Yamaha Corporation

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Yamaha Corporation

10-1, Nakazawa-che
Hamamatsu, Shizuoka 430
Japan
(0534) 60-2141
Fax: (0534) 64-8554

Public Company
Incorporated: 1897 as Nippon Gakki Co., Ltd.
Employees: 12,423
Sales: ¥384.69 billion (US $2.68 billion)
Stock Exchanges: Tokyo Osaka Nagoya

Yamaha Corporation, one of Japan’s most diversified companies, is the world’s largest maker of musical instruments. Since 1950 the company has also become a major producer of electronics, audio products, furniture, household products, and sporting goods, and it derives significant earnings from its resorts. Although largely a producer of luxury consumer items, the company has historically performed satisfactorily in recessionary periods.

Yamaha founder Torakusu Yamaha’s venture reflected turn-of-the-century Japan’s enthusiasm for new technologies and the ability of its middle-class entrepreneurs to develop products based on them. Raised in what is now the Wakayama Prefecture, Yamaha received an unusual education for the time from his samurai father, a surveyor with broad interests in astronomy and mechanics and a remarkable library. The Meiji Restoration, a government-subsidized effort to hasten technological development in the late 19th century, put educated people like Yamaha in a position to capitalize on the new growth.

At age 20 Yamaha studied watch repair in Nagasaki under a British engineer. He formed his own watchmaking company, but he was unable to stay in business due to lack of money. He then took a job repairing medical equipment in Osaka after completing an apprenticeship at Japan’s first school of Western medicine in Nagasaki.

As part of his job, Yamaha repaired surgical equipment in Hamamatsu, a small Pacific coastal fishing town. Because of their area’s isolation, a township school there asked him in 1887 to repair their prized U.S.-made Mason & Hamlin reed organ. Seeing the instrument’s commercial potential in Japan, Yamaha produced his own functional version of the organ within a year and then set up a new business in Hamasatsu to manufacture organs for Japanese primary schools. In 1889 he established the Yamaha Organ Manufacturing Company, Japan’s first maker of Western musical instruments. At the same time, the government granted Hamamatsu township status, which provided it with rail service and made it a regional commerce center.

Western musical traditions interested the Japanese government, which fostered and catered to growing enthusiasm for Western ideas. While Yamaha’s technical education enabled him to manufacture a product, government investment in infrastructure made it possible for him to create a business. Yamaha Organ used modern mass-production methods, and by 1889 it employed 100 people and produced 250 organs annually.

During the 1890s the more inexpensive upright piano surpassed the reed organ in popularity in U.S. homes. Yamaha saw the potential of this market. In 1897 he renamed his company Nippon Gakki Co., Ltd., which literally means Japan musical instruments. He opened a new plant and headquarters in the Itaya-cho district of Hamamatsu.

In 1899 one of Yamaha’s initial investors convinced other investors to pull out of Yamaha in favor of a competitor, a new organ maker that was near failure. Yamaha managed to borrow the money necessary to remain solvent and buy out his partners.

Japan’s government not only supported industrialization through heavy manufacturing, but also encouraged upstart businesses to contact overseas markets directly. Expansion into pianos required more research, so the Japanese Ministry of Education sponsored a Yamaha tour of the United States in 1899. He was to study piano making and to establish suppliers for the materials needed to produce pianos in Japan. In one year Nippon Gakki produced its first piano. Governmental and institutional orders were the first filled, including some for the Ministry of Education. In 1902, with U.S. materials and German technology, Nippon Gakki introduced its first grand piano. In 1903 the company produced 21 pianos.

Nippon Gakki demonstrated its new pianos in select international exhibitions. Between 1902 and 1920, the company received awards for its pianos and organs that had never before gone to a Japanese manufacturer, for example a Grand Prix at the Saint Louis World Exposition in 1904.

World War I curtailed sales by a German harmonica marker in Japan, so Nippon Gakki took the opportunity to broaden its product base and begin making and exporting harmonicas. Producing new products that share raw materials and manufacturing skills became a major operating principle for Nippon Gakki.

Yamaha died suddenly during the war. He had succeeded in introducing Western instruments and assembly techniques, but despite his assembly lines, piano making was still a craftsman’s industry at his death. Vice president Chiyomaru Amano assumed the presidency in 1917. His political contacts had helped the company expand. He saw the company through repeated labor strife for ten years before being replaced.

World War I produced tremendous growth in Japanese industry, and Nippon Gakki grew with it, supplying Asian markets cut off from traditional sources of supply. By 1920 it employed 1,000 workers and produced 10,000 organs and 1,200 pianos a year. The sales records set during the war continued afterward, despite recession. These gains were largely due to piano sales which doubled to ¥2 million between 1919 and 1921.

The next five years nearly put the company in bankruptcy. Appreciation of the yen, which made Nippon Gakki products less competitive overseas, was part of the problem. In 1922, fire destroyed a new plant in Nakazawa and the main Itayacho plant in Hamamatsu. The next year the Great Kanto earthquake destroyed the Tokyo office and again damaged company plants. Before the company recovered, labor unions went on strike after Amano refused to negotiate. Amano gave in to the union’s demands 105 days later, after the company’s reserves were depleted.

Board member Kaichi Kawakami, by request of the other directors, took the presidency in 1927. A director of Sumitomo Wire Company, Kawakami made an unexpectedly non-traditional choice in accepting the position at the troubled company. Kawakami cut production costs and reorganized the company. Half of all debts were paid within 18 months of Kawakami taking over.

Between the world wars, Western imports still dominated the Japanese sales of Western instruments. Since Nippon Gakki’s advantage was in price alone, Kawakami opened an acoustics lab and research center in 1930 to improve quality. He also hired advisors from C. Bechstein of Germany to improve the quality of the Yamaha piano.

The growth of the public school system of the 1930s expanded the market for Western instruments, and Nippon Gakki introduced lower-priced accordions and guitars to capitalize on the expansion.

When World War II began, Nippon Gakki plants produced propellers for Zero fighter planes, fuel tanks, and wing parts. As with expansion during World War I, these items laid the groundwork for broader diversification in the postwar years. In the meantime, Nippon Gakki had to stop making musical instruments altogether in 1945.

Only one Nippon Gakki factory survived the wartime U.S. bombing raids. Postwar financial assistance from the United States made possible the production of harmonicas and xylophones just two months after receipt of the funds. Within six months it produced organs, accordions, tube horns, and guitars. After the Allied powers approved civilian trade in 1947, Nippon Gakki began once again to export harmonicas.

Nippon Gakki already had experience with wooden aircraft parts dating back to 1920, but wartime activity exposed the company to new technologies. By 1947 Nippon Gakki could cast its own metal piano frames and produced its first pianos in three years. The company also produced its first audio component—a phonograph—in 1947.

Postwar growth was rapid. The Japanese government had fostered the growth of Western music in Japan since 1879, but Nippon Gakki received its biggest boost to date in 1948. That year the Education Ministry mandated musical education for Japanese children—only encouraged before the war— and greatly expanded business.

Kaichi Kawakami’s son, Gen’ichi Kawakami, became the company’s fourth president in 1950. During his tenure the Japanese rebuilt their economy, and consumer buying power increased. Nippon Gakki became less reliant on institutional purchases. President for 27 years, Kawakami made more progress in popularizing Western music in Japan by beginning the Yamaha music schools in 1954 to train young musicians. With the help of the Ministry of Education, Nippon Gakki founded the nonprofit Yamaha Music Foundation in 1966 to sponsor festivals and concerts and run the music schools.

Kawakami’s biggest accomplishments were in production, diversification, and the creation of foreign markets, all of which built the framework for the modern Yamaha Corporation. Kawakami toured the United States and Europe in 1953, a trip that inspired diversification into many areas unrelated to the music industry. Like Yamaha’s tour of the United States in 1899, G. Kawakami’s tour affected the company’s product line and reputation for decades to come.

His return sparked research into new uses for materials since capital was scarce. The company researched uses for fiberglass reinforced plastics (FRP). In 1960 the company produced its first sailboat made of FRP. Later it expanded to produce yachts, patrol boats for Japan’s Maritime Safety Agency, and oceangoing fishing vessels. Primarily serving the Asian market, it eventually became Japan’s largest FRP boat producer. FRP capability led to introduction of other products, such as archery bows, skis, and bathtubs. Through metals research Nippon Gakki developed sophisticated alloys for electronics as well as less complex alloys for structural purposes. Nippon Gakki soon became a major producer of equipment for the household construction industry, such as boilers and central heating systems.

In its traditional line of pianos, Nippon Gakki expanded production, raised its quality standards, and cut production costs, already lower than the industry average, even further. Through a conveyer belt system and an innovative kiln drying technique that facilitated the rapid drying of wood used in pianos, Nippon Gakki decreased the amount of time required to produce a piano from two years to three months.

The first large-scale marketing drive toward the United States was not related to music at all. In 1954 the government returned the company’s World War II-era metal working factory, which had been among confiscated assets. Nippon Gakki produced its first motorcycle in 1955 and established the Yamaha Motor Company Ltd., of which it was partial owner. Later it produced smaller motorized vehicles like snowmobiles, outboard engines, and golf carts. For the next 20 years, however, it was motorcycles for which the West would recognize the Yamaha brand. Following Honda’s lead, Yamaha introduced its first motorcycles in the United States in the early 1960s. Along with Suzuki, the three companies made smaller and lower-priced motorcycles and greatly expanded the U.S. market, which had been limited to large cycles for serious enthusiasts. Yamaha also marketed its motorcycles successfully in Asia.

Nippon Gakki began an ambitious drive into electronics in 1959, when it introduced the world’s first all-transistor organ to replace electronic organs using vacuum tubes. Nippon Gakki’s first electronic instrument represented the company’s new competence in product development.

With its new variety of products Nippon Gakki began its first serious export push, establishing its first overseas subsidiary, in Mexico in 1958. In 1959 the company made a few pianos with a U.S. retailer’s name on them, and in 1960 it created its own sales subsidiary in Los Angeles. Within a year Yamaha won a conspicuous contract to supply the Los Angeles Board of Education with 53 grand pianos. For the next seven years, the board annually purchased Yamaha pianos for schools in its jurisdiction. Since Nippon Gakki priced its pianos considerably lower than Western competition, this boost to its reputation for quality allowed it to bid with more success on U.S. institutional contracts.

Having worked well in Japan, Nippon Gakki sponsored overseas musical events and education beginning in 1964, when it opened the first Yamaha school in the United States. Like its Japanese counterpart, it was designed to teach music appreciation to students at an early age and create a long-term market. Financially independent of Yamaha, these nonprofit schools operate throughout Europe and the United States and have taught more than one million students.

These educational efforts were just beginning to pay off in Japan. During the 1960s Nippon Gakki’s domestic market grew tremendously. Annual piano output increased from 24,000 in 1960 to 100,000 in 1966, making the company the world’s largest piano maker.

In the mid-1960s, Nippon Gakki began to produce wind instruments on a large scale. In 1968 Nippon Gakki started exporting trumpets, trombones, and xylophones. Five years in development, the company produced is first concert grand piano in 1967.

U.S. instrument makers did not welcome Yamaha’s growth. In 1969 U.S. piano manufacturers sought a 30% tariff on imported pianos, but the U.S. Tariff Commission ruled in Yamaha’s favor. Nonetheless, the hearings delayed for three years a tariff reduction that had already been scheduled and established a hostile precedent for Nippon Gakki expansion in North America. In 1973 Yamaha bought its first U.S. manufacturing facility, but a strike there further delayed Yamaha’s U.S. drive.

Just as transistors had once replaced tubes in electronics, integrated circuits (ICs) replaced transistors in the 1970s. Because no manufacturer would develop an 1C for Nippon Gakki’s relatively limited demand, the company built a plant in 1971 to make its own. By developing the technology early, Nippon Gakki established itself as a serious electronics firm, better able to serve the accelerating demand for electronic keyboards and audio components.

Large-scale integrated circuits (LSIs) allowed the company to digitalize its keyboards. Nippon Gakki built an LSI plant in 1976 so it could convert all of its electronic products from analog to digital formats. LSIs also made possible Yamaha’s growth as an electronics supplier and the manufacture of advanced electronic systems such as industrial robots. In the early 1990s, 75% of Yamaha’s chips were sold to other companies.

Nippon Gakki developed electronic components more quickly than other types of components. In its traditional line of pianos and organs, by contrast, Nippon Gakki still depended on overseas suppliers for components in the 1970s.

While Nippon Gakki’s sales in 1979 remained steady, a favorable exchange rate boosted earnings to a record ¥15 billion. The same exchange rate, however, hurt motorcycle sales. Unlike Western companies, however, Yamaha did not pare down to a core business during the 1980s.

Nippon Gakki electronics research paid off well with increasing music synthesizer sales in the 1980s. Yamaha keyboards were among the best selling digital synthesizers in the world during the decade.

Growing sophistication in new technologies and experience in older methods continue to provide Yamaha with new areas in which to grow. The development of LSIs allowed Nippon Gakki to produce its first professional sound systems and to keep pace with the consumer audio industry during the early 1980s. In 1983 the company put its LSIs themselves on the market.

In the early 1980s, Nippon Gakki divided its research facilities to reflect its electronics emphasis. Research was then carried out by four sections: one on semiconductors and LSIs, a second for research applications to audiovisual equipment, a third on hall and theater acoustic design, and the fourth for products design.

While expanding its product line, Nippon Gakki also initiated a program to spread its manufacturing base overseas, adding to its network of marketing subsidiaries. Hiroshi Kawashima, former president of the U.S. subsidiary, spearheaded the U.S. drive. In 1980 Nippon Gakki opened an electronic keyboard plant in Georgia in the hope that basing this new venture in the United States would ease trade tension.

In 1981 second-place motorcycle manufacturer Yamaha Motor tried to gain market share in the United States against first-place Honda. Yamaha introduced new models and increased production. When Honda and other motorcycle manufacturers did the same, the industry faced overproduction. As a result Yamaha Motor posted two consecutive losses totaling $126.1 million. A relatively small motor manufacturer, Yamaha Motor was left with an inventory of one million motorcycles and debts that approached $1 billion. In addition, the price competition among Japanese motorcycle makers caused U.S. manufacturer Harley Davidson to request tariffs in imports, straining Yamaha’s U.S. business, since it did not have any U.S. factories. Nippon Gakki remained profitable since it only owns 39.1% of Yamaha Motor, but the period damaged the company’s reputation and position at home.

In 1983 the third generation of Kawakamis, Hiroshi, became the company’s seventh president. Formerly an employee of Sony, his contributions include strengthening Yamaha’s audio business and overseeing overseas production.

By 1984 the company had become so diversified that one of Kawakami’s first actions was to decentralize even further. Earnings during the reorganization period posted three straight declines from 1985 to 1987. In 1987 Kawakami changed the corporate name to Yamaha, the name still carried on all its products.

Yamaha is an enigmatic company loosely focused around music. Its products include acoustic and electronic instruments and audio systems, and also include music hall design and resort management. While Yamaha has progressed in establishing an overseas manufacturing network, much of its work is still carried out in Japan. The company no longer enjoys fantastic growth in its domestic market, and the absence of continuing government assistance will make expansion tougher.

Yamaha’s product development is ambitious, and it conducts its research economically on materials that can be employed in as many items as possible. Its brand name has a sound reputation, even if limited to luxury items, and as long as the Japanese economy grows, Yamaha stands to improve sales. Making the most of its growth, however, eluded the company during the boom years of the 1980s.

Principal Subsidiaries

Yamaha Plans Co., Ltd.; Yamaha Credit Co., Ltd.; Yamaha Recreation Co., Ltd. (99.5%); Yamaha Kagoshima Semi-Conductor Inc.; Yamaha Corporation of America (U.S.A.); Yamaha Europa G.m.b.H. (Germany);Yamaha Canada Music, Ltd.; Yamaha-Kemble Music (U.K.) Ltd. (87.5%); Yamaha Motor Company, Ltd. (32.1%).