Nogawa become the CEO,
the market for heavy equipment industry entered a period of dropping demand, global price war,
appreciating Japanese yen and trade frictions.
Facing dramatic market change, a good leader should lead his company to adjust to new environment and
seize new opportunity, which Nogawa failed. His lack of vision and management skills together with the
unoptimistic market, has brought crisis in Komatsu.
Evaluation:
Overall, he may be a very good engineer and manager, but not a competent CEO.
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 4 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
III. How appropriately has Mr. Tanaka dealt with the problems he inherited? What is your
evaluation of his brief tenure as CEO? (25 points)
Answers:
When Masao Tanaka was named the CEO of the Komatsu, the company was truly in risk and had no time
to lose. The company needed a complete change. There were four main problems that Mr. Tanaka had to
deal with. They were demand falling, worldwide price wars, a rapidly appreciating yen, and heightened
trade frictions throughout the industry. But Mr. Tanaka dealt with most of them successfully.
His strategy for demand falling was not to carry out a price war but to reduce production, which would
lead a virtuous cycle to the market. The market indeed responded positively to Tanakas efforts. Though
the market share fell down a little, but the overall profits rose.
Tanaka also had an aggressive expansion plans overseas. Not only focused on internationalizing sales and
market exposure, but also aimed to establish autonomous bases with regional capabilities in
manufacturing, sales, and finance in the core international markets. This is a good way to face the
Japanese yen appreciation.
In response to an antidumping suit, the company began sourcing other companies in other countries like
Britain, Germany, and Italy. The company moved even bolder in the United States, entering into a joint
venture with an American oil services company. However, this policy was controversial.
Evaluation:
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 5 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 6 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
IV. How effectively has Mr. Mr. Katada taken charge? How do 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 to date? (25 points)
Answers:
Mr. Tetsuya Katada took on the mantle of President in 1989 and did not inherit an easy situation, with
sales at levels of 7 years prior, and half the profits. Worldwide demand was up-and-down, with changing
demands for lighter equipment. As Mr. Katada saw the situation, Komatsus management is focused on
catching up with Caterpillar and it had stopped thinking of making strategic choices. Further, he was
concerned that the inflexible top-down approach that had become embedded at Komatsu has crushed the
spirit of enterprise among middle and front-line managers.
Mr. Katada moved away from the inherited culture, which he called bureaucratic, and instilled a spirit of
challenging enterprise. He pointed out that the international environment had become by this time a global
economy, requiring more international harmony. His own approach was inclusive and encouraged free
discussion. Mr. Katadas new vision was to radically depart from Komatsus traditional strategic maxims
and management directives: centralized production, total control over product development, whole
ownership of subsidiaries, and Japanese style management worldwide. His strategy enabled Komatsu to
think long term and more creatively than getting stuck with a closed target of beating one competitor.
His new strategy was called the Three Gs: Growth, Global, Groupwide. The long-term strategic plan,
Project G, was launched, with a focus on growth, by developing sales, and overseas production facilities,
and expansion into electronics, robotics, and plastics. His vision was, in short, to reinvent Komatsu as a
total technology enterprise, a globally integrated high-tech organization that integrates hardware and
software as systems, with 50% of sales in non-construction business. Under a new banner of Growth,
Global, Groupwide the Three Gs, Mr. Katada encouraged management at all levels to find new growth
opportunities through expanding geographically and leveraging competences. He pushed for
regionalizing production even during Tanakas tenure, reducing their yen exposure. He formed a 50% JV
with U.S. Dresser, which was controversial because some didnt see Dresser as a valuable addition with a
neglected product line, low quality and plants.
Mr. Katada will be playing a difficult balancing game of maintaining home (Tokyo) control as the rest of
Komatsu grows to meet his vision. He loosened the traditional company policy of whole ownership and
control over subsidiaries to allow flexibility and local participation. He focused not just on globalizing
Komatsus presence but also on localization efforts by extending the responsibilities of overseas firms and
banking on the skills and culture of the regional engineering teams which had a great impact on the local
morale. Though localization created some problems, the Japanese and western management practices
were converging, with each group learning from the other.
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 7 of 8
Constructio Strategic Management
nManagem Design and Construction
entCIEN41 Group 5
35E
Evaluation:
We have evaluated each of the Komatsus employees based on three criteria (i) Strategy Formulation (placing the forces
before the action), (ii) Relevance of strategy to specific market needs, (iii) Strategy implementation (managing the forces
during the action)
Page 8 of 8