Case Study Description of Komatsu Ltd. (A): Target Costing System
Komatsu, a leading manufacturer of construction equipment, seeks to expand aggressively through the 1990s. Key to its competitiveness is a strict adherence to target costs throughout the product development process. Komatsu conducts several design-for-manufacturability cost studies to ensure a product's profitability, sets target costs for suppliers, and uses cost reduction techniques when necessary. Because it is a crucial element of the design and manufacturing processes, Komatsu's target costing system is central to the firm's plans for growth, globalization, and diversification.
Swot Analysis of "Komatsu Ltd. (A): Target Costing System" written by Robin Cooper includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Komatsu Target facing as an external strategic factors. Some of the topics covered in Komatsu Ltd. (A): Target Costing System case study are - Strategic Management Strategies, Costs, Design, Growth strategy, Operations management, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Komatsu Ltd. (A): Target Costing System casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Komatsu Ltd. (A): Target Costing System
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Komatsu Ltd. (A): Target Costing System case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Komatsu Target, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Komatsu Target operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Komatsu Ltd. (A): Target Costing System can be done for the following purposes –
1. Strategic planning using facts provided in Komatsu Ltd. (A): Target Costing System case study
2. Improving business portfolio management of Komatsu Target
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Komatsu Target
Strengths Komatsu Ltd. (A): Target Costing System | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Komatsu Target in Komatsu Ltd. (A): Target Costing System Harvard Business Review case study are -
High brand equity
– Komatsu Target has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Komatsu Target to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Komatsu Target in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Komatsu Target has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Komatsu Target has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Komatsu Target is present in almost all the verticals within the industry. This has provided firm in Komatsu Ltd. (A): Target Costing System case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Komatsu Target has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Komatsu Ltd. (A): Target Costing System - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Komatsu Target is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Komatsu Target is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Komatsu Ltd. (A): Target Costing System Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Komatsu Target is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Finance & Accounting industry
– Komatsu Ltd. (A): Target Costing System firm has clearly differentiated products in the market place. This has enabled Komatsu Target to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Komatsu Target to invest into research and development (R&D) and innovation.
Organizational Resilience of Komatsu Target
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Komatsu Target does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Komatsu Target digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Komatsu Target has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Komatsu Target are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Komatsu Target is one of the most innovative firm in sector. Manager in Komatsu Ltd. (A): Target Costing System Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Komatsu Ltd. (A): Target Costing System | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Komatsu Ltd. (A): Target Costing System are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Komatsu Ltd. (A): Target Costing System HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Komatsu Target has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Komatsu Ltd. (A): Target Costing System, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Robin Cooper suggests that, Komatsu Target is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Komatsu Target products
– To increase the profitability and margins on the products, Komatsu Target needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Komatsu Target has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Komatsu Target supply chain. Even after few cautionary changes mentioned in the HBR case study - Komatsu Ltd. (A): Target Costing System, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Komatsu Target vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Komatsu Ltd. (A): Target Costing System, in the dynamic environment Komatsu Target has struggled to respond to the nimble upstart competition. Komatsu Target has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Komatsu Ltd. (A): Target Costing System has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Komatsu Target 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Komatsu Ltd. (A): Target Costing System that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Komatsu Ltd. (A): Target Costing System can leverage the sales team experience to cultivate customer relationships as Komatsu Target is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Komatsu Ltd. (A): Target Costing System, is just above the industry average. Komatsu Target needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Komatsu Target needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Komatsu Ltd. (A): Target Costing System | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Komatsu Ltd. (A): Target Costing System are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Komatsu Target in the consumer business. Now Komatsu Target can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Komatsu Target can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Komatsu Target to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Komatsu Target in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Komatsu Target can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Komatsu Target can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Komatsu Target can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Komatsu Ltd. (A): Target Costing System suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Komatsu Target to increase its market reach. Komatsu Target will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Komatsu Target can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Komatsu Target can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Komatsu Target has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Komatsu Target can use these opportunities to build new business models that can help the communities that Komatsu Target operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Komatsu Target is facing challenges because of the dominance of functional experts in the organization. Komatsu Ltd. (A): Target Costing System case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Komatsu Target to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Komatsu Target to hire the very best people irrespective of their geographical location.
Threats Komatsu Ltd. (A): Target Costing System External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Komatsu Ltd. (A): Target Costing System are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Shortening product life cycle
– it is one of the major threat that Komatsu Target is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Komatsu Target demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Komatsu Target can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Komatsu Target can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Komatsu Ltd. (A): Target Costing System .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Komatsu Target needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Komatsu Target.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Komatsu Target business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Komatsu Target needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Komatsu Target can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Stagnating economy with rate increase
– Komatsu Target can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Komatsu Target in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Komatsu Target with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Komatsu Ltd. (A): Target Costing System Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Komatsu Ltd. (A): Target Costing System needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Komatsu Ltd. (A): Target Costing System is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Komatsu Ltd. (A): Target Costing System is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Komatsu Ltd. (A): Target Costing System is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Komatsu Target needs to make to build a sustainable competitive advantage.