Reference no: EM133189947
Yamaha Motor Company: 'Revs your Heart' : In October 2015 at the Tokyo Motor Show Hiroyuki Yanagi, President, CEO and Representative Director of Yamaha Motor Co., Ltd, announced that the company planned to invest $1.1 billion to accelerate new growth strategies. He aimed to achieve a 2 trillion yen turnover within three years and an overall operating profit of 10 per cent. This would require the addition of at least one new business area such as cars, three-wheelers or robots. Currently the main interests of the company lie in its activities in engines and electric motors, body engineering in motorcycles and marine vessels, control systems, and manufacturing engineering technology. Innovation in these core areas will drive both incremental and radical new products and services as the company evolves and develops its technologies. Evolution is very important to Yamaha, and it is constantly trying to create powerful new combinations based on these four areas, including power sources and technologies. Such combinations include motorcycles and engines, motorcycles and electric motors, and three-wheelers in new frames or new bodies with motorcycle engines. PAS, the world's first electrically power-assisted bicycle, is another innovation created by Yamaha Motor in the early 1990s, when the Japanese market was developing environmental consciousness.
As restrictions and regulations were increasingly surrounding the motorcycle market, the company's engineers were motivated to create a new type of mobility combining human and electric power in a solution that does not require licences or helmets. Twenty years later, almost a half million units are still sold annually in Japan and almost 1 million units in Europe. It is especially popular in Germany and the Netherlands.
Despite the uncertainties in global markets Yamaha Motor's sales have been better than most Japanese companies. In developed markets, this growth can be explained by the yen, which is much weaker now compared to previous years. About 60 per cent of the company's business comes from emerging economies, while 40 per cent comes from advanced economies, similar to most Japanese automobile manufacturers. Yamaha Motor has grown its market share in both advanced and emerging economies. In the last three years, the company has gained significant market share in advanced economies, especially the United States and Europe, largely due to its range of best-selling models in the big motorcycle category. Production volumes declined a little in 2015 due to the general economic slowdown in most emerging markets. Production in Asia and mainland China declined almost 10 per cent. Yet in spite of generally declining production, sales grew in other advanced economies, due to increased sales of premium motorcycles.
In Asia, customers are stepping up to high-end motorcycles, so that's why their sales were up even though volume was down. In the past three years the company has restructured the business by improving products and reducing costs. In addition, it was successful in motorcycle racing, such as MotoGP. The company's 2015-18 strategic plan assumes that growth in emerging economies will remain sluggish for the next two to three years, meaning that business in these regions will be slow. At the same time, advanced markets are expected to remain strong enough to overcome the emerging markets and enable the company to achieve the same level of global profits as in its last trading year. By 2018 sales are targeted to reach 2 to 3 trillion yen and deliver at least a 9 per cent operating profit. Yamaha is proud to be a 'Kando' - or excitement - creating company and it is pursuing a number of CSR programmes to realise its vision, which is to provide 'Kando' to its customers. Although Yamaha Motor and Yamaha Corporation are independent corporate entities, they are united by 'one passion', which is to be unique both in the music and transportation industries. They share the same brand charter and a common commitment to passion, innovation and quality, and for the creation of Kando. Kando in Japanese refers to an emotional feeling that people have when they experience something that exceeds their expectations. If the experience just meets their expectations, then it doesn't draw an emotional response. The experience must surpass their expectations to draw the emotional response of Kando. That is their brand and what it says about Yamaha. Yamaha Motor's 2015-18 strategic plan allocates 130 billion yen for new growth strategies. Four themes have been identified for new growth.
1. Personal mobility - through bicycles, motorcycles, scooters, multi-wheelers, recreational vehicles and compact four-wheelers, all featuring the 'unique style of Yamaha'.
2. Marine business - Yamaha is the leading brand in the world in the marine market. The marine business currently accounts for sales of almost 300 billion yen and 20 per cent operating profit, which is a unique business model.
3. Solutions business, which includes robotics, surface mounters and unmanned systems, such as drones.
4. Foundational technology development.
In the growing personal mobility market the company is now advancing research on compact four-wheelers and multi-wheelers, such as twin-front-wheel systems. In the marine business, where Yamaha Motor already has solid market leadership and strong engine know-how, it isdeveloping more integrated controls for total boat systems, as well as advanced on-board IT systems to further improve performance and customer experiences.
3. In the marine business the company plans to expand its operations as a system supplier offering not only engines but also boat packaging, boat control systems, IT systems, and marine- life value.
The company's hallmark motorcycle business only delivers a 6 per cent operating profit compared to 20 per cent in its marine business. It is a market where there is growing competition from Honda and Suzuki. In Japan, there is a need to continue restructuring the business, as it is
still importing most of its motorcycles and scooters from Taiwan, which leaves it vulnerable to currency fluctuations. As the Taiwanese currency is linked to the U.S. dollar, importing items from Taiwan turns out to be very expensive, since the dollar is very strong and the yen is weak against the dollar. In Europe, there are new emissions regulations, called Euro 4, which will require additional expenditure on R&D to further upgrade the emissions performance of products. Artificial intelligence (AI) and robotics offer considerable growth potential to the largeautomobile and motor companies. At the Tokyo Motor Show in 2016 Yamaha presented the 'Motobot' robotics and automated systems it has developed and embedded in its new products. It is working with Stanford University to develop autonomous motorcycle-riding robots. The aim i to gain technological expertise and know-how in this field and then apply this to develop rider- support systems.
Additionally, the company aims to implement more automation within the machine-operation process, which is reflected in the specification of its flagship super sports model. The new model features ultra-high-performance technology and highly advanced control systems with its rider- support system. The plan is to introduce this concept and technology across the full Yamaha range of motorcycles. Currently the U.S. market represents about 20 to 25 per cent of Yamaha's global sales. The United States is a special market for Yamaha Motor. In Europe, 80 per cent of business comes from motorcycles, but in the United States, business comes from a variety of segments. The U.S. marine market is the biggest in the world and offers high volume and high sales. The U.S. motorcycle market also offers high business volume based on large motorcycles. Recreational vehicles, such as All-Terrain Vehicles (ATVs) and Recreational Off-highway Vehicles (ROVs), are another substantial market for Yamaha Motor in the United States. As global competition intensifies it is becoming essential for Yamaha to improve its local logistics and marketing activity as well as becoming more active in its business social responsibility programmes.
Question: Read the case brief and apply the 13-step strategic innovation management model. Make brief notes under each of the 13 step heads and then write a brief report to Yamaha's CEO with your recommendations for developing the company's management of strategic innovation in the U.S. market.