Mazda RX 7

International pricing and value creation strategy.

The Mazda Motor Corporation was formed in 1920 under the name of Toyo Cork Kogyo Co., Ltd. At first, Mazda was a machine tool manufacturer. Starting in 1931, however, the firm began to produce automobiles. Although all the vehicles created by Toyo Kogyo Co. were technically called "Mazdas," the company didn't officially adopt the name "Mazda" until 1984. In 1979, Mazda sold a quarter of its shares to the Ford Motor Company. Following a period of instability during the 1990s, Mazda handed even more control over to Ford. As a result, over the past quarter-century, Ford and Mazda have borrowed ideas from one another. Ford used Mazda's Japanese platform to access international and Asian markets, while Mazda used Ford to reach domestic U.S. consumers.

In the 70s and early 80s, Mazda suffered from a poor image in the US, due to the poor technical performance of its RX5 model, based on the revolutionary RX5 rotary engine. In 1986, Mazda was taken over by a non-Japanese CEO, Henry Wallace. At the time, Japanese industry leaders feared that Wallace would cut jobs, but he led Mazda to a resurgence and helped break new ground in terms of Japanese corporate diversity. Wallace was followed by two other non-Japanese CEOs, James Miller and Mark Fields. In the early 1990s a new model was launched, the RX7, which was to mobilize 600 million dollars’ worth of PPE, one third of which was to come from loans from its bankers. Trade creditors were expected to account for roughly one month of CoGS, itself equivalent to 47% of sales. The model was to use Mazda’s expensive rotary engine (unit cost: $6k). Sales were forecast to hit 110k units in 1992 of which 90% to the US), with a net profit of 3.1%. The recommended sales price in the US was 14.499 $, i.e. 13% below Japanese prices. When the car was launched in the US in 1991, buyers queued up to buy the car. Demand was so strong that many re-sold the car with a