8 cukup agresi¢ dg 1987 Tanalea memilih untuk ohus 09 pasar ternational, 10 beran! menatic fame tekal cebelum menolradapt ic : Pacer iteracstenal dew clivertipie lenge fangge 4 St predate. Ta felon % te Te aka TOA Menilile eanbor anbanng Ya Matapy ines 385-001 franupakhn. perqualan.» Keuowech 7 Petey ean di pasar fetal Tanaka teeneiee embers Hign pasar utema Komatsu) Sepoue, & eremili, eangacang: procakst Mengrunakcin strates) yang wrejar dale Steadying the AS= ere. Fsaunscin fokal. Perlahnin stten: Dies Capea atest auc Ral *Ohsaskar, welew gangs pasa In}june 1 tds ai ay ficum dart 25% Re Sit. Labo Foto ‘general manager Gl iyi Genta cieae nse het tat ao MOEA, LA prea tg overseas division, direkhor perencanaa Untuic molokuican 5 pi sictoys Loe Cherge renal # Sta « fokal di AS 2 crops though the way he pred penpialen agresie) Kes ict sar, + Tanaka feb) an harge (3 ° # result of c they will LESeces Sa aeenReCone = = Operationally, he xesponcied quickly to the crisis competitive situation in the domestic market before turning to the larger strategic goals of intemationalization and product diversification. Chosen, in part, for his diplomatic skills, Tanaka demonstrated his conciliatory approach by emphasizing that his most pressing policy goal was “restoring order to the domestic marketplace.” He argued: Market share is certainly a source of profit, but there can be no such thing as market share that ignores long-term profitability. We are trying to establish a situation where we can recoup the money spent on development and investment. If Komatsu cannot do this, there is no other company in Japan that can. If business conditions become worse, we should cover this not by carrying out a price war, but by reducing production. Domestically, Tanaka ended the practices of price discounting and high-pressure sales. He laid the groundwork for more rational, fair and orderly competition in the domestic market. Slowly, the industry responded and Tanake’s efforts culminated in a spate of collective OEM supply agreements within the industry and the creation of the Japan Construction Equipment Manufacturers Association in March 1990. More important from Komatsu’s perspective, restoring order improved the bottom line. In the hydraulic excavator market segment alone, for example, while Komalsu’s ‘market share fell from 35% to 31%, overall profits rose. ‘Tanaka's pricing and sales policies were controversial within the company. When Komatsu developed the first mini-excavator that used advanced microelectronic controls, for example, some managers contended that with its traditional lower prices and aggressive sales methods, the company could capture a 50% market share. But Tanaka’s philosophy prevailed, and the product was introduced at a 10% premium to existing prices. More broadly, in 1988 Tanaka raised U.S. prices 7%, the seventh mark-up since September 1985. (Collectively, these represented a 40% aggregate price increase.) Tanaka also pursued internationalization much more aggressively than his predecessor. More than internationalizing sales or market exposure, Tanaka wished to establish autonomous bases with headquarters’ capacities for manufacturing, sales and finance in the three core markets—Japan, the United States, and Europe. Explained Tanaka: ‘On the assumption that the yen will Further appreciate to, le’s say, ¥100 per US. dollar, I believe any extension of conventional measures such as management and production rationalization will no longer be effective. ‘Much of the driving force behind this emerging strategy came from his dizector for corporate planning, Tetsuya Katada. Concemed about Komatsu’s dwindling growth prospects in construction equipment and its dangerous reliance on domestic production, Katada pushed the company toward regionalizing production in Europe and the United States ‘This document is for use only with the Harvard Business Publishing ‘Case Analysis Coach’!