International Management UMSCQX-15-M

13035676

UNIVERSITY OF THE WEST OF ENGLAND | YAMAHA CORPORATION

YAMAHA CORPORATION
Word count:
2000

International Management

Yamaha Corporation
I. Introduction:
Yamaha Corporation is a Japanese multinational corporation with a wide range of products as
well as services. In 1887, Yamahas business was began by Torakusu Yamaha, the founder
when repaired a broken reed organ in Japan. Ten years later, 1897, Nippon Gakki Co., Ltd.
was established with the capital which was 100 million Japanese yen. Yamaha Corporation
was the official name from 1987 to mark the 100th anniversary of its foundation. Today, with
75 subsidiary companies and nearly 20,000 employees around the world, Yamaha becomes a
worldwide known brand name.
This essay will mention and discuss the portfolio strategies of Yamaha since 2000. In detail,
portfolio mix and long-term potential of the company will be analyzed by using portfolio
tools. Moreover, the strategies of the competitors are also analyzed to suggest the suitable
decisions.
II. Mapping Yamahas Business Portfolio:
Yamaha operate in multi-industry and multi-national, therefore, multi-divisional forms (Mform) was mapped for Yamahas business portfolio (Carrell et al 1997) (Figure 1). For
development of the corporation, analysis, portfolio plays an important role which could
understand competitive position and the rate of return which received from business units
(Henry 2010). Corporation could maximize the return on investment by allocating suitable
level of resources between business units. Therefore, the general electric- McKInsey matrix
(nine box matrix) will be applied. This method could assess the performance of business
units. However, these business units were controlled by corporate parent. The fight, which
can create or destroy corporations value, between the corporate parent characteristics and
opportunities in the business is an important element. In finding the businesses which
corporate parent should take into the portfolio, the parenting fit matrix will be used. Finally,
the corporation could decide to hold the units in the portfolio by using the Market- Activated
Corporate Strategy Framework.

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Board of directors

Risk Management
Committe

Representative Director

Managing Council

Internal Auditing
Division

Corporate
Committees
Executive Offices

Individual Business
Divisions

Administrative Divisions

Group Companies

Figure 1. Yamahas M form

Base in Chandler (1966) and Yamaha Annual Report 2015

III. Corporate Strategy:

In 1990s, Yamaha was one of the largest corporation of musical instrument in the world,
accounting for nearly a half of new musical equipment sales. With a wide range of production
than any other competitors, Yamaha was pursued a corporation strategy of diversification.
Yamaha operate in many businesses and diversify the organization following both industrial
diversification and global diversification (Mellahi 2005).
In the industrial diversification, Yamaha was concentrating on musical instruments with
65.2% in segment sales. Then they expanded into the related diversification which is an
audio equipment proportion (Yamaha annual report 2015). According to Thompson and
Strickland (2003), the corporation diversified into related business when the new businesses
have relationships among the activities in their value chains. The new businesses will be
similarly strategy with the existing business (Davis et al. 1992). The companies which belong
to the corporation and operate in related business, will have the opportunities which are:
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share technology and managerial model, reduce the costs, to be popular through brand name
usage, and benefit from cooperation (Ghoshal et al 1994).
Yamaha has also operated in education, network devices, golf products, etc., Yamaha was into
unrelated new business that value chains are different which no potential exists to transfer
technology or management know-how from one business to another, to transfer competencies
to reduce costs, to achieve benefits, or combine similar activities (Thompson and Strickland
2003: 295).
With the appearance of Yamaha around the world, global diversification was applied.
According to Kim (1989), the main reason for global diversification include the accession of
the new foreign markets to discover the unique assets of that market, quality resources,
accession of lower-cost, expand the economic scale and other efficiencies, and pre-occupy
competitors.
However, there are many risks and pitfalls of diversification. The corporation has to divide
the time and energy for the portfolio. There is argument that parents may destroy some value
by increase overhead cost, slowly decisions, some unsuitable interventions, and cannot add
enough value to compensate (Goold and Campbell 2002: 219). Moreover, unsuccessful
subsidiaries may use the resources from the success (Berger and Ofek 1995). An important
issue of diversification is unsuitable interference of a corporate parent.It can affect badly on
the subsidiary managers.

Key competences:

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Figure 2 (Yamaha Annual Report 2015).

According to Tampoe (1994), core competencies are the combination of technologies and
production skills which underlain a companys production line. From figure 2, there is a seen
that Yamahas key competency is fields of sound and music. With the history is more than
125 years, Yamaha has much knowledge and skills in their major. Through identifying core
competencies, Yamaha knows the core products which are an incarnation of one or more core
competencies .This was proved through their revenue as well as a market segment of sound
and music productions (Figure 3).
There is an argument that the successes of the corporation depend on the core competencies
which underlie their end products (Prahalad and Hamel 1990). From identifying the core
competencies, the corporation knows what the main products which need to be innovated and
developed. It helps companies focus on the market, find the effective ways to use the
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resources and exploit the new businesses. Thus, core competencies could give the potential to
access the variety of markets. Moreover, it could make the products become unique which
most of customers required.

Figure 3 (Yamaha Annual Report 2015).

It can be seen that core competencies were built through a process of improvement and
enhancement. It will be the competitive advantage. A corporation who missed to contribute
core competences, will be difficult to enter as well as maintain in the market.
IV. Portfolio Matrix:
a. Parenting fit matrix:

According to Campell, Goold and Alexander (1995), parenting mix matrix was used to
evaluate how good the parents characteristics fit opportunities and the records of extending
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of misfit these characteristics and critical success factors. There is a tool to figure out the
opportunities to increase as well as the issues of destroying the value of Yamaha.
To be defined as should be well-suited to exploit and well-understood by corporation,
heartland business should be the main of corporate strategy and acquisition activity. By
contributing 65.2% in segment sales proportion and nearly 84% in revenue, musical
instrument (M) is heartland business of Yamaha Corporation. With the history and experience
more than 125 years old, Yamaha was famous and expert on musical instruments.
Understanding the important as well as the role of this branch of the corporation, Yamaha
process to establish and expand optimal sales networks for each of musical instrument.
However, there was a downtrend in the side of music and English-language school (E) in
recent five years although the corporation has some activities to improve (Yamaha annual
report 2011, 2012, 2013, 2014, and 2015). It may fit with Yamahas approach by long time
established (1954). However, the adding value is quite low so that Yamaha should examine to
divest this business if the price was suffered over the expected value of future cash flow.
Therefore, music and English-language should be in ballast category.
Turn to the side of audio equipment (A), there is a good business for Yamaha. Although audio
equipment is not major of Yamaha, it was developed quickly. The reason could be that there
is some similar characteristics between this business and musical instrument which depends
on an existing professional background of knowledge about sound and music. For the future,
Yamaha intends to develop this business become one of their major business through
expanding the market into developed and emerging countries. Therefore, it can be seen as
edge heart business.
There is a value trap business for Yamaha in semiconductors (S). It can be fitted with
parenting opportunities through their experience and know-how in sound, expertise in
developing digital musical instruments, signal technologies and soft wave technologies
(Yamaha annual report 2015). However, Yamaha may lack of critical success factors. For
instance, there is a hard sector due to many strong suppliers such as: Intel, Samsung,
Qualcomm etc.
The other businesses of Yamaha which include: golf products, automobile interior wood
components, factory automation and resort facilities (O), can be categorized as alien-territory
business. Although these businesses may not fit with Yamahas approach due to different,

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there is a creation of potential value. They contributed in the revenue as well as the brand
name of Yamaha.

E
A

Source: Adapted from M. Goold, A. Campbell and M. Alexander, Corporate Level Strategy,
Wiley, 1994.
Figure 4. Yamahas parenting fit matrix.

b. Nine box matrix:

Nine box matrix was developed to set up the capital and resources for the business units.
There are two dimensions: the attractiveness of the industry and the units ability in the
industry. It helps company know what businesses should be developed, maintained and
divested.
Musical instrument:

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Yamaha has well-position in the global musical instrument industry. With the experiences as
well as knowledge in this sector, Yamaha possesses high competitive strength. The music
instrument industry seems to be high attractiveness. The global market for musical
instruments industry was forecasted to grow up. Although there are threats from China
producers and Kawai which is a strong brand name in musical instrument, Yamaha still gains
the market share and maintains the dominant position.
Audio equipment:
There is medium competitive strength in audio equipment. Although Yamaha expertise in the
musical field, electronic is not their strength. The audio equipment market is potential.
However, the attractiveness of audio equipment is medium. In particular, there are some
strong competitors in this field such as Sony, Hitachi, etc.
Education:
Yamaha maintains the high competitive strength in this field. With the experience and the
future plans that concentrate on expanding music schools and conducting local music lessons
in China and other emerging countries, the position of Yamaha is really stable. China and
other emerging countries are really attractive. However, there is a medium attractiveness
market that so many competitors are developing and expanding such as Kawai etc.
Semiconductors:
There is a low competitive strength for Yamaha. The achievement from semiconductors
required large investments as well as huge knowledge. However, in the rapid development of
semiconductors, Yamaha is young compared to others. Furthermore, with large investment in
technology, Yamaha could lose the positions in the other fields. The attractiveness for
semiconductors is medium. Although the market is expected to grow radically in the future,
there are so many strong companies in this field such as: Intel, Samsung, NVidia etc.
Others:
The competitive position of this area is medium. Although these businesses are not Yamahas
major, Yamaha has experience. The attractiveness is low because there are so many strong
brand names while there are niche markets.

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S
E
A

Source: Gluck et al (2000).

Figure 5. Yamahas nine box matrix
c. Market- Activated Corporate Strategy Framework (MACS):

MACS framework was used to connect parent fit and nine box matrix to support the
decisions which business units should be bought, sold, spun off or taken private (Gluck et al
2000). While the horizontal axis reflected nine box matrix, vertical axis reflected data from
the parenting fit matrix.
Yamahas strategy for future development could be followed:
-

Top priority investments for musical instruments. It includes many core

competencies which deliver high competitive advantages. Moreover, the
market develops with stable trend. It could bring huge benefits as well as

revenue for Yamaha.

Audio equipment is one of the key businesses for Yamaha. Furthermore, it
contributes largely in revenue as well as the brand name of Yamaha.
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However, it required huge investments for developing. It should be
-

considered as a priority for stable finance.

With the potential for education, Yamaha should keep this business as

stable financial as well as contributing brand name.

Semiconductors need to be considered to divest. It takes many resources
from the parent. Although it will need for internal operations, the cost
could be over the benefits which it could bring back. Yamaha could
consider becoming partners of the strong semiconductor companies if this

business was liquidated.

Other business could bring small value for Yamaha. It could be considered
to maintain and invest depends on the part of the contribution.

Relative Ability to Extract Value

Alternatively, it could be liquidated if the benefits could not cover the cost.

Natural Owner

One of the pack

High

Medium

Low

Value Creation Potential in Business Unit

Source: Gluck et al (2000)
Figure 6: Yamahas MACS framework

V. Strategy Moves and Response:

Kawai Musical Instruments Manufacturing (Kawai) is a Japan company which major in
manufacturing and selling musical instruments. It was established in 1927. Nowadays, Kawai
and Yamaha Corporation is dominating the piano global market. Therefore, there is a
competition between Kawai and Yamaha.

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Japan was used to the potential market for piano when piano sales, in 1979, was 300,000
units. However, it decreased and fallen to about 17,000 units. Therefore, finding a new
potential market to survive is an important mission.
Kawai realized the potential of the Southeast Asia market, which middle class as well as
wealthy people are increasing and the demand for piano is growing. The investment was
made for seeking new market and more resources. At the end of August 2013, Kawai opened
the first company music school in Indonesia.
Forecasting the change of industry as well as strategic moves from competitor, Yamaha
expanded their influences on the piano market of Southeast Asia. So many branches of
Yamaha were opened in Southeast Asia countries such as Thailand, Vietnam, and Malaysia
etc.

VI. REFERENCES:
Athony E. Henry (2010). Understanding Strategic Management.
Berger, Philip G., and Eli Ofek. "Diversification's effect on firm value." Journal of financial
economics 37.1 (1995): 39-65.
Carrell, M. R., Jennings, D. F., &Heavrin, C. (1997). Fundamentals of organizational
behaviour. Prentice Hall.
Chanler, D (1966) Proceedings of the American Philosophical Society [online]. Available
from: http://www.amphilsoc.org/sites/default/files/1530212.pdf [Accessed 25 December
2015].
Chan Kim, W., Peter Hwang, and William P. Burgers. "Global diversification strategy and
corporate profit performance." Strategic management journal 10.1 (1989): 45-57.
Campbell, Andrew, Michael Goold, and Marcus Alexander. "Corporate strategy: The quest
for parenting advantage." Harvard business review 73.2 (1995).
Davis, Peter S., et al. "Business unit relatedness and performance: A look at the pulp and
paper industry." Strategic Management Journal 13.5 (1992): 349-361.
Goold, Michael, and Andrew Campbell. "Parenting in complex structures." Long Range
Planning 35.3 (2002): 219-243.
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Ghoshal, Sumantra, and Christopher A. Bartlett. "Creation, adoption, and diffusion of

innovations by subsidiaries of multinational corporations." Journal of International Business
Studies (1988): 365-388.
Goold, Michael, Andrew Campbell, and Marcus Alexander. Corporate-level strategy:
Creating value in the multibusiness company. New York: J. Wiley, 1994.
Gluck, F.W., Kaufman, S.P., Walleck, A.S., McLeod, K. & Stuckey, J. (2000) Thinking
Strategically ,McKinsey&Company.
Hamel, Gary, and Coimbatore K. Prahalad. "The core competence of the corporation."
Harvard business review 68.3 (1990): 79-91.
Mellahi, K.A.M.E.L., Frynas, J.G.E.O.R.G.E. and Finlay, P.A.U.L. (2005) Gobal Strategic
Management. Oxford University Press Inc, New York.
Thompson, A. A Jr., and Strickland, J. A. (2003). Strategic Management: Concepts and Caes,
13thedn. (New York: McGraw-Hill).
Tampoe, Mahen. "Exploiting the core competences of your organization." Long range
planning 27.4 (1994): 66-77.
Yamaha Corporation (2015) Annual Report 2015 [online]. Available from:
http://www.yamaha.com/about_yamaha/ir/publications/pdf-data/2015/ann/an-2015e.pdf
[Accessed 25 December 2015].

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