Makita Corporation - Company Profile, Information, Business Description, History, Background Information on Makita Corporation

3-11-8, Sumiyoshi-Cho
Anjo City
Aichi Prefecture

Company Perspectives:

As a truly global supplier of a comprehensive array of power tools and related products, Makita is working to meet the sophisticated and diverse needs of its customers through its international manufacturing, marketing, and after-sales networks. Backed by these extensive networks and supported by its strong product development capabilities, Makita is striving for further growth in markets worldwide by rapidly introducing innovative, reliable, and high-quality power and other tools. In addition, Makita is contributing to the betterment of the communities in which it conducts business and is promoting various environmental protection activities.

History of Makita Corporation

Makita Corporation is Japan's number-one manufacturer and exporter of electric power tools. The company develops, manufactures, and distributes tools in four areas. Makita's portable general purpose division, which accounted for nearly 50 percent of 1997 revenues, encompasses drills, jackhammers, sanders, screwdrivers, and other construction equipment. The portable woodworking segment includes saws, routers, nailers, and other carpentry tools. It generated about 20 percent of sales in 1997. Stationary woodworking machines, including table saws, planer-jointers, and band saws for installation, contributed less than 2.5 percent of sales. Though it had traditionally targeted the professional user, Makita's distinctive turquoise tools increasingly appealed to the do-it-yourself market. Consumer tools included heavy-duty and household vacuums, submersible pumps, lawn mowers, and garden tools. These made up around 10 percent of annual revenues. Makita's parts and repair services were another important business area, contributing nearly 20 percent of revenues in 1997.

Having launched multinational operations in 1970, Makita boasted more than 100 sales offices and 28 overseas subsidiaries in the mid-1990s. North America was its oldest and largest foreign market, constituting just under 30 percent of sales. Though it only made up 12 percent of revenues in 1997, Southeast Asia was Makita's fastest-growing market, with sales increasing 22 percent from 1995 to 1997.

20th-Century Foundation and Development

The company traces its history to 1915 and the establishment of a repair shop for electric tools and equipment in Nagoya, Japan, midway between Tokyo and Osaka. It was incorporated in 1938 as Makita Electric Works, Ltd.

But it was not until 1958 and the administration of president Juiro Goto that the company diversified into the manufacture of electric power tools. A 1962 public stock offering raised funds for the program. Within just over a decade, Makita had leapfrogged to the top of the Japanese power tool market. The company credited its success in the domestic power tool market to high quality construction, pioneering research and development, and a unique system of direct distribution. Instead of relying on wholesalers to market its tools to retailers, Makita employed its own direct sales force. The close relationships engendered by this system gave the company insights into the needs of retailers as well as the end user, thereby fueling innovation.

With their brushed metal casings, the company's earliest tools look bulky, heavy, and primitive by today's standards. Over the years, Makita traded metal casings for shock-resistant, turquoise plastic; added multi-speed motors and electronic controls; and developed a mind-numbing variety of accessories. Makita targeted professional tool users in the carpentry, construction, timber, and masonry trades with its powerful, durable equipment that often cost two to three times as much as a typical tool made for the consumer market. Focusing on the high end of the power tool industry mitigated price competition, thereby boosting profit margins substantially.

Overseas Expansion Begins in 1970s

Realizing the limitations of the domestic market, Goto sought global expansion in the 1970s. Stock offerings in 1968 and 1970 generated a "war chest" that financed Makita's overseas campaign. The company employed a multinationalist strategy, establishing a new subsidiary in each target market. Makita set up a foothold in the United States first, in 1970. Within just four years, the company had operations in France, the United Kingdom, Australia, Canada, the Netherlands, and Italy. The late 1970s and early 1980s witnessed the creation of subsidiaries in Germany, Belgium, Brazil, Austria, and Singapore.

Makita used its comparatively low-cost production base to advantage in Europe and America. By the end of the 1970s, the company had captured almost one-fifth of the global professional tool market nearly matching Black & Decker's market share. As an unidentified analyst told Fortune's Bill Sapirito in 1984, "Basically, Makita had them by the you-know-whats and just said, 'Cough."'

By this time, competition between Makita and U.S. industry leader Black & Decker had saturated that country's market for power tools to the point that sales growth appeared limited to replacements, parts, and trade-ups. In fact, manufacturer's sales slid 16 percent from 1980 to 1983. Fortunately, the development of cordless rechargeable power tools established a whole new avenue of growth. After 10 years of research and development, Makita launched its first cordless tool, a drill, in 1978. Eliminating the cord freed the worker from the power source, but early cordless models had several limitations. They were often heavier and less powerful than their corded forebears, had very limited running time, and required long periods to recharge. Though these factors kept cordless tools out of many professionals' tool chests, they did appeal to the home handyman whose projects were less demanding. Improvements in battery technology throughout the late 20th century boosted power and running time while reducing recharging time. By the late 1980s, Makita's 9.6 volt family of cordless tools was beginning to find their way onto construction sites.

Overseas Factories Established in 1980s

A variety of factors encouraged Makita to begin to establish manufacturing operations outside Japan during this period. Rising labor and production costs at home combined with a desire to minimize the effect of currency fluctuations and circumvent many trade restrictions while simultaneously reducing shipping expenses. Makita set up production facilities--dubbed "transplants" in business jargon--in Canada in 1980, Brazil in 1981, the U.S. in 1985, and the U.K. in 1991. By the end of 1997, the company's Chinese factory was churning out over 100,000 power tools each month.

Makita also continued to expand its global presence throughout the late 1980s and 1990s, establishing sales, distribution, and service operations in Spain, Taiwan, Hong Kong, China, New Zealand, Mexico, Hungary, and Korea. The company augmented its manufacturing capabilities with the creation of plants in the United Kingdom (1991) and China (1993).

New Products Drive Power Tool Market in 1990s

Makita pursued new product development in the 1990s, focusing on ergonomics as well as dust, sound, and vibration control. In 1991, the company bought into the market for gasoline-powered tools like chainsaws via the acquisition of Germany's Sachs-Dolmer G.m.b.H. Research and development costs averaged 1.7 percent of sales mid-decade, and totaled ¥2.7 billion (US$21.4 million) in 1997. By that time, Makita held more than 150 patents worldwide and applications for hundreds more were pending. Some of the company's discoveries applied Makita's power tool know-how to home and garden appliances including cordless vacuum cleaners, rechargeable electric lawn mowers, remote-controlled drapery openers, and hedge trimmers. However, as Makita reached out to the consumer market, it had to take special care not to alienate its core constituency of professional tool buyers. The company launched two new lines of cordless tools powered by 12 volt and 14 volt battery systems in 1997 as well.

By the early 1990s, Makita had captured over 50 percent of the US$400 million U.S. market for professional tools, far surpassing American power tool maker Black & Decker (B&D). But B&D moved to reclaim the segment in 1992, when it relaunched the DeWalt brand as its pro-tool standard-bearer. The construction-yellow competitor to Makita soon took the segment by storm. Such industry observers as Fortune's Patricia Sellers characterized Makita as "complacent" in the face of this renewed competition.

And in fact, Makita's strategy remained unchanged as the turn of the 21st century approached. Masahiko Goto, who had succeeded Juiro Goto as president in 1984, continued to lead Makita into the late 1990s. In his annual message for fiscal 1997, Goto expressed Makita's "aim to become a 'Strong Company"' by "developing products that accurately meet the needs of the market, increasing overseas production and further rationalizing production processes at its domestic production facilities, and strengthening its sales and distribution bases." This rather unimaginative plan did not serve Makita well in the 1990s.

Sales declined from ¥178.9 billion (US$1.4 billion) in 1993 to less than ¥160 billion (US$1.3 billion) in 1996 before recovering to ¥186.2 billion (US$1.5 billion) in 1997. Net income fared worse, falling by more than 30 percent from ¥9.8 billion (US$79 million) in 1993 to ¥6.7 billion (US$54.4 million) in 1995, then rebounding somewhat to ¥8.1 billion (US$65.4 million) by 1997. The company's stock price mirrored its less-than-stellar fiscal results; its NYSE-traded ADRs slid from a high of US$21.63 in 1994 to less than US$13 in 1997.

Principal Subsidiaries: Makita U.S.A. Inc.; Makita Corp. of America (U.S.A.); Makita Mexico, S.A. de C.V.; Makita Canada Inc. (Canada); Makita do Brasil Ltda. (Brazil; 90.4%); Makita (Australia) Pty. Ltd.; Makita (New Zealand) Ltd.; Makita International Europe Ltd. (U.K.); Makita (U.K.) Ltd.; Makita Manufacturing Europe Ltd. (U.K.); Makita France S.A. (France); Makita Benelux B.V. (Netherlands); Euro Makita Corp. B.V. (Netherlands); S.A. Makita N.V. (Belgium); Makita S.p.A. (Italy); Makita Werkzeug G.m.b.H. (Germany); Dolmar G.m.b.H. (Germany); Makita Werkzeug Gesellschaft m.b.H. (Austria); Makita S.R.O. (Czech Republic); Makita Sp. AO.o. (Poland); Makita kft. (Hungary); Makita S.A. (Spain); Makita Singapore Pte. Ltd.; Makita (Taiwan) Ltd.; Makita Power Tools (H.K.) Ltd. (Hong Kong); Makita (Korea) Ltd. (South Korea); Makita (China) Co., Ltd.; Shiroyama Development Co., Ltd.; Makita Ichigu Co., Ltd.; TMK Co., Ltd.

Additional Details

Further Reference

Cory, James M., "Power Tools; Products and Prospects," Chilton's Hardware Age, June 1985, pp. 45--47."Electric Tool Industry Nearing Judgment Day," Business Japan, May 1987, pp. 45--46."Japan's Power Tool Industry," Japan 21st, June 1995, pp. 28--29.Kelly, Joseph M., "Cordless Tool Makers Power Up to Meet Market Demands," Home Improvement Market, September 1996, pp. 66--67.------, "Power Tool Makers Battle in Court," Home Improvement Market, August 1996, p. 49.Sapirito, Bill, "Black & Decker's Gamble on 'Globalization,"' Fortune, May 14, 1984, pp. 40--44.Sellers, Patricia, "New Selling Tool: The Acura Concept," Fortune, February 24, 1992, pp. 88--89.Smutko, Liz, "Building a Pro-Quality Niche," Chilton's Hardware Age, May 1994, pp. 59--61."Splinters," Forbes, June 6, 1983, p. 161.

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