Explain the factors behind Shimano’s success in the bicycle parts market

During the history of the company Shimano overcame its challenges by adjusting its strategy to changes in the market while at the same time establishing its core strength
- strong focus on technology to create innovative and quality products
- establishing a direct line to customers and iterating on its product based on their demands
- transferring technology between different product lines and fields to to increase the return on investment and to produce high value added products

Great Depression
The technology focus with the aim to produce high quality and thus high value added products was already established in the first crisis Shimano faced, the Great Depression of the 1930s. Despite struggling the company focused on improving its production process. While the aim was to produce high quality freewheels, this should in particular reduce the failure rate, allowing the company to establish its high quality sales strategy. Instead of giving discounts the company offered to replace defective product with two working products. This showed great confidence in its product while in fact the actual cost were limited by the actual failure rate that could be improved below the level of a discount. Assuming a failure rate of 20% the replacement costs were an extra 20% (or assuming that competitors also replace defective parts and have a similar rate just 10%).

This strategy worked, because while bicycles were expensive and mainly used for transportation, freewheels were a core part of the bicycle that was expensive to replace or repair. Accordingly it was in the interest of the end customer to have a high quality part, but similar in the interest of bike assemblers. These were in general smaller companies, for whom handling high failure rates would be a noticeable overhead. While at the