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1 CASE SUMMARY

In early 1950s, there were 50 competitors fighting for position in the


Japanese motorcycle market. Tohatsu was the number one motorcycle
manufacturer with 22% market share, followed by Hondas with a market
share of 20%. Within five years, Hondas successful to emerge as the
undisputed leaders of the Japanese motorcycle industry using aggressive
strategies by establishing a winner's competitive cycle. Honda successfully
increased its profitability and financial strength by borrowed heavily.
However, Tohatsu took a more conservative approach to the competitive
battles in Japan and grew at a slow and controlled rate. Finally, in February
1964, Tohatsu has been destroyed and it was filed for bankruptcy due to
decreasing in sales, exhausted funds and unpaid bills.
The next ten years, growth in the Japanese motorcycle industry
slowed due to the fact that they become more interested in purchasing
luxury goods over durable goods. To handle this situation, Honda starts to
diversify their investment into automobiles by transferring the available
cash and technical capabilities

from the motorcycles

business to

automobiles business. On that time, Yamaha saw an opportunity to take


territory in the motorcycles market by launching a sneak attack which
means they quietly increasing its motorcycle production capacity in Japan.
In 1981, Hondas production share declined whereas Yamaha managed to
increase its share. The territory that Honda lost went directly into
Yamahas hand. The second phase of Yamaha's strategy involved a more
direct frontal attack.
Despite being attacked by Yamaha, Honda did not seem to be
significantly redeploying it troops and continues to exhibit a preoccupation
with autos as it began investing in large scale automobiles production in
the United States. In August 1981, Yamaha announced plans to construct a
new motorcycles factory with annual capacity of one million units which

exceeding Honda normal capacity. They invested higher than its internal
cash generation could support and leads the company financial debts
increased steadily. In response to this war, Honda used simple and
innovative counterattack strategy like implemented massive price cuts
and increases in promotional funds and inventories. The rivalry between
both of these companies alarmed U.S manufacturer Harley-Davidson when
there was a massive inventories of Japanese motorcycle worldwide and
they worried this would be dumped in the US market. Harley persuaded
the U.S International Trade Commission (IT) to give their import protection.
In January 1984, Yamahas no longer hold the fort because Yamaha has to
bear losses that were estimated to be 19 million. Yamahas parent
company, Nippon Gakki called for emergency board meeting to figure out
new strategy.