Akai Electric: long-term performance & turning pointsSales (revenue) and profit-margin ratio
Sales (¥ bn)Net margin (%)
1924From radio components to an export-specialised audio maker
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1965 · unconsolidated
Revenue$7M
Net income$331K
Net margin4.4%
→
FY1969 · unconsolidated
Revenue$39M
Net income$6M
Net margin14.2%
1924Akai Denki Seisakusho founded as a sole proprietorship
1929Akai Electric established
1935Manufacture of automotive electrical equipment, motors and radio parts begins
1947Akai Electric refounded as the second company
1948Manufacture of general-purpose and small record-player motors begins
1951Entry into tape recorders, specialising in exports
1954The AT-1 tape mechanism goes on sale
1958The MS-60 stereo tape recorder goes on sale
1962The M-7 tape recorder with crossfield head goes on sale
1968Listed on the second section of the Tokyo Stock Exchange
Akai began as a maker of radio parts, vanished into wartime consolidation, and was rebuilt after the war by the founder's son around small motors for record players. The move that mattered came in 1951, when the company left components for finished tape recorders and went looking for its customers abroad. By 1969 exports were about nine-tenths of sales, and turnover had risen from $7.5M (¥3bn) to $39.4M (¥14bn) in five years.
A founding in socket radio parts, and the postwar revival of the business
The company traces its origins to 1924, when Akai Masukichi (赤井舛吉) began manufacturing socket radio parts in Minato-ku, Tokyo, at a time when demand for them was expanding rapidly. Starting a components business timed to the dawn of radio broadcasting was, for that period, a choice rich in foresight. But in the wave of wartime corporate consolidation the first Akai Electric disappeared. In 1947 the founder's son Akai Saburo (赤井三郎) revived the business and began afresh with the manufacture of small motors for record players. Prewar knowledge and postwar technique were thus handed on by the second generation. The socket radio parts business of the founding years had read accurately the demand for consumer electronics then germinating in Japan. It was an exquisite launch in which pioneering instinct and the tide of the times coincided.
In phonomotors the company briefly swept the domestic market, but as Matsushita Electric and other large household-appliance makers entered in earnest, price competition intensified. Securing continuous profit from the components business alone grew harder by the day, and the company was driven into a position where it had to search for its next pillar. Carried by the expansion of demand for electronic equipment during the postwar recovery, its management nonetheless had to confront the question of how an independent small or medium-sized maker could differentiate itself from the giants. What was required was ingenuity in carrying the technology cultivated in motors through to the next business. Recognising the limits of the components business and searching for the next pillar became the keynote of management from the early 1950s.
The vertical tape recorder, and exports to the United States in earnest
In 1951 Akai Saburo decided to enter tape recorders as a field to which the technology cultivated in phonomotors could be applied. Where horizontal tape recorders were then the mainstream in the domestic market, the company developed its own space-saving vertical machine and specialised in the vertical format, taking a position that avoided competing head-on with the majors. Judging that limited domestic demand set a ceiling on the growth of the business, Saburo set a policy early on of seeking a way through in exports, and in 1956 went to the United States himself to open up a sales network directly. A charismatic proprietor opening his own distribution was unusual among Japanese companies of the time.
In America Saburo won a supply contract with Califone Roberts (キャリホン・ロバーツ) on the spot, establishing the first foothold for putting the company's tape recorders into the United States market. Where Japanese appliance makers had until then expanded abroad through trading houses, Akai assembled its own export model: contracting directly with local sales agents, cutting out the intermediate margin and holding on to a high-margin structure. Success in the American market in the late 1950s became the important starting point that led on to the later widening of the sales network across Europe, Africa, the Middle East and elsewhere. It was an epoch-making period in which a distinctive export model began to take firm shape as the foundation of the high-margin constitution of later years. A thoroughgoing commitment to being present on the ground grew into the company's greatest strength.
A listing on the second section of the Tokyo Stock Exchange, carried by high margins
From 1965 onwards the company recruited highly educated engineers on terms far above the industry standard, strengthening its product development considerably. It offered graduates of the University of Tokyo and the Tokyo Institute of Technology an annual salary of $5,556 (¥2m) — extraordinary for the time — drew more than five hundred applicants and organised a technical staff around them. Its outlets reached beyond the United States to Europe, Africa, the Middle East and South East Asia, and by building a network of 170 agents it put in place a structure that avoided excessive dependence on any single customer. It was a singular period in which unstinting investment in technical capability and the construction of a dispersed worldwide sales network were pushed forward side by side. It was a boldly decisive policy of the kind an independent mid-sized firm could take.
By 1969 exports had reached about 90 per cent of sales, and the company had shifted to an export-specialised structure that depended hardly at all on the domestic market. In 1968 it achieved a listing on the second section of the Tokyo Stock Exchange, and at the time of listing its net margin on sales stood at 12.8 per cent. Known within the industry as a ferociously high-earning company, its flotation stirred extraordinary excitement in the securities market. Yet an export ratio of 90 per cent carried within it a vulnerability to currency movement, and that structure itself held the destiny that would strike the company's management directly in later years. This fated weakness, which would determine the company's fortunes, still appeared at the time of listing as nothing but a strength. The structural precariousness concealed beneath the brilliance of high earnings was beginning to take on an outline.
1970A late entry into video, and the collapse of margins under the rising yen
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1970 · unconsolidated
Revenue$48M
Net income$6M
Net margin12.9%
→
FY1984 · unconsolidated
Revenue$337M
Net income$3M
Net margin0.9%
1970Reassigned to the first section of the Tokyo Stock Exchange
1973Akai Saburo dies suddenly while serving as president
1975Entry into video; margins deteriorate as the yen rises against the dollar
1981The Mitsubishi Bank provides management support
1985The alliance with Mitsubishi Electric is strengthened across the board
1986A reconstruction plan is announced, including a third-party allotment to Mitsubishi Electric
1987Development and production of audio products is transferred from Mitsubishi Electric
Akai Saburo died suddenly in December 1973, and the succession struggle that followed left the company without the man who had held its engineers and its overseas dealers together. Sales kept climbing — from $47.8M (¥17bn) to $337.2M (¥80bn) — but profit did not follow. A late entry into VHS video brought volume without licence income, and the rise of the yen after the 1985 Plaza Accord turned the export concentration from an advantage into a structural liability.
The sudden death of the effective founder, and a management shaken by the succession
In December 1973 Akai Saburo, the effective founder, died suddenly while on a skiing trip, an event entirely unforeseen by the organisation. A struggle over the succession broke out internally around the choice of the next president, and management began to drift. The body of engineers and the overseas sales network that Saburo had built up during his lifetime rested on a personal system dependent on the founder's own command, and his absence had a serious effect on how the organisation was run. In the period after the founder's sudden death the company embodied the classic case in which the abrupt absence of a charismatic manager weakens at a stroke the organisation's very capacity to decide. The sudden death of the charismatic founder cast a long shadow over every subsequent reconstruction plan. Here the company embodied the classic case of an organisation whose capacity to decide was weakened at a stroke.
The industry environment also turned from 1965 onwards, as Sony, Pioneer, Japan Victor and other Japanese electrical makers began exporting audio equipment in earnest one after another. The export model Akai had pioneered spread through the industry as a whole, and the room for differentiation in the high-end audio market centred on tape recorders narrowed by degrees. The sharp rise of the yen against the dollar after the 1971 Nixon shock had also begun to squeeze the earnings of a company whose business structure rested on an export ratio of 90 per cent. It was a phase in which export specialisation, once a strength, began little by little to turn into a weakness. The shelf life of the export-specialised model was arriving sooner than expected amid the change of the industry as a whole.
Entry into video tape recorders, and falling behind in the format contest
The company chose the home video tape recorder as its new pillar after audio. It was a product built around a tape drive mechanism, and the technical affinity with what had been cultivated in audio was high enough; but having fallen behind in the format contest between VHS and Betamax, it could not secure licence income. By adopting the VHS format as a latecomer it expanded video sales, and by 1988 video-related business had grown to more than half of turnover — yet profitability remained at a low level. It was a phase in which sales growth unaccompanied by profit ate away at the company's financial constitution. Having joined the VHS camp as a latecomer, the company was left without the earnings opportunities available to the firms at the core of the format.
The bare fact of defeat in the format contest brought the company a long decline in profitability in the form of absent licence income, and continued to cast a heavy shadow over the reconstruction plans of later years. The reality that the distinctiveness cultivated in audio would not necessarily carry over into the new market of video was forced upon it in the first half of the 1980s. It was a phase in which the company was learning, within its own business, the bitter lesson that a high degree of technical affinity alone could not begin to close the gap with competitors ahead of it in a format war. It was a time of feeling keenly the weight of first-mover advantage. The distorted structure in which the distinctiveness built in audio and the hardship of being late into video existed simultaneously within the same firm characterised Akai in the early 1980s. The age moved on with the contradiction unresolved.
The rising yen after the Plaza Accord, and the collapse of the cost structure
As the yen rose following the 1985 Plaza Accord, the cost structure of a company whose principal base was its head-office plant in Ota-ku, Tokyo, moved close to collapse. In 1981 it had fallen into a net loss and had shifted to a footing of receiving management support from its main bank, the Mitsubishi Bank. In 1986 the management was replaced, a president from the Mitsubishi Bank took office, and the overseas subsidiaries in Europe and America were closed one after another. Here was the phase in which a distinctive business structure resting on an export ratio of 90 per cent turned vividly, through a dramatic reversal of the currency environment, from a strength into a structural weakness. The very foundation of the former prosperity was inverted into the weakness itself. The company's history may be said to have demonstrated to the industry at large that strength and weakness often appear in management as two sides of the same thin sheet. A change in the environment can at times reverse a company's character in an instant.
The management drawn from the Mitsubishi Bank announced one reconstruction measure after another in quick succession — opening up the domestic market, moving production bases overseas. But the export-specialised business culture and the rigidity of an organisational climate without its founder did not come loose easily, and no visible results followed. The audio equipment market itself was beginning its shift to digital at home and abroad — the CD, the MD and later the MP3 — and the technical advantage cultivated in analogue magnetic recording was in a phase of losing its value altogether. The difficulty of reconstruction became manifest as it intersected with the structural change of the industry as a whole, and hard days followed in which the company could not keep pace with the speed of the times. The speed of the industry's structural change was taking away the very possibility of reconstruction. Amid that intersection, the difficulty of rebuilding deepened by the day.
1989Changing rescuers, and the end of an independent manufacturer
1989Exports of AV equipment to North America are halted
1995An ordinary loss of ¥2.3bn is posted for the year to November 1994
1995The Semi-Tech group provides management support
1995Chairman James H. Ting takes on the presidency; Taneda Koji 種田公二 steps down
1995A decision is taken to withdraw from domestic production of the mainstay VTRs
1999Becomes a subsidiary of the Hong Kong-based Grande group
2000A net loss of ¥102.6bn is posted and the company falls into negative net worth
2000The parent Akai Holdings is put into liquidation in Hong Kong
2000Files for civil rehabilitation at the Tokyo District Court
What followed was fifteen years of rescue attempts under changing owners — the Mitsubishi Bank, then Mitsubishi Electric, then the Hong Kong-based Semi-Tech group and Grande. Each bought time, and each narrowed the room for independent decisions, until the company filed for civil rehabilitation in November 2000 and its seventy-six years as an independent manufacturer ended. The name outlived the company: the trademarks were sold on, and Akai survives today on equipment built by firms sharing neither its capital nor its engineers.
Successive rescue attempts by the Mitsubishi Bank and the Semi-Tech group
With the reconstruction led by the Mitsubishi Bank failing to produce sufficient effect, in 1995 the Hong Kong company Semi-Tech entered as a new bearer of management support. It came in as the party taking over after Mitsubishi Electric had abandoned the rebuilding; but the audio and video equipment market itself had turned to structural contraction amid the wave of digitisation, and rebuilding the company's business foundation from the ground up was by this point already difficult. It was also a phase in which the reality kept being forced home that even a change of supporting party could not resist a fundamental change in the business environment. However many times the party leading the rebuilding changed, it was impossible to go against the wave of structural change in the industry as a whole. Time was no longer being granted to the company.
Under Semi-Tech's support the company attempted to move production bases to China and elsewhere and to expand through mergers and acquisitions, but it could not arrest the decline of its brand value within Japan or the decay of its capacity to develop new products. Consumer spending on audio equipment itself turned to long-term contraction, and survival as a standalone firm was pushed by degrees into a phase of practical impossibility. It followed a painful course in which the money and the time put into rebuilding were consumed to no purpose in the face of the speed of the industry's structural change. Even with the supporting party changed, long hard days continued in which attempts at reconstruction ended almost in idle spinning before that speed. It was a course in which only the consumption of money and time accumulated.
The filing for civil rehabilitation, and a line drawn under seventy-six years
In November 2000 the company at last applied for civil rehabilitation, meeting effective bankruptcy and drawing a line under seventy-six years of history as an independent electrical manufacturer. It was the closing of a long road for a firm that, from its founding in 1924, had manufactured and sold vertical tape recorders, cassette decks and VHS video products around the magnetic recording technologies of tape and video. The high-margin model built on export specialisation can be looked back on as having fallen into an unsustainable structure from the point at which the mechanism went wrong in two respects: the response to currency risk, and the late entry into the VHS format contest. The long progress of a company that had marked an era as an independent mid-sized electrical maker reached its close here. For those who knew it in its days as a ferociously high-earning company, it was an end that brought home the weight of the passage of time.
It is hard to deny that the vacuum in management left by the sudden death of the effective founder Akai Saburo made correcting this business structure still harder. In excessive dependence on a charismatic manager and in a personal, individual-centred running of the organisation, the company embodied within the postwar Japanese electrical industry the classic case in which correction becomes difficult once the mechanism has begun to go wrong. The end of a firm once praised within the industry as a ferociously high-earning company, an independent mid-sized electrical maker, is still referred to from time to time as a classic case for discussing how entrepreneurial management and business succession should be conducted. Founder-dependent management and the difficulty of succeeding it determined the company's fortunes directly. It may be called an end in which the problem of succession and the structural deterioration of the business environment struck at the same time.
The sale of the businesses, and where the brand went
Through the transfer of businesses after the application of the civil rehabilitation law, part of the technical assets and trademarks the company had held passed to several operators at home and abroad. The brand name Akai is still used today on some professional sound equipment and consumer audio products, and the brand bearing the founder's name survives in a corner of the audio market in altered form, after the company as a legal person had disappeared. In the field of professional samplers in particular, product lines descending from the old company retain a measure of support among enthusiasts. The reuse of the Akai brand abroad tells of the way the old company's genes survive, transformed, within the global market. It is also a case in which the extinction of the legal person and the succession of technical assets do not necessarily coincide.
Yet hardly any trace can now be found of the company as it existed in the era when it was an independent listed firm within Japan. The distinctive export model opened up by the founder Akai Saburo, and the management method of extraordinary terms for highly educated engineers, are subjects that draw the interest of historians of the electrical industry as one typical figure of the independent mid-sized maker in postwar Japan. As a rare case embodying the rise and fall of the independent mid-sized electrical manufacturer, the company's history will continue to be a subject holding the interest of researchers and practitioners.
The turning points, read in full: what was at stake, what was chosen and what the revenue did around it. The Japanese edition is the edition of record and carries the sourced dossier behind each decision — background, options weighed, outcome — linked under every decision.
Key decision · 1956
Direct overseas selling without trading houses, and an export model built on the vertical tape recorder (1956)
What the choice of export specialisation left behind
At the centre of this decision lay a way of choosing: avoid competing on price with majors that had the advantage in mass production, and sell premium goods to the world through direct distribution. President Akai Saburo cut out the trading houses and tied up directly with local agents, taking a position in the vertical format that did not compete with Sony, who had gone first. A high margin freed of the intermediary's cut, and products chosen for quality rather than price, pushed an independent mid-sized firm into the ranks of high earners in a short time. Specialisation in exports itself can be seen as having determined the very outline of Akai Electric as a company.
At the same time, a structure that placed some 95 per cent of earnings abroad also meant entrusting results to the exchange rate and to overseas market conditions. It is telling that even the contemporary securities material introducing the flotation listed the thinness of domestic sales as a future problem. Export specialisation, which had been the strength, turned directly into the weakness once margins collapsed under the rising yen after the Plaza Accord of 1985. The road that ran through support from the Mitsubishi group, into the hands of Hong Kong capital and on to civil rehabilitation in 2000, was not unrelated to this choice. A judgement that built one success carried within the same root the fragility of later years — Akai Electric's progress leaves that question with us today.
Entry into home video and a late arrival in the VHS camp (1975)
The price of not being able to change the pattern
The heart of this decision lies in the attempt to carry the pattern of success in audio straight over into video, relying on the continuity of tape drive as a technology. Akai's strength — building a great many excellent machines and putting them on a worldwide sales network — did not carry over as it stood into home video, where the firms holding the format itself held the source of the profit. Having joined VHS as a latecomer, the company's position was settled from the outset: the more units it sold, the more it served the interests of the camp's core members. One can see how the high degree of technical affinity obscured the question of whether the business could actually earn.
Even so, unprofitable as video was, Akai still had time here to grow another pillar. It is not easy to fold a business that has grown to more than half of turnover simply because its profitability is low. As the expansion of sales and the deterioration of margins advanced together, the export-heavy structure grew heavier still under the rising yen, and this led on to the reconstruction under Mitsubishi group support. Whether to choose markets where one's strengths apply, or to remake the pattern in a market where they do not — Akai's entry into video is one example that reflected, at an early date, the difficulty a successful exporter faces in choosing its next pillar.
A capital and business alliance bringing in Mitsubishi Electric as the largest shareholder (1986)
The problem of independence while leaning on a keiretsu
The core of this decision lies in the attempt to rebuild margins broken by an over-reliance on exports by leaning on the capital and the business support of a keiretsu. While bringing in Mitsubishi Electric as its largest shareholder and integrating development, production and sales, President Okada Makoto (岡田眞) continued to hold up independence, saying that a merger was out of the question. In the stance of taking support to the fullest while refusing to let go of autonomy, one can sense the tension between the pride of a former high-earning company and the reality that it could not stand alone. Reconciling the two demands — depending deeply on a keiretsu while preserving one's own character — was not an easy road.
The slimming itself was carried through, and negative net worth was avoided. But a constitution in which exports exceeded 80 per cent did not greatly change over four years, and results did not surface above water. The lag between slimming and the compression of fixed costs, and an earnings structure that continued to be swayed by the exchange rate, reflect how deep-rooted the structural problem Akai Electric had taken on really was. Whether to seek survival under the keiretsu umbrella, or to remake the constitution itself beneath it — these four years of rebuilding led on, without ever fully answering that question, to support from foreign capital in the 1990s and to civil rehabilitation.
Survival under Hong Kong capital, and the end of an independent electrical manufacturer (1995)
The terminus of the high-margin export model
The end of Akai Electric can be read as the consequence of the export-specialised structure that had supported its postwar growth turning directly into a burden. A model that placed nine-tenths of sales in exports produced a high rate of return, but carried with it the weakness of margins that collapsed whenever the yen swung upward. The rising yen after the Plaza Accord, and the thin profit that came of arriving late in the VHS format contest, struck at that weakness simultaneously. Neither the support of the Mitsubishi group nor the acceptance of Hong Kong capital appears to have gone so far as to rebuild the broken cost structure itself.
Each time the bearer of support moved — from the Mitsubishi Bank to Mitsubishi Electric, then to Semi-Tech of Hong Kong and to Grande — Akai Electric gained time, but the range of its independent decisions narrowed with every change. The mass redundancies and the withdrawal from domestic production carried out under foreign ownership had the effect, before they could recover the lost margins, of cutting away the outline of the company itself. The path by which an independent maker that had made its name across the world through exports disappeared while changing the vessel that held its capital shows that the success of a business model can itself become the condition of its exit.
This English edition follows the Japanese one chapter by chapter. The Japanese edition remains the edition of record: it carries the source-by-source citations, the financial tables and the shareholder and executive records. 日本語版（詳細）— Akai Electric full history in Japanese →