komatsu presentation

Implementation of Project G at Komatsu Ltd. by

Focusing on SustainabilityChad Moore, Sana Makkani, Jessi Keavney

Brenau University

Background• Mr. Katada introduced a new bottom up leadership style in late

1980’s that fostered creativity• Project G: Growth, Global, Groupwide• New corporate slogan: “The Earth Company, Unlimited”

FactsHistory of Appreciating Yen

- Source: Case Analysis Coach

Facts• Stagnating Construction Industry:

• The global unit demand for bulldozers dramatically decreased since 1987, with a % yearly change of -4% in 1989 and -18% in 1990

• Global demand for hydraulic excavators declined as well with a negative 3% yearly change in 1990

• In 1991, 63% of Komatsu’s sales came from construction equipment


Facts


What is the Core Problem for Komatsu in 1991?

How does Mr. Katada mitigate risk whileimplementing Project G (growing globally and

groupwide)? What should be his specific course of action short-term, medium-term, and long-term?

Microsoft Office User

We identified the core problem for Komatsu as how does Mr. Katada mitigate risk and identifying his long, medium, and short term goals.

What are Komatsu’s Secondary Problems?

How does Mr. Katada keep the momentum and motivation going withKomatsu’s employees?

How does Mr. Katada integrate the international subsidiaries into Komatsu’s shared mission and vision?

What should Komatsu focus on as an overriding and cohesive theme?


Komatsu's secondary problems include Mr. Katada's ability to sustain the employees' excitement towards the new project and keeping them motivated towards the project. Also, incorporating the company's international subsidiaries into the company's core mission and vision could also prove to be challenging. And finally, identifying an overriding and cohesive theme for the company to focus on is also going to be an important step.

Constraints and Limiting Factors• Diminishing economy within construction industry• Limited capital• Scarce natural resources – price volatility on commodities and energy• Narrow time period to react to external pressures• Foreign exchange rate risk• Competitive risk• Supply chain risk• Regulatory threats• International tax laws• Geographic risk – vulnerable to natural disasters• Political threats


Some limiting factors we identified are: Diminishing economy within the construction industry, leading to a stagnant demand for construction equipment. Komatsu also has limited capital to invest in its future investments, along with scarce natural resources.

What is Sustainability?

Why is Sustainability Important for Komatsu?

Sustainability is not just a fad. According to a study conducted by MIT’s Sloan School of Management, 28% of survey respondents believe that sustainability is a permanent and core strategic consideration and 42%

say that it is on the agenda to stay (Brokaw, 2012).According to research in 2014 by McKinsey & Co., the value at stake

related to sustainability challenges could be as high as 25-70% of EBITDA because of restrictions on license to operate, reputational

harm, rising operation costs, and supply chain disruptions.

Why is Sustainability Important for Komatsu?

• Mitigate regulatory threats and avoid costly penalties• Lessen political pressure from foreign governments• Reduce costs (recycled materials) and lower cost of capital (risk control)• Create goodwill and improve general public perception• Align with Japanese attitudes about environmental conservation• Differentiate Komatsu from it’s competitors and drive eco-friendly growth

through new green product offerings

Recycling / Waste Reduction

• The construction industry produces a quarter of total waste each year, of which up to 13% is delivered and unused (Quinn, 2008).• Procurement - use recycled plastic and metal components• Manufacturing - Re-use water in production of steel with less stringent

standards - does not have to be fresh, drinkable water; high efficiency lighting; cut stand-by electricity; use heat-insulating paint on roofs; eliminate wood-framed packaging by switching to steel reusable pallets• Office - Institute paperless business transactions• Logistics - minimize transportation cost and conserve fuel by locating

factories near resources and concentrated near consumer markets

Noise Pollution• Improve quality of life and contribute to a more peaceful

environment• Safety – reduce hearing loss of factory and on-site workers

-Source: Komatsu


The bucket of the hydraulic excavator is the noisiest component of the machine. The force and the vibration of the bucket crashing into the earth is what makes the most amount of noise. Researching methods and materials that can be used to reduce the amount of noise cause by the buckets will ensure worker safety and safety of the surrounding residents.

Emissions• The use of non-renewable energy contributes to climate change

through the production of carbon dioxide emissions.• Environmental regulation compliance: proactively avoid costly fines

and penalties

Renewable Energy• Wind turbines• Water energy (hydropower)• Solar power• Types of Fuel - hybrid

How Does Technology Fit Into Sustainability?

• Technologically advanced construction equipment and systems can promote ease of use to the consumer.• Innovations can make construction more efficient, reduce noise and

emissions, and provide alternate sources of renewable energy.• Technology in design of factories can help to reduce time and cost in

manufacturing products.

Possible Solutions to Komatsu’s Problems Focusing on

Sustainability1. Diversify with separate divisions and stand alone product lines

(technology, robotics, plastics, metals, energy, recycling) and concentrate on smaller, lighter equipment.

• Minimize reliance solely on construction industry• Create vertical integration in the supply chain – maintain control over quality

throughout entire process• Utilize transfer pricing models to reduce price fluctuations on supplies

-Shinohara, 1989

Keavney

Komatsu expanding on its global reach should focus on small industrial and commercial applications for machinery such as forklifts, electric pallet jacks, and smaller back hoes. In every midsize city around the world, you will find forklifts and other power industrial equipment. If you look at major retailer like Target, Kroger, or Walmart, they all have powered industrial equipment numbering in the thousands. Acquiring 25% of this market globally could be substantial to the bottom line of Komatsu.


Sustainability2. Expand globally by evaluating potential mergers, acquisitions,

OEM agreements, and partnerships with companies that are currently experts in their respective industries.

• Reduce exchange rate risk• Decrease transportation and freight costs• Minimize threat of natural disasters• Create synergy• Generate economies of scale

Keavney

OEM - Original Equipment Manufacturer - when one company makes a part or subsystem that is used in another company's end product.


Sustainability3. Invest in research and development and expand marketing

budgets to focus on green, innovative products.• Komatsu needs to be able to quickly and proactively adjust to changing global

conditions and reduce the time to market for new, cutting edge products to become the leader in its industries• Conduct market analysis and surveys to determine the needs and wants of

consumers• Technologically advanced and eco-friendly products can save money for both

the company AND customers


Komatsu could evaluate using recycled plastic and metal in the procurement of materials. Another suggestion would be to partner up with a company that recycles plastic, and build a plastic recycling plant in Japan. Manufacture of materials requires large amounts of water, thus using water treated to less stringent standards will help conserve resources.


Sustainability4. Set an appropriate tone at the top and capitalize on teamwork

within Komatsu to generate innovative ideas and solutions that advance technology while conserving scarce resources.

• Employees have sense of ownership, which improves morale• Collaboration will generate more ideas than top down initiatives• Encouraging brainstorm sessions at all levels and all departments within the

organization will uncover hidden vulnerabilities• Accountability – tie performance appraisals to sustainability targets• Utilize Enterprise Risk Management techniques within small groups to

intuitively rank risks according to probability and severity of consequences


Enterprise risk management techniques could be employed within small group to intuitively rank risks according to probability and severity of consequences.

RecommendationsShort-term:• Ensure that the momentum of excitement is not lost by celebrating small

victories throughout Komatsu• Continue to engage employees by forming cross-functional and multi-

level committees to develop solutions for identified challenges• Bring together leaders from all international ventures to ensure

teamwork across the entire company and to align everyone to the broad, shared growth mission• Encourage transparent communication and environmental awareness

Keavney

Solutions are not necessarily mutually exclusive.

RecommendationsMedium-term:• Introduce sustainability project initiatives: reduce noise pollution, waste,

and emissions, focus on renewable energy, and prioritize recycling• Build R&D investment and utilize new technology to develop

environmentally conscious product lines and parts• Capitalize on the increase in brand value by advertising sustainability

efforts to consumers• Establish key sustainability metrics to monitor performance towards

goals and form accountability while providing incentives to improve

RecommendationsLong-term:

• Plan construction of new state-of-the-art and efficient plants and facilities in the most promising areas internationally, with consideration of the political environment, tax laws, environmental conservation, and closeness to available resources and consumers.• Vertically integrate the supply chain• Build worldwide dealer networks

Final Thoughts“For a solution to be truly sustainable and good it must

have a positive return to the environment and society. At the heart of any design problem is a question: Are we

trying to make something less bad or are we trying to make things better?...It’s not just about solving for the negative;

It’s about creating a positive.”

-Eric Wicks, 2009

TRIVIA TIME!

Acknowledgements

• Professor Carol – for assigning the case study…we had fun!• Terry Rose - General Manager, Komatsu in Los Angeles, CA• Norm Gaddis – videographer• Michael Keavney – video editor• Jessi’s co-workers at Wayne Farms for starring as extras in our video• Our family and friends – for supporting us on our MBA journey

Thanks for listening!

ReferencesAustin, R. (1997). Case Analysis Coach: Komatsu Ltd. and Project G (A). Boston, MA: Harvard Business Publishing.

Bonini, S., Swartz, S. (2014). Profits with purpose: how organizing for sustainability can benefit the bottom line. McKinsey, 12.

Brokaw, L. (2012). Five ways that sustainability commitment is up – drastically. MIT Sloan Management Review.

Brundtland Commission. (1987). Our Common Future. Oxford University Press: Oxford.

Imamura, K., Nakada, K., & Yabe, N. (2004). Research and development of low-noise bucket for construction machinery. Komatsu Technical Paper, 51(156), 2-3. Retrieved from http://www.komatsu.com/CompanyInfo/profile/report/pdf/156-02_E.pdf

Ministry of the Environment. (2014). History and current state of waste management in Japan. Tokyo, Japan. Retrieved from http://www.env.go.jp/en/recycle/smcs/attach/hcswm.pdf

Shinohara, I. (1989). Komatsu Ltd.: diversifying away from construction machinery. Tokyo Business Today, 47.

Quinn, C. (2008). Key issues in sustainable construction. Constructing Excellence. Retrieved from http://constructingexcellence.org.uk/resources/key-issues-in-sustainable-construction/

Wicks, E. (2009, Dec 19). Solving better problems. The Daily Good. Retrieved from http://magazine.good.is/articles/solving-better-problems

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