SHIMANO CASE STUDY

Shimano Case Study



Shimano Case Study

Shimano was founded in 1921. The founder, Shozaburo Shimano, who was a craftsman at an ironworks in Sakai, was only 28 years old. At that time, Sakai was the center of Japan's bicycle industry. This town, with a custom of blacksmiths and renowned for kitchen knives and guns since the 16th century, shifted its industry to the construct of bicycle parts and finished bicycles in the Meiji Period. The first merchandise constructed by the “Shimano Iron Works” was a single freewheel. Anyone who has ridden a bike knows that the back wheel turns when you pedal, but the wheel does not stop when you stop pedaling. This function is made possible by the use of a ratchet mechanism adhered to the free wheel on the back wheel. Shimano continues to make freewheels even today.

 

Macro And Micro Issues

We sometimes observe that while a whole industry may be in recession, some companies extend to present well. Shimano, a bicycle parts constructor, is such a company. The bicycle constructing industry has lately been in a structural recession. Imports accounted for 30% of the domestic market in 1997 and 67% in 2001, with over 7 million of the 11 million bicycles sold in Japan being imported (Figure 1). The mean cost of bicycles routinely seen round village and often called “granny bikes” is round 20,000 Yen for domestically constructed models and round 10,000 Yen for imported bikes from South East Asia and China. The distinction is clear.(Steensma, 2000 831) Domestic output of bicycles has proceeded to down turn and there has stayed no vestige that Japan one time shined as the output base for the world bicycle market. Yet, Shimano has organised to sustain an swamping share in the world market for bicycle parts, such as derailleur, shift levers, and brakes. Shimano's emblem worth is graded high amidst Japanese firms. According to the Nihon Keizai Shimbun's emblem score, Shimano is graded 20th in Japan (2001). Companies with the same grade encompass large firms like Hitachi, Sharp, Denso, Fanuc, and HOYA.

Fig. 1. Bicycle output and imports in Japan

 

Bicycle fans arrogantly say “I have Dura-Ace”. Dura-Ace is the emblem title of the series of parts Shimano sells for sporting bicycles. As previously cited, the use of Shimano parts matters more for customers as who assembled the bicycle. Major bicycle manufacturers will not even start merchandise development before Shimano announces a new merchandise plan. Intel's previous CEO Andrew Grove was allegedly amused to discover that Shimano was called “the Intel of the bicycle industry.”  (Tsai, 2000, 464)

 

Production Technology and Market Creation

Another issue was increased costs. High value parts must be made in alignment to consign superior functions and performance. For demonstration, in the case of SIS, the cost of the shift lever solely significantly increased13 since the number of parts was increased because the ratchet was supplemented to the shift lever, and resin parts were altered to sintered parts. Another component for cost increase was stricter precision ...