Management of Technology and Innovation in Japan

Case Study Shimano: Market Creation Through Component Integration 33
In general, the bicycle market consists of four segments.
1. Road: Sports bicycles used in professional road races such as the Tour de
France. The highest level of performance in gearshift, brake and drive power,
and the lightest weight are required in this market.
2. Mountain Bike (MTB): Bicycles for riding off-road through mountains and
mud. Toughness and lightweight are required.
3. Comfort: A segment centered in Europe. Bicycles for enjoying cycling with
the family. Comfort and stable operation are important.
4. City: Commuter bicycles used for going to school or work. An inexpensive
price is most important; the “granny bike” previously mentioned falls under this
segment.
It is estimated that about 95 million bicycles were sold worldwide in 2001. Of
this, the road market for racing bicycles was about 1 million and the professional
mountain bike market for bicycles such as those used in off-road races was also
around 1 million. 2 There is also a market on the fringe of the “serious” mountain
bike market for a broader definition of mountain bikes that are used for more general
purposes. For example, if we include all the mountain bikes ordered through
specialized bicycle shops called IBDs (Individual Bicycle Dealer), the market
reaches 6 or 7 million, and if we include all the mountain bike look-alikes that are
commonly sold, this figure further increases to 20 million. Bicycles other than
these two segments fall under the category of comfort or city. 3 Approximately
40% of the whole market is for bicycles with shifting gears, with 70% of these being
external gears and 30% internal gears. 4
Shimano provides components for all segments from (1) to (4). Shimano is
most competitive in the field of bicycles with shifting gears, and has created a
strong brand and commanded a high market share in segments (1) and (2). 5 However,
Shimano also has maintained a steady income in the high-volume city bicycle
market, although the margin is not high. While Japanese companies are having
2 The mountain bikes referred to here are racing bikes with at least nine gears.
3 Comfort is a segment that does not exist in Japan. It is an important market in Europe,
accounting for 25% of the total market in Germany for example. In Europe, the definition
of city and comfort is vague, and there is a possibility that the very concept of comfort
may change in the future. In America, mountain bikes are used for normal cycling
and commuting. The boundaries between the mountain bike market and the comfort/
city markets have thus become unclear.
4 Internal gears are a type that contains a gearbox on the hub axle. The gearbox stays inside
so it is compact and maintenance free, but the number of gears is limited and multiple
layering is difficult. The gear ratio cannot be freely changed. External types can be
found in (1) to (3) and internal types in (3). (4) does not usually use gears of any kind
(single speed), although recently some have gears.
5 Accurate data on the market for bicycles and bicycle parts are not available. Shimano’s
share is also not available. In general terms, it is told that Shimano has an overwhelming
share that is substantially higher than the second largest. Nikkei Business reported
that Shimano “has a 70% share in the shift-gears and brake markets, which require the
highest level of technologies.” (November 2, 1998)