STRUCTURAL CHANGE AND COMPETITION IN THE JAPANESE MOTORCYCLE INDUSTRY
1945-65
1999 Volume 34 Issue 4 Pages 1-28
Details
1999 Volume 34 Issue 4 Pages 1-28
The Japanese motorcycle industry produces more than 70 percent of the world's motorcycles and enjoys the position of one of the most competitive industries in Japan. This case history aims to single out the distinctive characteristics of the industry and presents an economic analysis of its evolution from 1945 to 1965.
After World War II, the market for motorcycles rapidly expanded when merchants employed them as a tool for lightweight transportation. New entry firms numbered over 200, which were mostly small- and medium-sized firms. The nature of motorcycle production then resembled bicycle making rather than automobile assembly. The entire process was basically a network of component suppliers and motorcycle manufacturers specializing in the final assembly. But Honda Motors first introduced mass production through an integrated system in its Saitama and Hamamatsu plants. This rapid expansion pushed Honda close to bankruptcy, owing to financial crises in 1954. By contrast, Tohatsu, a conservative but efficient firm, increased its market share to 20.2 percent in 1955 and became leader of the industry.
While obtaining emergency financing from Mitsubishi Bank, Honda rationalized its management and plant system. Furthermore, Honda invested 7 billion -yen to build a new plant in Suzuka in 1960 in order to manufacture Super-Cub, which became a dominant model in emerging the moped market. This plant, which aimed to achieve the maximum production economy, was designed to produce only Super-Cubs and adopted a highly automated mass production system. This strategic decision by Honda resulted in increasing its market share from 18.9 percent in 1957 to 63.5 percent in 1963. Other small- and medium-sized firms were outclassed by the operation of Suzuka plant and were wiped out from the motorcycle market. This was the formation of oligo-polistic competition among the so-called Big Four and of the distinctive characteristics of the Japanese motorcycle industry, which is far larger in production size relative to all other nations and which brought the advantages of the scale economy.
