Shimano's Success In The Bicycle Business

2269 words - 10 pages

Explain the factors behind Shimano’s success in the bicycle parts market

During the history of the company Shimano overcame its challenges by adjusting its strategy to changes in the market while at the same time establishing its core strength
- strong focus on technology to create innovative and quality products
- establishing a direct line to customers and iterating on its product based on their demands
- transferring technology between different product lines and fields to to increase the return on investment and to produce high value added products

Great Depression
The technology focus with the aim to produce high quality and thus high value added products was already ...view middle of the document...

R&D | Production | Marketing & Sales | Service |
| improved production process to increase quality | sales strategy of replacing defective parts as marketing | |

Focusing on technology to fulfill customer demands and having a matching sales system allowed Shimano to build its market share in freewheels to 60% through the Great Depression by the beginning of the 1940s.

Market slump in Japan at the end of the 1950s
After the second world war the Japanese economy quickly recovered leading to a general boom which also affected bicycles in 1954.This boom lasted until the end of the decade when a new substitute product for the bicycle as a transportation device, the moped, became popular, causing the growth to slow and causing several competitors (more than 10) to move to the new market. Instead of moving Shimano aimed to achieve a higher added value. In the US and Europe the bicycles were already a leisure product, so this can be seen as an early step to shift its target customer.

To achieve higher added value the company invested in its R&D and production capabilities. Adopting cold forging allowed reducing the weight of freewheels while maintaining the quality and simplified processes allowed reducing the cost. Hiring university graduates on the other hand boosted the long term technical and R&D capabilities.

To establish in the new market segment Shimano adjusted its sales and service activities to further improve its quality perception and establish direct customer feedback, which it again utilized through its increasing R&D capabilities.

Increasing its sales force and selling directly to assemblers and retailers, increased the profit margin and at the same time gave the company for the first time direct customer access. This also brought a change in the sales model and instead of replacing damaged parts the company introduced a try-now, pay-later scheme that motivated retailers and assemblers to accept the product and new sales channel while building upon the quality product image. To further improve the feedback capabilities Shimano established service centers for retailers in nine cities around Japan and built a system to hear requests and complaints from consumers via retailers. Being able to react to customer and consumer requirements allowed improving sales activities and products and at the same time improved the brand image.

R&D | Production | Marketing & Sales | Service |
- increase technical capabilities by hiring university graduates- new technology cold-forging-reduce weight | - investment in production process- new modern facilities in Japan
(1x annual op. income plant, 2x equipment)- reduce needed processes- direct promotion- standardize technology | - own sales force- try now, pay later- direct promotion- improve sales activities through customer feedback- direct sales to bicycle assemblers and retailers | - service centers for retailers in 9...

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