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 - – talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, geopolitical disruptions, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, 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 -
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.
High switching costs
– The high switching costs that Komatsu Target has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its 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.
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.
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.
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.
Ability to lead change in Finance & Accounting field
– Komatsu Target is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Komatsu Target in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the Komatsu Ltd. (A): Target Costing System Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Komatsu Target is one of the leading recruiters in the industry. Managers in the Komatsu Ltd. (A): Target Costing System are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Komatsu Target has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Komatsu Ltd. (A): Target Costing System Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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 -
Slow decision making process
– As mentioned earlier in the report, Komatsu Target has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Komatsu Target even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
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.
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.
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.
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.
Increasing silos among functional specialists
– The organizational structure of Komatsu Target is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Komatsu Target needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Komatsu Target to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Komatsu Ltd. (A): Target Costing System HBR case study mentions - Komatsu Target takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Komatsu Target, firm in the HBR case study Komatsu Ltd. (A): Target Costing System needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Komatsu Target can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Komatsu Ltd. (A): Target Costing System, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Komatsu Target can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Creating value in data economy
– The success of analytics program of Komatsu Target has opened avenues for new revenue streams for the organization in the industry. This can help Komatsu Target to build a more holistic ecosystem as suggested in the Komatsu Ltd. (A): Target Costing System case study. Komatsu Target can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Komatsu Target can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
Manufacturing automation
– Komatsu Target can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Komatsu Target to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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 -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Komatsu Target will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Komatsu Target in the Finance & Accounting sector and impact the bottomline of the organization.
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 wage structure of Komatsu Target
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Komatsu Target.
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 .
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.
Regulatory challenges
– Komatsu Target needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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.
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.
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.
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.
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.
High dependence on third party suppliers
– Komatsu Target high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.