Management of Technology and Innovation in Japan

46 A. Takeishi and Y. Aoshima
of the shift lever alone significantly increased 13 since the number of parts was increased
because the ratchet was added to the shift lever, and resin parts were
changed to sintered parts. Another factor for cost increase was stricter precision
requirements. In particular, the precision of the shift lever and gears was increased.
Furthermore those parts specially designed for the integrated system have
a cost handicap because standardized parts that are generally used for the conventional
system have a larger market and enjoy scale of economy. High precision requirements
and a limited market mean that integrated parts inevitably cost more.
Additional complications in the assembly process and at dealer shops also contribute
to increased cost.
How did Shimano overcome this problem? One method was Shimano’s superior
production technology. Most of Shimano’s products utilize cold-forge technology.
Precision is higher for cold-forged products than those forged at high
temperatures, which allowed efficient production. Cold-forge needs no heat distortion,
and the extra cutting process to obtain greater precision after shaping is not
required. Shimano established its cold forge technology long before. Shimano has
also supplied parts to automobile manufacturers. The aim of this business has been
to continue polishing Shimano’s cutting edge technology in the automobile market,
which has strict demands on quality precision and cost reduction. Shimano actively
developed its own automated assembly technologies and the Singapore factory,
as mentioned above, is making a great contribution to cost reduction, high
quality, and high productivity.
Another important approach in overcoming cost increases was the creation of
markets. Although SIS may have been expensive, it was marketed toward professional
riders, who are not much concerned about price but will properly evaluate
its functions and performance. As described, it took time for Shimano to have
them acknowledge the value of SIS, but its value was eventually recognized and
SIS spread throughout the market. Shimano’s strategy was to make its value be
recognized in high-end users, create a market there, and then use the success in
this market as leverage to expand into larger (lower end) markets. As the market
expanded, the mass production handicap compared to standardized parts got
smaller.
Even greater success was gained from the mountain bike market. Shimano noticed
the potential of mountain bikes at an early stage, and created a market together
with a group of mountain bike fanatics by developing parts specially designed
for the market and helping it grow. Not only did Shimano gain fame for
being a parts manufacturer that created the market, but it also gained a dominant
position by providing SIS and STI for the mountain bike market, which had higher
precision requirements and thus appreciated the value of Shimano’s systems. The
strong brand that Shimano built in this manner made possible pricing that covered
the increased cost compared to normal parts.
13 The shift lever, which was about 2,500 Yen for friction type system, was about 4,000
Yen for the SIS. However, as mentioned above, since SIS initially had the option of using
the friction type, a simple comparison cannot be made.