Komatsu Ltd.

The Komatsu ltd Company is a Japanese based company which has more than 60% market share in
Japan construction equipment industry. It also has the strong presence in top 3 construction
equipment industry. The company work basically on two principles (i) Contribution for realizing the
sustainable society and (ii) Improvement in environmental and economic performance.
Future Objective: Under the first principle, the companys objective is to make the society rich and
comfortable. The efforts for environmental conservation are the highest priority task of their
management. Komatsu committed to contributed towards the sustainable growth of the society with
integration of advanced technology in to environmental conservation. They have made this with their
hybrid construction equipment which facilitates the substantial reduction of CO2 emission from their
equipments and engines while in operations. Under the second principle their objective is improve the
performance of the environment and the economy working as a group of companies. They always
give importance to the advancement of the technology for the development of the performance of the
environment and the economy [9]
Strategy: Komatsus strategy is based upon three Gs: Growth, Global and Group wide. Their strategy
is to have a continuous focus of the growth, development of sales, and expansion in production
facility. Komatsu has made the strategy for being a total technology enterprise with the global
integration of high tech organization.
Product quality and efficiency is the strategic focus of Komatsu. They long term strategy target of the
performance enhancement of environment and the global economy. [9]
Assumptions: Komatsu Ltd has proved its third largest presence in the industry after Caterpillar and
John and deer. Komatsu Ltd is consistently expanding its market all over the world and hence, faster
growing in the industry. As on date the value of their stock in the market is $ 20.70 [Exhibit: 4]
compared to $17.8 in 2010 [ref: http://www.morningstar.com] which is approximately 16.3% higher
on an average. They have good CAGR rate of 6.4% in last 5 years which is third in the industry after
Caterpillar and John deer [Exhibit: 1]. Komatsu has enough resources and potential to grow even at
the better pace in the future. Komatsu can have its competitive advance of being third in the industry
and can grow. The kind of potential and resources available with Komatsu gives a clear idea that it has
the capacity to become the market leader in the future.
Capabilities: The Number of resources and potential capability available with Komatsu gives a clear
indication that it has the capacity to become the market leader in the future. Komatsu is one of the
fastest growing companies in the industry. Komatsu has good market capture of around $20,817

million with the market share of approximately 14.5% with the profit of around 1184 million [Refer:
Exhibit 1]. They have good operating profit margin of 10.3% which is second highest among major
competitors. Further, Komatsu has P/E ratio is around 18.9% which is far better compared to whole
industry P/E around 13.7%. Komatsu is the very less leveraged company with the debt-equity ratio of
0.4 against the D/E = 2.1 for the industry [Refer: Exhibit 1].
Apart from the performance highlight, Komatsu has the total assets of $20,045 million. They have
spread

cross

more

than

151

countries

with

approximately

46730

employees

[ref:

http://www.morningstar.com].
Response over competiveness in the industry: CAT has proved its leadership in the industry with
high performance parameter discussed above under four categories namely Future Objective, strategy,
assumption and the capabilities. It is clearly understood that the objective goal for all the companies
more or less to get the competitive advantage of the growing construction equipment industry, though
path of strategy or objective may differ. The financial parameter discussed under assumption and
capability are clear indication of their current performance, expectation for the future and capacities
available with each of them to achieve their goal. CAT has its competitive advance in case of
leadership, market capture, market ratio, CAGR and wide network across the world. CAT must
improve the product quality, delivery and after sale support to maintain the customer loyalty. Hence,
CAT has a good chance to keep the position of its maintained in the market with growing economy
and be the market leader always.