Building Network Capabilities in Turbulent Competitive Environments

137

9

Strategies of Japanese Firms

in the Brazilian Market

Brazil is another thriving emerging economy with a sizable popu-

lation and a vast natural resource basis. Among the emerging

economies, Brazil is experiencing phenomenal growth. is chap-

ter focuses on Japanese rms in Brazil, such as Komatsu (construc-

tion equipment rm), Toyota (auto manufacturer), Bridgestone (tire

manufacturer), and Epson (personal computer rm).

9.1 INTRODUCTION

is book presents (1) three types of competence that form network capa-

bility—technology competence, customer competence, and linkage compe-

tence; and (2) the concept of product architecture as a critical dimension of

product strategy. Chapter 8 focused on the cases of Japanese global rms

in India. is chapter examines the practices of Japanese global rms in

Brazil—particularly the cases of Komatsu, Toyota, Bridgestone, and Epson.

9.2 KOMATSU BRAZIL

9.2.1 A Brief Overview

e Komatsu case in Chapter 7 indicated that the large portion of its global

market sales is from emerging markets. e Chinese market is the largest

(21%), the Latin American market is also sizable (14%), and the prospect

138 • Building Network Capabilities

of growth is great. Here, we consider the case of Komatsu Brazil (Park and

Shintaku, 2014). In Brazil, the company has two plants, one marketing

business unit, and ten distribution centers. Komatsu do Brazil Ltda. (KDB)

was established in 1970 in response to “the home-made tractor law of 1969”

by the Brazilian government. However, with no real sales record and no

actual production plant, the Brazilian government rejected KDB’s “home-

made bulldozer” proposal. us, KDB decided to form a strategic alliance

with Franco-Nevada Corporation FNV, an indigenous Brazilian heavy

machinery maker. Komatsu FNV (KFNV) was formed in 1973. From 1975

on, the large scale of production, marketing, and aer-sales services were

achieved. Subsequently, it was recognized as a Brazilian home-based man-

ufacturer. Its main product lines are construction and mining equipment.

In the Brazilian market, KFNV reports more than 80% of market share

for heavy construction equipment. Mining equipment is mostly imported

from the United States, Japan, and Germany. KFNV’s aer-sales services

network is extended to 23 states of Brazil. Distribution centers keep ade-

quate inventory of key component parts and services agents handle minor

expendable parts. e key point is that KFNV is prepared to assume all

aspects of aer-sales services needed through KOMTRAX, which reduces

the response time in case of any maintenance needs or performance fail-

ures. “Domestic rms rst” by Brazilian government’s protection policy

denes the nature of the Brazilian construction machinery/equipment

market. us, customers’ choice options are limited as well. e vast land

area dictates very high demand for huge construction equipment with

large tires; a small number of protable coal mines hardly require large-

scale shovels or dump trucks. e market leaders are Caterpillar (United

States), New Holland (United States), Case (United States), and Volvo

(Germany). e market share details of construction equipment makers

are Komatsu (20%+), Caterpillar (30%+), and others (15%). Other makers

are Hyundai Heavy Industries and Doosan Infra Core (Korea) and SANY

(China) that appeal through their production facilities in Brazil.

9.2.2 Construction Equipment Usage Patterns

in Brazil and Komatsu’s Response

e ratio between urban and rural areas is 9:1 (Figure9.1). rough the infra-

structure expansion, more rapid growth is expected in rural areas. Even with

the same types of construction equipment, the usage patterns in cities and farm

lands are quite dierent. In rural areas, the construction equipment needed to

Strategies of Japanese Firms in the Brazilian Market • 139

FIGURE 9.1

Major business center cities of India and Brazil.