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In early 1950, there were 50 competitor fighting position in the Japanese motorcycle
market. Tohatsu was the first market share In Japanese motorcycle compared to the Honda was
number two market share different 20% to 22%. Other different between these two
manufacture between Honda and Tohatsu were debt in equity with ratio 6 to 1 for Honda and
1.5 to 1 for Tohatsu. In 5 years short, Honda undisputed leader of Japanese motorcycle because
Tohatsu was grow at slow rate and controlled rate. Then, Honda increase their share market at
66% per year and was establish winner competitive strategy. It is because of rise in revenue
and lower the cost. In 1960, Honda was reported 10.3% after tax of sales and Tohatsu loses 8%
of sales where balanced sheet for Honda in debt of equity with ratio 1 to 1 and Tohatsu 7 to 1.
It shows that Honda financial flow more efficiency than Tohatsu.
In 1964, Honda enemy was destroyed because of Tohatsu filled to bankrupt. It is form the sales
was decline, fund exhausted and bill unpaid. Therefore, from 50 manufacture motorcycle to 30
by 1960, 8 by 1995 and shrunk to 4 in 1965(Honda, Yamaha, Suzuki and Kawasaki). Moreover,
over the ten years, Japanese interested in purchasing luxury good over durable good. Honda
diversified into automobile cars. It is to reduce of failure risk, company deployed its strongest
forces in the automobile venture and become the best troops. End of 1960, Honda share of the
Japanese motorcycle reach 65% and Ministry of the International Trade (MINIT) persuade
Honda to get out of the automobile business and merge with much larger car such as Toyota
and Nissan ignored this administrative guidance and by 1975, was obtained more revenue from
auto than motorcycles.
In 1981, Honda focusing on the automobile front and then Yamaha saw an opportunity to attack
and take territory in the motorcycle troops. Yamaha borrowed a chapter from the ancient Ninja
Warrior and lunch a sneak attack. Yamaha took advantage when the enemy focuses on the
automobile away at Honda market shared. Therefore, Honda production was drop 65% to 40%
by 1981. On that Yamaha rise share by 25% in 1981. Then, Yamaha and Honda had nearly
equal shared motorcycle landscape which Honda Company was drop and Yamaha rise 38%.
From the R&D, Honda approximate 2% to 5% of sales than Honda more than 1% of sales.in
second phase, Yamaha do frontal attack which is Yamaha provide 18 model by 1981 rather than
Honda only 17 model. So, Honda investing large scale automobile production to U.S. besides

that, Yamaha announced plan to construct a new motorcycle factory with annual capacity one
million unit exceeding Honda 200,000 unit and makes Yamaha the world largest motorcycle
In 1982, Yamaha enjoyed rise in sales by 20% and ratio debt of equity was 3 to 1 rather than
Honda 1 to 1. Over eighteen month Yamaha war raged and Honda share increase 40% to 47%
and Yamaha was drop 35% to 27%. This is because of massive price cut and increase promotion
fund and field inventories. Summer in 1982, there were possible to buy 50cc motorcycle which
10 speed bicycle. Yamaha motor plummeted which having over 50% heavy lose. Early 1983,
Yamaha unsold stock which half estimated of industry total unsold stock and then Yamaha cut in
price. April 1983, Harvey Davidson persuaded the US international trade commission and give
initial import by give tariff from 4.4% to 47.4%. In 1984, Yamaha parent with Nippon Gakki
which stake 39.1% for called emergency board meeting.



To become the top producer of motorcycle market between Honda and Yamaha worldwide.
Yamaha try to attack Honda using battle plan Ninja like sneak attack of quietly by increasing
their capacity and dealing to produce more faster.


Yamaha and its affiliated companies had a debt-to-equity ratio of almost 3 to 1. This is because
of ineffective strategic where they produce too much quantity of product which is 4 million a
year. Yamaha try to invest more than their cash.


While Honda focusing on automobile, Yamaha took advantages of the fact that Honda attention
was focused on its automobile business by quietly increasing motorcycle production capacity.


Yamaha produces too much quantity of product in order to compete with Honda which lead to
increase production costs.


As Yamaha producing too much product in high quality motorcycle causing they lack of
customer. Customer demand has decreased due to higher prices. In addition, customer often
want the latest releases.



As in this case study, Yamaha and Honda is the big company that compete with each other. So,
they need to set the strategy target for the produced the product. Other than that, if this
company want to set a target they able to stop and see if company on track at any point. If they
cannot doing it, the company can analyse where the problem is. They should be able to identify
areas that are flourishing and present greater opportunity more quickly. In here, Honda has
own strategy target. In the study case the Honda had strategy to included massive price cuts
and increase in promotional funds and field inventories. This is because if this company make
this strategy, they had a lot opportunity to compete with the Toyota. For example in the case
study, Honda was able to provide products to its dealers at costs that enabled the dealers to
earn profit that were 10% higher than the profit they could earn by selling Yamaha motorcycles.
The others example in this case study is the innovative element of Hondas counterattack was
the use of product variety as a competitive weapon. So it will devote considerable resources
toward new modal design and production.



They target also for the immediate future. It can help the company plan for subsequent years
too. They can measure actual performance against the objectives that they set and start spotting
seasonal trends. This end of year analysis allows the company to lay out next targets in a more
informed way, with a set of data to work from and also can be improve. In here we can look the
reared in research and development, Honda strength lie in product and process innovation,
primarily in design new vehicle models and features an in designing new vehicle models and

features and in conceiving fresh techniques for building them faster and better. For example in
the case study, Hondas simple and innovative counterattack was funded by company auto
division which brought in two-third of companys sales even though the Honda company can
exceed to Yen 2 trillion and they continue to prosper during motor cycle war. As we know that
Yamaha decreased for 35% to 27% and Honda gained ground and increased its domestic
market share from 38% to 43% while Yamaha collapsed form 37% to 23%. The advantages
research and development in this case are the can firm become first develops a product
process, and can protect it legally by obtaining patents on the new product or process,
copyrights on the original writing or other media developments, and trademarks. R&D also a
activity that can produces new products or better processes for the company, but R&D are
expensive and risky to the company, its difficult to know beforehand what will work or what will
sell. Even if a product is successful, then its essential features will eventually diffuse throughout
the industry, or other firms will copy the product or the process to become more competitive
such as honda and yamaha also the rest automobile company.


Based this solution, it will help to contribute with other competitor with a same product line to
doing some agreement with them and to make sure all the manufacturing company will tend to
be bankrupt. So, they also can corporate with each other in term of size of production which is
give some quota of production. For example, Honda manufacturing produces by 10%, Yamaha
by 10%, Suzuki by 10%, and other by 70%. So, it will give opportunity to them to compete and
rising their profit in within a year. Other than that, they can make agreement in term of input
production. Where each of them will provide a major input for example engines prepare by
Honda manufacturing, accessories prepares by Yamaha manufacturing, tires prepare by Suzuki
and the other part of motorcycle will prepare by other.
Moreover, manufacturing of motorcycle should do agreement on market size. Each of
manufacturing in japan have their own place to do business. It can be divided by different group
of product line in different border. Therefore, it give opportunity to other manufacturing to build
their own brand to become more competitive in market places and market shared.



Every manufacturing and any company will have to face risk and uncertainty problem. So, it will
depend on the management manufacturing to settle this thing before it is happen such as
happen to the Yamaha that was mistaken by thinking their challenge when unnoticed by Honda.
Hearing Koike's statement, Honda's president, Kawashima was annoyed. Honda rapidly
redeployed its forces. Over the next 18 months, as the Honda-Yamaha War raged on, Honda's
production share increased to 47% while Yamaha's declined to 27%. The effects on Honda's
attack of new model proliferation and price cutting were overwhelming for Yamaha. By 1984,
Yamaha's losses were estimated to be 19 billion. Therefore, it need to some alternative to
solve it such as doing diversification yahama investment. Diversification is risk management
For example, Honda manufacturing which is not only focusing on one product but also think
diversify with other good such as luxury good and automobile. It will help Honda company in
term of preparation uncertainty problem which is Honda company got an attack from Yamaha
company. More than that, Yamaha Company also can doing foreign direct investment for
example from U.S just what Honda Company do on their company such as Honda continue to
exhibit a preoccupation with autos as it began investing in large-scale automobile production in
the United States. By 1979, Honda had more than $ 1 billion invested in automobile and
motorcycle production facilities in Marysville, OH and like what president of Yamaha president
said different between us and Honda is in our ability to supply. As primarily a motorcycle
producer, you cannot expect us to remain in the present number two position forever.


Effective Business strategy

In fact, that Honda was the leader early by 1955 on Japanese motorcycle manufacturing rather
than Tohatsu that being number one on early 1950 of producing in motorcycle because of
effective business strategy. Yamaha also had been used excellent strategy to become number
one motorcycle manufacturing. There are certain business strategy that have been implemented
to achieve their own objective such as Honda high growth contributed to overexpansion
deteriorated its financial condition because of excess borrowing. It is bring Tohatsu industry was
grew at a slow and controlled rate. Therefore, it will lead Honda industry winner competitive
cycles which is high growth led to higher revenue decrease cost through economics of scale. It
will bring Honda industry more profitability and financial strength. Moreover, always find the
opportunity is the other effective business strategy such as Yamaha industry saw that Honda
industry focusing on automobile font and Yamaha industry attack and take territory in
motorcycle market which is Yamaha borrowed a chapter from the ancient ninja warrior and
decide to lunch a sneak attack. Other than that, Yamaha industry business strategy by pushing
territory and capture market shares by doing two phases. The first phase is ninja like sneak
attack of quietly increasing capacity and able supply dealer with more quickly than Honda.
Second phase is involved more direct, frontal attack.


The best strategy and Justification

There are several way in how to the solve problem Yamaha- Honda war such as Make
agreement to other competitor, diversification, business strategy, Research and Development
(RND) and Innovation. It makes sense that all the strategy have been using by the other
competitor in business planning. Only different strategy and planning make a big different in
term gain more profit.
Therefore, the best strategy to solve is diversification. As we mention from early part,
diversification can reducing risk on investment to financial asset and real asset. This strategy had
been using by Honda industry. For example, over the ten year before, growing number of
Japanese become interested in purchasing luxury good over durable good. It bring motorcycle
industry become slowly. Honda industry sense this risk to motorcycle industry and turn into
automobiles to reduce risk and failure. For example, Nissan auto and Toyota auto.
Moreover, Honda industry diversification their motorcycle to international place which make
them more profitable and growth. Honda industry despite effort by the Minister of International
Trade (MITI). It bring Honda industry make more revenue and lower their cost because make
Other than that, Honda industry diversified year 1950 until end of 1960 to the market share
until Honda industry producing reach 65%. It help them to become more powerful motorcycle
rather than other manufacturing industry.
production and growth their industry.


So, it also help them to do increase volume of