The Honda-Yamaha War (A)
Summary
In the early 1950s, there were 50 competitors competing for position in the Japanese motorcycle market as demand growing steadily. Tohatsu was the number 1 leading company followed by Honda after there. However, in the space of five short years Tohatsu pursue a conservative approach whereas Honda fought aggressively. High growth of Honda leads to greater sales revenue and deducting cost through economies of scale.
As Tohatsu lost ground, Honda’s profit increased and in February 1964, Tohatsu announced bankruptcy with many others motorcycle manufacturers. In 1974, Japanese are highly keen in purchasing luxury goods over durable goods and thus, slow motorcycle industry growth. To react, Honda diversified into automobiles and deployed its strongest forces in the automobile venture.
While Honda prone towards establishing automobile front, Yamaha spot an opportunity. The first phase adopted by Yamaha was a sneak attack tactics of quietly increasing capacity and being able to supply more and faster to dealers. The second phase of Yamaha was a more direct attack, frontal attack. In its strike, Yamaha varied its product line as on par with Honda by year 1981.
In August 1981, Yamaha plans to increase its total capacity and this would deviate the balance of power towards Yamaha as the world’s largest motorcycle manufacturer. Although Yamaha highs vision, its company debt burden increased steadily with its affiliated company to experience debt-to-equity of almost three-fold the Honda’s group ratio.
Later on, Honda redeployed its forces and in eighteen months, Honda’s production share increased whereas Yamaha’s decreased. Honda’s simple and innovative counterattack which was product variety as a competitive weapon was funded by two-thirds of the company’s sales. The strategy comprises of massive price cuts and increased in promotional funds and field inventories. Thus, providing an extra of 10% profit higher to...