Komatsu vs Catterpilar - Comparative Essay

Worldwide demand for the EME industry had doubled between 1973 and 1980 where 70% of the dollar sales of the industry were from the construction equipments in 1981. In order to be successful and dominant in this industry it was necessary for the EME suppliers to understand the nature of the construction industry and how they needed to meet the criteria to fulfill customer needs. Key success factors in the EME industry were crucial for the suppliers to gain competitive advantage in the construction industry. These key success factors can be categorized in three different groups namely, manufacturing or production, distribution and brand image.
First, manufacturing higher quality products was crucial since machine dependability and reliability was important for contractors. Many construction companies all over the globe operated under severe cost and time constraints and companies’ main target was to schedule machine use efficiently and minimize downtime. High capital and energy costs made some construction companies to use their machines longer. Consequently, providing the replacement and spare parts on short notice and continuous improvement of the parts were essential. Also, profit margins for parts and attachments were significantly higher than for whole machines which encouraged most suppliers to pay more focus on providing these parts to their customers on a timely manner. Moreover, the ability to manufacture product capacity ahead of demand was important. For instance, Caterpillar’s excess capacity policy served not only as deterrence to competitors but also as a mechanism enabling company to respond to the industry’s’ wide swings in demand. This also helped companies to successfully maintain their low cost manufacturing position through higher scale of volume. In addition, a full and diversified product line was necessary for companies to gain competitive advantage over others. Also, the ability to be a shock absorber provided some companies flexibility and