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A Strong Dealer Network and Product Line – That’s What Market Expansion Takes

Kubota distributes its construction machinery in three key markets: Japan, Europe, and North America. The demand for construction machinery is surging across the globe, but Kubota has set its sights on one national market in particular – the U.S. – because of its huge potential as a construction machinery consuming country, backed by the fact that it is the world’s largest and most powerful economy. The U.S. has a nominal GDP of approximately 21 trillion and 440 billion dollars and its 2019 projected real GDP growth is 2.4% year-on-year^*1. Behind this brisk economic growth are robust employment and private consumption, which are stimulating investment in construction. In particular, investment in private housing, which accounts for roughly 40% of construction investment, has shown a strong comeback following the sharp plunge in the aftermath of the “Lehman shock” of 2008. A close look at the compact construction machinery market (including for compact excavator, CTL, SSL, and compact WL) in which Kubota is involved shows that unit sales in North America grew from 102,000 in 2007 to 135,000 in 2017, and the figure looks set to reach 157,000 by 2022^*2, while the numbers remained almost flat in Japan and Europe.
So, how should Kubota go about increasing its presence in this market climate? We invited Paul Manger from Kubota Tractor Corporation (KTC), the organization responsible for marketing Kubota’s construction machinery in the U.S., to comment on the current situation.
“The construction machinery business is vulnerable to general economic trends, such as new housing starts and capital expenditures by private enterprises, as well as road construction and other public works. In recent years, Kubota’s construction machinery business has continued to grow in tandem with the strong performance of the U.S. economy, and further growth is expected over the longer term,” said Manger. “Construction is a key industry in that it underpins social growth by creating comfortable urban spaces. As a member of this vital industry, we are required to meet social requirements through the supply of reliable products, and this necessitates us to keep tackling social issues, in the present and the future, hand in hand with our dealers and customers.”

Kubota gained a foothold on American soil when it started distributing its tractors and other agricultural machinery by establishing a sales company, Kubota Tractor Corporation, in California in 1972 (later relocated to Texas). Its sales network has since grown to include some 1,100 dealers coast to coast. The brilliant success of compact excavator – Kubota’s very first offering to the U.S. construction machinery market – was attributable not only to its popular features of durability, operability, and operator comfort but also to taking full advantage of this extensive dealer network that had been built for marketing agricultural machinery. It was a typical case of one-stop customer service – dealers of Kubota agricultural machinery also dealt in compact excavator.
In the U.S. construction machinery market, compact excavator served as Kubota’s “business card.” Buoyed by an outstanding start, Kubota launched CTL – the mainstay in the U.S. compact construction machinery market – in 2010, followed by SSL in 2015. Unlike compact excavator, for which Kubota created a new market, CTL and SSL had long been available in the U.S., and their markets were crowded with forerunners. Competing in such an environment was no easy task, so how did Kubota overcome the seemingly insurmountable barriers to entry? This challenging task was assigned to Tetsu Kojima, now General Manager, Sales and Marketing Department, Construction Machinery Division.
“It makes a big difference if you can offer a broad range of products to the market, such as compact excavator, CTL, and SSL. Consider this: Even Kubota dealers who sell our agricultural machinery and compact excavator would be forced to deal in other branded products if there was a hole in our product line, and hence would not be able to focus on Kubota’s products. So, we had no choice but to distribute a variety of products if we wished to enhance the appeal of our construction machinery to the dealers,” explained Kojima. “A good partnership with our dealers assumes top priority in our marketing strategy, because they are the ones who meet our users in person and passionately talk about how good Kubota’s products are. In this sense, it is absolutely crucial for us to draw their salespeople’s attention to our products and make them genuine Kubota fans. To this end, we introduced all sorts of programs, which included boosting of overall sales by offering bundles of compact excavator, CTL, and SSL, implementation of the most flexible forms of sales promotion, and improvement of dealer training and quality assurance services.”
Another channel for marketing construction machinery in the U.S. that is also important is the rental market. Typically run by dealers or independent rental companies, the rental business provides Kubota with an opportunity to demonstrate its products to potential users and a tool for effective sales promotion. Also, independent rental companies make bulk purchases regularly, thereby significantly impacting the expansion of Kubota’s sales.
“Because rental companies need to stock a wide variety of machinery, Kubota can gain greater recognition from them if we have a large selection in our catalogue. We had success example to open the door of new rental company with Kubota utility vehicle which is popular in U.S., then we could expanded the sales of construction machinery. Teamwork with dealers is also instrumental in after-sale service. Using this collective strength of Kubota to make a breakthrough, we made slow but steady headway into the rental market of compact construction machinery,” concluded Kojima.