High NC share and a “35% margin”: ultra-high-profit management (1985)

When “margin” management took hold even in the figures, in the mid-1980s

The heart of this management was not a response to any financial crisis but the drilling of a single idea into every corner of the organisation: decide the profit margin first, then design the product back from it. Setting a price that could win in the market and then squeezing cost down on the premise of a 35% margin was an attempt to make high share and high profit — usually hard to reconcile — stand together on the same product. The figures this piece leans on come mainly from the results for the year ended March 1983 and a survey article in spring 1984, but performance kept expanding afterward: non-consolidated ordinary profit rose from $184.4M (¥44bn) in the year ended March 1984 to $217.6M (¥52bn) a year later, sales grew over roughly the same span from $485.8M (¥115bn) to $594.1M (¥142bn), and the ordinary-profit margin still held in the mid-30s of a percent. Fanuc’s picture — high share in NC machine tools and top-of-Japan profitability — appears to have taken hold and reached its peak in the mid-1980s.

That said, President Inaba’s method was also double-edged in the NC and robot markets, where demand swings hard. From the end of the 1980s, in fact, performance rose and fell sharply on the waves of machine-tool demand, and the “35% margin” figure itself could not always be kept. Even so, the idea of governing the business from price and margin as its starting point, and the stance of concentrating development resources while cutting the matter short with “buy the technology you can buy,” remained the backbone that supported Fanuc’s high-margin frame thereafter. The singularity of this decision shows in its deliberate, sustained challenge — by numerical target — to the conventional wisdom that margins thin as scale grows.