honda yamaha war
TRANSCRIPT
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Anurag Pandey 11Gaurav Dave 21Juhi Kumar 23
Kailash Kumar Sahu 24Namrata Kaushal 32Vikas Yadav 65
HONDA YAMAHA WAR
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Demand was growing at 40% per year
HONDA was #2 competitor
Hondas financial condition was deteriorated because of borrowings
Tohatsu was financially superior
Tohatsu Honda
22% market share 20% market share
PAT-8% of sales PAT-3.4% of sales
Debt-to-Equity ratio= 1.5:1 Debt-to-Equity ratio= 6:1
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Tohatsu failed
Conservative approach
Grew at slow and controlled rate
Honda fought aggressively Grew at 66% vs. market at 42%
Established winners competitive cycle
Economies of Scale
In 1964 Tohatsu filed bankruptcy
Tohatsu Honda
4% market share 44% market share
LOSS-8% of sales PAT-10.3% of sales
Debt-to-Equity ratio= 7:1 Debt-to-Equity ratio= 1:1
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1950
1960
1965
1970
50
30
8
4
1 2 3 4
Japan -Motorcycle Market Trends
Year No. of manufacturers
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Japanese became more interested in luxury goods Honda deployed strongest resources into automobile All available cash and resources diverted Motorcycle market share went up to 65% at the end of 60s More revenues from automobile than from motorcycle business
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10%
35%
65%
40%
1970 1981
HONDA vs YAMAHA
Yamaha Honda
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In 1960s both companies had operating profit of 7-10% of sales Operating profits went to 3% in early1980s HONDA invested heavily in R&D for its new auto business
1% 1.1%
2%
5%
1970 1981
Investment in R&DYamaha Honda
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18
60
35
63
1970 1981
Variants
Yamaha Honda
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Yamahas sales increased by 20% to 516 billion
Pre-Tax profits reached to 15 billion
Yamaha invested more than their cash generation capacity
Took loans from banks
Debt burden increased drastically
Debt-to-Equity ratio of Yamaha was 3:1 and of Honda was less than 1:1
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Honda rapidly deployed its resources back to motorcycles business
1982 1984
35%27%
40%47%
Production ShareYamaha Honda
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Yamaha Honda
37% 38%
23%
43%
Domestic Market Share
1982 1984
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Companys auto division supported motorcycle division
Increase in promotional funds
Enabled dealers to earn 10% higher profits than they could earn byselling Yamaha bikes
The innovative element ofHondas counterattack was the use ofproductvariety as a competitive weapon
Hondas new model proliferation and price cutting
Customers had increased choices
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Yamahas sales of motorcycles plummeted by more than 50 percent andthe company incurred heavy losses
By early 1983, Yamahas unsold stock of motorcycles in Japan were
estimated to be about half of the industry total of unsold stock
At the then-current Yamaha sales rate, its inventories were equivalent toabout one years sales
Yamahas debt to equity ratio increased from less than 3:1 in 1981 to 7:1in 1983
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Ignoring the arrival of a low pressure economy in 1981
Less expenditure on R&D
Heavy Loans from banks
Investment more than cash generations
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Better promotional strategies
Competitive pricing to attract buyers
Better incentives to the dealers
Pre and Post sales services
Diversify in other business than motorcycles
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Reinvent the manufacturing process that result lower cost, betterproduction quality, greater capability to turn out multiple productversions, and shorter design-to-market cycles
Yamaha Motor has to come out with a new manufacturing technologythat enables the mass production at lower costs
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One of the best markets would be USA. Though the US ITC had increasedits import tariff, but it is more for the heavyweight motorcycles
Then sell the low CC bikes in the foreign markets, e.g., USA
It may reduce the massive unsold stock immediately and generaterevenue
As far as the balance sheet is concerned, assets can be reduced and in
turn cash can be generated
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THANK YOU