In 1970s, when Honda began focusing on the automobile market, Yamaha saw an opportunity to attack and take territory in the motorcycle market. However, instead of doing an all out direct assault on Honda’s motorcycle troops, Yamaha decided to launch a sneak attack. What Yamaha did was to increase quietly it’s capacity and able to supply dealers with more products quicker than Honda. This tactic has been successful.
By the end of 1981, Yamaha and Honda had nearly equal shares of the Japanese motorcycle landscape. Throughout the period from 1970s to 1980s, Yamaha’s profit compared favorably with Honda’s i.e. Operating profits of about 7% to 10% of sales in the late 1960s and 3% of sales in the early 1980s. Yamaha was able to push into Honda’s territory and capture market share by focusing all of its resources on motorcycles and related products.
However, bulk of Honda’s profit been on its heavy investments in R & D for its young auto business where it spends about 5% in 1983. As for Yamaha, it only spent slightly more than 1% of sales on R & D throughout the entire period. The second phase of Yamaha’s strategy involved a more direct, frontal attack. Throughout 1970s to 1980s, Yamaha increased its product line as compared to Honda.
Despite the attack, Honda continues to exhibit a preoccupation with autos and began investing in large scales automobile production in the United States. Most of its production was devoted to building the Honda Accord but some capacity was also directed toward manufacturing large ‘cc’ motorcycles. In 1981, Yamaha embarked on a breakneck production spree while totally disregarding the arrival of a low-pressure economy’.
In August 1981, Yamaha announced its plan to construct a new motorcycle factory with an annual capacity of 1 million units and would be increased to 4 million units, as compared to Honda’s capacity by 200,000 units.