Komatsu Limited is a multinational public limited corporation. It has been dealing in the heavy equipment industry. The company offering products and types of equipment for construction purposes, mining works, forestry and defense technology. It was founded in 1921, having its headquarters in Tokyo, Japan, dealing in the heavy equipment manufacture industry.
As of 2021, the company generated a strong sales figure of 2205.9 billion Japanese yen and has involved an employment figure of almost 62823 individuals (Komatsu, 2021). From the opinion of the global heavy equipment industry, the evaluation of Porter’s five forces would be a helpful instrument for maintaining prospect strategies to understand better the company standing position.
Competitive Rivalry in The Market
The competitive rivalry in the building material industry is high because of the increasing economic needs and the growth in the construction, mining and forest sector in almost every region. As a result of this increase, several firms and corporations have captured the market to provide the heavy pieces of equipment and machinery required to construct and maintain the infrastructure of construction and mining, resulting in fierce competition among established players.
The company’s major competitors in the industry in terms of revenue growth are Caterpillar, John Deere and Allison Transmission. Komatsu is trying to lead the market with almost 23 billion US dollars, while others showed a revenue figure of 41.7, 35.5 and 2.1 billion US dollars (Craft, 2020). Therefore, the presence of such big names in the industry makes the competition fiercer among each other.
Threat of Substitutes
The threat of having substitutes in the heavy equipment industry is considered to be low. This is mainly because of the availability of so many firms and the types of machinery offered by them. The basic requirement for raw materials and products like cement, concrete, and other building essentials is not easy to move on with any other substitute.
Due to the nature of the industry, these machines are the prime need to construct any project or mining work that is being provided already in the industry. However, the customers’ brand loyalty plays a vital role in the context of substitutes of machinery available from the existing firms (Kiel et al, 2020). Therefore, the risk of substitutes in the industry is considered to be minimal.
The Threat of New Entrants
The threat of new firms in the heavy equipment industry is considered low because of the number of operating firms in the market. The barriers to entry are placed high enough that it is difficult to meet by the entrant firms. Establishing a heavy equipment firm’s structure and managing supply chain networks takes a lot of money and time, making it extremely difficult for entrants to meet the requirements.
Apart from the capital obstacle, new firms have to deal with big brands of the heavy equipment industry and the time needed to reach the kind of position existing firms have established among customers. Economies of scale are another disadvantage for new forms that big firms have established (Baumers et al, 2016). Hence, such behavior of big giants leaving minimal ways for new firms.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the heavy equipment industry is moderate because several firms provide building material equipment for construction or mining purposes. The buyers are usually governmental bodies, firms, and individual persons that require such types of machinery for building houses or different projects. However, the products are not much different from each other but with variations in quality and cost.
Furthermore, the option of switching cost influence the consumer buying behavior in terms of satisfaction with work (Ram and Wu, 2016). Keeping in view such a pattern, the bargaining power of consumers is considered moderate in the sector.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the heavy equipment sector is moderate. The suppliers in this industry primarily produce and manufacture the resources and parts of materials and distribute them. These corporations embrace a significant capability of authority in the industry’s process dynamics and can change the equipment material prices.
Furthermore, the authorities’ dependencies on the places where such materials are produced affect the suppliers’ willingness to negotiate. (Costa et al., 2019). On the other hand, the business climate is dependent on the operations of such enterprises, allowing them to exhibit specific influence. Thus, in context to the heavy equipment industry, the bargaining power of suppliers is moderate.
References
Baumers, M., Dickens, P., Tuck, C. and Hague, R., 2016. The cost of additive manufacturing: machine productivity, economies of scale and technology-push. Technological forecasting and social change, 102, pp.193-201.
Costa, F., Denis Granja, A., Fregola, A., Picchi, F. and Portioli Staudacher, A., 2019. The understanding relative importance of barriers to improving the customer-supplier relationship within construction supply chains using DEMATEL technique. Journal of Management in Engineering, 35(3), p.04019002.
Craft, 2020. Competitors. [online] craft.co. Available at: https://craft.co/komatsu/competitors.
Kiel, D., Müller, J.M., Arnold, C. and Voigt, K.I., 2020. Sustainable industrial value creation: Benefits and challenges of industry 4.0. In Digital Disruptive Innovation (pp. 231-270).
Komatsu, 2021. Corporate Profile｜Company Info｜Komatsu Ltd.. [online] Komatsu Ltd. Available at: https://home.komatsu/en/company/profile/.
Ram, J. and Wu, M.L., 2016. A fresh look at the role of switching cost in influencing customer loyalty. Asia Pacific Journal of Marketing and Logistics.