SUBMITTED BY- SAMRIDHI

REG. NO.-MBA/0135/57

Case Write-up on Komatsu Komtrax

1. Assess the impact of Komtrax on Komatsu.

Komtrax is Komatsu’s wireless tracking system offered as a bundled service with its machines. It
gives integrated data capabilities to Komatsu which are also shared with machine operators & renters
which enables them to monitor machine performance, study utilization, track location and operators
and control machines remotely which in turn helped them to operate and schedule equipment
efficiently, recover them if stolen, manage timely payments, show maintenance and usage history to
prospective buyers of used equipment, reduce fuel consumption and improve profitability in long run.
The company started out by collecting basic data like running hours, engine speeds, temperatures and
oil pressures but over time collected vital information about engine health and key subsystems. The
data helped Komatsu in next generation machine development and allowed the company to
understand the needs of its customers in different markets globally. For eg., equipment in Saudi
Arabia were used for bulldozing loads of sand while in Turkey it was used for heavy rock movements
allowing the company to customize build as per the load requirements. The Chinese ran small
excavators for 20 hours per day and hence they had to toughen quality standards of items shipped to
the country. During the 2008 global crisis, Komtrax became instrumental as a business activity
tracking tool and in forecasting demand. Distributors had placed orders to meet their forecasts based
on past sales and the company had manufactured and dispatched equipments as per the orders placed
by them instead of actually using the already available data on Komtrax of declining sales trends due
to decline in construction activity. The holdup of inventory at the distributor end hurt the company
even more than the declining sales. By analysing Komtrax’s data, the company could develop the real
perspective of mining and construction activities taking place globally and thus coordinate production
schedules accordingly. It could document demand as well as make accurate projections and publish
the information on its website to as a leader in forecasting. This created value for customers and the
company by being able to plan ahead of competition. However, in certain emerging markets like
South Asia and China it was not able to charge significant premium on its standardised smart
construction services and was at a competitive disadvantage in terms of cost to customers because
these areas were slow in adopting new technologies which came as a cost to the company.

2. How should Komatsu move ahead?

As a leader in smart construction and equipment services, Komatsu should aim to build long term
relationships with its customers by implementing rewarding loyalty through innovative programmes.
It should also offer services like free demo initially so that customers can be better equipped with the
knowledge of its service features. It needs to clearly put out the message about how they can benefit
from its data capabilities to improve profitability in long term by engaging in customer awareness
programmes. This would also help the company capture the market in emerging economies like India
and China where rates of technology adoption are low. The company can set up a separate ICT
vertical locally and decentralising its management by hiring local executives to better understand local
trends in emerging markets. This will help diversify its offerings beyond telematics. It can also then
align its services with the local regulations, environmental laws and other customer needs to
revolutionise client’s business. It can provide repair services for free initially and at lower rates as
compared to competitors. Making the data and other services accessible through smartphones can help
increase adoption and customers can be better trained. The company should leverage the vast labour
pools in these countries to establish local data analysis and service centres. Instead of standardising its
services, it can offer only equipment and charge additional premium based on client’s choice. This
will help it to maintain its position in existing markets as well as to grow sustainably.