Kobelco Construction Machinery Co., Ltd.  

August 05, 2013
Kobelco Construction Machinery Group
Fiscal 2013-2015 Medium-term Business Plan

The Kobelco Construction Machinery Group has launched its Fiscal 2013-2015 Medium-term Business Plan.

In the previous medium-term business plan covering fiscal years 2010 to 2012, the Group focused primarily on tackling such tasks as strengthening its business for globalization and expanding business operations mainly in emerging countries.

Concentrating its management resources on countries with strong growth in the APAC market, such as China, Southeast Asia, and India, the Kobelco Construction Machinery Group was able to achieve most of the goals it had originally planned. These goals include:

a) Establishing a production network in emerging countries and areas of strong demand
b) Responding to the polarization of markets in advanced countries and markets in emerging countries in terms of development
c) Reducing procurement costs and strengthening the stable procurement of parts
d) Strengthening service locations in emerging countries to improve distribution
e) Improving quality at every production site of the Group under the slogan “Made by Kobelco” by thoroughly implementing quality standards so that “Kobelco quality” is maintained no matter where the machines are manufactured.

In response to globalization, the Kobelco Construction Machinery Group reassessed its role as a Japanese manufacturer and launched the Global Engineering Center (GEC). At the same time, it relocated its factory to Itsukaichi in Hiroshima Prefecture. The GEC functions as a control center to optimize all of Kobelco’s overseas production sites.

Under the new Fiscal 2013-2015 Medium-term Business Plan, the Group plans to transform itself into an enterprise that is resistant to changes in the business environment. Kobelco plans to strengthen its revenue base by implementing and optimizing the Group’s systems and frameworks that had been established in the previous medium-term business plan, while placing emphasis on continuous and stable growth.

Additionally, the Group intends to promote its activities to become a truly global brand by improving its presence as quickly as possible in the European, North American, and other new distribution territories following the dissolution of its global alliance with CNH Global N.V. at the end of last year.

The medium-term management policies covering fiscal 2013-2015 are as follows.

[Medium-term Management Policies]

  • Transform into a tough enterprise resistant to changes in the business environment.

In terms of consolidated earnings, it is important for each region to make a consolidated profit. However, the Group must avoid incurring a huge overall loss arising from too much emphasis on the optimization of each area. The Group will pursue balanced management, the overall optimization of its business operations, and flexibly making full use of its management resources. In these ways, the Group aims at creating a strong enterprise that will be affected minimally from the impact of changes in the business environment.

  • Maximize Kobelco’s brand value throughout the world by re-entering Europe and North America.

Similar to its plans for growing emerging countries, the Group aims at the early establishment of the KOBELCO brand presence in European and North American markets, in which the Group is re-entering for the first time in 10 years, through a customer-oriented marketing and a differentiation strategy. The Group aims to be a truly global corporation by entering the European, South American, Middle East, Russian, and African markets while putting priority on business expansion in the North American market.

  • Maximize profits through profit-focused strategies in regions where the group has acquired a certain degree of market share.

For the areas in which the Group has already acquired a certain share of the market, the Group will promote higher profits not only from new machine sales, but also from the stock business, in order to build a business foundation that will ensure stable profits. The Group will also put effort into increasing the ratio of parts sales to overall sales, as well as manufacturing more parts in-house.

In concrete terms, the Group will operate its business based on the following basic strategies.

[Basis Strategies of the Medium-term Business Plan]

  1. Transformation to a balanced and tough enterprise and maximization of profits through the improvement of its human resources base
  • Undertake reforms to become an enterprise capable of flexibly responding to changes in the demand structure.
  • Improve financial performance.
  • Improve organizational capabilities and site performance through human resources development.

  1. Re-entry into European and North American markets and establishment of a strong global brand
  • In re-entering Europe and the Americas, place top priority on the Americas and recapture market share.
  • Improve general sales in Japan.
  • Improve organizational framework and rebuild distribution networks in China.
  • Maximize profits in the Southeast Asian business and reinforce stability in the Indian business.

  1. Shift from increasing production and expanding manufacturing sites to in-house manufacturing, product differentiation and other technological improvements
  • Pursue differentiation technologies and improve profitability.
  • Improve core technologies by restructuring the Numata operations.
  • Reduce development lead time by half and improve marketing functions.

  1. Establishment of a business foundation from flow to stock to ensure stable profits
  • Invest management resources in the parts business. Strengthen the parts business by expanding sales overseas.
  • Transform customer services through an IT strategy that offers preventive maintenance, proposal-based services, and new maintenance plans.

[Management Targets]
[Medium-term Business Plan: Business Targets (Consolidated)]

(in billions of yen)
Initial Forecast
Current Forecast
Net Sales 267.8 285 335 330 - 350
Ordinary Income 6.8 11 17 20 - 30

[Important Numerical Targets]

  • Establishment of a strong global brand
    Global share of heavy machinery: 10% of global share, 20% or more in Japan, 15% or more in China (among foreign companies), 25% or more in Southeast Asia, and 7% or more in North America.
  • Transformation into a tough enterprise
    Ordinary income margin: 8%. Parts sales: 10% or more of total sale. Number of months of inventory: to be halved to 2 months. Reduce 40 billion yen of external debt.

[Medium-term Slogan]
The Kobelco Construction Machinery Group has made a slogan for the medium-term business plan.

[About “True Blue KOBELCO”]
Blue represents the color of the company’s excavators. The slogan is a declaration that KOBELCO, an original, reliable and honest company, will evolve and develop on a global scale. Kobelco Construction Machinery is creating value, building a future, and changing the world.