1. 0Case Summary In 1950s in Japanese motorcycle market have 50 competitors. Tohatsu Company was the number one motorcycle manufacturer with a 22 percent market share; Honda was the number two competitors with a 20 percent market share. From 1995-1960, Honda did significantly increase market share at 42 percent per year. Hence Honda established a “winner’s competitive cycle”. To support “winner’s competitive cycle” Honda borrowed heavily as well.
Until 1964s, Tohatsu filed for bankruptcy and Honda become the leader in Japanese motorcycle market. In 1970s, when Honda began focusing on the automobile market, Yamaha saw an opportunity to attack and take territory in the motorcycle market. 1981 year-end Yamaha almost nearly market share with Honda, during this time Yamaha want to beat Honda become number one motorcycle manufacturer in Japan market. Even so Honda still committed them to automobiles industry, not seem to redeploying troops in order to protect its motorcycle market.
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. 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.
Yamaha and its affiliated companies had a debt to equity ratio of almost 3:1, while Honda group’s ratio was less than 1:1. Although Yamaha thought its overt and public challenge had gone unnoticed by Honda, they were mistaken. In later times, Honda turned its attention to motorcycle market, throughout cut down the price and promotion in order to increase market share. The war between Honda-Yamaha result in worldwide inventories. The US market worried about that inventories would influence their market. 2. 0Problem Statement 2.
1 Main problem: The war between Honda-Yamaha impact on domestic and international markets From this case, After Tohatsu Company filed for bankruptcy, Honda leading motorcycle market in Japan, but after a period of time Honda concentrates on automobiles industry. Thus gave Yamaha a change to surpass Honda to become number one motorcycle manufacturer. But when Yamaha’s market share practically can contend against with Honda’s, but Honda still want to keep the number one position so Honda transformation attention to motorcycle, take advantage of cut price to increase market share.
After violent compete, Honda and Yamaha made a great scale inventories whatever in domestic and international motorcycle market. 2. 2 The not-so comprehensive of Yamaha’s strategy on the business During 1970s Yamaha catch the opportunity to increase the market share in Japan motorcycle market. Yamaha took advantage of Honda attention on automobile market, and increase share to 35 percent. By the end of 1981, Yamaha and Honda had share 37 percent with 38 percent. Therefore, Honda utilized all kinds of method to retake motorcycle market shares.
Honda spent more investment in R&D than Yamaha. The sneak attack of Yamaha is quietly increasing its production capacity in Japan though was successful, but Yamaha had no other business and it had invested at a rate far higher than its internal cash generation could support compared to Honda. When Honda regain its business on motorcycles, Yamaha’s production share decreased from 35percent to 27percent and sales of motorcycles as well as plummeted by more than 50 percent. 2.
3 Honda’s negligence on its motorcycle business causes overtake of Yamaha For after some time Honda had substituted Tohatsu’s position, Honda diversified into automobiles. Honda deployed its strongest forces into automobile venture which means all available cash and technical capabilities, along with the best troops. Thus, Honda had put all attention into automobile industry and given the lacuna to Yamaha an opportunity to overtake the motorcycle market for some time and increases their market share.
In other words, Honda did not have a plan to carry on both of the business at the same time and that is the time when the majority markets falls on Yamaha’s lead at that time. 3. 0Alternative Strategies 3. 1 Joint venture between Honda and Yamaha in order to achieve win-win situation Based on the case, we can see that Honda-Yamaha is in a great war of fighting over each other for their business. To stop all these fire, one of the better ways to solve this is to create a win-win situation for the both of them.
To be more precise, win-win situation means that both of the companies get benefits out of their joint venture. Joint venture in term means that two business entities coming together to undertake a single project or aspects of business. This action does not involve dissolving the original business of both companies and organizational structure. A joint venture of Honda and Yamaha can actually combine their effort to create another company where each of them take an interest, both operational and financial as well as sharing profits and losses for their new venture.
In this way it can be observed that the level of involvement and commitment from both companies they put forth from the start. Although joint ventures sometimes does not come in as complete or even as permanent as mergers because when a project has been ended then the newly formed company might be dissolved. As a whole, Honda and Yamaha should have taken this thought of joining venture seriously in order to bring in the benefits of both and not to affect the rest of the company’s business operations as well as giving poor reputation for the both companies. 3.
2 Regulations and economic controlled by governments towards Honda and Yamaha In the hand of being fair, regulations are set by governments to ensure that everyone that gets involve in the industries have the equal rights on carrying their business. To protect all of the business and entrepreneurship of the country, government will set some rules and regulations for operating businesses so that those big companies do not forestall the other small or medium enterprises. Honda and Yamaha are big companies that trying to get rid of each other as their competition and monopolize the motor vehicle industry.
Government can stop their competitive action by imposing higher income taxes for larger company in heavy industries so that these companies will not trying to expand their business as wide as they can without some worries and concerns financially. Besides shrinking the currency of the company, government need to make sure that the actions carry out are going to help in stabilizing the economic situation in the country as no one gets to monopolize the industry and making control of that particular field.
If either Honda or Yamaha or any other big companies that taking over control of motor vehicle industry in Japan, there definitely will be a lot of common industry that can hardly survive in the market. 3. 3 Interference of international trade on increasing import tariff To avoid the battle of the both companies that will either derange the domestic or international market, not only the country of origin of the products can do something for the issue but so does other countries that are involve in the import of goods and products.
By increasing import tariff in the U. S. , Yamaha can hardly export their motorcycles in a huge numbers of amount as in the import tariff is going to be really high for the company to bear with it. As the import tariff goes up higher, Yamaha will have to sell their motorcycles in a higher price in order to cover their cost and also gain profits at the same time. In that case, if Yamaha is going to sell its products in the U. S. with a higher price the consumer in the U.
S. will eventually get back to their own domestic products which is not that expensive anymore compared to Yamaha’s. 5. 0The best strategy and justification From the case study, it illustrates how Honda grabs the title of top motorcycle manufacturer from Tohatsu. As Japanese motorcycle getting slow, Honda decided to diversified into automobile industry, to enhance the degree of successful, company has had deployed its strongest force in the automobile venture.
Even though Yamaha thought its public challenge had gone unnoticed by Honda but they are once mistaken. The war between Honda and Yamaha has caused Yamaha incurred heavy losses, and the effect of Honda-Yamaha war, retail prices for popular models had fallen drastically. Thus, the best strategy to stop this rivalry is that Yamaha shall joint venture with Honda. Reason for both Honda and Yamaha to joint venture is to decrease the price war and in order to adjust the fluctuated market price.
For instance, joint venture is a strategic alliance which help both of them sustain in the rival. In addition, joint venture helps them penetrate into the market without consider or investing tremendous resources. The process of joint venture is a well-known, time-tested principle. Besides, the crucial aspect does not lay on the process itself but the execution of joint venture. Therefore, Honda and Yamaha shall neglect those happening issues and deeply involved in order to achieve an excellent result in joint venture.
Apart from that, from the article, Honda is a well-known company who has the powerful business strategies, thus, Yamaha able to learn some of these from this joint venture. The purpose of this joint venture is decrease the risk of price war, besides, joint venture helps Honda and Yamaha to ensure their customer stay loyal to their products and gain respect from them. On the other hand, joint venture helps both of the companies reduce its traffic paperwork so that they can invest additional time in seeking potential buyers.