Komatsu vs Catterpilar – Comparative Essay

These winder winner factors gutter be categorized in three dissimilar roofs namely, manufacturing or production, dispersion and soil image. First, manufacturing high quality products was crucial since machine depend expertness and reli capability was fundamental for contractors. Many pull companies entirely oer the universe ope sum upd under horrendous be and time constraints and companies main target was to schedule machine habit in effect(p)ly and minimize downtime.High capital and energy cost made nigh construction companies to utilisation their machines longer. Consequently, providing the replacement and sp ar separate on utterly notice and continuous Improvement of the split were essential. Also, bread margins for move ND attachments were significantly higher than for whole machines which encouraged or so suppliers to pay lots focus on providing these parts to their customers on a timely manner. More over, the ability to manufacture product efficiency ahea d of enquire was Important.For Instance, Caterpillars excess capacity policy served not sole(prenominal) as deterrence to competitors yet to a fault as a mechanism enabling alliance to respond to the perseverance unspecific swings in demand. This also helped companies to madely maintain their first gear cost manufacturing coiffe through higher scale of volume. In addition, a full and modify product line was unavoidable or companies to gain completive advantage over others. Also, the ability to be a shock absorber provided some companies flexibility and ability to adapt to cyclical downturns more than easily than others.Spargon parts were much less(prenominal) prone to cyclical downturns and the vast variety of machines In the field provided a baseline of business. Next, heavy Investment In product quality and upgrading programs resembling Total Quality Control (ETC) led to higher quality and efficient equipments where research and development programs provided the abili ty to produce great quality products with the use of new technology to spiel customer needs and new trends. Second, distribution of high quality products and planetary assist through dealers was another snappy factor.Internationally, the MME manufacturers sold through dealers, who provided direct and after-sales go. Although the sales were made direct, it was often the dealers who provided marvelous service to customers. The worldwide electronic network of dealers was truly crucial because these dealers were capable of providing service and spargon parts backups to customers in no time. Being able to service and repair equipment and supply spare parts anyplace rough the globe on a timely manner was a powerful schema for the construction companies to be nominative.For Instance, 100 Independent dealers handled Comates products and were backed by the social clubs computerized parts supply system, which guaranteed a replacement part within 48 hours anywhere in the world. Als o, the typical overseas 1 OFF were a major merchandise asset and a valuable entry barrier in this diligence. Third, brand image was another essential factor to attract fast(a) customers and respected dealers. Reputable name for high quality products and services in the construction persistence provided the companies a competitive advantage over others. For instance,Caterpillar had construct an unmatched reputation for its quality and services in the construction equipments where its leal network of dealers in North America, Europe and Latin America were the heavy source of its strength. A survey conducted in the late asses showed that the reputation of a manufacturer and capability of its loyal dealers were the most critical factors that customers would channelise into reflexion when selecting a supplier. With a great reputation and super loyal network of dealers a manufacturer had a founder opportunity to dominate the MME construction attention successfully.As for Cate rpillar & Kumquats nominative position in 1985, Caterpillar was the largest sham in the MME industry with a market conduct of 43% worldwide, objet dart Comates was the second largest player with a market share of 25% worldwide and 60% in their home country Japan. They both face rival from other established players like Clark Equipment, J. J. Case, International Harvester, Fiat- every last(predicate)is, and John Deere, as good as specialized local players in North America and Europe. Generally, profit margins were substantially higher for parts and attachments than for whole machines.With the benefit of a push back cost advantage relative to U. S. ND European competitors, and of the postwar Nipponese construction boom, Comates has managed to focus on extensive advertising, lower bell and higher quality of their products to maintain their competitive position. Their products were priced 30% to 40% below the alike Cat products, allowing them to increase their market share ver y promptly their cost reduction plans consisted in reducing the cost by 10% while still maintaining and improving product quality. Simplification was ab show up reducing the offspring of parts. Value engineering re-designed the products to save cost and to increase added value, maintain low-cost ND high productivity. Moreover, Comates noticed that the Japanese domestic construction industry was leveling off in the sasss, and elected to aggressively expand abroad, developing several exclusive dealer networks where it saw potential future harvest-tide like in markets like USSR, China, Western Europe, North American, Asia, and Latin America. In Europe, as part of their geocentric system, their marketing subsidiary handled distribution and supply of field service.Comates used internal yen/dollar exchange rate to make them more profitable at the worst-scenario rate. In line of battle to better compete against Cats product line made of more than 120 products, Comates increase their product line as well, always applying total quality run into to ensure the highest quality in every aspect of operations, and always make sure to incorporate the latest technology thanks to its own R&D laboratory since these are some of the key successes factors in the industry and launched customized lines with focus on markets with needs that were different from the Japanese market.Consumers confidence was increase by the products longer durability and double Engel of warranty period compared to Cats, and by their efficient assistance service networks, another key industry key success. Caterpillars competitive position in 1985 relied on their huge reputation ascribable to high quality products backed by effective operating 605 branches worldwide, low dependence on debt and excellence at servicing/repairing equipment and supply parts anywhere around the globe and especially locations where these dealers were a major marketing asset and important entry barrier to its competitor s.Hence, Caterpillar was able to safekeeping a price premium of up to 20% over competitive products, while maintaining the low cost manufacturing position. Heavy investments were constantly made in R&D to assure product leadership, as well as widespread advertising in specialized magazines like the prominent Engineering News Record, since these are industry key success factors. Manufacturing wise, Cat was highly integrated backward nearly 90% of its products were substantially the same and parts were made in-house, which facilitated flexibility and quality control.Therefore, their products were sophisticated, durable, reliable, and constantly adapted they boasted 120 different machines serving almost as many market segments. Enabling all this depended on hiring high quality human capital, who was receiving higher wages than Comates, and who were instruct continuously such as having to read newsletters emphasizing the importance of change magnitude productivity to meet foreign c ompetition. Dealers were regularly taken care of as well Cat helped them maintain inventory, and conducted regular training programs for them and product demonstrations for their customers.Based on the current state of Caterpillar, specific actions are needed to be taken immediately to help regain some of the sales and profits unconnected in the last three years. After extensive research, our groups initial testimonial is to not overreact. It is important to realize that this company has had an outstanding amount of success based on its classic strategic position instilled throughout the company of high- quality products and effective service. The company still has a 43% share in the industry and although this figure has dropped in recent years, it is still very respectable.Throughout Caterpillars entire history, it now has four years where it incurred losses, which would be considered very successful by many companies worldwide. With that said, three of those four years of losse s declare happened these early(prenominal) three years so some changes are necessary to bring the company back to acceptable amounts of sales and profitability. The first order of business it to eliminate the recent communication issues with our customers. For years our note strategy has led to our products being known for their exceptionally high-quality and reliability.Over the last half of the decade, the disjuncture between Caterpillar and their consumers has become alarming. When our major competitor is sending out personnel to specific countries, specifically Australia, in an attempt to better experience their individual needs and create a product to cater to those needs. We check been charging a premium on all of our products and without any real value-added features. A bulldozer in America is the same bulldozer in India and in Australia. To maintain our differentiation strategy, we need to create individual products that cater more to the needs of specific customers.A C omates dealer is quoted as saying When you are sell against number one, you need some price advantage. But we tell contractors we can give them 10% more machine for 10% less money. Thats not selling price in my book. That is a clear sign that we to send our employees to the construction sites to find out specifically what they need to succeed. The biggest designate for construction companies are managing time. They are forced to meet deadlines and use their resources correctly.We cede to take the same mentality, and create products that not only allow them to meet their deadlines in a more efficient way, but for us to utilize our resources in the most appropriate way. One final point to this offspring comes from the current global economy we are in. Distressed economies and weak currencies are not likely to buy products eased on reputation alone. Our price premium can be a hindrance to these developing economies and unless we grade ourselves with product lines that appeal to their countries needs, it is unlikely they will choose us.Local differentiated products are the key to the future success of our company. The second order of business is to take a good hard look at our company financial. The most alarming statistic we found was that Caterpillar has to sell $6. 8 Billion dollars a year in products Just to break-even. In 1983, we would have had to command 63% of the market Just to break-even ($6. /$10. 95 Ex. 1 Comates). Our tribute would be to overturn the production levels in the U. S. And spread it out across the globe. Although we have trim the number of facilities in the U.S. In recent years, our current production levels are still too high resulting in high labor cost and foreign exchange issues and ultimately lower profits. The consistency of the company has been great, All CAT products were the same, no matter where they were made. This leads us to believe that the company can see the same type of success it has seen in the past while savi ng on costs. We have been hurt badly over the last couple of years because 68% of our non-U. S. Sales were manufactured in the U. S. And the U. S. Dollar has appreciated around 40%.This has resulted in our company receiving few profit margins in overseas sales, which is a major concern because our margins were much higher in the U. S. Before the recession (20% to 7%). Based on our recommendation, we would utilize the assembly plants we created in years past in countries around the globe and enhance their capabilities. This would allow for Caterpillar to maximize their production levels in certain areas of the world, as well s utilize the first recommendation and customize machinery as it pertains to a certain area of the world.This would not only lower export costs and mitigate foreign exchange risk, but it would also lower our exceptionally high labor rates to a more respectable level. When our labor costs are two-thirds of overall costs of the product, something needs to change. By increasing production in countries such as China, Japan, Indonesia, or India our company could lower the overall cost and gain a much higher margin based on our current differentiation strategy. Lastly, this would help eliminate some of the excess capacity issue the industry is currently experiencing.When the industry was experiencing great times, our capacity levels were less than 75% which could call back two things either we have the capability to produce more if demand increases or we have too much capacity for the current industry environment. Clearly, we have seen that we had too much extra capacity which has resulted in our occlusion of ten U. S. Plants. By implementing this recommendation, we can gain more respectable levels of around 95% capacity as we enter the maturity stage of the industry. A third recommendation we would make involves the use of