HONDA-YAMAHA WAR

CASE SUMARY
In early 1950, there were 50 competitor fighting position in the Japanese
motorcycle market. Tohatsu was the first market share In Japanese motorcycle
compared to the Honda was number two market share different 20% to 22%. Other
different between these two manufacture between Honda and Tohatsu were debt in
equity with ratio 6 to 1 for Honda and 1.5 to 1 for Tohatsu. In 5 years short, Honda
undisputed leader of Japanese motorcycle because Tohatsu was grow at slow rate
and controlled rate. Then, Honda increase their share market at 66% per year and
was establish winner competitive strategy. It is because of rise in revenue and
lower the cost. In 1960, Honda was reported 10.3% after tax of sales and Tohatsu
loses 8% of sales where balanced sheet for Honda in debt of equity with ratio 1 to 1
and Tohatsu 7 to 1. It shows that Honda financial flow more efficiency than Tohatsu.
In 1964, Honda enemy was destroyed because of Tohatsu filled to bankrupt. It is
form the sales was decline, fund exhausted and bill unpaid. Therefore, from 50
manufacture motorcycle to 30 by 1960, 8 by 1995 and shrunk to 4 in 1965(Honda,
Yamaha, Suzuki and Kawasaki). Moreover, over the ten years, Japanese interested in
purchasing luxury good over durable good. Honda diversified into automobile cars. It
is to reduce of failure risk, company deployed its strongest forces in the automobile
venture and become the best troops. End of 1960, Honda share of the Japanese
motorcycle reach 65% and Ministry of the International Trade (MINIT) persuade
Honda to get out of the automobile business and merge with much larger car such as
Toyota and Nissan ignored this administrative guidance and by 1975, was obtained
more revenue from auto than motorcycles.
In 1981, Honda focusing on the automobile front and then Yamaha saw an
opportunity to attack and take territory in the motorcycle troops. Yamaha borrowed a
chapter from the ancient Ninja Warrior and lunch a sneak attack. Yamaha took
advantage when the enemy focuses on the automobile away at Honda market
shared. Therefore, Honda production was drop 65% to 40% by 1981. On that Yamaha
rise share by 25% in 1981. Then, Yamaha and Honda had nearly equal shared
motorcycle landscape which Honda Company was drop and Yamaha rise 38%. From
the R&D, Honda approximate 2% to 5% of sales than Honda more than 1% of sales.in

second phase, Yamaha do frontal attack which is Yamaha provide 18 model by 1981
rather than Honda only 17 model. So, Honda investing large scale automobile
production to U.S. besides that, Yamaha announced plan to construct a new
motorcycle factory with annual capacity one million unit exceeding Honda 200,000
unit and makes Yamaha the world largest motorcycle manufacture.
In 1982, Yamaha enjoyed rise in sales by 20% and ratio debt of equity was 3 to 1
rather than Honda 1 to 1. Over eighteen month Yamaha war raged and Honda share
increase 40% to 47% and Yamaha was drop 35% to 27%. This is because of massive
price cut and increase promotion fund and field inventories. Summer in 1982, there
were possible to buy 50cc motorcycle which 10 speed bicycle. Yamaha motor
plummeted which having over 50% heavy lose. Early 1983, Yamaha unsold stock
which half estimated of industry total unsold stock and then Yamaha cut in price.
April 1983, Harvey Davidson persuaded the US international trade commission and
give initial import by give tariff from 4.4% to 47.4%. In 1984, Yamaha parent with
Nippon Gakki which stake 39.1% for called emergency board meeting.

PROBLEM STATEMENT
1. AGGRESSIVE COMPETITIONS
To become the top producer of motorcycle market between Honda and Yamaha
worldwide. Yamaha try to attack Honda using battle plan Ninja like sneak attack
of quietly by increasing their capacity and dealing to produce more faster.
2. FINANCIAL BURDEN
Yamaha and its affiliated companies had a debt-to-equity ratio of almost 3 to 1. This
is because of ineffective strategic where they produce too much quantity of product
which is 4 million a year. Yamaha try to invest more than their cash.
3. LAUNCH SNEAK ATTACK
While Honda focusing on automobile, Yamaha took advantages of the fact that
Honda attention was focused on its automobile business by quietly increasing
motorcycle production capacity.
4. AGGRESSIVE PRODUCTION
Yamaha produces too much quantity of product in order to compete with Honda
which lead to increase production costs.

5. EXCESS PRODUCT IN MARKET

As Yamaha producing too much product in high quality motorcycle causing they lack
of customer. Customer demand has decreased due to higher prices. In addition,
customer often want the latest releases.

ALTERNATIVE STRATERGY
1. THE COMPANY NEED TO SET THEY OWN TARGET.
As in this case study, Yamaha and Honda is the big company that compete with each
other. So, they need to set the strategy target for the produced the product. Other
than that, if this company want to set a target they able to stop and see if company
on track at any point. If they cannot doing it, the company can analyse where the
problem is. They should be able to identify areas that are flourishing and present
greater opportunity more quickly. In here, Honda has own strategy target. In the
study case the Honda had strategy to included massive price cuts and increase in
promotional funds and field inventories. This is because if this company make this
strategy, they had a lot opportunity to compete with the Toyota. For example in the
case study, Honda was able to provide products to its dealers at costs that enabled
the dealers to earn profit that were 10% higher than the profit they could earn by
selling Yamaha motorcycles. The others example in this case study is the innovative
element of Hondas counterattack was the use of product variety as a competitive
weapon. So it will devote considerable resources toward new modal design and
production.

2. RESEARCH AND DEVELOPMENT.

They target also for the immediate future. It can help the company plan for
subsequent years too. They can measure actual performance against the objectives
that they set and start spotting seasonal trends. This end of year analysis allows the
company to lay out next targets in a more informed way, with a set of data to work
from and also can be improve. In here we can look the reared in research and
development, Honda strength lie in product and process innovation, primarily in

design new vehicle models and features an in designing new vehicle models and
features and in conceiving fresh techniques for building them faster and better. For
example in the case study,

Hondas simple and innovative counterattack was

funded by company auto division which brought in two-third of companys sales

even though the Honda company can exceed to Yen 2 trillion and they continue to
prosper during motor cycle war. As we know that Yamaha decreased for 35% to 27%
and Honda gained ground and increased its domestic market share from 38% to 43%
while Yamaha collapsed form 37% to 23%. The advantages research and
development in this case are the can firm become first develops a product process,
and can protect it legally by obtaining patents on the new product or process,
copyrights on the original writing or other media developments, and trademarks.
R&D also a activity that can produces new products or better processes for the
company, but R&D are expensive and risky to the company, its difficult to know
beforehand what will work or what will sell. Even if a product is successful, then its
essential features will eventually diffuse throughout the industry, or other firms will
copy the product or the process to become more competitive such as honda and
yamaha also the rest automobile company.
3. MAKE AGREEMENT WITH OTHER COMPETITOR
Based this solution, it will help to contribute with other competitor with a same
product line to doing some agreement with them and to make sure all the
manufacturing company will tend to be bankrupt. So, they also can corporate with
each other in term of size of production which is give some quota of production. For
example, Honda manufacturing produces by 10%, Yamaha by 10%, Suzuki by 10%,
and other by 70%. So, it will give opportunity to them to compete and rising their
profit in within a year. Other than that, they can make agreement in term of input
production. Where each of them will provide a major input for example engines
prepare by Honda manufacturing, accessories prepares by Yamaha manufacturing,
tires prepare by Suzuki and the other part of motorcycle will prepare by other.
Moreover, manufacturing of motorcycle should do agreement on market size. Each of
manufacturing in japan have their own place to do business. It can be divided by
different group of product line in different border. Therefore, it give opportunity to

other manufacturing to build their own brand to become more competitive in market
places and market shared.

4. Diversification.
Every manufacturing and any company will have to face risk and uncertainty
problem. So, it will depend on the management manufacturing to settle this thing
before it is happen such as happen to the Yamaha that was mistaken by thinking
their challenge when unnoticed by Honda. Hearing Koike's statement, Honda's
president, Kawashima was annoyed. Honda rapidly redeployed its forces. Over the
next 18 months, as the Honda-Yamaha War raged on, Honda's production share
increased to 47% while Yamaha's declined to 27%. The effects on Honda's attack of
new model proliferation and price cutting were overwhelming for Yamaha. By 1984,
Yamaha's losses were estimated to be 19 billion. Therefore, it need to some
alternative

to

solve

it

such

as

doing

diversification

yahama

investment.

Diversification is risk management technique that mixes a wide variety of

investments within a portfolio. The rationale behind this technique contends that a
portfolio of different kinds of investments will, on average, yield higher returns and
pose a lower risk than any individual investment found within the portfolio. For
example, Honda manufacturing which is not only focusing on one product but also
think diversify with other good such as luxury good and automobile. It will help
Honda company in term of preparation uncertainty problem which is Honda company
got an attack from Yamaha company. More than that, Yamaha Company also can
doing foreign direct investment for example from U.S just what Honda Company do
on their company such as Honda continue to exhibit a preoccupation with autos as it
began investing in large-scale automobile production in the United States. By 1979,
Honda had more than $ 1 billion invested in automobile and motorcycle production
facilities in Marysville, OH and like what president of Yamaha president said
different between us and Honda is in our ability to supply. As primarily a motorcycle

producer, you cannot expect us to remain in the present number two position
forever.

5. Effective Business strategy

In fact, that Honda was the leader early by 1955 on Japanese motorcycle
manufacturing rather than Tohatsu that being number one on early 1950 of
producing in motorcycle because of effective business strategy. Yamaha also had
been used excellent strategy to become number one motorcycle manufacturing.
There are certain business strategy that have been implemented to achieve their
own objective such as Honda high growth contributed to overexpansion deteriorated
its financial condition because of excess borrowing. It is bring Tohatsu industry was
grew at a slow and controlled rate. Therefore, it will lead Honda industry winner
competitive cycles which is high growth led to higher revenue decrease cost
through economics of scale. It will bring Honda industry more profitability and
financial strength. Moreover, always find the opportunity is the other effective
business strategy such as Yamaha industry saw that Honda industry focusing on
automobile font and Yamaha industry attack and take territory in motorcycle market
which is Yamaha borrowed a chapter from the ancient ninja warrior and decide to
lunch a sneak attack. Other than that, Yamaha industry business strategy by pushing
territory and capture market shares by doing two phases. The first phase is ninja like
sneak attack of quietly increasing capacity and able supply dealer with more quickly
than Honda. Second phase is involved more direct, frontal attack.

EVALUATIONS

The best strategy and Justification

There are several way in how to the solve problem Yamaha- Honda war such as Make
agreement to other competitor, diversification, business strategy, Research and
Development (RND) and Innovation. It makes sense that all the strategy have been
using by the other competitor in business planning. Only different strategy and
planning make a big different in term gain more profit.
Therefore, the best strategy to solve is diversification. As we mention from early
part, diversification can reducing risk on investment to financial asset and real asset.
This strategy had been using by Honda industry. For example, over the ten year
before, growing number of Japanese become interested in purchasing luxury good
over durable good. It bring motorcycle industry become slowly. Honda industry sense
this risk to motorcycle industry and turn into automobiles to reduce risk and failure.
For example, Nissan auto and Toyota auto.
Moreover, Honda industry diversification their motorcycle to international place
which make them more profitable and growth. Honda industry despite effort by the
Minister of International Trade (MITI). It bring Honda industry make more revenue
and lower their cost because make corporation.
Other than that, Honda industry diversified year 1950 until end of 1960 to the
market share until Honda industry producing reach 65%. It help them to become
more powerful motorcycle rather than other manufacturing industry. So, it also help
them to do increase volume of production and growth their industry.

IMPLEMENTED