Case Study Description of Komatsu Ltd. (B): Profit Planning and Product Costing
Describes Komatsu's profit planning and product costing systems. Komatsu can boast a high degree of employee dedication to achieving its profit plan. Also explores the logic behind the design of a new cost system at Komatsu that is less accurate at the product level but more accurate at the product-line level.
Swot Analysis of "Komatsu Ltd. (B): Profit Planning and Product Costing" written by Robin Cooper includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Komatsu Accurate facing as an external strategic factors. Some of the topics covered in Komatsu Ltd. (B): Profit Planning and Product Costing case study are - Strategic Management Strategies, Costs and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Komatsu Ltd. (B): Profit Planning and Product Costing casestudy better are - – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models,
geopolitical disruptions, wage bills are increasing, etc
Introduction to SWOT Analysis of Komatsu Ltd. (B): Profit Planning and Product Costing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Komatsu Ltd. (B): Profit Planning and Product Costing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Komatsu Accurate, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Komatsu Accurate 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. (B): Profit Planning and Product Costing can be done for the following purposes –
1. Strategic planning using facts provided in Komatsu Ltd. (B): Profit Planning and Product Costing case study
2. Improving business portfolio management of Komatsu Accurate
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 Accurate
Strengths Komatsu Ltd. (B): Profit Planning and Product Costing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Komatsu Accurate in Komatsu Ltd. (B): Profit Planning and Product Costing Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Komatsu Ltd. (B): Profit Planning and Product Costing 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.
Learning organization
- Komatsu Accurate 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 Accurate is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Komatsu Ltd. (B): Profit Planning and Product Costing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Komatsu Accurate 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.
Ability to recruit top talent
– Komatsu Accurate is one of the leading recruiters in the industry. Managers in the Komatsu Ltd. (B): Profit Planning and Product Costing are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Komatsu Accurate
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Komatsu Accurate 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 Accurate digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Komatsu Accurate 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.
Low bargaining power of suppliers
– Suppliers of Komatsu Accurate in the sector have low bargaining power. Komatsu Ltd. (B): Profit Planning and Product Costing has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Komatsu Accurate to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Komatsu Accurate has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Komatsu Ltd. (B): Profit Planning and Product Costing HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Komatsu Accurate has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Komatsu Accurate 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.
Superior customer experience
– The customer experience strategy of Komatsu Accurate in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Komatsu Accurate 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. (B): Profit Planning and Product Costing - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Komatsu Accurate is present in almost all the verticals within the industry. This has provided firm in Komatsu Ltd. (B): Profit Planning and Product Costing 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.
Weaknesses Komatsu Ltd. (B): Profit Planning and Product Costing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Komatsu Ltd. (B): Profit Planning and Product Costing are -
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 Accurate supply chain. Even after few cautionary changes mentioned in the HBR case study - Komatsu Ltd. (B): Profit Planning and Product Costing, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Komatsu Accurate vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Komatsu Ltd. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing can leverage the sales team experience to cultivate customer relationships as Komatsu Accurate is planning to shift buying processes online.
High cash cycle compare to competitors
Komatsu Accurate has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Komatsu Ltd. (B): Profit Planning and Product Costing, it seems that the employees of Komatsu Accurate don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the segment, Komatsu Accurate 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.
Increasing silos among functional specialists
– The organizational structure of Komatsu Accurate is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Komatsu Accurate needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Komatsu Accurate to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Robin Cooper suggests that, Komatsu Accurate 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Komatsu Accurate is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Komatsu Ltd. (B): Profit Planning and Product Costing can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Komatsu Ltd. (B): Profit Planning and Product Costing, is just above the industry average. Komatsu Accurate 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.
Lack of clear differentiation of Komatsu Accurate products
– To increase the profitability and margins on the products, Komatsu Accurate needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Komatsu Accurate 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 Accurate 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.
Opportunities Komatsu Ltd. (B): Profit Planning and Product Costing | 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. (B): Profit Planning and Product Costing are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Komatsu Accurate 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.
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 Accurate 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 Accurate 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Komatsu Accurate 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. (B): Profit Planning and Product Costing, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Komatsu Accurate is facing challenges because of the dominance of functional experts in the organization. Komatsu Ltd. (B): Profit Planning and Product Costing 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.
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 Accurate can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Komatsu Accurate can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Komatsu Ltd. (B): Profit Planning and Product Costing 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 Accurate to increase its market reach. Komatsu Accurate 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.
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 Accurate 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.
Creating value in data economy
– The success of analytics program of Komatsu Accurate has opened avenues for new revenue streams for the organization in the industry. This can help Komatsu Accurate to build a more holistic ecosystem as suggested in the Komatsu Ltd. (B): Profit Planning and Product Costing case study. Komatsu Accurate can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Komatsu Accurate can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Komatsu Accurate 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.
Learning at scale
– Online learning technologies has now opened space for Komatsu Accurate 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Komatsu Accurate 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 Accurate to hire the very best people irrespective of their geographical location.
Threats Komatsu Ltd. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing are -
Consumer confidence and its impact on Komatsu Accurate 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.
Technology acceleration in Forth Industrial Revolution
– Komatsu Accurate has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Komatsu Accurate needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Komatsu Accurate 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Komatsu Accurate with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Komatsu Ltd. (B): Profit Planning and Product Costing, Komatsu Accurate may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Accurate needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Accurate business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Komatsu Accurate 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.
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.
Environmental challenges
– Komatsu Accurate 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 Accurate can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Komatsu Accurate 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. (B): Profit Planning and Product Costing .
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 Accurate 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.
Weighted SWOT Analysis of Komatsu Ltd. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing 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. (B): Profit Planning and Product Costing 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 Accurate needs to make to build a sustainable competitive advantage.
