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 - – increasing household debt because of falling income levels, central banks are concerned over increasing inflation, increasing energy prices, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing commodity prices, there is increasing trade war between United States & China, 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.
Strong track record of project management
– Komatsu Accurate is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
High brand equity
– Komatsu Accurate has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Komatsu Accurate to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Analytics focus
– Komatsu Accurate is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Robin Cooper can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
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.
Ability to lead change in Finance & Accounting field
– Komatsu Accurate 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 Accurate in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Komatsu Accurate is one of the most innovative firm in sector. Manager in Komatsu Ltd. (B): Profit Planning and Product Costing Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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 -
No frontier risks strategy
– After analyzing the HBR case study Komatsu Ltd. (B): Profit Planning and Product Costing, 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.
Low market penetration in new markets
– Outside its home market of Komatsu Accurate, firm in the HBR case study Komatsu Ltd. (B): Profit Planning and Product Costing needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Komatsu Ltd. (B): Profit Planning and Product Costing 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 Accurate 's lucrative customers.
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Komatsu Ltd. (B): Profit Planning and Product Costing, in the dynamic environment Komatsu Accurate has struggled to respond to the nimble upstart competition. Komatsu Accurate has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Interest costs
– Compare to the competition, Komatsu Accurate 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.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Komatsu Accurate can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Komatsu Accurate 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.
Building a culture of innovation
– managers at Komatsu Accurate 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.
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.
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.
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.
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.
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.
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.
Using analytics as competitive advantage
– Komatsu Accurate has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Komatsu Ltd. (B): Profit Planning and Product Costing - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Komatsu Accurate to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Leveraging digital technologies
– Komatsu Accurate 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.
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 -
Shortening product life cycle
– it is one of the major threat that Komatsu Accurate is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Komatsu Accurate 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.
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.
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.
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 .
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.
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.
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 Accurate can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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 Accurate in the Finance & Accounting sector and impact the bottomline of the organization.
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 Accurate.
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.