83 Japanese Research in Business History2005•£•¥22 The Origins and Development of Honda's Globalization Motorcycles:The establishment localization of the Honda brand,and the of sales and production Tsutomu DEMIZU Osaka Sangyo University SOICHIRO HONDA had tried his hand atrepairing automob and manufacturing he Honda Motor of million one the city and of a fresh time for the where his was later to Taiwan spur speech race,Osaka,August1961. set Furuhashi main by Soichiro Man an Honda the at the a capital office being held in Sun of Tokyo, strap-on time.Around record Rising in in A-type the pinnacle war Yamashita-cho product,the product the the as•eHonda')with established raised TT after in1948of in a world challenge of to period,but foundation operations were up had to Isle the exported its Championships Soichiro racing,the started first Furuhashi compatriot 1.Keynote its was Aquatic prewar to in1950it bicycles,which World motorcycle first Hamamatsu,but to in the referred yen.Honda Hironoshin That rings start,leading Co.,Ltd.(hereafter shipped engine piston made in Los this Angeles, the1500meters. flag world in America Grand Prix Race.1 at the meeting to report on the victory in the TT 84JAPANESE This RESEARCH event,soon to the tell best the global in them•gIf factory,this is no we're motorcycles made speed,no In of on to Year at the we was year of when drive out foreign greatest enable hardly mere that•gJapan's the possible motorcycle up Honda,with in1952,Soichiro there no was motorcycles them3.•hFor of small-time thing,and the will Honda's a words,and can to its a daunting world eyes Hamamatsu';now must on challenge. proclaimed:•gThe we be Manager of time with regulation were•eHonda is real the level competition last(1950)we Japan';this fantasy the bring export greeting his never General in his times.Unless government go days,in world,we'll forcefulness technical to impetus earliest would the the view the want its was than real our world,domestic New before of then wider his behind survive.I in outlook'was raising amount to standard,and the way by best more his•eglobal are industry the Honda's vehicles company,added in Nishida,who was catch-phrase2.Soichiro the than50employees,Soichiro not little there of Honda;even Michihiro owner,but that of less seemed doubt HISTORY2005|22 foundation with Japan.•hTo workshop the outlook workshop repeatedly the after emerging back-street IN BUSINESS year we are•eHonda become•eHonda of the World'4.•h MOTORCYCLE The early motorcycle out auxiliary the mail engines single he customers,and The shot proliferation a head payment bicycle of capital 2.Interview with Michihiro 3.Interview with Soichiro no kibo•h[The at the Nishida,former Honda,Chief President's to to the the Honda sales the Branch of successful;at the a country as network. world was yen,but of Honda . Advisor,Honda. hopes],Honda by F-type Honda Kyobashi was6million Vice-President the Director, dispatch throughout conquer time into competitors sell outstandingly shops battle entrants its network.To into was BRAND.' Executive a deposit a nationwide Honda's October1952.Honda's over shops,offering strategy created in of start sales had13,000bicycle had first 4.•gShacho to Bank.This stroke THE•eHONDA Fujisawa,Honda's shots on Mitsubishi a took a nationwide engine,Takeo direct ESTABLISH saw Honda establishing bicycle carried OVERSEAS nineteen-fifties industry,but successfully Cub RACES Geppo,6,Feb.1952 ,p.1. fired in they DEMIZU:The used the million deposits yen machine on from tools.This gap,not the not only use own•eHonda specialized as utilize to to basis as they our by design and added their their out so tools. based by on the using new department.6•h methods the thus products research was their machine competitors production Honda,and to further,and carried our with ingenuity were,but of the competition.They even was of close also their designed capabilities ahead in November1952Soichiro Honda America,Switzerland competition with a long was their own created wellspring the of were convinced to create startup,but certainly the huge sum outstanding been their the reaction after complaints the of end their Demizu,Otobai and automobile of the be Korean products suddenly Fujisawa recalls joyosha sangyo the factories were youth to in their act new those of critical keieishi[A industry],(Tokyo,Nihon Keizai of investment brought the previous early1954, War,combined this world time equipment fair.However,in threw the the the old weapon on from factory,and over set as itself problems yen to advanced, for a new overseas certainly with in1953tripled appeared crisis.Takeo 5.Tsutomu motorcycle of of1.5billion winds about that a space Kawashima the was of cash-flow construction results.Sales year,and many Honda Kiyoshi saw West tradition,but for had and Germany,and eyes.The they scope stage.There the and industrial fashioned,and a state of use the always got at to productivity the world-class to superiority. to of their borrow450 stroke overtake tools developed innovation Starting flew to to purchase competitors,but was Kawashima,•gDesign improvement competitive as machine utmost techniques for their the technology.We Unceasing step to single domestic so raise Kiyoshi production there new a Globalization85 collateral order at machines5.Honda to According newest process ideas'to create their as in them next the of Honda's engines Bank with machining simply bicycle enabled manufacturers.The improve and Development Mitsubishi overseas with the the technical did Origins with Honda period history a series management as of into follows: of management in the Hyoronsha,2002),pp.130- 138. 6.Jidosha Gijutsu [Report of 2001),p.22. a survey Kai,ed.,Jidosha on the history gijutsu of no automobile rekishi ni kansuru technology],(Jidosha chosa hokokusho Gijutsu Kai, 86JAPANESE RESEARCH There end were of be to afraid number reality of this to throw and Paolo race,and Paolo capital.It taken part job in was an of machine,the commercially competition and included Velocette speed 13th gearboxes of There names as Triumph.They and OHC way that pause of in the to in the take Isle of race the Sao breath, Man held in TT rider completed February establishment of a Japanese-made race;the was Mikio Omura, race Circuit.Honda Special entered R125,which engine,with its power boosted UK,Italy the motorcycle vehicles.The Interlagos maximum enable desperation, participate auto that E-type because were,to world.7 from20countries,including such and time Honda its was the test-driving Dream from150to125cc.,and part take anniversary the8-kilometer available a to international first was hardly a young,and precisely to be created all it plan to us!•hthe reduction were setback,and the the really stop a downturn.So,in•@ in international firm with modified the the comprised8laps a race the400th in of going can immunity,as with were motorcycle was the effects ahead we race Brazilian whose the were going anyone inventory of no then,with top commemorate sort it was eventually company.Precisely workers.They any that would we the way and our effect we other:•gWe're no developed I pushed 1954to within each cutbacks off that race,the moral told among the that critics.What world;there's had Honda Sao in experienced proclaimed had the to confident outside rashly production they them The drop insecurity never of a in comments were these had one HISTORY2005|22 of we was we of sorts confound of because had all Honda,but able lot IN BUSINESS had capacity to the reduced 6HP8.The and Germany, Guzzi,Mondial,MV,Norton,Matchless, were engines.The all racing machines Honda Special with4-or5R125came in the22finishers9. was no the Honda,with its top speed of just over100 7.Materials for the Honda Company History,held in the Honda Public Relations Department. 8.Interview with ECA Toshiji Baba,who traveled to the Brazilian race in charge of technical affairs. 9.Mota Fan[Motor Fan],June1954,pp.222-226. DEMIZU:TheOrigins and Development of Honda's Globalization87 kph,could compete machines.The winner and dirt-track the of and part in was published TT that put the intention to the shown very the of company behind sending than rumors of a of how little race,Honda a formal would be by Takeo Fujisawa, of Intent'on taking March March20.It out the•eStatement the internal•eDeclaration'was Honda's was standard clearly they the Honda the a•eDeclaration'on earlier European between Honda,made that a•eStatement as the Brazilian out as company circulating gap was after management the company distributors5days of the laps.The announcement,worked the within a stop two were month outside outside the nearly time;they top and speed gearbox10.This world.One races.The 15,1954,and Honda's the real within was a2-speed at the maximum a mere8laps,but machine Fujisawa,the declaration said over bike,with machines knew Soichiro the150kph was Honda race Japanese they with race of impending is Intent'to to bankruptcy. Honda,of course,did not possess a racing motorcycle;moreover, they had virtually no accumulated technical experience of race engines. Their participation in the Brazilian race had made them all too aware of the high technical level of their overseas competitors.This experience acted as a stimulus for the serious development of a high-revolution OHC engine,but this was to be no easy task.Facing a moment of truth, with serious questions raised as to whether Honda could ride out the management crisis,Fujisawa recommended that Soichiro should go to Europe to observe the Isle of Man TT race.On the surface this was an observation tour of Europe,but its real aim was to announce to the world that Honda's fortunes were on the rise. In June Soichiro set off on his planned see the TT races,and Britain,Germany accompanied to inspect and by Matao one-month the mechanical cylinder his interpreter-cum-guide Sanuki,who had spent at truly amazing capacity,was 10.Materials in the Honda 11.Interview with Matao industries Italy11.As as a propeller engineer for Nihon Gakki.What races was the sight of the top racing machines competing tour of Europe,to engineering speeds.Their three Collection Sanuki,who times a long period of output,for the current Hall. accompanied in Europe met their eyes at the TT from Europe and America power that of he was Soichiro Honda. the same Honda 88JAPANESE RESEARCH IN BUSINESS HISTORY2005|22 motorcycles.Tires,chains-all standard penny which Back Mount the Asama two defeated after spent every of copies of advanced goal but the and of becoming,through best Kiyoshi in the was the survival of commercially machine company.This motorcycle on which Asama afresh,and technology in and foundation of out this working Honda's reverse purposes,such theoretical the 13.Kiyoshi on be was the were dakara best in on Japan, by was and to for the looked to the at basic become for the were the was to research NSU carried history] ,(Honda be a works adopted imported it can true was method no ayumi[Honda's the adapting developed back encountered,tests Win stage13.The going machine by being a that motorcycles hanaso•h[Now sights by machine there.This works not international strength.The on others. our machine.•g done the fashion,but identical stakes developing of from the racing by based this one Section,headed a to the doubt imitate Soichiro,the was Mondial problems Kawashima,•gIma by aspect up just develop every 12.Honda Motor Co.Ltd.,comp.,Honda Co.,Ltd,1975),p.28. 1962,January-March. to project technical never No.2Research own engineering as own that are without persevere,with was a piecemeal the immediately virtually shall efforts,not its in efforts,and will producing we issued hold races,but not are machine,but would years our up the produced which Mount set directive the seemed motorcycles development us A prime in were it summing-up face,let world.12•h Kawashima,was races!•h favorites,they the makers may Japanese Honda,but where machines,but we of pre-race his over foreign difficulties for said:•gOur research other level participated a period lost.In own fruit.Some Whatever the Honda resource,accumulated bear the part,they Honda's invaluable technical victory through 1957race.Soichiro product parts, them in1955,1957,and1959.The being went took the manufacturers overwhelming Yamaha,and they the raising Race,held an races,despite by whenever in of Japanese Endurance ended previous Where of a technical quality. aim major 1959race carry fact-were than that of Japan.Soichiro parts of comparable in Japan,with motorcycles,the very higher he had with him on a large number of racing machine on his return to Japan he handed to his suppliers,charging to develop day their parts,in immeasurably told.],Motasaikurisuto Max. out Motor , DEMIZU:TheOrigins and Development of Honda's Globalization89 until they were into the realm successor combustion solved.In of the prewar chamber,and further,adopting the dynamic Honda had export record sixth to come in this Trade had Honda came and Honda's on and6th in the the hitherto the 14.For of the and record-holding a victory born 15.Interview with Yoshitaka of technical lida,who matters. 16.Article in the Asahi Shinbun,June6,1959. coming in captured the Ministry of to the effect as an export the1960Isle of the125cc the speed memorable:in machines,probably the of both the a comprehensive eclipsing Man class,and proving most victory, performance of machines. out of conviction details please refer to the author's was were, industry in TT,achieved MV race a comment year,1961,was completely of they machine class,clearly Italian gijutsu keisei no25nen[25years a global Honda]. business Japan15.The achievement,in Honda the allocation class.Japan's the250cc books an places,and places no Kiyoshi staff'of receive first eighth to virtually though to10th classes had team,from motorcycle following history record This was they from their solid in and250cc rewriting to the125cc the6th order although of•econsulting out and Japanese this machines.The powerful in the monopolized the125cc tools them set seventh Race.In whole status they TT required,and Industry(MITI)issued established in4th,5th Man was rankings,with took prize industry16.Building TT of machine the theory for to the full their•eDeclaration',Honda products.The May the team was a chamber,achieving Agusta;Honda,newcomers also manufacturer's Isle enabled in place.They International the given MV imitation, machine system14. currency Company.This Italy's managed in own down,was by mere works a supercharging which exploited issuing foreign their currency,and won time importing of Trading foreign that first after abroad,foreign been Kawashima Okura years the trip beyond combustion effects of the inlet and exhaust for this pent-roof were able to establish system-i.e.a theory June3,1959,five participated make went Mondial Alfa Romeo engine,with a hemispherical two large-diameter valves.Honda went a four-valve greater power.They the inlet and exhaust On this way they of true innovation.The Machi and a determination to koba kara sekai no Honda e no development accompanied from a backstreet the team as manager workshop to in charge of 90JAPANESE avoid RESEARCH IN BUSINESS HISTORY2005|22 bankruptcy Europe and establish and America,where sport,the Honda machines had product,and truly served invaluable on from Yamaha of machines the had their former firm nearly rivals for a machine into to was to world of the last the markets in racing years of as Asia,and firmly WORLD In late1956Honda a into models of the is to be Cub all the the of as MARKETS-OPENING the of Honda as a racing its which it is,and commercial of .Kiyoshi technology with motorcycle. products enterprise,leading markets market philosophy features words,the the a new the C100 his superiority global attractive onto transferred,just appearance,to on commercial of50cc,125cc,and Super possess other establishing sent into came the must established development being competitive brethren and back President,expressed races even use the noise18.•hIn win changes manufacturing Southeast the raised fed range,with model machines machine-except the a marked companies;by output motorcycles,which second follows:•gCommercial minor in flagship been immediately a wide the Kawashima,Honda's Honda had were C series around1960,covered only which racing Honda 250cc,with about of all the Japanese with doubt sales efforts17. of Suzuki and brought power commercial brand without into oblivion. production,resulting models.The enables levels doubled,compared strengths through motorcycle events racing we include Kawasaki,a latecomer to the field, become the rulers of the motorcycle world,driving foreign technical basis Prix as a word;the for the of the Honda nineteen-sixties,the previous decade.If Japan had suddenly The Grand in the technical middle guard footing.In appreciated a household as the advance awareness is highly support to Honda's overseas Honda's success,the participation in motorcycle improvement on a stable racing was immediately by spreading provided Following the name the company motorcycle to its break Japanese Europe,America and brand. UP AMERICA its top executives,Soichiro Honda and 17.Jidosha Gijutsu Kai,ed.,Jidosha gijutsu no rekishi ni kansuru chosa hokokusho [Report of a survey on the history of automobile technology],(Jidosha Gijutsu Kai, 2001),pp.22-23. 18.Interview with Yoshiki Kawashima. DEMIZU:TheOrigins and Development of Honda's Globalization91 Takeo Fujisawa to Europe,and Section,Kihachiro Assembly out Section,Kazuo market targeted export markets still for export to the•eTrade This be Japan but Fujisawa was acquisition also of States The Japan compact for terms of According efforts were to sold,and be companies as the export hands on Overseas give top time report that certain I was was the drawing leaders survey report. by already United States the been market, his recalls:•gThis determined of Asia.Recalling convinced Engineering carried that Honda's this was how it the way to the United was choice Federation,an out of an had ranked strength' report,the come with the the report number of through fierce for competition countries concentrated was under survey fiscal1957.21 major of on in the gradually distribution,motorcycle 19.Amerika ni itta Honda AHM1959-1963-](document market motorcycles around400,000,and geographical organization overseas motorcycles-in industry and•enow competitive to Southeast be target. motorcycle share was Markets',published priority in to whether target,the a and were intermediaries had vehicles-including to the of on carry States,Europe main main their factor Mechanical the1950s terms the umbrella,had the market United to drive.The their report,Kawashima the primary motor Because in their MITI their interested survey I read was as to very the started.When go.20•hThis trading were Federation(JMF).Kawashima by he on Report Machinery where Sales Hamamatsu export June1958,when taken Team'laid the •eSurvey instructed the to be Office the Asia19.They products use determined.In Project was or Head of full-scale to the of their directly a decision a the chief Southeast restricted questions precisely would near to of the to were the concentrated,how were Kato Asia,but chief and research,preparatory Southeast they the Kawashima Europe this in industry. United States increasing.In ownership was Giken-AHM1959-1963-[Honda held in the Honda Public Relations relatively goes to AmericaDepartment,1984), p.22. 20.•gTai-bei yushutsu no kyoito-ho•h[A bridgehead for exports to America],Jidosha Uiikurii.53.(Oct.1959),p.20. 21.Nihon Kikai Koigyo Rengokai[Japan Machinery Federation],Kaigai shijo chosa kokusho-kogata jidosha wo chutshin toshite-[Report of an overseas market surveyho with the emphasis on compact automobiles-],(Showa32-nendo kikai kogyo kiso chosa hokokusho N dai6-shu[Fiscal1957mechanical engineering basic survey reports N collection6](1958),p.3. 92JAPANESE RESEARCH IN BUSINESS HISTORY2005 22 high in the Central Northeast,the Pacific coastal region,and coastal region in the South22.Overall,however,motorcycle in the United States was low in absolute 1,000 population 47.3in in1957,compared America-the ownership stood extremely However,motorcycle rising trend.In 156%,while Japan country period.Given as automobile-passenger car is clear that this low23. imports particular,year the growth .7per Italy, in France,70.4in in the same of the at only2 at over300per1,000population,it figure of2.7was was with130.2 West Germany,and16in befitted terms,standing the Atlantic ownership into the United States showed a clear on year growth from1956to1957was rate from1957to1958,on a half-year approaching200%24.Imports from Germany were base, increasing particularly rapidly,at the expense of Britain,which had hitherto been dominant.The U.S.motorcycle market had a dual structure,dominated at one end by large bikes Britain's West Triumph Germany own Harley of which had seen competition,therefore,was compact'group;it Davidson on the other by small motorcycles and Italy,imports since1956.Honda's competition such as America's and BSA,and a sharp to be from increase this latter was not to be until the latter half of the1960s arose in the market and from ' that for large motorcycles. The JMF survey reported that the majority of the sales of compact machines were first-time purchases,with the reasons for purchase being low maintenance costs,and ease of driving and parking.50%of them were used for commuting to work or school.The Super Cub C-100 fitted these needs precisely,and the emphasis of Honda's'trade project' shifted firmly over to the U.S.market.The JMF survey group brought together its conclusions as follows:(1)The future demand for motorcycles,particularly for compact,light vehicles,appears good;(2) the Italians and Germans have the same view,and are increasing their exports;and(3)there is a trend towards using mail-order networks as the medium for sales of compact,light motorcycles.They summed up the JMF report by saying that'rapid changes are taking place in the American motorcycle market,signifying,we believe,that a new class of 22.Ibid.,p.32. 23.Shoichi (Seibundo 24.Nihon Saito,Jidosha no kuni America[America,the Shinkosha,1957),p.80 Kikai Kogyo Rengokai,op.cit.,p.33 land of the automobile] DEMIZU:TheOrigins and Development of Honda's Globalization93 consumers is appearing25.' The European motorcycle market,which since the latter half of the1950s,had contraction,due the economic reconstruction other hand,had to the expansion had expanded entered growth that was taking had been completed.Japan's finally the trends in motorcycle European motorcycle entered a phase of passenger a period production of stagnation car sales resulting and from place now that postwar motorcycle market,on the of real growth.Table1shows and exports manufacturing continuously for Japan and the main countries.Postwar motorcycle production in West Germany,France and Italy had in each case exceed 500,000vehicles per year by the early1950s,but had started to stagnate or decline in the concerned,Britain latter alone half had of the already decade.As been far sending as exports about half were of its production overseas,but the other manufacturing countries had come to rely increasingly on export markets as their domestic markets stagnated or contracted26.It first passed was in1958that Japanese the500,000mark.From1959there Table1.Motorcycle Production motorcycle production was a marked and Exports-Europe growth in and Japan (Unit:No.of vehicles) Source:Jun Otahara,Nihon nirin sangyo no hatten to Honda Giken no yakuwari1945-1963[The Development of the Japanese motorcycle industry and the role of Honda1945-1963],(Doctora dissertation,Kyoto University,2001). l 25.Nihon Kikai Kogyo Rengokai,op.cit.,pp.5-8. 26.Jun Otahara,Nihon nirin sangyo no hatten to Honda Giken no yakuwari19451963[The development of the Japanese motorcycle industry and the role of Honda19451963],(Doctoral dissertation,Kyoto University,2001)p.43. WestGermanylta8yFranceUnitedKingdomJapanYearProductionExportsProductionExpor“dsProductionExportsProductionƒÃxportsProductionExpor“ds1949145,5163,43499,9 94JAPANESE RESEARCH exports,but IN BUSINESS they nevertheless sales,with the domestic HISTORY2005•b22 accounted market for only a few percent remaining of total dominant. For Honda's sales department,expansion into overseas markets now had the highest priority;they saw defeating the Europeans in the U.S., Southeast Asian and Latin American markets as their best strategy for also achieving domination in the European market27.Geographically speaking,Southeast Asia seemed to offer the best option for resisting the Europeans and relatively easily expanding demand for their own products.The U.S.motorcycle market was mature,and Southeast Asian lifestyles seemed,naturally enough,to offer brighter prospects for the future.Fujisawa's view,however,was that given the major differences in the size of the markets,and taking into account the likely knock-on effects,Honda's first priority must be to open up the U.S.market.The short-term results from selling to Southeast Asia would no doubt be impressive,but would never,he felt,serve as a basis for the establishment of Honda as a global brand28. Kawashima,the by leader Fujisawa back to decide and give accuracy had of high his always and Kawashima opted this carving time out were 'Plan Ministry would would quality of service selling direct to their for Exporting 27.Kensuke into the consumer30.The Honda's basic through Takahashi,•gKaigai overseas],Honda 28.Amerika ni itta Honda AHM1959-1963-](document company the moment shinshutsu ni zenryoku the export their their own initial Dream wo like essential, philosophy efforts. to MITI proposals. C-70series;they in the United sales between decisions States',submitted set out to look goods absolutely the to the United sales distance consumer was on their main models,the directly;for advancing into was market29.Fujisawa durable products persuaded years perspective,and American shorten of Finance,Honda center sales the for develop later global to for in Fujisawa's since to project',was U.S.,and need set up a wholly-owned control efforts for Honda •etrade the choosing the a demand the Exports to in high In their and praise consumer,and a at of foresight motorcycles of the emphasized producer made of in favor efforts keichu•h[Putting States would to be all our Shaho(Jan.1959),p.6. Giken-AHM1959-1963-[Honda held in the Honda Public Relations p.190. 29.Interview with Kihachiro Kawashima. 30.Interview with Kihachiro Kawashima. goes to AmericaDepartment,1984), DEMIZU:TheOrigins and Development of Honda's Globalization95 concentrated in the Western United States;and they would establish a solid after-sales program offering parts and technical service.A key issue in the discussions at this time what the setting of a price schedule for North American sales31.The great majority of motorcycles with a capacity of250cc or less imported into the United States came from Europe-mainly West Germany,Italy,and Britain.The average price for250cc machines was around$600,and for125cc machines in the region of$500 32. Honda's these trade Fujisawa's prices team must be the reduced their was contrast,had Table2.Price the competitive.•hYamaha trading margins far task of make a was already to Breakdown go into a reasonable the U.S.by of Motorcycles profit•h price with in mind and•gselling exporting to the U.S. Table2shows,they level,so that trade project mere0.7%to0.8%33.Honda's decided on bearing must company,but,as below competing makers,while that•gexports Marubeni a had European instructions through ratio project already-established establishing Exported had their profit team,by a wholly-owned through Trading Companies (Unit:%) 50cc125cc250cc350cc Dealer'smargin25.025.025.125、1 1morter'smargin12.715.016.818.3 1mporttariff7.35.95.45。8 1nsuranceO.70.40.40.3 0ceanfreight3.63.22.72.5 DomesticchargesO.70.50.40.4 Packing2.71.91.71.6 Factorycost46.547.346.945.3 ProfitO.80.80.70.7 「 「btal100.0100・0100・0 .100・0 Source:Tsushosangyo-sho(MITI),Nihon Japan]. 31.Amerika ni itta Honda AHM1959-1963-](document automobile Giken-AHM1959-1963-[Honda held in the Honda Public Relations p.71. 32.Tsushosangyo-sho(MITI),Nihon Japan],p.121. 33.Ibid.,p.122. no jidosha kogyo[The no jidosha Kyogyo[The industry in goes to AmericaDepartment,1984), automobile industry in 96JAPANESE RESEARCH IN BUSINESS HISTORY2005 22 local sales company,which from the start was to be responsible for the whole range of sales activities-importing,wholesaling,retailing,and developing and organizing a dealer network.The project team took this decision for the following reasons.They would cut out the12-18% importer's profit margin,and be able to devote the money thus saved to Honda's own profits,and to the intensive development of a sales network34.They would thus ensure an adequate profit for themselves as manufacturers,and even if they gave their retailers the current maximum profit margin of25%,they would still be able to afford a further2-3%to offer to their dealers as a sales incentive in order to expand their sales network.The project team finally settled on a U.S. retail price of$590for the305cc Dream CA76,$560for the250cc Dream CA71,and $245for the 50cc Super Cub CA100.Prices were set on the low side where the performance of the Honda machines was around the same level as,or somewhat lower than that of the competition,and on the high side where the Honda product's performance was superior to that of their competitors' machines35. These prices were well able to compete with those of the European motorcycle manufacturers,while insuring that Honda's own profits were not sacrificed. Kawashima and his colleagues made the final presentation of their American project to MITI in the MITI conference room on February25, 1959.MITI's Automobile Section approved their plans,and forecast that Ministry of Finance approval would be received sometime in March.In fact it was not until April that this approval-for the export of foreign currency-was received.The Ministry of Finance,however,had made drastic cuts in the planned level of capital expenditure.Of the$500,000 capital that Honda had applied for,permission was granted for only $250,000.Moreover$140,000of this was to be investment in kind; the allocation of actual foreign currency was a mere$110,000.This figure was about one-tenth of the foreign currency allocated to the Toyota Motor Corporation when it established Toyota USA36.We can see here 34.Amerika ni itta Honda AHM1959-1963-](document 35.Interview 36.Amerika Giken-AHM1959-1963-[Honda held in the Honda Public Relations with Kihachiro Kawashima. ni itta Honda Giken-AHM1959-1963-[Honda goes to AmericaDepartment,1984),p.73. goes to America- DEMIZU:The the discriminatory as the to capture a to set Yamagishi.The Pico,near where the the main Japanese Japanese managers States had Triumph being and up a complete where the first as with the task of over to a more encountered an rescue.In with a sales their be network of for AHM1959-1963-](document held at of time the high the these115 gave Public the new at Relations the company's September were to Super as•emopeds•f).This in the Honda speeds hindered operation,from projections,and faced moving machines,but to full problems was same with to a country of problem larger to style going company the of came Honda's from coping their with3 United compared variety sort up American new up the above,so small immediately and machines,classified sales in or the development original started constructed.A sold175machines;of C-100models(50cc set Japanese,coming complaints first3months December1959,they exceeded to American colleagues, Tokyo•f, BMW.The and the roads38.This unexpected their German model,capable American of time yet the two as•eLittle located.It of500cc engine to at Honda)was known overheating,and durable development same had engine dealing on the shock freeway occurred,such of his CA76)were the raising were staff.Motorcycles BSA,or driving,too,starting power,was Manager was capacity were expenses.By U.S.A.with the305cc its motorcycle of$1million,they Angeles community a cylinder largest Britain's Los and7locally-hired normally machines(the in began operations,they company(American area existing footing37. General the of this Honda States operating a stable for as United later out treatment industry.Leaving actual for on Company,set and West of started funds U.S.operation their in which the of$500,000,and the Motor Kobayashi in Honda of the conditions June1959,Kawashima,the Honda of of short capital,first able the in Globalization97 motorcycles,seen periphery were of Honda's bureaucrats mere6%share desperately additional the industry-and the American continually In a key above market.When last of mainstream,on aside,however,the effort and Development arbitrariness automobiles-seen outside Origins Cub figure them the far idea of Department,1984), p.78. 37.Interview 38.Tsutomu [25 years (Union with Kihachiro Demizu,Machi of technical Press,1999),p.37. Kawashima. koba development kara from sekai no Honda a backstreet e no gijutsu workshop keisei to a global no25nen Honda], 98JAPANESE RESEARCH creating a new became American their sales sales IN BUSINESS network HISTORY2005•b22 devoted Honda specifically company Honda's sales target was not,however,a air.By this figure time American motorcycle than insurance one-sixth of had started The time for attract was extend premiums those to operations in attracting was the of States for as•ea had established of the low,at of of approximately the of the Coast motorcycle transportation. company,for to the them whole United People•fcampaign, specialist magazines such wider regarded had as Life,Look,and People, audience.The as hitherto publications,suddenly truly response to continued establishing products was epoch-making.The years,leading whose out network Motors.Moreover, advertisements,which several previous plucked a result motorcycles,and maker for means West extremely a sales Davidson to be Honda's simply extremely the a much can continued sales United of move sales been foundation restricted attention actual economical the motorcycle the the Coast.Their•eNicest general-interest the that campaign in East entirely appearing an from the almost such Cub.This expansion an vehicle.As as after in1964,saw been were attention States,including started Super the had Harley a four-wheeled ripe,4years their that Honda numbering743outlets-more to to for1963was challenging200,000machines;5times the the led network. American year.It to policy,and growth Honda appeal to the man in the in the street.•f39 By this time motorcycles Honda with Japanese with started the exporting large and CB75OFour 750cc the model time,the technical 39.Interview 40.Kokusan bike],Supplement the an standard was an joined Italian in the States40.This power inline Kihachiro for horizontally engines for for U.S.market machines the market started capacity large market the by battle Suzuki, exporting the inline4-cylinder high-performance source or the less.Now,in1965 CB450,and large-bike large epoch-making terms,four-cylinder with and finally,in1969,Honda United was dominated of250cc two-cylinder450cc and soon Yamaha,and to motorcycles In the was completely capacity British,German began.Honda Kawasaki machines a cylinder motorcycle.At European opposed and American two-cylinder required a high engine. level of Kawashima. supabaiku15-nenshi[A fifteen-year to Motasaikurisuto,6,(Oct.1984),pp.48-59. history of the Japanese-made super- DEMIZU:The precision view engineering,and of in terms of at high vibration at engines,and the world the for Honda's a they received motorcycle consequently wisdom to be brought world.The introduction who engines their unable to 1961saw the in Dream model follow of from Japan's arrival of manufacturers motorcycle of market machines at and the time on as the into of next hardly an market of the motorcycle toward the part multiof all the manufacturers Britain's the Triumph,BSA market. in the Honda sales no Europe this way Public arm,European to this attracted Show. considerable amazing departure acclaiming inferior to the those of Europe41.The roughly on Switzerland relations divided the Honda's Motorcycle was•ean continental was prior Amsterdam imitation•f,and and held the a move years Italy Netherlands,Denmark,Sweden materials is European that in Britain,Germany,France,and 41.From at pattern Britain the four-cylinder European from machines traditional a high-capacity machines Honda's saying Japanese the made construction,and to triggered Germany.Two exhibited Japanese was profitable.It trend,such of attention,commentators had conquering OF LOCALIZATION-BELGIUM West been field that in in machine this START in had was be racing machines,the introduction to disappear foundation Hamburg advance to the high-capacity destined of reality. long-established THE Honda into industry costly this racing machine make a revolution of for Norton,were The too about the complicated manufacturers,and were and the say,therefore,that CB750Four Japanese in superior multi-cylinder low-capacity to of mass capable,however,of engine,virtually multi-cylinder excessively to incomparably four-stroke in multi-cylinder point unsuited majority with high-revolution determined would exaggeration cylinder equipped commercial was the as were technicians,who were parts.From characteristics.The were creating of which The other Globalization99 were revolutions,and high-powered development dream time of of Honda's regarded manufacture.They and the by number were output of machines own a large methods power their and Development cost,therefore,they production high Origins on Department. top European into one proud the two hand,and the other.The blocs: the 100JAPANESE former RESEARCH group the were whole motorcycle satisfying importing imported vehicles,or all populace as Europe accounted annual a means demand Man prospects added Economic favorable for plans for further urgency to this appeared likely be Okayasu faced of the Materials European the Motorcycle 2.4million bloc by high demand machines in therefore,that when into consideration There a also the (motorcycles 42.•gOshu with kyodoôshijo Honda a an history birth of there was cylinder e no Shaho,(Special of the European capacity a and solid form largest it market in Planning by Hideo Department,Kenjiro Iwase,Manager of Department.Shortly in Hamburg,they was at an times the Japanese the three started in Europe42. ample in scale use scope EEC for countries the suitable of50cc shinshutsu•h[Advancing edition,May8,1962),pp.12-19. annual level of market.It motorcycle increase eminently on Affairs market still doubt factory. the take offices of Isle in no European Office,manned market domestic the factory footing,and a second Personnel long an a in up stable Tetsuya the European the corresponding existed people. barriers.A•eSpecial General economies steadily,with to Head Honda's on the market.Indeed,the a the the one-and-a-half sold the Germany,Italy were tariff motorcycle machines,only million and strategy.This was EEC the of in Market],in plans set of Department,and of a survey on global Honda's Sub-section work on for in use,with opposition to France,West the of afterwards,based taken these to in Manager Welfare by imported role goods the construction with established Iwamura,Deputy from January1958,comprising exports world-would Office•fwas both decision Honda's economic that either a vital motorcycles were the together Switzerland.If the the sales Honda's countries for of overwhelming Community(EEC)in Benelux assembled played number made Honda's seemed What after races,Honda accelerated satisfied on were machines. a month Europe.American latter was motorcycle the for2.4million TT demand transportation for80%of were demand.The domestically the of countries,who domestic vehicles countries In1961,only the own domestic by these HISTORY2005•b22 manufacturing their countries,whose parts.In of IN BUSINESS or into the1.5 was in felt, Europe was growth in were growing employed market of this population. for•emopeds•f less),which the European were Common DEMIZU:The treated favorably in Origins terms of which,moreover,persons license to for moped success in legal as ride.These outstanding and Development in this the economic had to be built factors gave Super Cub,firm in parts a division of labor be motorcycle in as at to choice the restricting facility between market-and market faced many a in the Germany,Italy each either of many as as large number of countries, purchase of land, force.Though France activity.If Europe,the as labor and an Italy had they a large were team concluded of Europe,forming going that the Belgium43. is in the center cultural is often sphere referred France-then Holland,which growth.It moped in the6EEC a large economic Germanic by of being with year,half faced be and European Peugeot as per have could number and half as what large-scale and would South.It bordered manufacturers,producing 43.Ibid.,p.14. the highest several highest in regarded in the had of under medium-sized engaged the the in Belgium the to time would situation Holland between and support supply was were recruitment production Geographically of the regulations is firms among expenditure culture small production.80%of the were a Europe.•fIt manufactured mopeds,with Honda level of lay were its factory to a smooth of France,Holland as interface Latin as severe build with where produced120,000mopeds Germany number an prospects new over1,000,000machines.Germany construction,and as their infrastructure time Motobecane,Velosolex many considerable not of as competitors;wage factory a had countries,each solid number of mass Britain Holland.In in for obtain already of60,000vehicles number as of half these,while a same a large consisted such of obtained.Mopeds France.France produced tax,and could characteristics.The with production regarded production and be a tiny market manufacturers age confidence number at the amongst only properly of Honda,which market country annual large,while annual a could enterprises;an made a and activity,and motorcycle and as16years market. conditions entrepreneurial Globalization101 regulation,insurance young Europe,however,comprised own of Honda's reliable to possessed parts to offer a which the largest considerable large they number were an North,and as•ethe Europe's appeared also to the crossroads of motorcycle prospects of supplying parts to 102 JAPANESE RESEARCH IN BUSINESS HISTORY 2005|22 the German automobile industry.The team also found that wages in Belgium were lower than those in other countries such as Germany. Just at this time Honda received an enthusiastic approach from the city of Aalst,26kilometers northwest of Brussels,inviting them to establish their new factory there.The enthusiasm of the local government boded well for the setting up of a factory,and there would be no problems as far as the procurement of materials was concerned.The three-man team from the Special Planning Office proposed Aalst as their most favored candidate,and Honda's top management immediately accepted this, making what was to be a historical decision.The formal decision had now been taken to set up a factory at Aalst in Belgium44.By the fall of 1962the project was under way;the decision to set up Japanese industry's first manufacturing facility in Europe had been taken with a remarkable lack of fuss.At this time the only Japanese firms operating in Belgium Were Mitsui and Co.,the Bank of Tokyo,and a MarubeniSumitomo Shoji joint venture trading company;little information was available for Honda in its first overseas manufacturing venture45. In1962there were no precedents for Japanese firms establishing manufacturing facilities in the advanced countries of Europe and North America.Japan at the time suffered from a dearth of foreign exchange, and there were strict controls on the export of precious dollars to finance investment overseas.There was no likelihood that the Japanese government of the day would permit such a venture unless it was likely to be economically viable.The Special Planning Office,mainly in the persons of Tetsuya Iwase and Taizo Ueda,set about preparing the voluminous documentation required to obtain government approval. Ueda had worked in the export field at Mitsubishi Shipbuilding Co. (Mitsubishi Heavy Industries),and had been assigned to the Special Planning Office the month following his move to Honda.Honda was in the process of turning,in one fell swoop,from an SME to a major international enterprise;Ueda,however,was given no time to reflect on the differences in the company cultures of Mitsubishi and Honda,but spent all his days immersed in planning for the Belgian venture.Day after day Iwase and Ueda made the rounds of the Ministry of Finance, 44.•gOshu kyodo shijo e no shinshutsu sono2•h[Advancing into the European Common Market•|part2],in DEMIZU:TheOrigins and Development of Honda's Globalization MITI,and the application should for the in import added to convince earliest Japan,repeatedly official of a Europe.Using tariff this on would the insurmountable the of receive Establishment situation the Bank mopeds be obstacle possible Value bureaucrats date to was explaining approval.Based Factory in Europe',they France as an from outside Added Tax that these imports,so the only of EEC the explained starting form local tax that was25%,and that a further25%,and open Honda explained would that the their•eProposals example,they the route why on 103 tried an production to almost at to Honda46. The result was approval for the-at that time unprecedented advance of a Japanese company into Europe.Controls on foreign exchange dealings were strict,and because of the need to restrict as far as possible the export of dollars,as much of the investment as was possible was to be in kind,with the production line being manufactured in Japan,and transported to Belgium.Since everything they were undertaking was new,Honda applied for sufficient funds to enable them to undertake their activities in Belgium with the minimum of trouble.In the end,however,their pleas were in vain;the foreign currency allocation was75million Belgian francs(\450million at the current rate of exchange,20%of which was to be investment in kind.This was half the sum for which they had applied.In July1962the members of the Special Planning Office left Haneda Airport for Belgium,and their activities on the ground got under way.Honda's plan was to import only moped engines from Japan,procuring or producing all other parts locally.In this way they aimed to achieve a local content level of60% or more,so that their products would be recognized as made in Belgium, and thus be subject to low rates of duty within the EEC. They had been informed that Belgium was a country free of racial prejudice,but there was conflict between the two regions of this culturally divided country.Aalst was a quiet provincial town with a population of some80,000,about30kilometers north-west of the capital,Brussels.As Figure1shows,Belgium is divided into the southern region of Wallonia,inhabited by the French-speaking Walloons,and Flanders which occupies the northern half of the country 46.Katsuto Uchihashi,Takumi no jidai[The age of the craftsman],(Kodansha, vol.8,pp169-170. 1984), 104 JAPANESE RESEARCH IN BUSINESS Figure1.The HISTORY 2005|22 Location ofHonda Belgium HondaNederland ◎Amsterdam ■ 髪...IWestGe・manyl ! 3 oRotterdam HondaEuroe Flemish-language reglon 三 Gent S 副 S U ・ r B German一 毒〉 隠階ge. ' ∼ ⋮ 転 ; .燭・ . ・ ●・ ー "● ・ へ・紅` . 亀 .彰% HondaBenelux (HondaBelgium) 1備 転量叉舜 A .。る 6し b . . a lljl 、 山且 ⊥ Frankfu幽 ﹁ France Paris ◎ ■ Luxembourg 9 French-ianguageregion HondaFrance and is inhabited by the Flemish,whose language is close to Dutch.The border between the French- and Flemish-speaking cultural regions runs east-west,passing a little way south of Brussels .A large number of Walloons live in the area around Brussels,forming a sort of enclave within Flanders,where both languages are used.There is a longstanding history of linguistic and cultural friction between the two communities,with serious effects in the political arena.Historically the Flemish were subjected to political pressure from the much larger nation of France,and still regard the French with considerable suspicion .They are regarded as simple and hardworking.The Walloons ,on the other DEMIZU:TheOrigins and Development of Honda's Globalization105 hand,have been strongly influenced assertive.Economically,industrial Flemish-speaking As well region drawings the end and examples employees culture,and tend has been stronger to be in the than in Wallonia47. as the problems difficulties.In by French development of cultural the Honda of the actual to understand by friction,language planners would also bring parts concerned,and explaining with caused out design get the local gestures48.A further problem was that industrial standards in Europe differed from country country;Belgium itself had no unified standard corresponding Japan's where JIS.The Japanese,coming mass production techniques system of vertical division to to from an industrialized country have been established through a of labor with the parent company at the peak of the pyramid,realized afresh the importance of mass production techniques.They were forced to abandon the idea of sourcing all their parts within Belgium,and their own supplier network supply traveled throughout the EEC,building up to supply parts from the country most able to them. On March27,1963the production line in Honda's Belgian factory started moving.Production had started at last,but problems arose one after another.At that time containers had not yet come into use,and the engines produced in the Suzuka factory were packed there,shipped from the Port of Nagoya to Antwerp,and transported from there to Honda's Belgian factory,a process which took nearly three months.For other parts,procured from within Belgium and the other EEC countries, a semi-knockdown system was adopted at the time of startup. Knockdown production can be of two types-semi-knockdown(SKD), and complete knockdown(CKD).In the former case the key sections of the complete vehicle are imported as components,and merely assembled on site.In the latter case,some processing is carried out on site,and locally-produced components are also used,being combined with key components and parts brought in from the parent factory. Generally speaking,the production tends to move from SKD to CKD, until finally the vehicles are assembled from parts all of which are 47.Tetsuo Sakitani,Honda-shiki daiseiko e no kaigai senryaku[The overseas strategy leading to great success],(Jatech Press,1986)pp.34-36. Honda style of 48.Interview who has experience with Vice-president of living Kazutaka and working Monden in Belgium. of the HAM Anna engine factor y 106 JAPANESE locally RESEARCH IN BUSINESS HISTORY 2005|22 sourced. The motorcycle built at the Belgian plant was the C310,developed for the European market,based on the Super legally restricted to a maximum speed of30kph,and output of5ps,so it was impossible characteristics had the highest C310was a bastardized pedals,and were soon with an engine whose dealing with a mountain had been returned,with complaints the network in the from the sales between up on the Japanese and version that they which new model,suited ground the true performance as a moped,the vehicle had to be provided have a wheel diameter of at least19 provided with reduced.They dealers power to any extent inches49.The developed.A were a maximum to utilize of the C100engine,which in its class.To be recognized with bicycle-like pedals,and Cub C100.Mopeds basis European the Super under-powered,by had so painstakingly conditions,had of feedback Cub, power had been of vehicles which were Honda to local of to be created about the preferences.Every differences aspect-design, standards,and performance-was looked at afresh.In some cases vehicles had to be fitted with French-made parts for the French market, and German these parts for export complex denominator though to Germany.While conditions,they which would the EEC market had to be acceptable was supposed taking seek the into account greatest throughout all common the EEC.Open to be,traditional,old-fashioned distribution systems were still the norm.For all that'a superior product knows no frontiers',to create a new distribution network in such an environment was no easy task. The Belgian extremely factory short had been built and had gone into operation space of time,but made could be sold,they misled were now faced by the idea that anything with such quantities in an they of unsold stock that bankruptcy was a very real danger.The management of the Belgian Honda factory,which because of restrictions on the export of foreign currency funding,now 49.•gOsha Honda 50.•gHonda cause in Nikkei faced kyodo Market],in the had shijo been established an ongoing e no critical edition,May mota(Berugii)kusetsu10-nen Bijinesu(Dec.11,1972),pp.72-74. the shortage shinshutsu•h[Advancing Shaho,(Special for10years-Honda with Motors(Belgium)finally minimum of of funds50.In1964 into 8,1962),pp.17-18. yatto very shohisha gets the European Common wo tsukamu•h[Faithful through to the consumer], to DEMIZU:TheOrigins and Development of Honda's Globalization107 Koichiro of Yoshizawa51was rebuilding from Fujisawa chance to go back our from took bold It was this of they was had The factory month53,but its is eloquent proof the of grow of took problems their experience for was utilized in all their establishment of Ohio in States.Some the transmitted manuals United in in experience.In 51.Yoshizawa final later became of not trial yet over. of believed.In the June francs,but nearly12years.The Honda. per than50,000;this figure faced.Nevertheless,we philosophy:•eStart operations invaluable see here small and gained in asset in an in Honda's Belgian the later facilities analysis,whether Vice-president were able strategy.This international ventures,from in Asia,to can much be later operation international know-how to the internationalization,and develop Honda's has period SA of10,000vehicles less involved form,but way,but the was an production documentary this for you Motors Belgian red and conception to be overseas later to money there!•h52Then, was any capacity those Honda's experience have the production,distribution,sales, became of get give the of American investment of control bitter the profits they never Honda startup task orders, of in of40million area activities.Many use experienced output every responsibility to be a production experience and to in overseas factory,in overseas Japan the annual the hang the in profit of had Honda's development out average big.'54The Belgian up amounts capital.However since to a the rather damaged.We'll it is,just continuously made Belgian origins had posted operating been its back faced;they immense production,Belgian continued those Honda after deficit had sales,with withdraw,we'll severely tough starting doubling for 1974Belgian cost be however which impossible problems would after step we would Japan,so tribulation for instructions,or follows:•gIf again.It years the and as reputation in1965,three responsibility Honda.Yoshizawa's went effort,and support given Belgian of absorbed be it cannot factory in down be through a company of Honda,with their written and turned actual into human succeeds or responsibility for fails business matters. 52.Honda hand Motor Co.,ed.,Kataritsugitaikoto down-50challenging 53.•gOshu Common 54.Nikkei kyodo Market-part2],in Sangyo charenji no50-nen[A story I wish the European years],p.135. shijo e no Honda shinshutsu Shaho(Special Shinbun,November9,1999. sono2•h[Advancing edition,May31,1962),p.18. into to 108JAPANESE RESEARCH IN BUSINESS HISTORY2005|22 in internationalizing depends on whether or not it has this stock of human experience.In this sense,rather than looking at the economic balance sheet of the Honda Belgian factory,we should appreciate the intangible profits in the form of know-how that were gained by a Japanese firm for the first time thanks to this pilot project in overseas production. CONCLUSION Honda's be overseas said to product leap be a player single on the rivals,and world had activity firmly laid Honda on down proof is the of engine-for up overseas wherever blending Honda an there Way.' its different in contrast to Head kind the from Western Office,it its own same independent industry units would overseas appear of as turning into a a the the key a new American Takeo that is world and born of leader in of the Japan but into system. a transnationalism, is,in authority centralized each which system expansion in country Company decision-making overseas in values,the of Motor of producing developed •e of a similar in types exceeds12 the has with actors three system network model its rationalism.That Yamaha Japanese a global and selling model constructed Honda as Honda new a pyramid loose node.The Honda,has are that of into business enterprise use-now a new which and built of with of utility create created model has mode a philosophy to European of motorcycle Honda position in to global development global philosophy,of way a a multitude always production unshakable has Honda dynamism. annual cultures enterprise its to the is a demand,is local between of Honda is the and Further,the transnational process of total that wake the founders,Soichirio Honda with its possible leading could linkage to slogan•eAct road source it SME in made Honda's a enabled an brand.And company the manufacture.The forms of automobiles.It this,Honda's units,giving engine on management.It motorcycles,automobiles million around1960,which based stage,leaving the by opened period status Honda four-wheeled today,and As the the based Fujisawa,that It from effects,which of perspective' local the time,was motorcycle synergistic a manufacturer now in the and bound establishing brand the for development,production in the expansion extreme too,in where its process. is in the