Winners / Selection Rationale

Shimano Inc. Bicycle Components Division

2003 3rd Porter Prize Winner Development, manufacturing and sales of bicycle parts and
Achievement in systematizing bicycle parts, and constantly upgrading and seeking higher performance products through the establishment of close ties with leading bike users and bike shops. Despite being a components manufacturer, Shimano also created a new mountain bike market. The Shimano brand has earned a high level of confidence among users that far exceeds that of any of its competitors.

Executive Summary

Established in 1921, Shimano has earned itself the leading position in the global bicycle component industry. It is believed that Shimano holds 60-70% of the global market for bicycle components for competition use.

Unique Value Proposition

Shimano focuses on key functions such as gear changers, brakes, and power driving mechanisms that determine a bicycle's performance, including its handling and safety. Moreover, by designing each component as an integral part of a system, Shimano is able to deliver a level of performance, handling and comfort to end-users that cannot be attained by merely combining and assembling discrete parts. For example, Shimano integrated a brake lever and a gearshift lever that had been separate and independent parts until the company developed a new system that greatly enhanced the ease of handling. Because of easier handling, professional road racers were relieved of the extra stress in the gear-shifting process, and could instead concentrate on negotiating the road and pay attention to the other competing racers. When the mountain bike market was just taking off, Shimano also started offering totally new features of durability and protection from mud and dirt, in addition to achieving the innovation of allowing users to shift gears while holding onto the handlebars. This innovation simplified maintenance, and more people became able to enjoy dirt road running without having to worry about special care.

Shimano's system performance was honed in the road racing and mountain bike markets, and its system application was extended to the comfort bike category, which included bikes for leisure and city use. This represented a significantly larger bike market for the general public, who could now enjoy high functionality with ease.

Unique Value Chain

Technology development
Shimano's engineers who are responsible for developing individual parts and components place an emphasis on the system's performance as a whole. They develop and test products with the primary objective of realizing the system concept. The priority is on realizing the system's smooth performance, rather than on maximizing the performance of each single part.

Shimano focuses its product development on the high-end segment of road racing and mountain bikes, and every year it introduces new products that achieve improvements in functionality, ease of handling and comfort. The company has created an organization for outside elite riders of mountain bikes, and periodically gives them prototypes of products to test drive on the road.

Shimano receives requests and complaints from end-users via two different routes: directly and through bike shops. As a direct-route activity, Shimano meets bicycle users by sponsoring bike racing teams, holding races and events with "Shimano" sponsorship, and by sending its staff to work as mechanics at races. The Shimano Suzuka Road Race has a 20-year history, while Shimano Bikers Festival is 13 years old. These events are managed and operated by Shimano staff members, who fulfill a variety of roles ranging from mechanic and race judge, to parking attendant. Such occasions are an opportunity for many of the Shimano staff to enjoy direct contact with bike lovers. By speaking to end-users directly, the staff can gain an understanding their needs. As for the bike shop route, Shimano arranges "dealer caravans," during which staff members make visits to individual bike shops. The company also conducts new product presentations to which bike shop personnel are invited. These events are attended not only by marketing and sales staff, but also by representatives from the development and engineering departments as well as quality assurance staff, who talk with bike shop employees to find out their requests and complaints.

Through its collaboration with other parts manufacturers and bike manufacturers, Shimano looks for a future direction for new-style bikes and develops "concept bike" proposals. The company aims to come up with proposals that would not have been possible by merely relying on existing parts technology alone. It is also willing to make drastic changes the bicycle's design.

Marketing and sales
Shimano focuses its promotional activities on the high-end market. It has established brand recognition and a reputation for high performance in Europe and US, which are the primary markets for high-performance bicycles, through the sponsorship of professional road racing events and professional racing teams. In Japan, the company sponsors such events as the "Shimano Suzuka Road Race" and the "Shimano Bikers Festival." Sponsorship of such events helps to further strengthen the company's brand recognition among bike lovers.

These events help expand the market, and sometimes even create new markets. For example, a new pastime called mountain bike riding emerged in the late 1980s. This activity was started by a small group of bike users. Shimano took the initiative by supplying parts tailored to fit this riding style, and then persuaded assembled bicycle manufacturers to market new products. The company also held events to promote mountain bike riding to support and expand this emerging market segment.

Shimano extends strong support to bike shops, which are its primary sales channel for reaching high-end customers. Shimano established a sales subsidiary in the U.S. as early as 1965, and its own staff provided direct support for local bike shops in that market. In addition to organizing dealer caravans and new product presentations to display and demonstrate Shimano products and hosting training events for repair and maintenance, the company also dispatched selected staff from Japan to bike shops in the European and U.S. markets for three-month periods, whereby the staff learned first-hand about the work done in a bike shop and the characteristics of the local bike community in each market. No other bike parts manufacturer provides such extensive support services to bike shops. This support is what has earned the company a high degree of trust from bike shops.

After-sales service
Through the hosting of dealer caravans, Shimano teaches bike shop personnel about product features and repair techniques. Since Shimano introduces new products every year, ensuring a continuous supply of repair parts for former models can become an issue. Thus, in addition to its own parts distribution network, Shimano has built an extensive network of bike shops under contract in major cities serving as "Shimano Service Centers," whereby it can provide a broader array of repair parts more quickly to those bike shops.

Fit among Activities

Continuous functional improvements and frequent introductions of new products are key to ensuring the success of Shimano's strategy of functional differentiation through the development of systematized components. Shimano supports this strategy by conducting marketing activities to communicate the value of the product and offering training on adjustment methods and techniques for repairing new products, as well as by ensuring a supply of spare parts. Shimano creates opportunities for direct communication with end-users by hosting various events, undertaking team sponsorship, and extending support to bike shops. This direct feedback from people in the field helps the staff to generate ideas for product development and provides them the opportunity to communicate to a wide variety of users the distinct advantages of Shimano's product features. Furthermore, by hosting events and sponsoring a team, the company can enhance its brand equity while creating a broader base of support among bicycle sports fans.

Shimano's commitment to the two different markets of road racing and mountain bikes provides the opportunity to leverage the technologies of one market for application in the other market. For example, the company's sealing technology for protecting against mud and dust was originally developed for mountain bikes. This technology was later transferred to road-racers for the European market, where racers must endure far worse road surfaces and weather conditions than racers in the U.S.

Seeking a demand-pull from end-users, Shimano focuses on identifying end-users' needs and responding to those specific needs. It does not accept requests for the manufacturing of dedicated components, nor will it undertake batch production of special components for individual manufacturers of assembled bikes. Adhering to such a policy serves to reduce the burden on the company's development and production capacity. Unlike in the development of parts as discrete units, the complexity is multiplied in the development of parts as systemized components.

(Please refer to the "Activity System Map" attached for a more detailed account of the relationship among these activities.)

Innovations that Enabled the Strategy

  • In the global bicycle parts industry, each part was treated traditionally as a physically discrete unit but one that was commonly shared in a standardized interface established by parts manufacturers, who specialized in a specific area. Shimano changed all that by designing and developing systematized components for such features as gear shifts, brakes, and power drive mechanisms using its own proprietary interface (i.e., the company systematized various discrete parts, making them into a single component.)
  • Shimano created and developed a totally new mountain bike market.

Consistency of Strategy Over Time

Since commencing production and sales of parts for road-racing bicycles in 1973, Shimano has continued to dominate the high-performance bike market with the fruits of its ongoing R&D efforts. Shimano began creating special parts for the development of systematized components in 1973, and the company continues to follow this strategy today. In recent years, Shimano has been working on gearshift systems incorporating automated electro-mechanical solution. This is one example of the company's efforts to achieve a high performance and superior ease of handling and comfort for end-users.


  • Shimano does not seek to maximize the performance of a single part.
  • It does not develop and manufacture components, such as saddles and tires, for which systematization would not improve its performance.
  • Shimano delivers value to end-users in the form of a system, and therefore it does not sell discrete parts on the market.
  • Shimano does not engage in OEM arrangements, whereby dedicated parts or systems are displayed under the brand of an assembled bike manufacturer.
  • Shimano does not produce assembled bicycles. Manufacturers of assembled bikes are customers for Shimano, which is a manufacturer of parts and components.
  • Shimano does not rely on trading firms or middlemen in its distribution process, primarily to ensure sufficient training to bike shops regarding Shimano's product features, installation and repair methods.
  • Shimano does not independently conduct mass-marketing activities.


Shimano achieves a much higher return on invested capital and return on sales than the bicycle parts industry average.

Return on invested capital (ROIC)   (Unit = percentage point)
Difference from industry averag
over 5 year period
Difference from industry average, by year
1998 1999 2000 2001 2002
16.3%P 18.0%P 19.7%P 16.2%P 11.0%P 17.5%P
Return on invested capital = Operating income / Average invested capital

Return on sales (ROS)   (Unit = percentage point)
Difference from industry average
over 5 year period
Difference from industry average, by year
1998 1999 2000 2001 2002
14.3%P 14.9%P 17.1%P 15.3%P 11.7%P 16.2%P
Return on sales =Operating income / Net sales

Activity System Map

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