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8. Hitachi Construction Machinery: Becoming a Wholly Owned Chinese Entity

8.1 Introduction

In 1995, Hitachi Construction Machinery Co., Ltd. (HCM) established a Chinese subsidiary, Hitachi Construction Machinery (China) Co., Ltd. (HCMC). Since then, the company has established close relations with the city of Hefei in the Anhui Province and has steadily built a strong business reputation of being a quality committed local firm. HCM's operations in China began as a joint venture (JV) with a local, state-owned firm, Hefei Mining Equipment (Hefei Mining). Later dissolving this JV, HCM now operates as a wholly owned subsidiary. HCM's China business is often cited as a successful example of a global business, although the road to acquiring that success was not often smooth and included negotiations with the JV partner and the creation of an internal management system.

In 1970, HCM spun off from Hitachi Ltd. to become an independent construction machinery manufacturer. It currently holds the world's third largest market share in construction machinery manufacturing following Caterpillar and Komatsu (Table 8.1).

Apart from HCM's widely popular hydraulic excavator, the company is also globally known for its other construction machinery, such as wheel loaders, mini excavators, dump trucks, cranes, and forklifts. The company does not rely too heavily on demand from any one specific region, and its sales headquarters in Japan manage operations in six regions throughout the world, in addition to Japan: North America, EMEA (Europe, Russia, and the Middle East), China, Asia-Pacific, India, and Africa (as of October 2012).

Responsible for this global expansion is the powerful “Made by Hitachi” brand that delivers the same quality no matter its country of origin. Along with the increase in headcount as a result of the group's overall expansion, HCM has built an education system for global employees and has aggressively attracted employees from overseas companies to its research institute in Kasumigaura, Japan, built in 2007. The Kasumigaura Institute offers programs for language instruction, development

Table 8.1 Global construction machinery manufacturers' revenue (fiscal year 2011)

Source: Corporate annual reports

Table 8.2 Hitachi Construction Machinery's revenue by region

Units: M yen

2004

2005

2006

2007

2008

2009

2010

Japan

150,029

203,425

238,549

248,733

213,703

171,700

172,700

US

91,490

119,222

125,129

88,518

79,178

37,200

62,400

EMEA

92,304

132,647

195,209

291,942

180,843

97,000

131,600

APAC

75,423

103,608

126,280

184,021

151,148

141,200

202,400

China

38,797

67,555

71,286

127,323

119,295

158,700

204,800

Total

448,043

626,457

756,453

940,537

744,167

605,800

773,900

Source: Hitachi Construction Machinery Co., Ltd

of overseas application skills, and strengthening in areas of specialization. In addition, the increasing demand in emerging markets has accelerated the transfer of production technology to overseas manufacturing locations to reduce costs. In 2005, HCM created the “Global Production Improvement Headquarters,” sending welders and other skilled technicians to visit foreign plants and partner companies to improve quality. Seen from a company-wide perspective, in 2011 HCM's global operations remained high, with overseas sales constituting 75 % of its total. However, the Chinese share of overseas revenue is the largest; therefore, making it a strategically important market for HCM (Table 8.2).

 
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