Komatsu Europe International N.V., being one of the leaders in producing and selling equipment for mining and construction faced the problem of addressing the changes in the industry. The problem was that business revenues depended on the sales of equipment, but a new market situation required focusing on after-sales services because of the threat of new entrants. Komatsu’s business model is based on Research and Development (R&D) to design unique innovative products, an effective distribution network, the development of customer relationships (customization of solutions), and sales and product support. It is expected that today the model should be based on the service dominant logic, according to which the company should cooperate with customers to co-create value. This approach is important in the context of developing service-oriented businesses. Komatsu’s competitors also applied this logic and offered numerous complex solutions for customers based on distinctive after-sales services. The purpose of this paper is to evaluate available alternatives for Komatsu and propose the scenario to follow with reference to the assessment of possible outcomes.
Assessment of Alternatives
The first alternative to consider is to “stay who we are” and cooperate with a new service provider. Following this model, it is not necessary to change operations and processes significantly, but it is possible to expect consequences in customer satisfaction levels. In this case, challenges include the possibility that minimal changes in the course will not lead to the company’s competitive advantage in the market. Still, it is possible to realize this plan effectively, changing the work with distributors to make them actively collaborate with the representatives of a new service provider.
The second alternative is to adopt a special hybrid model, in which the cooperation with a new service provider is associated with building and developing Komatsu’s competencies and offerings. In this case, the company continues to focus on providing unique solutions to customers, but it has more opportunities for development, innovation, and addressing customers’ needs with the help of a new model elements. Consequences will include customers’ satisfaction, opportunities for further development, the focus on the service dominant logic model, and increased revenues. Challenges will be related to the costs of making the hybrid model working because of changes in a business model and operations. However, Komatsu can demonstrate their excellence following this course, and the work with distributors will need to be altered significantly.
The third alternative is to develop the offering that will resemble Babcock’s model. In this case, all the processes associated with R&D, distribution networks, sales and product support will require changes. Consequences can be twofold as loyal customers can be more interested in traditional unique solutions, or customers will be attracted by new solutions. There are also many implementation challenges associated with high costs and the necessity of altering all processes, networks, and operations, and the work with distributors will be reconsidered.
Solution for Komatsu
The second alternative based on the development of a hybrid model can be discussed as the most appropriate solution for Komatsu. The reason is that the company will be able to increase customers’ loyalty and satisfaction, attracting new customers, with minimal expenses associated with cooperating with a new service provider and making adjustments in networks with distributors. More resources can be spent on R&D to continue to propose a unique innovative product. As a result, it will be possible for the company to avoid challenges associated with complex changes in their business model, but they will be able to increase significantly their competitive advantage.
Conclusion
When moving to service dominant logic with a focus on adopting a hybrid model, Komatsu will increase their profits, as well as the market share. The reason is that their position will be strengthened in the industry as they will promote the advantages of their business model combined with a new business model. As a result, the focus on service dominant logic will allow the company to attract more customers and gain more profits, offering them unique solutions and remaining the leader in the market.