Yamaha 2008 Annual Report Download - page 26

24 Yamaha Corporation
Review of Operations
Key Policies and Priority Measures in Fiscal 2008
■ Establish a highly profitable earnings structure as a core Yamaha business
■ Enhance product lineup from customer perspective
■ Boost cost-competitiveness (expand production in China and Indonesia;
consolidate piano factories in Japan)
■ Expand sales aggressively in growth markets such as China, Russia and Brazil
Fiscal 2008 Highlights
■ Sales increased and operating income grew significantly by 26.7% compared
with the previous year
■ Professional audio equipment showed steady sales growth at a double-digit pace
of 12.9% year on year
■ Production capacity in China and Indonesia increased; consolidation of piano
operations in Japan proceeded on schedule
■ Sales in emerging markets such as China rose at a double-digit pace. New
subsidiaries were established in Russia and India
Musical Instruments
04/3 05/3 06/3 07/3 08/3
293,430 302,617 314,078 325,989 340,021
Net Sales
(Millions of Yen)
Business Outline
Musical instruments are the cornerstone of Yamaha’s business
operations, accounting for over 60% of consolidated sales. The
Company has earned a strong reputation for quality from the
multitude of customers it has served over its 120-year history,
offering a broad assortment of musical instruments that are engi-
neered to provide superior sound quality and are supported by
high-quality customer service. Yamaha offers an extensive lineup
of products to suit the requirements of every player, from begin-
ners to professional musicians. Products range from acoustic
items like pianos, wind, string and percussion instruments to
digital keyboards and other digital musical instruments, as well as
professional audio equipment. The Company also offers a variety
of services related to its music businesses, including music enter-
tainment and the Yamaha music schools, which aim to increase
the number of people who play a musical instrument, as well as
promote an appreciation of music among the public at large, thus
serving to perpetuate growth in the overall music-related market.
Performance Overview
Sales in the musical instruments business increased 4.3% year
on year in fiscal 2008, to ¥340.0 billion, mainly reflecting sales of
digital musical instruments, professional audio equipment and
wind instruments. Sales were particularly brisk in Europe, China,
the Middle East, Latin America and other emerging markets.
Operating income grew 26.7% from the previous year to ¥27.9
billion due to sales growth, favorable exchange rates (particularly
the yen-euro exchange rate), and higher gross profit margins
resulting from factors including the Company’s efforts to restruc-
ture production facilities and reduce costs.
Business Review by Major Product Category
Pianos
The global piano market is evolving towards a highly polarized,
two-tier segmentation according to price and customer needs.
Demand in the lower-end price range is steady, but these prod-
ucts are starting to become mere commodities with little oppor-
tunity to add value. On the other hand, demand for top-quality,
high-value-added pianos is also brisk, and in fiscal 2008, overall
sales of pianos increased year on year. Specifically, by region,
sales weakened in the highly mature Japanese market, as well
as in the U.S., where an economic downturn depressed
demand, while sales in Eastern Europe, China and other emerg-
ing markets continued to increase.
In Europe, unit prices have been falling as price competition
intensifies, but sales of upright pianos manufactured in Indonesia
expanded. In Eastern Europe, in particular, economic growth
and rising market penetration levels for musical instruments
supported double-digit sales growth. In 2008, Yamaha
acquired L. Bösendorfer Klavierfabrik GmbH, an Austrian
manufacturer of premium pianos, to enhance the Company’s
presence in the market for these pianos.
In China, the Company has set up Yamaha piano displays in
retail stores to raise its visibility, particularly in major cities, and
promoted the development of Yamaha music schools as part of
its marketing strategy. The Company also pursued initiatives to
expand sales of low-priced upright pianos built at its local factory,
and increased sales of high-end pianos imported from Japan.
During fiscal 2008, Yamaha expanded production capacity at
its factory in China, Hangzhou Yamaha Musical Instruments Co.,
Ltd., as well as at PT. Yamaha Indonesia. Meanwhile, the Com-
pany is taking steps to consolidate its two piano factories in Japan
(Hamamatsu and Kakegawa), in order to improve efficiency, facili-
tate the transfer of skills, and improve personnel training. This
comprehensive project is due to be completed in 2010.