Yamaha Corporation

10-1, Nakazawa-cho
Hamamatsu, Shizuoka 430-8650
Japan
Telephone: (53) 460-2211
Fax: (53) 460-2525
Web site: http://www.yamaha.co.jp

Public Company
Incorporated: 1897 as Nippon Gakki Co., Ltd.
Employees: 21,599
Sales: ¥527.90 billion ($4.97 billion) (2000)
Stock Exchanges: Tokyo Osaka Nagoya
NAIC: 331513 Steel Foundries (Except Investment); 334119 Other Computer Peripheral Equipment Manufacturing; 334310 Audio and Video Equipment Manufacturing; 334413 Semiconductor and Related Device Manufacturing; 339920 Sporting and Athletic Good Manufacturing; 339992 Musical Instrument Manufacturing; 551112 Offices of Other Holding Companies; 611610 Fine Arts Schools

Yamaha Corporation, one of Japan’s most diversified companies, is the world’s largest maker of musical instruments, including pianos and keyboards, wind instruments, string and percussion instruments, and digital musical instruments. Since 1950 the company has also become a major producer of audio products, semiconductors and other electronics products, furniture, sporting goods, and specialty metals. Yamaha also runs music schools in Japan and 40 other countries, owns and operates a string of resorts located throughout Japan, and holds a 33 percent stake in the separately managed Yamaha Motor Company, Ltd., the world’s second largest producer of motorcycles, and a producer as well of boats, snowmobiles, golf carts, all-terrain vehicles, engines, and industrial robots. Nearly three-fourths of Yamaha Corporation’s net sales are derived from its musical instrument and audio products operations.

19th-century Origins

Yamaha founder Torakusu Yamaha’ s venture reflected late 19th-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 such as 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 because of a 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 Hamamatsu 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 St. Louis World Exposition in 1904.

The World Wars

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 required the same 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 crafts-person’s industry at the time of 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 nontraditional 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.

Postwar Expansion

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.

Company Perspectives:

Yamaha is one of the world’s leading manufacturers of pianos, digital musical instruments, and wind, string, and percussion instruments. At the same time, the Company has grown through a broad spectrum of business activities, including electronic devices and equipment, professional audio equipment, and audiovisual equipment.

To continue growing in the 21st century, the Yamaha Group will make a concerted effort to become a truly global enterprise that fulfills its corporate mission of contributing to enriching the quality of life of people worldwide.

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 Yamaha expanded to produce yachts, patrol boats for Japan’s Maritime Safety Agency, and oceangoing fishing vessels. Primarily serving the Asian market, the company eventually became Japan’s largest FRP boat producer. FRP capability led to the 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 such as 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 an 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.

Key Dates:

1887:

Company founder Torakusu Yamaha builds his first reed organ.

1889:

Yamaha founds Yamaha Organ Manufacturing Company, Japan’s first maker of Western musical instruments.

1897:

Company’s name is changed to Nippon Gakki Co., Ltd.

1900:

Company produces its first upright piano.

1902:

Production of grand pianos begins.

1930:

Company opens an acoustics lab and research center.

1948:

Japan’s Education Ministry mandates musical education for Japanese children, expanding Yamaha’s business.

1954:

Yamaha Music Schools debut.

1955:

Company produces its first motorcycle through an affiliated company, Yamaha Motor Company, Ltd.

1958:

First overseas subsidiary is established in Mexico.

1967:

First concert grand piano is produced.

1971:

Production of semiconductors begins.

1982:

The first Disklavier pianos are produced.

1983:

Company introduces the DX-7 digital synthesizer, a top seller.

1987:

Company changes its name to Yamaha Corporation to celebrate the 100th anniversary of the firm.

1993:

The Silent Piano series debuts.

2000:

Yamaha posts a net loss of $384 million for the fiscal year ending in March; newly installed President Shuji Ito initiates a restructuring program.

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 eventually operated throughout Europe and the United States and taught scores of 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. After 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 percent 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.

Electronics Developments in the 1970s

Just as transistors had once replaced tubes in electronics, integrated circuits (ICs) replaced transistors in the 1970s. Because no manufacturer would develop an IC 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. 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. Nevertheless, the same exchange rate hurt motorcycle sales.

Overextension in the 1980s

The 1980s were a difficult decade for the company. While there were notable successes, Nippon Gakki was badly mismanaged in a case of imperial overreach. The company’s first major blunder actually came from its affiliate, Yamaha Motor, which in 1981 unwisely tried to unseat Honda from its top position in motorcycles. 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 on imports, straining Yamaha’s U.S. business, since it did not have any U.S. factories. Nippon Gakki remained profitable since it owned only 39.1 percent of Yamaha Motor (later reduced to 33 percent), but the debacle damaged the company’s reputation and position at home.

On the positive side, synthesizers and LSIs brought the company success early in the decade. Electronics research paid off well with the 1983 introduction of the DX-7 digital synthesizer, which went on to become the best-selling synthesizer ever. 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.

Also 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 Kawa-shima, 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.

Further difficulties, however, were in store when Hiroshi, the third generation of Kawakamis, became the company’s seventh president in 1983. His father, then chairman, reportedly distrusted Hiroshi and battles between the two helped lead the company astray. Hiroshi brought in outside consultants in end-runs around his father, but this only resulted in such unwise moves as building huge headquarters in London and Buena Park, California, which served simply as symbols of a global powerhouse that was not. The company also became notorious for moving ahead with ambitious projects after doing little, if any, market research. Before there was even the smallest market for it, for example, Nippon Gakki attempted to develop a multimedia computer in the early 1980s and, probably to the company’s good fortune, failed. Another marketing miscalculation at the other end of the decade left Yamaha with 200,000 unsold wind instruments in 1990.

Such ventures might have been perceived as noble failures if it were not for the company’s increasingly troubled finances. Throughout the 1980s, rising profitability became increasingly elusive. Hiroshi Kawakami’s attempt at a reorganization from 1985 to 1987 had failed to turn the company around. Meanwhile, to celebrate the 100th anniversary of the firm, Kawakami changed the corporate name to Yamaha Corporation in 1987.

1990s and Beyond

Kawakami made another attempt to resurrect Yamaha but was thwarted by a demoralized and rebellious workforce. He reportedly had hoped to use early retirement as a means of reducing the company’s number of employees, but the workers’ labor union refused to go along with the plan and demanded that Kawakami be fired—and he was.

Taking over in 1992 was a 36-year Yamaha veteran with a marketing background, Seisuke Ueshima, who quickly moved to turn the company around. He demoted Kawakami cronies and brokered an agreement with the union that retained all nonmanagerial employees but led to the elimination of 30 percent of the administrative positions in Japan along with overseas employees (notably those in the London and Buena Park headquarters). Ueshima also downsized the noncore resorts and sporting goods operations, both of which were losing money.

For the longer term, Ueshima had to change the way new products were developed and marketed. Specifically, he wanted Yamaha employees to ask “Why are we building this product?,” a question rarely raised during previous decades. In the face of the maturation of some markets, Ueshima decided to go after the high end of these markets where larger profits could be made. One example was the Disklavier series of pianos, originally introduced in 1982, with built-in computers for recording and playing back performances; individual Disklavier models could retail for more than $30,000.

Ueshima also pushed the company to develop innovative new products. In 1993 the Silent Piano series was introduced to great success. Costing $7,300 each, more than 17,000 were sold in Japan in their first 12 months on the market, 70 percent above the amount projected. These pianos could either be played as regular acoustic pianos or their sound could be muted and only heard by the pianist through headphones. In 1995, Yamaha introduced a similarly functional electronic trumpet mute and sold 13,000 of them in the first few months. Silent Drums followed in 1996, the Silent Violin in 1997, and the Silent Cello in 1998. Other successful musical introductions of this period included the VL1 and VP1 virtual acoustic synthesizers, which, rather than storing libraries of sounds that could be replayed, stored computer models of the instruments themselves which were then able to reproduce a wider variety of sounds and in a more authentic fashion.

Other innovations during this time included the Yamaha FM sound chip used in many sound boards—an essential feature of multimedia computers—and a karaoke system that received music via phone lines connected to a central computer loaded with laser disks. Such successes returned Yamaha to healthy profitability: ¥6.4 billion in 1994 and ¥28.5 billion in 1995. In June 1997 Kazukiyo Ishimura took over as president of Yamaha, having headed up the company’s electronic parts unit, turning it into a ¥100 billion business. Yamaha went on to post solid results for the 1998 fiscal year: net income of ¥13.48 billion ($101.3 million) on revenues of ¥608.99 billion ($4.58 billion).

The end of the 20th century saw Yamaha make another change at the top, as Shuji Ito was named president. By this time, the company had fallen into the red once again as a result of the stagnant Japanese economy, the appreciation in the yen, and a dropoff in results in the company’s electronic parts unit. For the fiscal year ending in March 2000, Yamaha posted a net loss of ¥40.78 billion ($384.2 million) on sales of ¥527.9 billion ($4.97 billion). Part of this loss was attributable to restructuring costs, including the company’s withdrawal from the manufacturing of storage heads (electronic components that write on and read from hard disks), the sale of a semiconductor plant, an early retirement program that cut the workforce by 11 percent, and additional restructuring efforts undertaken to turn around several underperforming businesses.

Seeking a quick return to profitability in the early 21st century, Ito aimed to further focus the company’s efforts on the core musical instruments and audiovisual groups. Ito also sought to engender more cross-company cooperation by consolidating group management. Another new initiative was the Digital Media Business Strategy, which included a number of components, including an increased emphasis on equipment such as sound chips and digital content designed for mobile phones and other handheld devices; the formation of a new record company called Yamaha Music Communications Co., Ltd., with the eventual goal of offering online downloading of music content; and the development of network-enabled musical instruments and equipment.

Principal Subsidiaries

Yamaha Music Tokyo Co., Ltd.; Yamaha Music Nishitokyo Co., Ltd.; Yamaha Music Yokohama Co., Ltd.; Yamaha Music Kitakanto Co., Ltd.; Yamaha Music Higashikanto Co., Ltd.; Yamaha Music Niigata Co., Ltd.; Yamaha Music Osaka Co., Ltd.; Yamaha Music Kobe Co., Ltd.; Yamaha Music Okayama Co., Ltd.; Yamaha Music Matsuyama Co., Ltd.; Yamaha Music Nagoya Co., Ltd.; Yamaha Music Hamamatsu Co., Ltd.; Yamaha Music Kanazawa Co., Ltd.; Yamaha Music Kyushu Co., Ltd.; Yamaha Music Hokkaido Co., Ltd.; Yamaha Music Tohoku Co., Ltd.; Yamaha Music Hiroshima Co., Ltd.; Yamaha Music Trading Corporation; Yamaha Music Media Corporation; Yamaha Music Communications Co., Ltd.; Yamaha Sound Technologies Inc.; Yamaha Kagoshima Semiconductor Inc.; Yamaha Livingtec Corporation; Yamaha Living Products Corporation; Yamaha Resort Corporation; Kiroro Development Corporation; Haimurubushi Inc.; Yamaha Metanix Corporation; Yamaha Fine Technologies Co., Ltd.; Yamaha Credit Corporation; Yamaha Insurance Service Co., Ltd. THE AMERICAS: Yamaha Corporation of America (U.S.A.); Yamaha Exporting, Inc. (U.S.A.); Yamaha Electronics Corporation, U.S.A.; Yamaha Music Manufacturing, Inc. (U.S.A.); Yamaha Musical Products, Inc. (U.S.A.); Yamaha Canada Music Ltd.; Yamaha de México, S.A. de C.V.; Yamaha de Panamá, S.A. EUROPEAN REGION: Yamaha-Kemble Music (U.K.) Ltd.; Kemble & Company Ltd. (U.K.); Kemble Music Ltd. (U.K.); Yamaha Electronics (U.K.) Ltd.; Yamaha Europa G.m.b.H. (Germany); Yamaha Electronik Europa G.m.b.H. (Germany); Yamaha Musique France S.A.; Yamaha Electronique France S.A.; Yamaha Electronique Alsace S.A. (France); Yamaha Musica Italia s.p.a. (Italy); Yamaha-Hazen Musica S.A. (Spain); Yamaha Scandinavia A.B. (Sweden). ASIA, OCEANIA AND OTHER REGIONS: Tianjin Yamaha Electronic Musical Instruments, Inc. (China); Taiwan Yamaha Musical Instrument Mfg. Co., Ltd.; Yamaha KHS Music Co., Ltd. (Taiwan); Kaohsiung Yamaha Co., Ltd. (Taiwan); P.T. Yamaha Music Indonesia; P.T. Yamaha Indonesia; P.T. Yamaha Music Manufacturing Indonesia; P.T. Yamaha Musical Products Indonesia; P.T. Yamaha Manufacturing Asia; Yamaha Music (Asia) Pte. Ltd. (Singapore); Yamaha Systems Technology Singapore Pte. Ltd.; Yamaha Electronics Manufacturing (M) Sdn. Bhd. (Malaysia); Yamaha Music (Malaysia) Sdn. Bhd.; Yamaha Music Australia Pty., Ltd.

Principal Competitors

Allen Organ Company; Baldwin Piano & Organ Company; C.F. Martin & Company; Casio Computer Co., Ltd.; Fender Musical Instruments Corporation; Gibson Musical Instruments; Kaman Corporation; Kimball International, Inc.; Matsushita Electric Industrial Co., Ltd.; Roland Corporation; Sony Corporation; Steinway Musical Instruments, Inc.

Further Reading

Armstrong, Larry, “Sweet Music with Ominous Undertones for Yamaha,” Business Week, November 15, 1993, pp. 119–20.

Henry, Lawrence, “Yamaha Stubs Its Imperial Toe,” Industry Week, April 6, 1992, pp. 29–31.

Lieberman, Richard K., “The Ivory Poachers: Steinway & Sons Was the Incomparable Maker of the Grand Piano—Until Yamaha Came Along,” Financial Times, August 9, 1997, p. 1.

Morris, Kathleen, “Play It Again, Seisuke,” Financial World, November 22, 1994, pp. 42–46.

“Perfect Pitch?,” Economist, February 17, 1996, p. 60.

Schlender, Brenton R., “The Perils of Losing Focus,” Fortune, May 17, 1993, p. 100.

Yamaha: A Century of Excellence, 1887–1987, Hamamatsu, Japan: Yamaha Corporation, 1987.

“Yamaha’s First Century,” Music Trades, August 1987.

—Ray Walsh
—update: David E. Salamie

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%).

Further Reading

Yamaha’s First Century,” Music Trades, August 1987; Yamaha: A Century of Excellence: 1887-1987, Hamamatsu, Japan, Yamaha Corporation 1987.

—Ray Walsh

Yamaha Corporation

10-1, Nakazawa-cho
Hamamatsu, Shizuoka 430
Japan
(53) 460-2850
Fax: (53) 456-1109

Public Company
Incorporated: 1897 as Nippon Gakki Co., Ltd.
Employees: 10,676
Sales: ¥446 billion (US$2.93 billion) (1994)
Stock Exchanges: Tokyo Osaka Nagoya
SICs: 3325 Steel Foundries, Not Elsewhere Classified; 3577 Computer Peripheral Equipment, Not Elsewhere Classified; 3651 Household Audio & Video Equipment; 3931 Musical Instruments; 6719 Offices of Holding Companies, Not Elsewhere Classified

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, semiconductors and other computer-related products, home appliances and furniture, sporting goods, specialty metals, machine tools, and industrial robots. Yamaha also owns and operates a string of resorts located throughout Japan, and holds a 31 percent stake in the separately managed Yamaha Motor Company, Ltd. which is the world’s second-largest producer of motorcycles. Yamaha Corporation foundered in the 1980s from mismanagement, but was turned around following the appointment of its eighth president, Seisuke Ueshima, in 1992.

19th Century Origins

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.

The World Wars

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 craftsperson’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 nontraditional 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.

Postwar Expansion

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.

Company Perspectives

Our corporate philosophies are embedded in our customer oriented management and operations; providing excellence in our products and services; continuous efforts to expand our existing market and create new markets; enhancement of research and development on a long range perspective; commitment to care for end users through providing even better service after sale; pursuit of further globalization of Yamaha’s business; fostering positive growth through diversification. Yamaha’s very basic corporate objective is reflected in everything that it does, which is to contribute to the enrichment of the quality of lives for people around the world.

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 such as 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 percent 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.

Electronics Developments in the 1970s

Just as transistors had once replaced tubes in electronics, integrated circuits (ICs) replaced transistors in the 1970s. Because no manufacturer would develop an IC 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. 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. Nevertheless, the same exchange rate hurt motorcycle sales.

Overextension in the 1980s

The 1980s were a difficult decade for the company. While there were notable successes, Nippon Gakki was badly mismanaged in a case of imperial overreach. The company’s first major blunder actually came from its affiliate, Yamaha Motor, which in 1981 unwisely tried to unseat Honda from its top position in motorcycles. 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 US$126.1 million. A relatively small motor manufacturer, Yamaha Motor was left with an inventory of one million motorcycles and debts that approached US$1 billion. In addition, the price competition among Japanese motorcycle makers caused U.S. manufacturer Harley Davidson to request tariffs on imports, straining Yamaha’s U.S. business, since it did not have any U.S. factories. Nippon Gakki remained profitable since it only owned 39.1 percent of Yamaha Motor (later reduced to 31 percent), but the debacle-damaged the company’s reputation and position at home.

On the positive side, synthesizers and LSIs brought the company success early in the decade. Electronics research paid off well with the 1983 introduction of the DX-7 digital synthesizer, which went on to become the best-selling synthesizer ever. 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.

Also 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.

Further difficulties, however, were in store when Hiroshi, the third generation of Kawakamis, became the company’s seventh president in 1983. His father, then chairman, reportedly distrusted Hiroshi and battles between the two helped lead the company astray. Hiroshi brought in outside consultants in end-runs around his father, but this only resulted in such unwise moves as building huge headquarters in London and Buena Park, California, which served simply as symbols of a global powerhouse that wasn’t. The company also became notorious for moving ahead with ambitious projects after doing little, if any, market research. Before there was even the smallest market for it, for example, Nippon Gakki attempted to develop a multimedia computer in the early 1980s and probably to the company’s fortune failed. Another marketing miscalculation at the other end of the decade left Yamaha with 200,000 unsold wind instruments in 1990.

Such ventures might have been perceived as noble failures if it were not for the company’s increasingly troubled finances. By the end of the decade, it was seen that 1980 represented the decade’s peak of profitability. Hiroshi Kawakami’s attempt at a reorganization from 1985 to 1987 had failed to turn the company around. Meanwhile, to celebrate the 100th anniversary of the firm, Kawakami changed the corporate name to Yamaha Corporation in 1987.

1990s and Beyond

Kawakami made another attempt to resurrect Yamaha but was thwarted by a demoralized and rebellious work force. He reportedly had hoped to use early retirement as a means of reducing the company’s number of employees, but the workers’ labor union refused to go along with the plan and demanded that Kawakami be fired—and he was.

Taking over in 1992 was a 36-year Yamaha veteran with a marketing background, Seisuke Ueshima, who quickly moved to turn the company around. He demoted Kawakami cronies and came to an agreement with the union that retained all nonmanagerial employees but led to the elimination of 30 percent of the administrative positions in Japan along with overseas employees (notably those in the London and Buena Park headquarters). Ueshima also downsized the noncore resorts and sporting goods operations, both of which were losing money.

For the longer term, Ueshima had to change the way new products were developed and marketed. Specifically, he wanted Yamaha employees to ask “Why are we building this product?,” a question rarely raised during previous decades. In the face of the maturation of some markets, Ueshima decided to go after the high-end of these markets where larger profits can be made. One example was the Disklavier series of pianos with built-in computers for recording and playing back performances; individual Disklavier models could retail for more than US$30,000.

Ueshima also pushed the company to develop innovative new products. In 1993 the Silent Piano series was introduced to great success. Costing US$7,300 each, more than 17,000 were sold in Japan in their first 12 months on the market, 70 percent above the amount projected. These pianos could either be played as regular acoustic pianos or their sound could be muted and only heard by the pianist through headphones. In 1995, Yamaha introduced a similarly functional electronic trumpet mute and sold 13,000 of them in the first few months. Other successful musical introductions of this period included the VL1 and VP1 virtual acoustic synthesizers, which, rather than storing libraries of sounds that could be replayed, stored computer models of the instruments themselves which were then able to reproduce a wider variety of sounds and in a more authentic fashion.

Other innovations during this time included the Yamaha FM sound chip used in many sound boards that were an essential feature of multimedia computers, and a karaoke system that received music via phone lines connected to a central computer loaded with laser disks. Such successes returned Yamaha to healthy profitability: ¥6.4 billion in 1994 and ¥28.5 billion in 1995. Although the company still had some distracting noncore assets as it headed into the 21st century, the leadership of Ueshima appeared to have set it on course for a new era of musical and electronic success.

Principal Subsidiaries

Yamaha Credit Co., Ltd.; Yamaha Plans Co., Ltd.; Yamaha Hall Co., Ltd.; Yamaha Kyohan Co., Ltd.; Yamaha Livingtec Corporation; Yamaha Motor Company, Ltd. (31%); Yamaha Recreation Co., Ltd.; Yamaha Electronik Europa G.m.b.H. (Germany); Yamaha Europa G.m.b.H. (Germany); Yamaha Music (Asia) Pte. Ltd. (Singapore); Yamaha Corporation of America (U.S.A.); Yamaha Electronics Corp. USA.

Further Reading

Armstrong, Larry, “Sweet Music with Ominous Undertones for Yamaha,” Business Week, November 15, 1993, pp. 119–20.

Henry, Lawrence, “Yamaha Stubs Its Imperial Toe,” Industry Week, April 6, 1992, pp. 29–31.

Morris, Kathleen, “Play It Again, Seisuke,” Financial World, November 22, 1994, pp. 42–46.

“Perfect Pitch?,” Economist, February 17, 1996, p. 60.

Schlender, Brenton R., “The Perils of Losing Focus,” Fortune, May 17, 1993, p. 100.

“Yamaha’s First Century,” Music Trades, August 1987.

Yamaha: A Century of Excellence: 1887–1987, Hamamatsu, Japan: Yamaha Corporation, 1987.

—Ray Walsh

—updated by David E. Salamie

Yamaha Corporation

founded: 1897

Contact Information:

headquarters: 10-1, nakazawa-cho
hamamatsu, shizuoka 430 japan phone: 81-53-460-2071 fax: 81-53-464-8554 url: http://www.yamaha.com

OVERVIEW

Yamaha is a Japan-based conglomerate that makes a wide range of products. The company is probably best known as the world's largest maker of musical equipment. Yamaha also produces audio equipment, furniture, sporting goods, and household fixtures. The company's annual sales in the mid-1990s were in the $4-$5 billion range. Yamaha owns one-third of the Yamaha Motor Corporation, the world's second-largest motorcycle maker after Honda.

COMPANY FINANCES

In the fiscal year ended March 31, 1997, Yamaha recorded sales of 604,554 million yen ($4.88 billion), up 14 percent from the prior year. Net income advanced 49 percent to 14,066 million yen ($113.60 million). The net profit margin (net income as a percent of sales) was 2.3 percent compared with 1.8 percent the year before. Earnings per share were about 72 yen and dividends per share were 9 yen, or a payout ratio of 12.5 percent (dividends as a percentage of earnings per share).

HISTORY

In 1889 Torakusu Yamaha established the Yamaha Organ Manufacturing Company. In 1897 he renamed the company Nippon Gakki Co., Ltd., which means "Japan Musical Instruments." By 1920 the company was making 10,000 organs and 1,200 pianos a year.

Nippon Gakki was hurt by significant labor strife during the 1920s, but the growth in Japan's public school system in the 1930s helped the company make a comeback. During World War II the company made propellers for Zero fighter planes and other like products. Only one of the company's factories survived World War II, but by the late 1940s Nippon Gakki was once again exporting musical instruments. In 1954 Nippon Gakki established the Yamaha Motor Company Ltd., a motorcycle manufacturer. During the 1950s the company also diversified into electronics.

In the 1960s Nippon Gakki greatly increased its markets for musical instruments, including a strong push into the United States. Yamaha began to make semiconductors and entered electronics research in the 1970s. Nippon Gakki continued to diversify in the 1980s, as it expanded into electronic instruments, audio systems, music hall design, and resort management. The company changed its corporate name from Nippon Gakki to Yamaha in 1987.

STRATEGY

Yamaha has been criticized for trying to produce and market products for every activity it has developed. The range of its product line is indeed astounding: music schools, boats, motorcycles, archery equipment, tennis rackets, violins, kitchens, semiconductors, and more. Some say these offerings have the overall theme of "creating richer lives." Others argue, however, that for most of its history Yamaha really has not had a corporate strategy at all.

Since Seisuke Ueshima took over presidency in 1992 (he later became chairman), Yamaha's performance has improved over that of the late 1980s and early 1990s. The company has introduced such innovative and well-received products as the silent piano, the Yamaha Home Cinema, and the Disklavier (a high-quality acoustic piano with digital features). Ueshima also has restructured the company somewhat and has reduced the number of employees by cutting administrative and overseas staff.

FAST FACTS: About Yamaha Corporation

Ownership: Yamaha is a publicly owned company traded on the Tokyo Stock Exchange.

Officers: Seisuke Ueshima, Chmn.; Kazukiyo Ishimura, Pres.

Employees: 9,324

Principal Subsidiary Companies: Yamaha has numerous operating subsidiaries, including Yamaha of America, which was founded in 1960. It is one-third owner of Yamaha Motor Corporation, which makes motorcycles, snow mobiles, golf carts, and industrial robots.

Chief Competitors: Because of its many varied businesses, Yamaha competes with a wide range of companies. In motorcycles, competitors include: Honda and Kawasaki. In musical instruments: Steinway; and in audio equipment: Matsushita and Sony.

DON'T SHOOT THE PIANO MAKERS

When you hear the name Yamaha, you may think of the motorcycle idling next to you at a traffic light. But Yamaha has its fingers in any number of pies and is currently involved in an intense competition to dominate the grand piano market. Their principal competitor is Steinway, and similar to the way in which professional athletes are paid to endorse a particular shoe, both Yamaha and Steinway have signed up professional concert pianists to promote and endorse their brands. So, who do you go with? Yamaha pianos sell for less, but Steinways are said to age better. Yamaha is first overall in the world market for musical instruments, but Steinway has a better reputation for turning out well-crafted products. High culture aside, the fact is that the market for grand pianos is as cutthroat as any other business.

INFLUENCES

In 1887 Torakusu Yamaha was a young engineer who fixed medical equipment in Osaka, Japan. As part of his job he was responsible for repairing surgical equipment in Hamamatsu, a small Japanese fishing town. Because of the area's isolation, Yamaha was asked to repair the town's U.S.-made Mason & Hamlin reed organ. He quickly recognized the potential for a Japanese manufacturer of such instruments and set up the Yamaha Organ Manufacturing Company in 1889. The Japanese government gave the company a boost when it granted Hamamatsu township status, helping it acquire railway service and making it a regional commerce center.

The Japanese government had other ways of helping the company, which was renamed Nippon Gakki in 1897. As part of an effort to build exports, in 1899 the Ministry of Education sponsored Yamaha on a tour of the United States. He studied piano making and established relationships with suppliers for the materials to make them. Within a year Yamaha had built his first piano, and the Japanese government was among his most important customers.

The disruption caused by World War I helped the company diversify its product line. Harmonicas made by a local German maker became difficult to obtain, so Nippon Gakki entered the harmonica business. More generally, the war cut off traditional supply lines to Asia, which helped the Japanese economy grow. Nippon Gakki grew along with it, and by 1920 the company employed 1,000 workers who produced 10,000 organs and 1,200 pianos a year.

Yamaha died suddenly during the war and was succeeded by vice-president Chiyomaru Amano in 1917. Amano had extensive political contacts that helped the company expand. But during his 10-year tenure the company suffered severe labor strife. These problems, combined with the appreciation of the yen, fires at important facilities, and the impact of the Great Kanto earthquake, drove the company to near bankruptcy by 1922.

In 1927 Amano was replaced as president by Kaichi Kawakami, who helped reorganize the company and reduce its debts. The company's fortunes continued to improve in the 1930s. In 1930 Kawakami opened an acoustics lab and research center so that Nippon Gakki could produce higher-quality instruments. The company also hired advisors from C. Bechstein of Germany to improve the quality of the Yamaha piano. The growth of the Japanese public school system in the 1930s helped expand demand for the company's musical instruments.

In the Japanese war economy of the early 1940s, Nippon Gakki produced propellers for Zero fighter planes, fuel tanks, and wing parts. World War II almost led to the company's collapse, as Japan lay destitute in 1945. But the war also helped Nippon Gakki acquire the production skills to broaden its product line. In the early postwar period, financial assistance from the United States allowed the company to once again begin production of musical instruments. The company produced its first audio component, a phonograph, in 1947.

With the recovery of the Japanese economy in the 1950s, the company's sales picked up. Nippon Gakki helped to popularize Western music in Japan by opening the Yamaha music schools in 1954. Ten years later it established its first Yamaha schools in the United States, boosting demand for its musical instruments. The company continued to improve its production techniques and developed new markets in both the United States and Europe. The company's annual piano output rose from 24,000 in 1960 to 100,000 in 1966, making it the largest piano producer in the world.

Yamaha also became involved in fiberboard reinforced plastics (FRP). It produced its first sailboat made entirely of the plastic in 1960. Yamaha's expertise in FRP for boats helped it introduce other products, such as archery bows, skis, and bathtubs. Research into metals engineering enabled the company to become a major factor in the household construction industry, producing boilers, heating systems, and other products. Moreover, during the 1970s the company established itself as a serious electronics firm. It began to produce large-scale integrated circuits (LSIs), and it built its own plant in 1971. By developing its technology early, Yamaha would later be better able to meet expanding demand for digital synthesizers and audio equipment. Early development of technology also enabled the company to become a supplier of advanced electronic systems, such as industrial robots.

CHRONOLOGY: Key Dates for Yahama Corporation

1889:

Yamaha Organ Manufacturing Co. is established

1897:

Company is renamed Nippon Gakki Co., Ltd.

1917:

Chiyomaru Amano becomes president

1920:

Company employs 1,000 people

1927:

Kaichi Kawakami becomes president

1930:

Opens acoustics lab and research center

1947:

Produces a phonograph—the company's first audio component

1954:

Establishes Yamaha Motor Co. Ltd.

1960:

Yamaha of America is founded

1966:

Becomes largest piano producer in the world

1971:

Builds plant to produce large-scale integrated circuits

1987:

Changes name to Yahama

1992:

Seisuke Ueshima becomes president

In 1955 Nippon Gakki built its first motorcycle and established the Yamaha Motor Company, with Nippon Gakki as part owner. Yamaha Motor introduced its first motorcycles in the United States during the 1960s. Along with Honda and Suzuki, Yamaha offered smaller, lower-priced cycles that appealed to a wider customer base than the large cycles, which were primarily aimed at enthusiasts. In the early 1980s, when it was the second-leading motorcycle manufacturer, Yamaha made an all-out attempt to gain market share in the United States at the expense of first-place Honda. The effort backfired, however, and Yamaha Motor wound up losing tens of millions of dollars.

In 1987 the company changed its name from Nippon Gakki to the better-known Yamaha. By that time Yamaha was involved in seven widely diverse markets: musical instruments, motorcycles, snowmobiles, out-board motors, electrical components, acoustic products, and sporting goods.

CURRENT TRENDS

In the seven years between fiscal 1986 and fiscal 1992, Yamaha's income as a percent of sales fell steadily from 2.5 to 0.4 percent. In 1993 the company actually lost money. In 1994 and 1995, however, the company staged a recovery, and in 1996 net income was up nearly 50 percent to $114 million on sales of $4.9 billion. The improved performance reflected Yamaha's efforts to cut its administrative and overseas staff and reorganize its operations. The company also introduced innovative products such as the Disklavier (see the Products section for a description), which have been hugely successful.

PRODUCTS

One of Yamaha's most successful new products has been the Disklavier, a high-quality acoustic piano that incorporates digital features. According to Paul Lim of Money magazine, "The Disklavier sounds just like a traditional acoustic instrument. But at the flick of a switch it becomes a high-tech player piano. You just insert one of more than 400 albums on floppy disk, from Tchaikovsky's The Nutcracker to the sound track of Jesus Christ Superstar, into a box that sits unobtrusively under the keyboard." Depending on the model, the Disklavier costs between $8,500 and $50,000.

Another exciting new product is the Yamaha Home Cinema. Using its own digital sound processing (DSP) chipset, the Home Cinema gives film viewers a movie theater experience in their own homes. And Yamaha's "silent" musical instruments, including silent pianos and SilentViolin, allow the user to practice anywhere using earphones that simulate a concert hall environment.

GLOBAL PRESENCE

In fiscal 1996 some 25 percent of Yamaha's total sales came from outside Japan. The company has been expanding operations in other Asian countries, most notably China. It invested $10 million in a joint venture with China's largest piano maker, and it formed the Yamaha Trading (Shanghai) Co. to sell electronic musical instruments in China.

SOURCES OF INFORMATION

Bibliography

lieberman, richard. "the ivory poachers." the financial times, 9 august 1997.

lim, paul. "how you can get a high-tech piano that's truly grand." money, february 1997.

morris, kathleen. "play it again, seisuke." financial world, 22 november 1997.

putscher, joyce. "yamaha home theater mind boggling." electronic news, 17 february 1997.

yamaha jumps into top atv (all-terrain vehicle) slot." deal-ernews, august 1995.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. yamaha's primary sics are:

3651 household audio & video equipment

3732 boat building & repairing

3751 motorcycles, bicycles & parts

3931 musical instruments

3949 sporting & athletic goods