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Yamaha Corporation

FOUNDED: 1897

Contact Information:

HEADQUARTERS: 10-1, Nakazawa-cho
Hamamatsu, Shizuoka 430
Japan PHONE: 81-53-460-2071
FAX: 81-53-464-8554
URL: http://www.yamaha.com

OVERVIEW

Yamaha is a Japan-based conglomerate that makes a wide range of products. The company is probably best known as the world's largest maker of musical equipment. Yamaha also produces audio equipment, furniture, sporting goods, and household fixtures. The company's annual sales in the mid-1990s were in the $4-$5 billion range. Yamaha owns one-third of the Yamaha Motor Corporation, the world's second-largest motorcycle maker after Honda.

COMPANY FINANCES

In the fiscal year ended March 31, 1997, Yamaha recorded sales of 604,554 million yen ($4.88 billion), up 14 percent from the prior year. Net income advanced 49 percent to 14,066 million yen ($113.60 million). The net profit margin (net income as a percent of sales) was 2.3 percent compared with 1.8 percent the year before. Earnings per share were about 72 yen and dividends per share were 9 yen, or a payout ratio of 12.5 percent (dividends as a percentage of earnings per share).

HISTORY

In 1889 Torakusu Yamaha established the Yamaha Organ Manufacturing Company. In 1897 he renamed the company Nippon Gakki Co., Ltd., which means "Japan Musical Instruments." By 1920 the company was making 10,000 organs and 1,200 pianos a year.

Nippon Gakki was hurt by significant labor strife during the 1920s, but the growth in Japan's public school system in the 1930s helped the company make a comeback. During World War II the company made propellers for Zero fighter planes and other like products. Only one of the company's factories survived World War II, but by the late 1940s Nippon Gakki was once again exporting musical instruments. In 1954 Nippon Gakki established the Yamaha Motor Company Ltd., a motorcycle manufacturer. During the 1950s the company also diversified into electronics.

In the 1960s Nippon Gakki greatly increased its markets for musical instruments, including a strong push into the United States. Yamaha began to make semiconductors and entered electronics research in the 1970s. Nippon Gakki continued to diversify in the 1980s, as it expanded into electronic instruments, audio systems, music hall design, and resort management. The company changed its corporate name from Nippon Gakki to Yamaha in 1987.

STRATEGY

Yamaha has been criticized for trying to produce and market products for every activity it has developed. The range of its product line is indeed astounding: music schools, boats, motorcycles, archery equipment, tennis rackets, violins, kitchens, semiconductors, and more. Some say these offerings have the overall theme of "creating richer lives." Others argue, however, that for most of its history Yamaha really has not had a corporate strategy at all.

Since Seisuke Ueshima took over presidency in 1992 (he later became chairman), Yamaha's performance has improved over that of the late 1980s and early 1990s. The company has introduced such innovative and well-received products as the silent piano, the Yamaha Home Cinema, and the Disklavier (a high-quality acoustic piano with digital features). Ueshima also has restructured the company somewhat and has reduced the number of employees by cutting administrative and overseas staff.

INFLUENCES

In 1887 Torakusu Yamaha was a young engineer who fixed medical equipment in Osaka, Japan. As part of his job he was responsible for repairing surgical equipment in Hamamatsu, a small Japanese fishing town. Because of the area's isolation, Yamaha was asked to repair the town's U.S.-made Mason & Hamlin reed organ. He quickly recognized the potential for a Japanese manufacturer of such instruments and set up the Yamaha Organ Manufacturing Company in 1889. The Japanese government gave the company a boost when it granted Hamamatsu township status, helping it acquire railway service and making it a regional commerce center.

The Japanese government had other ways of helping the company, which was renamed Nippon Gakki in 1897. As part of an effort to build exports, in 1899 the Ministry of Education sponsored Yamaha on a tour of the United States. He studied piano making and established relationships with suppliers for the materials to make them. Within a year Yamaha had built his first piano, and the Japanese government was among his most important customers.

The disruption caused by World War I helped the company diversify its product line. Harmonicas made by a local German maker became difficult to obtain, so Nippon Gakki entered the harmonica business. More generally, the war cut off traditional supply lines to Asia, which helped the Japanese economy grow. Nippon Gakki grew along with it, and by 1920 the company employed 1,000 workers who produced 10,000 organs and 1,200 pianos a year.

Yamaha died suddenly during the war and was succeeded by vice-president Chiyomaru Amano in 1917. Amano had extensive political contacts that helped the company expand. But during his 10-year tenure the company suffered severe labor strife. These problems, combined with the appreciation of the yen, fires at important facilities, and the impact of the Great Kanto earthquake, drove the company to near bankruptcy by 1922.

In 1927 Amano was replaced as president by Kaichi Kawakami, who helped reorganize the company and reduce its debts. The company's fortunes continued to improve in the 1930s. In 1930 Kawakami opened an acoustics lab and research center so that Nippon Gakki could produce higher-quality instruments. The company also hired advisors from C. Bechstein of Germany to improve the quality of the Yamaha piano. The growth of the Japanese public school system in the 1930s helped expand demand for the company's musical instruments.

In the Japanese war economy of the early 1940s, Nippon Gakki produced propellers for Zero fighter planes, fuel tanks, and wing parts. World War II almost led to the company's collapse, as Japan lay destitute in 1945. But the war also helped Nippon Gakki acquire the production skills to broaden its product line. In the early postwar period, financial assistance from the United States allowed the company to once again begin production of musical instruments. The company produced its first audio component, a phonograph, in 1947.

With the recovery of the Japanese economy in the 1950s, the company's sales picked up. Nippon Gakki helped to popularize Western music in Japan by opening the Yamaha music schools in 1954. Ten years later it established its first Yamaha schools in the United States, boosting demand for its musical instruments. The company continued to improve its production techniques and developed new markets in both the United States and Europe. The company's annual piano output rose from 24,000 in 1960 to 100,000 in 1966, making it the largest piano producer in the world.

Yamaha also became involved in fiberboard reinforced plastics (FRP). It produced its first sailboat made entirely of the plastic in 1960. Yamaha's expertise in FRP for boats helped it introduce other products, such as archery bows, skis, and bathtubs. Research into metals engineering enabled the company to become a major factor in the household construction industry, producing boilers, heating systems, and other products. Moreover, during the 1970s the company established itself as a serious electronics firm. It began to produce large-scale integrated circuits (LSIs), and it built its own plant in 1971. By developing its technology early, Yamaha would later be better able to meet expanding demand for digital synthesizers and audio equipment. Early development of technology also enabled the company to become a supplier of advanced electronic systems, such as industrial robots.

In 1955 Nippon Gakki built its first motorcycle and established the Yamaha Motor Company, with Nippon Gakki as part owner. Yamaha Motor introduced its first motorcycles in the United States during the 1960s. Along with Honda and Suzuki, Yamaha offered smaller, lower-priced cycles that appealed to a wider customer base than the large cycles, which were primarily aimed at enthusiasts. In the early 1980s, when it was the second-leading motorcycle manufacturer, Yamaha made an all-out attempt to gain market share in the United States at the expense of first-place Honda. The effort backfired, however, and Yamaha Motor wound up losing tens of millions of dollars.

In 1987 the company changed its name from Nippon Gakki to the better-known Yamaha. By that time Yamaha was involved in seven widely diverse markets: musical instruments, motorcycles, snowmobiles, out-board motors, electrical components, acoustic products, and sporting goods.

CURRENT TRENDS

In the seven years between fiscal 1986 and fiscal 1992, Yamaha's income as a percent of sales fell steadily from 2.5 to 0.4 percent. In 1993 the company actually lost money. In 1994 and 1995, however, the company staged a recovery, and in 1996 net income was up nearly 50 percent to $114 million on sales of $4.9 billion. The improved performance reflected Yamaha's efforts to cut its administrative and overseas staff and reorganize its operations. The company also introduced innovative products such as the Disklavier (see the Products section for a description), which have been hugely successful.

PRODUCTS

One of Yamaha's most successful new products has been the Disklavier, a high-quality acoustic piano that incorporates digital features. According to Paul Lim of Money magazine, "The Disklavier sounds just like a traditional acoustic instrument. But at the flick of a switch it becomes a high-tech player piano. You just insert one of more than 400 albums on floppy disk, from Tchaikovsky's The Nutcracker to the sound track of Jesus Christ Superstar, into a box that sits unobtrusively under the keyboard." Depending on the model, the Disklavier costs between $8,500 and $50,000.

Another exciting new product is the Yamaha Home Cinema. Using its own digital sound processing (DSP) chipset, the Home Cinema gives film viewers a movie theater experience in their own homes. And Yamaha's "silent" musical instruments, including silent pianos and SilentViolin, allow the user to practice anywhere using earphones that simulate a concert hall environment.

GLOBAL PRESENCE

In fiscal 1996 some 25 percent of Yamaha's total sales came from outside Japan. The company has been expanding operations in other Asian countries, most notably China. It invested $10 million in a joint venture with China's largest piano maker, and it formed the Yamaha Trading (Shanghai) Co. to sell electronic musical instruments in China.

SOURCES OF INFORMATION

Bibliography

Lieberman, Richard. "The Ivory Poachers." The Financial Times, 9 August 1997.

Lim, Paul. "How You Can Get a High-Tech Piano that's Truly Grand." Money, February 1997.

Morris, Kathleen. "Play It Again, Seisuke." Financial World, 22 November 1997.

Putscher, Joyce. "Yamaha Home Theater Mind Boggling." Electronic News, 17 February 1997.

Yamaha Jumps Into Top ATV (all-terrain vehicle) Slot." Deal-ernews, August 1995.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Yamaha's primary SICs are:

3651 Household Audio & Video Equipment

3732 Boat Building & Repairing

3751 Motorcycles, Bicycles & Parts

3931 Musical Instruments

3949 Sporting & Athletic Goods