Case Study : Caterpillar 's Cost Management

717 WordsDec 14, 20153 Pages
Komatsu’s 2015 Annual report delineates that the ROA is about 5.5%. The indicated data by Komatsu is 154,009 million yen as net income and 2,798,407 million yen as a summary of assets (Komatsu Report 2015, 31). Caterpillar, in reference, delineates an ROA of 4.4% and John Deere delineates an ROA of 5.2%. ). Using the two competitors in addendum to Komatsu, it is logical to maintain that Komatsu’s differentiation strategy has resulted in above average returns. As one can determine, Komatsu’s ROA, which is not a ratio discussed in any of the three reports but instead calculated separately, is a minimum of .3% greater than the two direct competitors displayed in the construction and mining equipment manufacturing industry. Caterpillar, the giant of this environment, exemplifies in the 2014 annual report that Caterpillar enacts cost management. Komatsu’s differentiation strategy resulted in a 1.1% larger ROA than Caterpillar’s cost leadership strategy at 4.4%. The ROE that Komatsu indicates in its five-year consolidated financial performance section of the 2015 Annual Report is 9% in 2015 and a solid number of 10.6% in 2014 (I say “solid” because the 2015 percentage is variable still according to Komatsu) (31). In contrast, Caterpillar and John Deere delineate ROE’s of 19.6% and 30.8%. Given the statistics recorded by Caterpillar, John Deere, and Komatsu, it would be logical to see that Komatsu is the least attractive group. However, Komatsu’s ROE has traveled over five years

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