The Komatsu/Caterpillar saga illustrates the fact that global competitive battles can be shaped by factors other than the pursuit of generic strategies. Explain this statement giving examples and impact on competitive strategies

What will be an ideal response?

Caterpillar has faced a very challenging set of environmental pressures over the last several decades. Many of Caterpillar's plants were closed by a lengthy strike in the early 1980s; a worldwide recession at the same time caused a downturn in the construction industry. This hurt companies that were Caterpillar customers. In addition, the strong dollar gave a cost advantage to foreign rivals. Compounding Caterpillar's problems was a new competitive threat from Japan. Komatsu was the world's number 2 construction equipment company and had been competing with Caterpillar in the Japanese market for years. Komatsu's products were generally acknowledged to offer a lower level of quality. The rivalry took on a new dimension after Komatsu adopted the slogan "Maru-c," meaning "encircle Caterpillar." Emphasizing quality and taking advantage of low labor costs and the strong dollar, Komatsu surpassed Caterpillar as number 1 in earthmoving equipment in Japan and made serious inroads in the United States and other markets. However, the company continued to develop new sources of competitive advantage even after it achieved world-class quality. For example, new-product development cycles were shortened and manufacturing was rationalized. Caterpillar struggled to sustain its competitive advantage because many customers found that Komatsu's combination of quality, durability, and lower price created compelling value. Yet even as the recession and a strong yen put new pressure on Komatsu, the company sought new opportunities by diversifying into machine tools and robots.
This is an example as to how many firms have gained competitive advantage by disadvantaging rivals through "competitive innovation." Hamel and Prahalad define competitive innovation as "the art of containing competitive risks within manageable proportions" and identify four successful approaches used by Japanese competitors. These are building layers of advantage, searching for loose bricks, changing the rules of engagement, and collaborating.