Issue March 4, 2002
Takara's Market Expansion Strategy
Why the 'Choro-Q' Mini Car Toy Will Actually Take to the Streets
Can a toymaker really make cars? Many people were surprised when
the news broke in early January that Takara Co., Ltd. had plans to sell an electric
vehicle called "Q-Car." Speculation was rife as to whether all safety
issues had been addressed and exactly what the company intended to do with its
core business of toy manufacturing.
 Takara
is a veteran toymaker in Japan, known for products like the "Rika-chan"
doll, the board game "Jinsei Game" (Game of Life) and its "Choro-Q"
mini cars. In 2001, it launched two successful products -- "Bey Blade,"
a modern version of the spinning top, and the "E-kara" home karaoke
system.
Amid Japan's economic gloom, Takara is noteworthy for its healthy financial
state. Annual sales amount to around 40 billion yen, considerably less than
the 200 billion yen-plus posted by leading toymaker, Bandai Co., Ltd. (133.31
yen = US$1)
The news that Takara intends to enter auto production, far removed
from its core business, would likely cause many people to suspect that Takara
had gotten carried away with its run of popular products and rushed headlong
into some form of indulgence.
Takara President Keita Sato (44) firmly denies the suggestion.
"We have absolutely no intention of becoming an automaker, and the electric
vehicle fits precisely into our business strategy," he said.
Last fall, Sato mapped out mid-term business plans that include
a consolidated sales target of 100 billion yen for the year ending March 2004.
But miniature toys for kids do not comprise a fast-growing market. For Takara
to reach its sales target, the only option is to extend the age range of the
people who buy its products. Given the limitations of its in-house technology
and sales channels, the company is aggressively pursuing alliances with other
companies and is broadening its product segments.
A case in point is Takara's equity partnership with the leading
producer of games Konami Co. Ltd. Sato announced the tie-up just two months
after he took charge of the company in February 2000. Konami is now Takara's
largest stockholder with a 20.2 percent equity stake. The advantage for Takara
is the acquisition of a source of capital for business expansion. As a further
significant gain, the company will be able to make new products utilizing Konami's
technology.
The benefits of the partnership with Konami became apparent last
October when Takara unveiled its remote-controlled "DigiQ" toys. These
toys are an update of Choro-Q, the mini car released more than 20 years ago
and still as popular as ever. But the Choro-Q could only move straight forward.
The DigiQ toys are remote-controlled and can move freely backward, forward,
and around. The difference is "Micro IR," an infrared remote control
technology developed by Konami. Although the 4,980-yen price tag is high for
a toy, DigiQ is proving such a hit with young men in their 20s and 30s that
the monthly production of 150,000 vehicles isn't meeting demand.
Seeing a window of opportunity in DigiQ's success, Takara has
unveiled two new products for adults -- a remote-controlled "sky ship"
and the news-breaking Choro-Q mini car. The sky ship is a 90cm-long dirigible
that uses helium for flotation and can be propelled indoors through the air.
It comes with a manual that describes, among other information, the sky ship's
history and how it works. This is intended to arouse the child-at-heart enthusiasm
of young men who tend to be know-it-alls about their pastimes.
Takara is convinced that the Q-Car, following on the success of
the remote-controlled Choro-Q toy car, will find support as a Choro-Q that an
adult can actually ride. The fact that it is an electric vehicle, eco-friendly
and with no gas emissions, could also be selling points.
Q-Car Manufacturing to be Outsourced
However the toymaker Takara has neither the technology nor the
know-how to make automobiles. It has thus partnered with Cox Inc., a company
based in Ashigara Kami-Gun, Kanagawa Prefecture. Cox sells imported cars and
does performance testing of auto parts. Takara will outsource everything from
the body manufacturing to vehicle assembly, while specializing in marketing,
advertising, and developing new sales channels.
"From our toymaker perspective, we'll bring a sense of playfulness
and innovative ideas to the auto industry," Sato said.
The Q-Car series vehicles are expected to be single-seaters selling
for 980,000 yen to 1,280,000 yen, and which can be recharged from a 100V household
electric outlet. The incumbents in the auto industry are watching developments
with interest. Fujio Cho, president of Toyota Motor Corp., said he believes
that the Q-Car is an "interesting concept," although he has not yet
studied the specifications in detail.
Naturally enough, the prospects for Takara are not entirely rosy.
Regardless of whether the Q-Car proves popular or not, some observers question
whether Takara has the corporate clout for this sort of venture.
In comparison with Bandai's solid revenue base, Takara has few
popular characters or products, other than the long-time bestseller Rika-chan,
that generate stable earnings. The stock market has reacted favorably to Takara's
transformation, and the aggregate market value of the company's stock shot up
to 70 billion yen as of mid-February, more than double the value a year ago.
But Takara still has a long way to go before it reaches 100 billion yen in market
capitalization.
Takara's performance in the stock market has roots in the past.
The company posted a loss for the half-year ended Sept. 30, 1999. This was because,
under the regime of the former president, freedom of thought was suppressed
and employees started quitting, leaving the company in such a mess it was unable
to produce any successful products.
Sato left Takara for a period at this time, and experienced the
hard work involved in setting up from scratch a company that can both devise
and make toys. Sato is the second son of the company's founder, but it is his
real-world experience that differentiates him from his predecessor who took
over the leadership without having to prove himself.
On his return to the Takara fold, Sato immediately initiated a
major restructuring program. One third of the staff had left the company. Having
completed debt restructuring, Sato's next task was to map out his growth strategy,
the aim of becoming a company with annual sales of 100 billion yen. Now, at
last, Takara looks ready to tackle that goal.
The child that was crying just now because it had fallen over
is suddenly back on its feet and grown in stature, and such is Takara's situation
at the moment. But whether it can attain the president's goal is yet to be seen.
(Renge Jibu, Staff Writer, Nikkei Business)
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