Professional Documents
Culture Documents
CORPORATION
Yamaha Corporation
I. Introduction:
This essay will mention and discuss the portfolio strategies of Yamaha since 2000. In detail,
portfolio mix and long-term potential of the company will be analyzed by using portfolio
tools. Moreover, the strategies of the competitors are also analyzed to suggest the suitable
decisions.
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Board of directors
Risk Management
Committe
Representative Director Internal Auditing Division
Managing Council
Corporate Committees
Executive Offices
Individual Business
Administrative Divisions Group Companies
Divisions
In 1990s, Yamaha was one of the largest corporation of musical instrument in the world,
accounting for nearly a half of new musical equipment sales. With a wide range of production
than any other competitors, Yamaha was pursued a corporation strategy of diversification.
Yamaha operate in many businesses and diversify the organization following both “industrial
diversification” and “global diversification” (Mellahi 2005).
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share technology and managerial model, reduce the costs, to be popular through brand name
usage, and benefit from cooperation (Ghoshal et al 1994).
Yamaha has also operated in education, network devices, golf products, etc., Yamaha was into
unrelated new business that value chains are different which no potential exists to transfer
technology or management know-how from one business to another, to transfer competencies
to reduce costs, to achieve benefits, or combine similar activities (Thompson and Strickland
2003: 295).
With the appearance of Yamaha around the world, global diversification was applied.
According to Kim (1989), the main reason for global diversification include the accession of
the new foreign markets to discover the unique assets of that market, quality resources,
accession of lower-cost, expand the economic scale and other efficiencies, and pre-occupy
competitors.
However, there are many risks and pitfalls of diversification. The corporation has to divide
the time and energy for the portfolio. There is argument that parents may destroy some value
by increase overhead cost, slowly decisions, some unsuitable interventions, and cannot add
enough value to compensate (Goold and Campbell 2002: 219). Moreover, unsuccessful
subsidiaries may use the resources from the success (Berger and Ofek 1995). An important
issue of diversification is unsuitable interference of a corporate parent.It can affect badly on
the subsidiary managers.
Key competences:
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According to Tampoe (1994), core competencies are the combination of technologies and
production skills which underlain a company’s production line. From figure 2, there is a seen
that Yamaha’s key competency is fields of sound and music. With the history is more than
125 years, Yamaha has much knowledge and skills in their major. Through identifying core
competencies, Yamaha knows the core products which are an incarnation of one or more core
competencies .This was proved through their revenue as well as a market segment of sound
and music productions (Figure 3).
There is an argument that the successes of the corporation depend on the core competencies
which underlie their end products (Prahalad and Hamel 1990). From identifying the core
competencies, the corporation knows what the main products which need to be innovated and
developed. It helps companies focus on the market, find the effective ways to use the
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resources and exploit the new businesses. Thus, core competencies could give the potential to
access the variety of markets. Moreover, it could make the products become unique which
most of customers required.
It can be seen that core competencies were built through a process of improvement and
enhancement. It will be the competitive advantage. A corporation who missed to contribute
core competences, will be difficult to enter as well as maintain in the market.
According to Campell, Goold and Alexander (1995), parenting mix matrix was used to
evaluate how good the parent’s characteristics fit opportunities and the records of extending
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of misfit these characteristics and critical success factors. There is a tool to figure out the
opportunities to increase as well as the issues of destroying the value of Yamaha.
However, there was a downtrend in the side of music and English-language school (E) in
recent five years although the corporation has some activities to improve (Yamaha annual
report 2011, 2012, 2013, 2014, and 2015). It may fit with Yamaha’s approach by long time
established (1954). However, the adding value is quite low so that Yamaha should examine to
divest this business if the price was suffered over the expected value of future cash flow.
Therefore, music and English-language should be in ballast category.
Turn to the side of audio equipment (A), there is a good business for Yamaha. Although audio
equipment is not major of Yamaha, it was developed quickly. The reason could be that there
is some similar characteristics between this business and musical instrument which depends
on an existing professional background of knowledge about sound and music. For the future,
Yamaha intends to develop this business become one of their major business through
expanding the market into developed and emerging countries. Therefore, it can be seen as
edge heart business.
There is a value trap business for Yamaha in semiconductors (S). It can be fitted with
parenting opportunities through their experience and know-how in sound, expertise in
developing digital musical instruments, signal technologies and soft wave technologies
(Yamaha annual report 2015). However, Yamaha may lack of critical success factors. For
instance, there is a hard sector due to many strong suppliers such as: Intel, Samsung,
Qualcomm etc.
The other businesses of Yamaha which include: golf products, automobile interior wood
components, factory automation and resort facilities (O), can be categorized as alien-territory
business. Although these businesses may not fit with Yamaha’s approach due to different,
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there is a creation of potential value. They contributed in the revenue as well as the brand
name of Yamaha.
E
A
Source: Adapted from M. Goold, A. Campbell and M. Alexander, Corporate Level Strategy,
Wiley, 1994.
Nine box matrix was developed to set up the capital and resources for the business units.
There are two dimensions: the attractiveness of the industry and the units’ ability in the
industry. It helps company know what businesses should be developed, maintained and
divested.
Musical instrument:
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Yamaha has well-position in the global musical instrument industry. With the experiences as
well as knowledge in this sector, Yamaha possesses high competitive strength. The music
instrument industry seems to be high attractiveness. The global market for musical
instruments industry was forecasted to grow up. Although there are threats from China
producers and Kawai which is a strong brand name in musical instrument, Yamaha still gains
the market share and maintains the dominant position.
Audio equipment:
There is medium competitive strength in audio equipment. Although Yamaha expertise in the
musical field, electronic is not their strength. The audio equipment market is potential.
However, the attractiveness of audio equipment is medium. In particular, there are some
strong competitors in this field such as Sony, Hitachi, etc.
Education:
Yamaha maintains the high competitive strength in this field. With the experience and the
future plans that concentrate on expanding music schools and conducting local music lessons
in China and other emerging countries, the position of Yamaha is really stable. China and
other emerging countries are really attractive. However, there is a medium attractiveness
market that so many competitors are developing and expanding such as Kawai etc.
Semiconductors:
There is a low competitive strength for Yamaha. The achievement from semiconductors
required large investments as well as huge knowledge. However, in the rapid development of
semiconductors, Yamaha is young compared to others. Furthermore, with large investment in
technology, Yamaha could lose the positions in the other fields. The attractiveness for
semiconductors is medium. Although the market is expected to grow radically in the future,
there are so many strong companies in this field such as: Intel, Samsung, NVidia etc.
Others:
The competitive position of this area is medium. Although these businesses are not Yamaha’s
major, Yamaha has experience. The attractiveness is low because there are so many strong
brand names while there are niche markets.
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S
E
A
MACS framework was used to connect parent fit and nine box matrix to support the
decisions which business units should be bought, sold, spun off or taken private (Gluck et al
2000). While the horizontal axis reflected nine box matrix, vertical axis reflected data from
the parenting fit matrix.
- Top priority investments for musical instruments. It includes many core competencies which
deliver high competitive advantages. Moreover, the market develops with stable trend. It
could bring huge benefits as well as revenue for Yamaha.
- Audio equipment is one of the key businesses for Yamaha. Furthermore, it contributes
largely in revenue as well as the brand name of Yamaha. However, it required huge
investments for developing. It should be considered as a priority for stable finance.
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- With the potential for education, Yamaha should keep this business as stable financial as well
as contributing brand name.
- Semiconductors need to be considered to divest. It takes many resources from the parent.
Although it will need for internal operations, the cost could be over the benefits which it
could bring back. Yamaha could consider becoming partners of the strong semiconductor
companies if this business was liquidated.
- Other business could bring small value for Yamaha. It could be considered to maintain and
invest depends on the part of the contribution. Alternatively, it could be liquidated if the
benefits could not cover the cost.
Relative Ability to Extract Value
O
M
Natural Owner
S E A
Japan was used to the potential market for piano when piano sales, in 1979, was 300,000
units. However, it decreased and fallen to about 17,000 units. Therefore, finding a new
potential market to survive is an important mission.
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Kawai realized the potential of the Southeast Asia market, which middle class as well as
wealthy people are increasing and the demand for piano is growing. The investment was
made for seeking new market and more resources. At the end of August 2013, Kawai opened
the first company music school in Indonesia.
Forecasting the change of industry as well as strategic moves from competitor, Yamaha
expanded their influences on the piano market of Southeast Asia. So many branches of
Yamaha were opened in Southeast Asia countries such as Thailand, Vietnam, and Malaysia
etc.
VI. REFERENCES:
Berger, Philip G., and Eli Ofek. "Diversification's effect on firm value." Journal of financial
economics 37.1 (1995): 39-65.
Chan Kim, W., Peter Hwang, and William P. Burgers. "Global diversification strategy and
corporate profit performance." Strategic management journal 10.1 (1989): 45-57.
Campbell, Andrew, Michael Goold, and Marcus Alexander. "Corporate strategy: The quest
for parenting advantage." Harvard business review 73.2 (1995).
Davis, Peter S., et al. "Business unit relatedness and performance: A look at the pulp and
paper industry." Strategic Management Journal 13.5 (1992): 349-361.
Goold, Michael, and Andrew Campbell. "Parenting in complex structures." Long Range
Planning 35.3 (2002): 219-243.
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Gluck, F.W., Kaufman, S.P., Walleck, A.S., McLeod, K. & Stuckey, J. (2000) Thinking
Strategically ,McKinsey&Company.
Hamel, Gary, and Coimbatore K. Prahalad. "The core competence of the corporation."
Harvard business review 68.3 (1990): 79-91.
Mellahi, K.A.M.E.L., Frynas, J.G.E.O.R.G.E. and Finlay, P.A.U.L. (2005) Gobal Strategic
Management. Oxford University Press Inc, New York.
Thompson, A. A Jr., and Strickland, J. A. (2003). Strategic Management: Concepts and Caes,
13thedn. (New York: McGraw-Hill).
Tampoe, Mahen. "Exploiting the core competences of your organization." Long range
planning 27.4 (1994): 66-77.
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