The Karate Kid, Part III is a 1989 film, and the second sequel to the hit motion picture The Karate Kid (1984). The film stars Ralph Macchio, Pat Morita, Thomas Ian Griffith, Robyn Lively, and Martin Kove. Like the first two films, it was directed by John G. Avildsen, written by Robert Mark Kamen, stunts choreographed by Pat E. Johnson, and music by Bill Conti.
The story picks up almost a year after the parking lot confrontation. The futures of Kreese and his Cobra Kai dojo appear bleak and uncertain, after it is revealed through phone messages that since Cobra Kai no longer has any students, the All-Valley Karate Tournament committee won't be including them in the upcoming competition, as well as a utility bill collector threatening to shut off services.
After giving up all hope and having nowhere to go, Kreese visits his long-time Vietnam War comrade Terry Silver (Thomas Ian Griffith), who is also a karate expert, fellow Cobra Kai (later indicated as the real owner of Cobra Kai dojo), multimillionaire and president of Dynatox Industries (a multinational company with a record of polluting the environment with toxic chemicals). Silver, a sponsor of Kreese's, tells Kreese that they will get their revenge on Daniel and on his teacher, Mr. Miyagi (Pat Morita), for the role Daniel played in their school's financial collapse. Kreese especially requests that Silver makes Daniel's knuckles bleed, as Kreese's had done when he punched car windows after Miyagi ducked. Silver sends Kreese to Tahiti, with instructions to have fun and get himself back together, while Silver plots to put Cobra Kai into success and ruin Daniel and his mentor.
Miyagi and Daniel arrive home from their trip to Okinawa, only to find that the apartment complex where Daniel originally lived—and where Miyagi worked—has been sold. Miyagi, now out of a job, is asked by Daniel to start a business with him selling bonsai trees, in the aptly-named "Mr Miyagi's Little Trees." Unfortunately, Miyagi seems less than optimistic about the idea; he says he feels Daniel could better invest his money in a college education, instead of opening a bonsai shop. Daniel leases a shop in the rougher part of town, and at length convinces his sensei to help him move the merchandise. Together, they start the process of opening and operating a small business. Daniel decides to visit a pottery dealer, intending to use hand-thrown pots for containing the bonsais, a value-added. At the pottery store, Daniel meets Jessica Andrews (Robyn Lively) and they instantly become friends.
Meanwhile, Terry Silver contacts a replenished Kreese in Tahiti by telephone and tells him that he (Silver) plans to make Daniel suffer great pain, additionally using him to make Miyagi experience the same (great pain). Silver, looking through a karate magazine, finds "Karate's Bad Boy" Mike Barnes (Sean Kanan), whom he hires to help Kreese take revenge and restore their Cobra Kai line of businesses; this will be more prudent than just beating him up himself. Barnes decides that 25 percent of 20 dojos is not sufficient remuneration for a teenager, and in a brief bargaining session he demands 50 percent. The multi-millionaire, Silver, is out-negotiated by the child and agrees to provide the named-figure of fifty percent.
Daniel receives word about the All-Valley Tournament, where he can defend his title as champion, but Miyagi does not support the idea. He feels that after fighting for honor in the first tournament, then for his life in Okinawa, defending his title is merely for personal reward. Later, Terry Silver sneaks into Miyagi’s house, looking for information to use against him and Daniel. He hides in their chimney, where he hears Daniel tell Miyagi that he wants their karate to mean something: thus, he will not be participating in the tournament.
That evening, Daniel takes Jessica to visit their bonsai store. He introduces Mr. Miyagi to her. Miyagi leaves the two, while Daniel shows Jessica the workings of the shop. After a short tour, Daniel and Jessica are confronted by Mike Barnes and his aide "Snake" (Jonathan Avildsen). They threaten to harm Daniel if he does not join the All Valley Tournament. Mike explains that his financial accommodation—the fifty-percent figure agreed to above—is contingent on his facing Daniel in the tournament, but Daniel nevertheless declines. Barnes departs in a heated rage, while promising to return. Without Daniel's sufficient guarantee, he cannot rely upon the fifty-percent compensation arrived at with the (aptly-named) Silver.
Terry Silver visits Miyagi's home in the morning, now playing the role of a sympathetic and humble counselor. He introduces himself to both Miyagi and Daniel, explaining that John Kreese has died and feigning both displeasure and embarrassment on behalf of his Korean master for Kreese's shameless actions at the previous year's tournament. Miyagi and Daniel offer condolences. Silver departs, a guilty smirk on his face. Daniel and Jessica, returning to their independently operated store that night, are again confronted by Mike and Snake—now joined by Mike's personal trainer Dennis (Christopher Paul Ford). (Dennis' financial incentive is not immediately disclosed: the nighttime hours suggest it could be substantial as well.) Daniel once again refuses to enter the tournament. The three goons respond by destroying the potentially uninsured shop. When Daniel attempts to prevent this damage, he and Jessica are attacked. Miyagi shows up and fends off the three men. Miyagi and Daniel arrive home to find their stock of bonsai—the bulk of their investment—has been stolen. An All-Valley Tournament application hangs above the display cases once used to contain the bonsai. At last, Daniel has been provided sufficient incentive (in this case, a negative incentive) to return to tournament competition.
Having received no assistance from the local police, Daniel and Jessica decide to dig up the "real" bonsai tree which is growing halfway down the cliffs surrounding the Devil's Cauldron. Miyagi had previously revealed this hiding place as the home of the one true bonsai he had brought from Okinawa, a gift from his late father. Daniel thinks they can use this valuable tree as a new source of capital (to pay for more bonsai), although Jessica doubts Miyagi will condone this sale of a valuable family heirloom. While Daniel is climbing the cliff, Silver's henchmen take his ropes and force him to sign the tournament application, adding an additional, non-capital incentive. During the ordeal, Barnes forces Daniel to give him the tree, which he snaps in half, sharply reducing its value. Daniel returns to the shop with Miyagi’s now-broken bonsai, which Miyagi immediately mends and restores. Miyagi then explains that he had already sold his truck in an effort to purchase more bonsai trees, resolving the short-term business problem. Daniel reveals that he has been forced to sign the tournament application; Miyagi refuses to train him. Daniel, by now extremely upset with the whole situation, departs. He once again runs into Terry Silver; Silver now offers to "train" Daniel, and soon begins to do so.
During the training sessions—called “Quick Silver," a tribute to both the investor's name and the metal's flowing nature—Terry schools Daniel in many cheap and corrupt ways of fighting with karate. This includes kicks to the knee, forearm-strikes to the ribs, and chops to the nose —- none of which actions sanctioned by the All-Valley Tournament governing regulations. Silver repeatedly invites Daniel to attack a wooden dummy, injuring Daniel in the process. Miyagi, unaware of these training sessions, is saddened by a now confused, angry and secretive Daniel.
During the last of these training sessions, Silver places a picture of Mike Barnes on the dummy. The viewer is moved to recall a previous scene: Kreese, in Tahiti, telling Silver he wants Daniel's knuckles to bleed (as his own had bled in his previous confrontation with Miyagi at the close of the tournament), Silver had promised Kreese he'd do just that. He makes good on the promise now, as Daniel makes his fists bleed by ferociously punching the dummy. Daniel eventually destroys the entire dummy, at which point Silver proclaims that he is now ready to win the tournament.
Later on the same day, Silver coaxes Daniel into assaulting a stranger while at a club with Jessica. Daniel, displeased by his own behavior, apologizes for his recent actions to Miyagi and Jessica (who reveals plans to return to Columbus, Ohio). Daniel thanks Silver in person for his help; however, he adds that he will not continue training with him, after what occurred in the club. Daniel adds that he also no longer intends to compete in the tournament, despite numerous assurances to that intention. Silver reveals his real agenda to Daniel and introduces Barnes to him. Daniel tries to escape the Cobra Kai Dojo; to Daniel's surprise, Kreese appears to block his path. Barnes attacks Daniel, but Miyagi shows up from a previously undisclosed location and defeats all three of these enemies. Afterwards, Miyagi finally decides to train Daniel for the upcoming All-Valley Tournament. They train by Devil's Cauldron, where they replant the now-healed bonsai.
At the All-Valley Tournament, Mike Barnes makes his way up to the final round to face Daniel. Silver then reveals the final disgrace for Daniel and Miyagi: Barnes is to alternately score points and then intentionally lose them by incurring penalties with illegal moves designed to hurt Daniel and break his spirit. Barnes is to continue this until until the three-minute time limit ends, and then score a quick point in sudden death.
At the beginning, Barnes charges ferociously toward Daniel, who timidly runs out of the ring, drawing a warning from the referee. Daniel then re-engages, but is punched in the chest by Barnes for his first point. In the next round, Barnes loses the point by kicking Daniel in the groin. Barnes then scores again, but loses the point on the next round by sucker-punching Daniel in the face during a timeout. Barnes then further inflicts pain on Daniel by punching his ribs, resulting in a "no clean technique, no point awarded", and then twice grabbing Daniel's arm, twisting it, and repeatedly kicking Daniel in the back until the round ends.
Seemingly hurt and broken beyond hope, Daniel begs Miyagi to forfeit the match, but Miyagi reminds him that he still has his best moves left. After Barnes screams at him to get up and finish the match, Daniel finds one last bit of resolve and begins the kata that Miyagi taught him. Daniel's sudden kata display confuses Barnes, who hesitates as Silver screams at him to "get the point!" When Barnes finally comes in to attack, Daniel quickly counters him into a shoulder throw and then scores the winning point with a punch to Barnes' ribs. Daniel becomes victorious once again and the crowd throws back the Cobra Kai Dojo t-shirts they were given, thus proving the Cobra Kai have lost everything (with John Kreese proving himself as a sadistic, sore loser again, threatening to hit one of the spectators who throws his Cobra Kai T-shirt back).
Actor Sean Kanan suffered near-fatal injuries during the course of filming. While performing stunts, he suffered injuries that led to undiagnosed internal bleeding. The Aspirin he took for pain-management worsened his condition, leading to hospitalization for hypovolemic shock. He recovered in time to return to filming.
Miyagi and Daniel wear the same costumes as they did at the All Valley Tournament in the original Karate Kid.
When Miyagi says, "Hope confusion end soon, Daniel-San. Miyagi heart empty without you," he is looking at a picture of himself and Daniel in the same costumes they were wearing at the O-Bon dance in The Karate Kid, Part II.
Many wondered why the Daniel LaRusso character, who fought for respect and then his own life in the two previous films, somehow became even wimpier and more obnoxious than before Miyagi took him under his wing. Also, whereas in the second film, he ends up fighting for his life and in this film, he is back to fighting for something less than his very life, violating a dependable narrative strategy—i.e., the increase of jeopardy, or narrative "stakes," often known as Freytag's Triangle. Mr. Miyagi even points out numerous times how trivial the tournament is. Adding insult to injury is the general sense at the end of the film that Daniel is no match for Barnes. During the entire final fight, Barnes is in total control and deliberately loses points so he can prolong the fight and embarrass Daniel. Daniel appears to only win the fight by getting a quick point in at the very end.
Supposedly taking place approximately 6 months since The Karate Kid, Part II, Daniel appears to have aged considerably. Many viewers have also pointed out the belief that Ralph Macchio looked noticeably pudgier in KK3 than in the previous two, which would seem to mitigate against a successful outcome to the All-Valley Tournament. A then-twenty-eight year-old Ralph Macchio nearly did not take the role, knowing he was almost 30 and still portraying a teenage boy. As a matter of fact, Thomas Ian Griffith is in real life, several months younger than Ralph Macchio, despite Griffith's character being a Vietnam War veteran.
Daniel's bye through to the All Valley Tournament final (something that Johnny Lawrence didn't apparently receive in the first film) is an obvious plot loophole to avoid tagging another twenty minutes of montage and footage to the end of the film. In return, this would essentially had been the same as the final 20 minutes of montage and footage in the first film of the series. The idea of a respected tournament giving a bye to the reigning champion seems without precedent and if this occurred in the real world almost certainly would be met with disdain and protest by tournament competitors.
Furthermore, Barnes' conduct in the All-Valley tournament; i.e., the repeated illegal punches and taunts to Daniel and the crowd, would certainly not be condoned by any respected karate tournament governing body and Barnes certainly would have been disqualified from this tournament and probably banned from any future competition.
The Jessica Andrews character is also a topic of concern for fans. Her character never really develops into anything more than an unsatisfactory, just-friends relationship with Daniel and disappears from the film well before its actual conclusion. Some suspect she never developed into a girlfriend for Daniel (like Ali Mills and Kumiko from the first two films respectively) because of Ralph Macchio's age (Robyn Lively is in reality, 11 years younger than Ralph Macchio) during the film and his being married.