Kawai Musical Instruments Manufacturing Co., Ltd.

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Kawai Musical Instruments Manufacturing Co., Ltd.

200 Terajima-cho
Hamamatsu, Shizuoka, 430-8665
Japan
Telephone: (81) 053 457 1213
Fax: (81) 053 457 1305
Web site: http://www.kawai.co.jp

Public Company
Founded: 1927 as Kawai Musical Instruments Research Institute
Employees: 2,780
Sales: $639.9 million (2005)
Stock Exchanges: Tokyo
Ticker Symbol: KWMS F
NAIC: 339992 Musical Instrument Manufacturing

Kawai Musical Instruments Manufacturing Co., Ltd. is second only to Yamaha Corporation in global sales of musical instruments. The Japanese company's core business is the manufacture and marketing of pianos, ranging from less expensive upright and grand pianos to the Shigeru Kawai handcrafted concert grand, one of the most expensive pianos on the market, priced around $65,000. Kawai also makes electronic pianos, electronic organs, synthesizers, guitars, percussion instruments, sells scores and records, offers tuning and repair services, and runs a music school. In addition, the company operates gymnastic schools and sells computers and peripheral devices, sporting goods, leisure-related goods, environmental cleaning supplies, and wood fabricating and metal fabricating devices. Kawai is a public company, listed on the Tokyo Stock Exchange.

ORIGINS

Kawai Musical Instrument Manufacturing Co. was founded by Koichi Kawai. The son of a wagon maker, born in Hamamatsu, Japan, in 1886, Koichi displayed an inventive spirit in his early years. As a youngster he made his own pedal-driven cart and caught the attention of a neighbor, a watchmaker by training who was forced to repair medical equipment to make a living and by chance was enlisted to repair a U.S. reed organ. In 1889 the neighbor launched his own organ manufacturing company, but as the upright piano began to supplant the reed organ in the marketplace, he turned his attention to the development of his own piano using imported parts. It was during this struggle to build a piano that he spied 12-year-old Koichi Kawai riding his pedal contraption. The neighbor's name was Torakusu Yamaha, remembered today as one of the pioneers of the piano industry. He took Kawai under his wing, making him his apprentice, and during the initial decades of the 1900s Kawai played a key role in the research and development efforts of Yamaha's Nippon Gakki Co., which resulted in pianos that won numerous international awards.

Yamaha died in 1917, new management took over, and the company prospered through 1921. Nippon Gakki then experienced a string of setbacks over the next five years: the rising value of the yen that made its products less competitive internationally, a fire and earthquake that damaged or destroyed company facili-ties, and a crippling labor strike. By 1927 Nippon Gakki was on the verge of ruin, a new president was installed, and the company was reorganized. In that same year, Koichi Kawai decided to strike out on his own and along with seven colleagues left Nippon Gakki to form the Kawai Musical Instrument Research Laboratory in Hamamatsu to design his own piano.

Koichi Kawai soon produced a breakthrough, becoming the first Japanese piano maker to design and build a piano action. Prior to then, Japanese piano makers had to import piano actions from the United States or Germany. By making his own action, Kawai would be able to competitively price his pianos. A year after building the action, Kawai began producing upright pianos. Eighteen months later, he completed his first grand piano. In 1929 the company changed its name to Kawai Musical Instruments Manufacturing Co. Its corporate structure was expanded to partnership status in 1935, and the company took the name of Kawai Musical Instruments Manufacturing, Ltd. In 1930 the company also began to produce reed organs.

PIANO PRODUCTION RESUMES AFTER WORLD WAR II

Japan's economy went on a war footing in 1937 as Japan invaded China, a conflict that began the country's involvement in what would escalate into World War II. Until the end of the war in 1945, Kawai factories produced aircraft parts instead of pianos and organs. With much of Japan's infrastructure devastated, it wasn't until 1948 that Kawai could resume the production of pianos and organs. Within a few years the company was thriving once again, turning out more than 1,500 pianos per year and employing 500 people. The company was incorporated in Japan in May 1951 and took its present name. Kawai built his first concert grand piano in 1952, and his efforts in the field were recognized a year later when he was awarded the Blue Ribbon Medal of Honor from the Emperor, the first person in the piano industry to be recognized. Two years later, in October 1955, Koichi Kawai passed away at the age of 70.

Kawai's 33-year-old son, Shigeru Kawai, took charge of the company his father had founded and transformed it into a contemporary enterprise, combining his father's handcraftsmanship with modern manufacturing techniques. He established the Arai lumber processing plant in 1957 to supply materials to a new piano assembly plant, which opened four years later and featured a truly modern production line for the first time in company history. While increasing production capacity, Shigeru Kawai took steps to build demand for the company's output. In 1956 he launched the company's music education program, establishing a chain of Kawai Music schools, and to staff them with qualified teachers he began the Kawai Academy of Music. The company developed a door-to-door sales program to push piano lessons and generate piano sales, and within a few years some 2,000 sales representatives combed the country and more than 300,000 Japanese were enrolled in Kawai music schools. To make sure that the pianos the company sold would be used and enjoyed by its customers, Kawai also founded the Kawai Piano Technical Center, which trained technicians to tune and service pianos. In 1959 Kawai became involved in the direct retailing of pianos by opening its own stores, which in addition to selling pianos also serviced them.

Kawai introduced its first electronic organ to the market in 1960. Kawai became a public company in 1961, its stock listed on the Tokyo Stock Exchange. With the company now well established in its home market, Shigeru Kawai set his sights overseas, in particular the United States. In May 1963 Kawai America Corp. was launched. More foreign subsidiaries would soon follow in Australia and Asia. In 1975 Kawai Canada was established, followed a year later by Kawai Deutschland GmbH, located in West Germany. In 1979 Kawai Europe GMbH was formed, also based in West Germany in Dusseldorf. Along the way, Kawai introduced a number of innovations and key products. In 1968 the company introduced its ABS Styran action flanges, replacing some wooden parts in the piano action with longer-lasting, stronger plastic parts that better resisted warping, shrinking, and swelling caused by moisture. Kawai unveiled a transparent grand piano in 1971, and a year later introduced its KG-series of midrange priced grand pianos. A top-end line of hand-built grands, the GS-series, was introduced in 1979.

COMPANY PERSPECTIVES

Through three generations of family leadership, the Kawai company has dedicated itself to the advancement of beauty, sensitivity, creativity, and excellence.

Kawai began the 1980s with the opening of a new $50 million 300,000-square-foot facility, the Ryuyo Grand Piano Factory & Research Center, capable of turning out more than 60 grand pianos per day. It was here a year later that the company began to build its EX Concert Grands. In 1984 Kawai began the assembly of pianos in Los Angeles on a limited basis, and as the yen rose in value the company elected to build a full-scale plant in Lincolnton, North Carolina, in 1988, which operated under a new subsidiary, Kawai America Manufacturing Inc. On the technical side, Kawai in 1981 introduced the EX Concert Grand, which would serve as an opportunity for Kawai to launch innovations, such as carbon "Black Jacks" (a part of the piano action) in 1983. Also of note, Kawai unveiled its first digital piano in 1985. Furthermore, it was during the 1980s that Kawai started several new subsidiaries. In 1980 Kawai Precision Metal Co., Ltd. was formed to bring even more of the piano making process in house. A pair of units was launched in 1985: Kawai Distribution Service Co., Ltd. and Kawai Business Software Co., Ltd., which provided the company with some diversification. Then, in 1989, it formed Japan Leisure Development Co., Ltd. to become involved in leisure and sporting goods.

NEW LEADERSHIP: 1990–2000

A third generation took over the presidency in 1989 when Hirotaka Kawai succeeded his father, who now assumed the chairmanship of the company. Like his father and grandfather, Hirotaka was eager to modernize the piano building process. Under his leadership, Kawai moved into the 1990s by investing tens of millions of dollars to introduce robotics. He also oversaw the launch of manufacturing operations in Malaysia, forming Kawai Asia Manufacturing Sdn. Bhd. in 1991. The Kawai America Manufacturing subsidiary also established Kawai Finishing Inc. in November 1995, and subsequently acquired Continental Finishing Inc., based in Greer, South Carolina, which began producing polyester-coated piano parts under the Kawai Finishing name.

Kawai joined forces with Steinway & Sons in 1991, agreeing to manufacture a new, mid-priced piano line under the Boston Piano label, in the $8,000 to $15,000 price range, designed by Steinway engineers. The pianos would also be sold through Steinway's global network of dealers. For Steinway the Boston line helped it to better compete in the midprice range, now crowded with Japanese and Korean imports. The contract helped Kawai to broaden its manufacturing base and make use of excess production capacity.

Kawai also added to its own product lines in the 1990s. It introduced the GM-series in 1992 with the GM1, which added a new low price point to Kawai's grand piano offerings. The GM pianos were smaller than the other grands, but offered much of the same styling and quality of its larger counterparts. Neverthe less, the baby grands were an entry level line for Kawai's grand piano lineup. On the other end of the scale, Kawai launched its RX-series of grand pianos in 1995. The 5′10″ piano offered the best of Kawai technology and was geared for use at home as well as school, church, and teaching studios. In the upright category, Kawai, along with Yamaha, introduced its "silent" piano in 1993 in Japan, offering an option that made the piano only audible through headphones. It was marketed to people concerned about disturbing their family or neighbors—a major problem given the population density of Japan. According to the Wall Street Journal, Kawai and Yamaha once "benefited from a generation of baby boomers longing to be rock stars or the next classical sensation. Today, most silent-piano customers are these formerly rebellious noisemakers, looking to buy a quiet instrument for their children."

KEY DATES

1927:: Company founded as Kawai Musical Instruments Research Institute by Koichi Kawai.
1929:: Name is changed to Kawai Musical Instruments Manufacturing Company.
1948:: Production is resumed after World War II.
1955:: Shigeru Kawai succeeds father after Koichi Kawai's death.
1963:: Kawai America established.
1979:: Kawai Europe launched.
1985:: The first digital piano is offered.
1989:: Third generation assumes presidency.
1995:: RX-series of grand pianos launched.
2002:: Shigeru Kawai EX Concert Grand unveiled.

With the new century Kawai looked to compete with the most prestigious piano companies in the world at the upper reaches of the market. In 2000 it introduced the Shigeru Kawai limited production series of grand pianos, named after its chairman, offering a number of handcrafted features. Moreover, owners received a visit from one of the company's "Master Piano Artisans," who would apply concert-level voicing, regulation, and tuning to the instruments. But after years of establishing itself in the marketplace on the basis of value, Kawai faced a difficult challenge in changing the perception of the brand. The company persevered, however. It added to its initial three models with the Shigeru Kawai Classic Noblesse in 2001, followed a year later by the Shigeru Kawai EX Concert Grand, which the company promoted by providing it to the Rachmaninoff International Piano Competition, where it was used for all levels of competition. Also of note in the early years of the 2000s, Kawai established the Shigeru Kawai Foundation, its mission to "perpetuate music education and acknowledge significant contributions to the musical arts." The first artists to be honored were Broadway star John Raitt and Elmer Bernstein, an Oscar-winning composer of more than 200 film scores.

Kawai and its rivals had to contend with a slip in demand for pianos in Japan in the 2000s, forcing the company to launch a restructuring effort that was scheduled to be completed by early 2007. The plan called for the phaseout of the Maisaka upright piano plant, with production transferred to an Indonesian facility established in 2001. The company also planned to close its upright piano manufacturing plant in North Carolina. Kawai hoped to make up for lost business at home by focusing more attention on the rapidly growing Chinese market. In 2004 Kawai began to build a piano parts plant in China and by 2007 hoped to have a complete piano plant in operation.

PRINCIPAL SUBSIDIARIES

Kawai America Corporation; Kawai Deutschland GmbH; Kawai Europe GmbH; Kawai Asia Manufacturing Sdn. Bhd.; Kawai Finishing Inc.; MIDI Music Center Inc.; Kawai Australia Pty. Ltd.