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Yamctha has not only steppecl on the raiL of a tiger, it has ground
it into
the earth. Yamaha wo tsubusu! [Crush. break, srnash, squash,
bucher,
s
latLg ht e r, de
-Battle,7
rolt
Yatnaha
What had Yamaha done that caused such a violent reacrion from Honda's president
Kawashinla? The explanation begins in the early 1950s when there
were 50 competitors
tighting for position in the Japanese motorcycle marker. Demand was growing
,t"udily ot
over 40Vc per year. Honda was the number two competitor with a
market share of 207r. Its
was Tohatsu, the number one mororcycre manufacturer with
a 22 percent mar(,,.,Irh.rnrry
ket share. By most rneasures, Tohatsu', like the Shoguns whose military
lrt
I
Richard wirrger' "Fast Means Tough in the 90s." Tlrc E.rec'ur ive Speake
lKuirhu-Yoron (Conrpany
Handbook) (Tokyo: Diamond, March I 956),
306
r,ol.
I I , no. ,3
2 I 2- I 3.
(March I 990): L
307
However, in the space of five short years, Honda emerged as the undisputed leader of
the Japanese motorcycle industry. Tohatsu took a more conservative approach to the competitive battles in Japan and grew at a slow and controlled rate. From 1955 to 1960, it did
not significantly increase production capacity. Honda, on the other hand, fought aggressively and grew at 66Vo per year in a market growing al42Vo pef yeal. In dorng so, Honda
established a "winner's competitive cycle." High growth 1ed to greater sales revenues and
decreased costs through economies of scale. With increased revenues and decreased costs
came increased profitability and financial strength. More cash was available inlernally and
from external sources to fund growth. This cash was reinvested in the business in ways that
yielded further increases in market share and a replay of the "winner's competitive cycle."
To wage this aggressive battle Honda borrowed heavily. Although these borowings
canied high interest rate penalties, they were critical to Honda's expansion and growth. As
complacent competitors such as Tohatsu lost ground, Honda's protits increased and it
became even more aggressive. Tohatsu's market share dropped to less than 47o while
Honda's soared to 44Vo.In 1960, Honda reponed an after-tax profit of 10.37c of sales while
Tohatsu registered losses of almost 87o of sales. Honda's balance sheet had strengthened
and the company had a debt-to-equity ratio of I to l. Tohatsu's balance sheet deteriorated
with a debt-to-equity ratio of 7 to I as it borrowed to offset losses. With market growlh
slowing to 9% per year, this new competitive positioning appeared to be permanent.
The financial community in Japan. somewhat belatedly, reassessed its opinion of the
two companies:
Honda: It has the largest production capacity for motorcycies in the world, and is still
aggressively expanding production at its Suzuki plant. Rapid growth is expected in
both domestic and overseas markets.
Tohatsu: Business has been deteriorating because of intense cotnpetition. The company is currently being restructured with the support of Fuji Electric.3
Final1y. in Februar-v 1964, Honda's enemy was destroyed. Tohatsu filed fbr bankruptcy. Its saies had decreased sharply, its funds were exhausted, and its bilis were unpaid.
Tohatsu had fallen from number one position to bankruptcy in less than 10 years. And it was
not the only casualty; other motorcycle manufacturers aiso went bankrupt or exited the
industry. The original 50 manutacturers had shrunk to 30 by 1960, 8 by 1965, and by 1965
to four-Honda, Yamaha, Suzuki, and Kawasaki.
Honda's battle for market share is a ciassic example of aggressive kaisha or Japanese
corporate racrics. Like Shogun generals.of the past, kaisha executives battle ferociously for
territory and the right to proclaim themselves iclziban or number one in the country. The
winners seemed to be those kaisha that, like Honda, get the winner's cycle going lor thernseives by boosting their share of the market faster than their Livals. To lose in this battle
often meant corporate deatir, and this was the fate Tohatsu suffbred. Hence, in this coirmercial equivalent of jungle warfare. kaishc executives sharpen their strategic thinking and
competitive skiils.
Over the next ten years, as a sharply growing number of Japanese became more interested in purchasing luxury goods over durable goods, growth in the Japanese motorcycle
industry sio$'ed: Honoring the rule of the kaisha to never rest on your laureis, Honda diversified into auromobiles. To reduce the risk of failure, the company deployed its strongest
fbrces in the automobile venture. This meant that all available cash and tecirnical capabilities, along rvith the best troops, had to be directed toward the automobile business. Honda's
high tevel of investment in the auto industr,v had to be supported by the resources and cash
3
308
chapter 14
1970s.
l?Hjr:t_il::::,
inro
Japanese
at
-yamaha's
president Koike,
1979.
-Yamaha's
During this period, yamaha's
presidenr Koike.
19g1.4
pp. 7.
(A)
309
Despite yamaha's massing of
troops on the motorcycle front,.Honda
did noi seem ro
be significantry redeproying itJtroopr;;;;.r
ro p.o,"., ii,i"r;^t*". flank. yamaha
rnterpreted this as an unexpecred
chance to strike ani gain .";;;;;.;round
on Honda. As
a resurt' in Iggr, totaily disregarding
,r", p*rru"r."..ono*r,,,yamaha
the aiuut
or".
embarked on a breakneck productionipree
In August 19g 1, yamaha announced
plans to construct a new motorcycre
facrory with
an annual capaciry of one million
units. This fu.to.y wourd increase
irs
totar
capacity
to
million
four
unirs' exceed'ig_T"10,"'r
l"p.".i,v Lv]00,000 units. If the n"* tu",o.y,, torar pro_
duction were sold in Japan, yamaha's
aor.rii. market rr,ur. *ouia approach 607o.The
opening of the new factory wourd
shift the balance of power and make yamaha
the worrd,s
largest motorcycle manufacturer,
trr" pr.rtigio* position that
Honda had won from Tohatsu
and held for alrlost 20 years.
The difference berween us and
Honda is in our abirity to supply.
As primariry
you cannot expect us to remain
in our present number rwo
;ffiH?J.Sproducer'
-yamaha's
il;:J:i:-e
w'i
president Koike
announcing new facrory plans.
Augusr rggl.
president
-yamaha's
with
will
be number one
i","*1'i$1i.1:,Tx:Tffi
A;
;;;;;;;;;;;;;;";;#"to,'.,ur"
up rhe dir_
t-erence' its debt burden increasc
iteadiiy. Arthough ir was as proi-itable
as Honda, yamaha
;:i#:,f,'l:T:,:::lif,:fi
had a debt
io-;;l;;
"""0i-1'f.T*."#rT-:1:Tr;r,Ti;i:F,::lTiil:Tff
I am president of this to*puny r" *iii
,uo.nd",
Jong as
ff :ff
t"ff :n:lil
our number one spor lin motor;he late r960s until recentty we
have con-
in."nr"O.
Iffi:i:,i''
destroy
-Bartre
::il::,,:il::r'i,::"iilJ::::,i:T;
":::"Tjdi{T:::?J:ii:iTiqi:i;,fi
iiom 35 percent
.t
.
in rhe g0s.:'
|.
310
chapter 14
New
Models
1981
Discoitinued
Models
l QAt
982-83
Yamaha
i8
34
Honda
17
Q1
a.2
JI
iii'i;'
f SAO),
ia.
"
"
,H;1;,.
ciecrined
_eai
srrengrh.
19g3.
sheer
980
'1
001
Yamaha
2.24 (35)
2.79 (s6)
Honda
3.09 (4s)
1982
2.66 (s3)
0.82 (29)
3.59 (39)
3.64 (46)
2.61 (4s)
1oat
311
market.
,,vhich historically, had taken in about 20vo of
Japan's output. In april 19g3, Harley_
Davidson persuaded the US International Trade Commission (ITC) to give
lt import
protection.
Frankly, we were scared that nationwide fire sales would spell the death kneil
for
HarJey.
-Harley-Davidson
ro be Y
i9 billion.
BIBLIOGRAPHY
ABEGCLEN' Jaues C. and
GsoRcr staLr,
"Altitude sickness on wall street." The Financial ritnes, ocrober 13, 19g3, 20.
'A Burned outYamaha Pulis in for an overhaul." Bu.yiness week, JuIy 11. 19g3,41.
CuaxRevp,ery sunnnra
Fi-aNeceN.
Gnerur'
wrr-lrev
Allsoru' "Budding
of Competitive
Advanta-ge." Hcttt,tttrl
Bu.s,ines.r
Wtll
Streer
Engines and Powerrrain Assentblies ThereoJ, Reportto the president on Investigation N. TA-201-4'7, USITC Publication l342,February .t9g3. pp. 1.