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
All of these challenges demanded a shift from a global strategy to a more transnational focus. The big question was, “How far to the right do we need to go?”
At first, Kawai’s successor Shoji Nogawa was reluctant to give up central control and continued to fight the new challenges with the same weapons Komatsu had always used; lower prices and aggressive sales tactics. After several such “pushes” failed to generate results, Nogawa did eventually open 2 major overseas plants; one in the US and one in the UK. However, firm control over these international operations remained in the hands of Tokyo and the autocratic style of management persisted despite the growing need for more nimble operations. Only after Nogawa was replaced by Nasao Tanaka in 1987 did the shift to a more transnational approach accelerate. Tanaka pushed the company towards regionalized production in Komatsu’s 2 main regions, the US and Europe. He also established autonomous manufacturing, financial and sales bases in the 3 main markets. The end of the 80’s also saw a wave of new joint ventures with other international companies. Tanaka saw these partnerships as an opportunity to open up new markets and further reduce FX exposure.
By the time Tanaka was replaced by his VP of corporate planning, Komatsu was a completely different company than what it was when it rose to international prominence 10 years earlier. The strategy had shifted from a centrally