Komatsu Case Analysis

1. How was Komatsu able to evolve from a $169 million company with low-quality products to become a real challenge to Caterpillar by the early 1980s? How would you evaluate Mr. Kawai’s performance?

Komatsu’s evolution can be attributed to Kawai’s excellent leadership and the structure that he implemented upon assuming the presidency. He built on the “Total Quality Control” foundation laid by his father, but gave straightforward, attainable goals that supported the program: to acquire and develop advanced technology, to raise quality, and to increase efficiency. He aimed these goals at a specific target: “to catch up with and surpass Cat.” Kawai implemented a new style of management called “management by policy,” which gave the company a specific target to work toward, and ensured that employees always understood where the company was aiming. He then introduced one policy at a time, and instituted the “Plan, Do, Check, Act” system of control to ensure quality and progress at all levels of the organization. “Project A,” which sought to raise the quality of bulldozers, increased sales and Komatsu’s market share from 50% to 65% by 1970. Kawai launches Projects B, C, and D in succession, along with a campaign to make Komatsu internationally cost and quality competitive (Page 2). By 1982, Komatsu’s sales were approaching those of Caterpillar, and showed that they were a true competitor (Exhibit 2). Kawai’s ability to focus on a company-wide target, form individual goals to reach the target, and plan for and implement courses of action for each goal shifted the company’s focus and Komatsu went from the verge of bankruptcy to a market leader (Pages 1-2.)

2. Why did performance deteriorate so rapidly in the mid-1980s? What grade would you give to Mr. Nogawa’s term as CEO?

A combination of a turbulent outside environment and Nogawa’s character and leadership tactics caused Komatsu’s performance to deteriorate rapidly in the mid-1980s. External conditions included...