Shimano Inc.

1921–1973

Shimano Inc. is a leading producer of bicycle parts and fishing equipment. It is the world's largest manufacturer of such bicycle components as gear wheels, derailleurs, and brakes, with a 70 percent market share. In the late 1990s, Shimano began selling equipment for golf as well as snowboarding and other sports. Headquartered near Osaka, Japan, Shimano has 24 sites in 17 countries around the world. The company is known for its efficiency as well as innovation.

Origins and Growth of Shimano

Shimano dates back to 1921, when Shozaburo Shimano founded Shimano Iron Works in Sakai City, near Osaka. The town was a legendary blacksmithing center known for its swords and gun barrels. Rather than follow his father into farming, Shozaburo had apprenticed at an iron works after high school. Later, he started his own company, and the first product it made was a single-speed bicycle freewheel. In ten years, Shimano was exporting freewheels to China.

The business was incorporated as a limited corporation in January 1940 under the name Shimano Iron Works Co., Ltd. In 1951, it was renamed Shimano Industrial Co., Ltd.

Shimano began making its famous derailleurs in 1956. Also called external speed changers, these were the mechanisms that moved the bicycle chain from gear to gear on ten-speed bikes and the like. The next year, the company began producing an internal, three-speed gearing mechanism that was enclosed in the hub of the rear wheel. This internal speed changer was introduced to the U.S. market a few years later and soon became the standard for three-speed bikes. In 1960, Shimano installed a cold forge that enabled stronger products to be made in a more efficient fashion.

Shozaburo Shimano eventually turned over management of the business to his three sons. Though the company made brakes and other components, Shimano refused to produce complete bicycles. "Our founder said, 'never ever compete with a customer,'" remarked one of Shimano's sons to the Straits Times. A U.S. subsidiary, Shimano American Corporation, was set up in January 1965. Shimano launched into the bike-crazy European market in the same year.

Tackling New Challenges in the 1970s

In 1970, Shimano built what was then the largest bicycle plant, located in Yamaguchi Prefecture, Japan. Later in the decade, according to Design Week, Shimano began hiring engineers to create a unified look among component systems as well as elevating their performance. A European unit, Shimano (Europa) GmbH, was established in Düsseldorf in 1972 with just two employees. The company's shares began trading on the Osaka Securities Exchange the same year and were also listed on the Tokyo Stock Exchange in 1973.

Exports of Japanese bicycles and components as a whole grew furiously in the late 1980s, reported the Asahi News Service, reaching ¥115.4 billion ($848.7 million) in 1990.

1973–1989

Shimano's first manufacturing plant abroad was set up in 1973 in Singapore. Opening a sales office in California in 1974, the company was well placed to ride the booming bike market in the United States during the 1970s.

Shimano's path to success was not without its bumps.

As Yoshizo Shimano later told the Asian Wall Street Journal, the company made a huge investment designing, developing, and testing a series of aerodynamic bicycle components in the late 1970s. They were well ahead of their time and took several years to catch on.

Shimano had also begun to diversify into tackle for fishing, another sport whose tools required precision mechanisms. However, it did not become a major force in this industry until the late 1970s. Shimano's Bantam reels were introduced in 1978, followed by X-line rods in 1981.

Ahead of the Pack in the 1980s

Shimano continued to refine its biking products, creating new market leaders. The AX line of components for bicycle racing came out in 1980, followed two years later by a series for mountain bikes dubbed Deore XT. The Shimano Index System allowed cyclists to dial in to specific gears by numbers. Annual sales exceeded ¥50 billion in the mid-1980s. At this time, Shimano employed 1,500 people around the world.

Shimano beat its European competitors to the mountain biking craze, observed the Far East Economic Review. The company developed a thumb-shifting mechanism specifically for mountain bikes and produced tougher versions of its brakes and steering controls to stand up to knobby tire abuse. By the late 1980s, Shimano was considered the standard for mountain bike components.

The range of Shimano's cycling offerings expanded throughout the 1980s. New shifting systems continued to be developed, such as the Rapidfire Remote (1989) for mountain bikes. The company began selling a line of bike shoes in 1988.

1988–1997

In 1988, Shimano set up a UK subsidiary that focused on fishing tackle sales. In the same year, Shimano shifted some of its fishing reel production to Singapore, which, due to the rise of the yen, was producing about ¥4 billion ($26 million) worth of bike parts a year. In 1989, Shimano established three subsidiaries in the Netherlands that sold an array of products.

Sales were ¥84 billion in 1989. Exports of Japanese bicycles and components as a whole grew furiously in the late 1980s, reported the Asahi News Service, reaching ¥115.4 billion ($848.7 million) in 1990. By now, one-third of Shimano's production went to Europe.

Global Expansion Continues in the 1990s

Shimano opened a plant in Malaysia in 1990. In the same year, the company bought an interest in Alfred Thun S.p.A. This was renamed Shimano Italia S.p.A. after the rest of the stock was acquired. A fishing equipment unit was also set up in Italy in 1990. In addition, Shimano was expanding its Singapore operations. The company also set up subsidiaries in Belgium and Indonesia in the early 1990s. The parent company's name was changed to Shimano, Inc. in 1991.

The proprietary SPD (Shimano Pedaling Dynamics) line of quick-release "clipless" pedals called was introduced in 1990. Evolution of the fishing tackle line soon saw the introduction of the Stella reel and the SHIP (Smooth and Hi-Power) system.

In 1995, Shimano rolled out its Nexus line of seven- and four-speed internal hubs for cruiser bicycles, which were growing in popularity in the United States due to their retro styling and simplicity of operation. Shimano was also developing an in-hub gear system that could be locked to prevent theft. It was introduced to the Japanese market in 1997.

Competition in Asia increased towards the end of the decade as European manufacturers entered this market. Bicycles had long been a staple form of transportation in China, and, as its economy grew, so did the demand for high-end bikes. The Far Eastern Economic Review had observed that most of China's 320 million bicycles did not have gears in the early 1990s. However, this was changing rapidly, and Shimano claimed a 50 percent market share on gears there.

After reports of cyclists being injured by broken cranks, Shimano recalled more than 2.5 million of them in 1997. It was the largest recall in the bike industry to date, reported the Los Angeles Times, and cost the company $15 million or more. Due to the popularity of Shimano's mountain bikes, the affected parts had been installed in about 50 different brands over the previous three years.

1800–2004

Shimano acquired G. Loomis Inc. in 1997 as it launched an Action Sports Division offering products for growing new sports such as snowboarding. Shimano set up a Golf Division in 1999 and continued to develop new products in other areas, such as a wobble-free fishing rod.

2000 and Beyond

Shimano became more visible than ever on the global stage as longtime user Lance Armstrong began his winning streak at the Tour de France in 1999. While overseas production accounted for 30 percent of production in 2000, exports accounted for more than 80 percent of revenues of ¥141 billion. As the Japanese bike market stalled, the Nikkei Weekly reported Shimano was shifting the focus of its overseas plants to supplying local bike manufacturers rather than producing parts to export back to Japan. Shimano was investing ¥1 billion to boost production at its Shanghai plant by 60 percent and was adding a three-speed gear line there to meet new demand.

In 2001, the company set up a ¥5 billion factory in the Czech Republic to meet booming bike demand in Eastern Europe, as well as building a plant in mainland China. A Taiwanese unit was established in 2002, and a second, ¥2 billion ($17 million) factory opened in the People's Republic of China in 2003. Shimano also opened a ¥500 million ($4 million) fishing rod production facility on the site of its Kunshan, China, bike parts complex. The company was aiming to increase overseas production to half of total production by 2004, reported Asia Pulse.

After extensive design and testing, an automatic gear shifter for bicycles was announced in late 2003. The device used magnets and other sensors to determine a bike's speed and make shift adjustments accordingly. Shimano was hoping to sell 50,000 units a year at ¥200,000 ($1800) each. Yoshizo Shimano told the Financial Times that the motivation for the idea was to allow bike commuters to concentrate on traffic by freeing them from the distraction of selecting gears.

Shimano continued to innovate as a manufacturer of fishing gear as well. In late 2001, it introduced the Dendomaru 3000SP, an electric reel with an LCD screen displaying the length of line cast as well as other data to give novices feedback on their technique. A few years later, Shimano developed an underwater fish detector in partnership with Furuno Electric Co., a maker of navigation instruments.

Sales were growing at the rate of 6 or 7 percent a year, reaching ¥143.7 billion in 2003. Net income grew more than 50 percent to ¥12.3 billion. As it proceeded into the first decade of the 21st century, the company had an estimated 70 percent share of the world market for bike parts.