Just 10 years ago, a Japanese businessman on a machine-tool shopping expedition to this country decided to attend the Isle of Man TT motorcycle races. He was shocked by what he saw. His own company – Honda – was at that time turning out a 250cc machine called the "Dream", which developed 13 horsepower; the equivalent 250cc British machines competing in TT events gave 36hp. The realisation of the difference between the two was a turning point in Soichiro Honda's career. When he returned to Japan, he immediately established a research department (headed, as it still is, by himself) with the sole aim of producing a machine that could compete with the world's best in Grand Prix racing.

By the end of last week's Manx TT races, Honda had scooped up a first and a third in the 250cc class and a first in the 350cc. Incidentally, he had also become the world's biggest manufacturer of motorcycles. Early this month, the company started pilot production in Belgium. After only seven months of selling in Britain, Honda claims it has 40% of the 50cc market.

Soichiro Honda is the new Japanese tycoon: self-made, determined, with a touch of genius. He and men like Konosuke Matsushita of Matshushita Electric and Masaru Ibuka of the Sony Corporation are as different from the semi-feudal bureaucrats of the prewar zaibatsu cartel as today's Japanese economy is from prewar days.

Honda is 57, son of a blacksmith, and left school to be apprenticed to a garage in Tokyo. He says that he's been obsessed with speed ever since he can remember. Honda's early days after the war could hardly have been less impressive. He went into the motorcycle business in 1948 when he bought 2,000 surplus Japanese army petrol motors and fitted them on to the crossbars of ordinary bicycle frames.

As sales boomed, he incorporated the Honda Motor Company with a capital of £1,000 to begin full-scale motorcycle manufacturing.

After the Isle Of Man revelation, Honda scrapped his old two-stroke engines and developed a four-stroke, knowing that if he could give them a reputation in the racing world he would be able to develop his export markets. It took four years before he won his first major event in Japan.

All Honda's success has been built on sophistications of production techniques. His plants are more like watch factories than mass-production machinery plants. The entire purchasing, production and distribution systems are so integrated that plants have no stockpiles of finished products or raw materials. Each day's production moves directly from factory to dealer.

The company's 6,000 employees are among the highest paid in Japan. The average monthly wage is £26 13s (plus two annual bonuses and fringe benefits) compared with a nation-wide average of £23 06s. In common with other big Japanese firms, Honda is firmly paternalistic. Supplying housing, medical care and holiday resorts to its workers at nominal cost. The workers own 30% of the stock (Honda himself owns 10%) and two out of three own either a car or a motorcycle – far above the Japanese average.

Honda spends most of his time at a new £1.5m research centre. Spread over 26 acres, near the Saitama plant, where innovation goes on round the clock. The company spends an average £150,000 a month on research, which is one of the biggest research budgets in Japan. Much of it is directed at repeating Honda's success with motorcycles in other fields.

Honda is planning to market sports cars designed to attract teenage sports car enthusiasts in the United States. Conscious of the Grand Prix successes in promoting motorcycle sales, Honda is now engaged in a crash programme to develop a Formula II racing car with which he expects to surprise the racing world next year.

And more is on the way. Honda will announce its entry into the light plane market soon. The company has developed a plane which is expected to take a substantial share of the market now dominated by the United States.

It plans to establish a chain of private flying fields and aero clubs around Japan – eventually expanding abroad – which will give sales a practical, promotional boost. In the same way, the company has been busily creating interest in motorcycles by building Techniland parks throughout Japan, with racing tracks, hill-climbing facilities and novelty rides to keep the children happy – all employing Honda products.

A racing circuit has been built at Suzuka and Japan's first Grand Prix car race was held there in May this year. Nineteen of the world's top racing drivers were invited (at Honda's expense) to compete.

The Honda Motor Company is in a strong financial position by Japanese standards. Its capital has increased from £1,000 in 1948 to £9.9m in 1963 and its profits have never fallen below 20% cent of the paid-up capital.

This is an edited extract