International Engineering Management Assignment 1: Komatsu Expansion

This report analyzes the development and growth of Komatsu Limited, a multinational corporation in the manufacturing industry. The report examines Komatsu's financial performance based on a 3-year plan (2016-2018), focusing on sales growth, profitability, efficiency, shareholder return, and financial position. It then compares Chile and Nigeria as potential expansion destinations, evaluating cultural, monetary, and political factors. The analysis includes a detailed comparison of key business, trade, and labor data, such as GDP, GDP per capita, debt, expenditure, and various economic indicators, along with business confidence and political stability. The report concludes with a comparative analysis of business factors and cultural differences to determine the most favorable location for Komatsu's expansion, considering the country's overall business environment, potential for growth, and associated risks.

Running Head: INTERNATIONAL ENGINEERING MANAGEMENT
MANU 1398 – Assignment 1
Name of the Student
Name of the University

1INTERNATIONAL ENGINEERING MANAGEMENT
Task 1: Development and Growth of Komatsu Company
Komatsu Limited is a large scale multinational corporate that was first founded and based
in Japan but has now spread over multiple countries of the world. Komatsu is one of the largest
corporate giants that deal in multiple sub-industries within the manufacturing industry including
mining, forestry, construction as well as military equipments. The aim of the company has
always been to reach the financial pinnacle of the global manufacturing industry and in 2015,
they developed a 3 years plan for rapid growth. The data from 2018 regarding the 3 year plan is
shown below (Komatsu official website).
Target
FY2016 FY2017 FY2018
Index Results Results Plan
Growth Aiming to growth beyond industry
benchmark
Growth rate of
sales (2.8%) 38.7% 0.1%
[VS FY2015] [34.8%] [34.9%]
Profitabilit
y
Aim to increase income ration to one of the
best in the industry
Operating
income ratio 9.7% 10.9% 13.5%
Efficiency Aim at 10%-level ROE. ROE 7.3% 12.1% 13.4%
Shareholde
r
return
Set the goal of a consolidated payout ratio
of 40% or higher, and maintain the policy of
not decreasing dividends as long as the ratio
does not surpass 60%.
Maintain appropriate balance between
investment for growth and shareholder
return (incl. stock buyback), with the top
priority being making profitable investment
in projects and other sectors in the form of
sponsorships.
Consolidated
payout ratio
48.2%
(Dividend:
JPY58)
40.3%
(Dividend:
JPY84)
40.1%
(Dividend:
JPY96)

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Financial
position
Reach top level financial position in the
industry Net D/E ratio 0.18 0.40 ー
.
Retail finance
business
ROA: 2.0% or above ROA 0.7% 1.9% ー
5.0 or under for net D/E ratio Net D/E ratio 3.65 3.50 ー
It is seen from the table that Komatsu company gained considerable amount of growth in
profit and income ration and the three years plan is considered to be successful for the company.
Currently, the company is willing to expand services to another country and for that
purpose, Nigeria and Chile have been shortlisted. The rest of the report is focused on comparing
and analysing various types of financial and industry related data and statistics to compare Chile
and Nigeria in terms of possible best destination for expanding the business.
However, before resorting to any new country, the company first wants to analyse the
two options very closely. The company management is not willing to take risks that can result in
disastrous consequences in the new country, resulting in loss of its brand value worldwide. As a
result, the company has set out to study both Chile and Nigeria in detail including business,
cultural and political aspects and decision will be taken accordingly based on the analysis.
Task 2: Data Comparison and Analysis of Chile and Nigeria
Chile and Nigeria are two entirely different countries. Chile is a country in South
America whereas Nigeria is located in central Africa. Other than the geographical locations,
Chile and Nigeria differ in almost every aspects including culture, business, population,

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development, industry, politics and others. Chile is one of the most developed countries of the
world, on the verge of becoming a first world country whereas Nigeria belongs to the category of
developing / third world country. If a company wants to do business in a new country and have
Chile or Nigeria as the possible options, there are a lot of differences that need to be considered
before establishing the business. These factors are as follows.
Culture: There is a huge cultural difference between Chile and Nigeria. The cultural
differences include language, philosophy, outlook, ideas and many others. Both the cultures can
have positive and negative aspects and it is important for the company to select which one suits
their own business philosophy and alignment more.
Monetary Status: Monetary status is one the major factors to be considered while starting
business in a new country. While Chile’s monetary status is considerably high as compared to
Nigeria, Chile looks to be a better position if the two are considered to be candidates for new
business opening. However, low monetary status of Nigeria means availability of more cheap
labour that will significantly help the company set up and run easily without unreasonable
investments.
Business Potential: Following the monetary status, business potential is another
important factor. In business potential, a lot of sub factors come into play including availability
of cheap labour, production cost, export import cost, market demand and profitability and others.
Politics: Political factors play major roles in any business. In Nigeria, politics is unstable
and there are frequent riots and terrorist attacks. On the other hand, Chile is much more stable
politically.

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The basic business and financial data comparison of Chile and Nigeria is shown below
(countryeconomy.com).
Chile Nigeria
Annual GDP [+] 2018 298,180M.$ 398,186M.$ 2018 Annual GDP [+]
GDP per capita [+] 2018 15,921$ 2,033$ 2018 GDP per capita [+]
Debt [+] 2018 76,183 108,502 2018 Debt [+]
Debt (%GDP) [+] 2018 25.56% 27.26% 2018 Debt (%GDP) [+]
Debt Per Capita [+] 2018 4,068$ 554$ 2018 Debt Per Capita [+]
Deficit (M.$) [+] 2018 -4,366 -18,001 2018 Deficit (M.$) [+]
Deficit (%GDP) [+] 2018 -1.47% -4.52% 2018 Deficit (%GDP) [+]
Expenditure (M.$) [+] 2018 75,597.0 51,889.1 2018 Expenditure (M.$) [+]
Education Expenditure (M.$) [+] 2016 13,390.9 851.1 1975 Education Expenditure (M.$)
[+]
Education Expenditure (%Bud.)
[+]
2016 21.18%
Gov. Health Exp.(M.$) [+] 2018 15,479.9 1,925.7 2016 Gov. Health Exp.(M.$) [+]
Gov. Health Exp. (%Bud.) [+] 2016 19.74% 5.01% 2016 Gov. Health Exp. (%Bud.) [+]
Defence Expenditure (M.$) [+] 2018 5,627.8 2,017.2 2018 Defence Expenditure (M.$) [+]
Defence Expenditure (%Bud.)
[+]
2018 7.41% 4.05% 2018 Defence Expenditure (%Bud.)
[+]
Expenditure (%GDP) [+] 2018 25.36% 13.04% 2018 Expenditure (%GDP) [+]
Expenditure Per Capita [+] 2018 4,036$ 265$ 2018 Expenditure Per Capita [+]
Education Expenditure P.C [+] 2016 737$ 13$ 1975 Education Expenditure P.C [+]
Gov. Health Exp. P.C. [+] 2018 834$ 10$ 2016 Gov. Health Exp. P.C. [+]

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Defence Expenditure P.C. [+] 2018 300$ 10$ 2018 Defence Expenditure P.C. [+]
Moody's Rating [+] 07/26/2018 A1
S&P Rating [+] 07/13/2017 A+ B 09/16/2016 S&P Rating [+]
Fitch Rating [+] 03/12/2020 A B+ 12/19/2019 Fitch Rating [+]
Corruption Index [+] 2018 67 27 2018 Corruption Index [+]
Competitiveness Ranking [+] 2019 33º 116º 2019 Competitiveness Ranking [+]
Fragile States Index [+] 2018 40.7 99.9 2018 Fragile States Index [+]
RTI Raking [+] 09/28/2018 50º 61º 09/28/2018 RTI Raking [+]
Innovation Ranking [+] 2018 47º 118º 2018 Innovation Ranking [+]
Unemployment Rate [+] November
2019
7.0%
Unemployment rate [+] 2019Q1 7.2% 7.2% 2016Q4 Unemployment rate [+]
Unemployed [+] 2019Q1 659 m. 5,821 m. 2016Q4 Unemployed [+]
NMW [+] 2019 429.6 $ 115.9 $ 2013 NMW [+]
Average Wage [+] 2018 15,063$
Human Capital Ranking [+] 2017 53º 114º 2017 Human Capital Ranking [+]
US Dollar exchange rate [+] 03/31/2020 846.3000 306.4500 11/20/2019 US Dollar exchange rate [+]
Stock ExchangeYTD % [+] 03/30/2020 -28.99%
CPI (overall index) [+] February 2020 3.9% 12.5% April 2018 CPI (overall index) [+]
PPI Year on Year [+] February 2020 5.3%
Key rates [+] 10/24/2019 1.75% 13.50% 03/27/2019 Key rates [+]
Doing Business [+] 2019 56º 146º 2019 Doing Business [+]
IPI Year on Year [+] January 2020 1.8%

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Passengers vehicles Year [+] December 2017 270,113 4,051 December 2017 Passengers vehicles Year [+]
Annual Vehicles/ 1,000 p. [+] December 2017 20.45 0.04 December 2017 Annual Vehicles/ 1,000 p. [+]
Vehicles / 1,000 people [+] 2015 247.34 20.70 2015 Vehicles / 1,000 people [+]
Standard VAT [+] 01/01/2006 19.00% 5.00% 01/01/2006 Standard VAT [+]
Top tax rate + SSC [+] 2018 35.0% 24.0% 2018 Top tax rate + SSC [+]
Exports [+] 2018 75,451.8 M.$ 60,546.6 M.$ 2018 Exports [+]
Exports % GDP [+] 2018 25.30% 15.21% 2018 Exports % GDP [+]
Imports [+] 2018 75,003.5 M.$ 43,007.0 M.$ 2018 Imports [+]
Imports % GDP [+] 2018 25.15% 10.80% 2018 Imports % GDP [+]
Trade balance [+] 2018 448.4 M.$ 17,539.6 M.$ 2018 Trade balance [+]
Trade balance % GDP [+] 2018 0.15% 4.40% 2018 Trade balance % GDP [+]
Retail Sales YoY [+] December 2016 3.6%
Global AgeWatch Ranking [+] 2015 21º 86º 2015 Global AgeWatch Ranking [+]
Density [+] 2018 25 212 2018 Density [+]
Global Peace Ranking [+] 2019 27º 148º 2019 Global Peace Ranking [+]
Remittance received (M.$) [+] 2017 104.2 21,967.2 2017 Remittance received (M.$) [+]
% Immigrant [+] 2019 5.02% 0.64% 2019 % Immigrant [+]
% Emigrant [+] 2019 3.47% 0.73% 2019 % Emigrant [+]
Birth Rate [+] 2017 12.71‰ 38.38‰ 2017 Birth Rate [+]
Remittance sent (M.$) [+] 2017 892.8 1,143.7 2017 Remittance sent (M.$) [+]
Crude death rate [+] 2017 6.08‰ 12.11‰ 2017 Crude death rate [+]
Fertility Rate [+] 2017 1.68 5.46 2017 Fertility Rate [+]

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Rate Homicides per 100.000 [+] 2017 4.30
Population [+] 2018 18,729,160 195,874,740 2018 Population [+]
Immigrant stock [+] 2019 939,992 1,256,408 2019 Immigrant stock [+]
Emigrant stock [+] 2019 650,151 1,438,331 2019 Emigrant stock [+]
HDI [+] 2017 0.843 0.532 2017 HDI [+]
Gender Gap Ranking [+] 2018 54º 133º 2018 Gender Gap Ranking [+]
Life expectancy [+] 2017 79.91 53.95 2017 Life expectancy [+]
Number of homicides [+] 2017 779
CO2 Tons per capita [+] 2018 5.01 0.57 2018 CO2 Tons per capita [+]
The data above basically shows the current difference between Chile and Nigeria in terms
of economy, business, education and other factors that are interrelated with each other. The data
clearly shows Chile is ahead of Nigeria in almost every aspect of financials and other business
related factors. In the first few data, it is seen that the annual GDP of Nigeria is considerably
greater than that of Chile but at the same time, GDP per capita of Nigeria is less than Chile. This
is because the population of Nigeria is much greater than Chile and considering the population
difference, the annual GDP of Nigeria is not in a healthy status if compared to that of Chile.
All the other data is favourable towards Chile if the option is between Nigeria and Chile.
However, since new business entry is planned in one of the countries, further analysis needs to
be conducted and discussed as below.

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Task 3: Business Factors and Cultural Differences between Chile and Nigeria
Chile
Figure 1: Ease of Doing Business in Chile
(Source: Trading Economics Website)

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Business Last Reference Previous Range Frequency
Business Confidence (points) 43.91 Feb/20 40.67 32.53 : 64.43 Monthly
Industrial Production (%) 5.6 Feb/20 2 -11.5 : 14.05 Monthly
Industrial Production Mom (%) 0.2 Feb/20 -1.6 -8 : 10.5 Monthly
Manufacturing Production (%) 3.7 Feb/20 3.7 -14.2 : 32 Monthly
Changes in Inventories (CLP Billion) -1653 Dec/19 246 -1653 : 1551 Quarterly
Total Vehicle Sales 31090 Dec/19 24272 21184 : 39263 Monthly
Leading Economic Index (%) 1.5 Jan/20 1.1 -4.4 : 12.6 Monthly
Internet Speed (KBps) 9259 Mar/17 8567 1098 : 9259 Quarterly
IP Addresses (IP) 3793061 Mar/17 3843649 1174118 : 3924514 Quarterly
Competitiveness Index (Points) 70.54 Dec/19 70.26 4.58 : 70.54 Yearly
Competitiveness Rank 33 Dec/19 33 26 : 35 Yearly
Copper Production (Thousands of
Tonnes)
452 Feb/20 468 356 : 558 Monthly
Corruption Index (Points) 67 Dec/19 67 60.5 : 79.4 Yearly
Corruption Rank 26 Dec/19 27 14 : 27 Yearly
Ease of Doing Business 59 Dec/19 56 34 : 59 Yearly
Mining Production (%) 9.9 Feb/20 1.3 -21.8 : 36.8 Monthly
Steel Production (Thousand Tonnes) 75 Feb/20 110 0 : 157 Monthly

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Trade Last Reference Previous Range Frequency
Balance of Trade (USD Million) 821 Feb/20 1214 -1385 : 2969 Monthly
Current Account (USD Million) -2363 Dec/19 -3528 -5331 : 3256 Quarterly
Current Account to GDP (%) -3.9 Dec/19 -3.6 -14 : 4.5 Yearly
Exports (USD Million) 5134 Feb/20 6702 644 : 7761 Monthly
Imports (USD Million) 4313 Feb/20 5488 493 : 7866 Monthly
External Debt (USD Million) 205992 Jan/20 197226 2435 : 205992 Monthly
Capital Flows (USD Million) 1258 Dec/19 -3696 -5487 : 13891 Quarterly
Gold Reserves (Tonnes) 0.25 Jun/19 0.25 0.21 : 35.96 Quarterly
Crude Oil Production (BBL/D/1K) 3 Nov/19 3 2.3 : 13 Monthly
Foreign Direct Investment (USD
Million)
86.34 Dec/19 -989 -6260 : 899 Quarterly
Terms Of Trade (points) 96.61 Dec/19 96.03 58.8 : 122 Quarterly
Terrorism Index 4.12 Dec/18 3.45 0.5 : 4.12 Yearly
Tourist Arrivals (Persons) 289671 Dec/19 258839 50093 : 521425 Monthly

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Labour Last Reference Previous Range Frequency
Unemployment Rate (%) 7.8 Feb/20 7.4 5.1 : 13.5 Monthly
Employed Persons (Thousand ) 9063 Feb/20 9118 6479 : 9118 Monthly
Unemployed Persons (Thousand
)
768 Feb/20 732 498 : 856 Monthly
Employment Rate (%) 58.2 Feb/20 58.7 54.1 : 59.1 Monthly
Labor Force Participation
Rate (%)
63.1 Feb/20 63.4 59.6 : 63.4 Monthly
Job Vacancies (points) 9.6 Feb/20 14.4 9.6 : 167 Monthly
Wages (CLP/Hour) 4944 Nov/19 4938 2571 : 4960 Monthly
Minimum Wages (CLP/Month) 301000 Jan/19 276000 115648 : 301000 Yearly
Wages in
Manufacturing (points)
119 Jan/20 117 97.75 : 144 Monthly
Population (Million) 19.11 Dec/19 18.75 7.65 : 19.11 Yearly
Retirement Age Women 60 Dec/18 60 60 : 60 Yearly
Retirement Age Men 65 Dec/18 65 65 : 65 Yearly
Living Wage
Family (CLP/Month)
599700 Dec/18 600000 584400 : 600000 yearly
Living Wage
Individual (CLP/Month)
388600 Dec/18 394100 379500 : 394100 yearly
Wages High
Skilled (CLP/Month)
1154700 Dec/18 1149700 1112800 : 1179700 yearly
Wages Low Skilled (CLP/Month) 388700 Dec/18 397600 363600 : 397600 yearly