Canon Inc.

TABLE OF CONTENT
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EXECUTIVE SUMMARY....................................................................................................32
In the early thirties, the two most popular brands of miniature cameras were Leica and
Contax, both made in Germany, the camera kingdom of the world. These two brands
attracted the camera fans, receiving enthusiastic support throughout the world as super
grade cameras. There was a Japanese man who disassembled a Leica camera in an
attempt to develop a high-grade 35mm focal-plane-shutter rangefinder camera (hereafter
referred to as a 35mm rangefinder camera). .......................................................................32
This person was Goro Yoshida (1900-1993). In 1933, Yoshida, together with his brother-
in-law, Saburo Uchida (1899-1982) and Takeo Maeda (1909-1975), a former subordinate
of Uchida, established the Precision Optical Instruments Laboratory in a room of an
apartment located in Azabu Ward, Tokyo. Although it was reported that they were able
to produce several prototypes of a high-grade 35mm rangefinder camera, "Kwanon
(equipped with the Kasyapa = Kashapa lens)," no such camera is thought to exist today.
"Kwanon" became a phantom prototype camera. (http://www.canon.com/camera-
museum/history).....................................................................................................................32
Canon Inc success has resulted from a strategy of internally generated growth, selection
of the best locations for its freestanding stores, a focus on customer service and
convenience, high volume prescription sales, a focus on profit per customer visit, and its
selective implementation of technology. www.dpreview.com indicates the firm has a wide
economic moat, meaning that Canon Inc has a more sustainable competitive advantage,
based on its high-volume stores, internal growth capacity. ..............................................32
BACKGROUND OF COMPANY.........................................................................................33
Canon, a Tokyo based company, was established in 1933 by Yoshida Goro and Uchida
Saburo to research and develop good quality cameras. They managed to create Japan’s
first 35mm camera in 1934 and started to introduce other products thereafter. They also
made significant contributions to X-ray cameras, electronic calculators, Video Tape
Recorders, and copying machines into the 1970s. By the end of 1970s, Canon had
positioned itself well in the business machines market. Throughout the 1970s, Canon also
started to expand into international markets including the Americas and Europe. As the
company grew, a new structure was necessary and so in 1978 the company was
reorganized into product divisions. Canon’s growth in imaging technology helped it move
into the SLR (Single lens reflex) camera business in 1983. In 1988 it introduced its first
digital camera, Q-PIC, however it continued to focus more on its traditional camera
business. It was not until 2000, when Canon was listed on the New York Stock Exchange
(NYSE), that it entered the digital camera market with its popular PowerShot product
line. Canon now is undoubtedly a leader in the digital camera market, as well as in the
other product markets it competes in. ..................................................................................33
DIGITAL CAMERA BUSINESS IN CANON INC.............................................................34
Canon manufactures and markets digital cameras and film cameras. Canon also
manufactures and markets digital video camcorders, lenses, and various camera
accessories. Digital cameras have become common tools to input images into PCs. In
addition to ensuring the best possible image quality throughout its product lineup, Canon
offers digital compact cameras that are easy to use and to carry. In 2003, the compact
digital camera market continued to show significant growth. Canon introduced six new

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PowerShot series and three Digital ELPH series cameras and has finally reached the top
position in the industry, in unit sales basis............................................................................34
Canon's digital single-lens reflex cameras are designed to meet needs from amateurs to
professionals. These cameras incorporate innovative technologies such as 45-point area
auto-focus, eye-controlled auto-focus, depth-of-field control, Base-stored Image Sensor
(BASIS), Complementary Metal Oxide.................................................................................34
Semiconductor (CMOS) imaging sensors, Digital Imaging Processor (DIGIC), and a fully
electronic mount system to transmit data between the lens and the camera chassis.
Particularly in the digital single-lens reflex camera segment, popular new product
offerings including the EOS 10D and EOS Digital Rebel (EOS 300D Digital) bolstered
Canon's dominant position worldwide. Canon's digital single-lens reflex cameras feature
the company's proprietary, CMOS imaging sensors to offer advantages like low image
noise, and low power consumption. Both the sensor technology, and the cameras
themselves, won numerous awards in the respective industries. Canon also offers a
comprehensive line-up of conventional film cameras to satisfy the needs of users
everywhere, from models with high-performance zoom lenses to models with large
enhanced viewfinders and full water resistance...................................................................34
Hindered by the surging popularity of digital cameras, the continued shrinking of the
conventional film camera market has been a recent trend. Canon's introduction of new
models in fiscal 2003, however, enabled it to retain its position firmly atop this market
worldwide and to record a healthy level of profitability. With a cautious eye on market
trends, Canon will continue to develop new products and maintain a firm commitment to
the film camera market..........................................................................................................35
In the camera lens segment, technological developments, including diffractive optical
elements, image stabilizer and ultrasonic motor, have helped Canon to maintain a
technical lead over other makers. Canon offers over 50 lenses in the EF series. These
high-qualities, high-performance lenses provide outstanding performance with digital
cameras as well as silver-halide cameras, greatly contributing to Canon's sales. Due to
market expansion of digital single- lens reflex cameras, sales of middle to high-class
lenses have been increasing. The introduction of new lenses offering optimum
performance with Canon's digital single-lens reflex cameras is planned for 2008............35
..................................................................................................................................................36
KWANON (Prototype) 1934..................................................................................................36
35mm Focal-Plane Shutter Rangefinder Camera................................................................36
..................................................................................................................................................36
Figure 1.1 Canon Sales by Product.......................................................................................36
..................................................................................................................................................37
Figure 1.2 Digital Camera Market share..............................................................................37
TASK 1....................................................................................................................................37
1.0 ELEMENT OF BUSINESS STRATEGY VARRIED IN DIFFERENT SECTOR......37
Business can be categories into several parts that is small business, Multinational
Corporation, Manufacturing and Service Organization and Public Sector ......................37
1.1 Small business...................................................................................................................37
A small business may be defined as a business with a small number of employees. The
legal definition of "small" often varies by country and industry, but is generally under

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500 employees depending on the industry. These businesses are normally privately owned
corporations, partnerships, or sole proprietorships.............................................................37
1.1.1 Various Industries in Small Business...........................................................................38
Wholesaling : maximum 100 employees...............................................................................38
Retailing : maximum yearly sales ranging from $6 million to $24.5...................................38
million on industry ..........................................................................................38
Mining : maximum of 500 employees...................................................................................38
Agriculture : maximum annual receipt of $0.75 million up to $5 million..........................38
Small business are typically are managed by the people who started and own them.
Owner of small business would rather take the risk of starting and operating their own
firm. The internet has become a small business on ramp for teenaged entrepreneurs.....38
1.1.2 Franchise Small Businesses...........................................................................................38
Franchising is a way for small business owners to benefit from the economies of scale of
the big corporation (franchisor). KLG restaurants are an example of a franchise. The
small business owner can leverage a strong brand name and purchasing power of the
larger company while keeping their own investment affordable. However, some
franchisees conclude that they suffer the "worst of both worlds" feeling they are too
restricted by corporate mandates and lack true independence. KLG has even been sued
by franchisee's who feel they have been exploited with unreasonable costs for materials
they are required to purchase from the parent company....................................................38
1.1.3 Advantages of Small Business.......................................................................................38
A small business can be started at a very low cost and on a part-time basis. Small
business is also well suited to internet marketing because it can be very manageable to
serve a niche, something that would have been more difficult prior to the explosion in
internet activity.......................................................................................................................39
Adapting to change is crucial in business and small business, lacking bureaucratic
inertia, can often respond to the marketplace quickly. Small businesses operators tend to
be intimate with their customers and clients resulting in greater accountability and
responsiveness.........................................................................................................................39
1.1.4 Problems faced by small businesses..............................................................................39
Small businesses often face a variety of problems related to their size. A frequent cause of
bankruptcy is undercapitalization. This is often a result of poor planning rather than
economic conditions - it is common rule of thumb that the entrepreneur should have
access to a sum of money at least equal to the projected revenue for the first year of
business in addition to his anticipated expenses. For example, if the prospective owner
thinks that he will generate $100,000 in revenues in the first year with $150,000 in start-
up expenses, then he should have no less than $250,000 available. Failure to provide this
level of funding for the company could leave the owner liable for all of the company's
debt should he end up in bankruptcy court, under the theory of undercapitalization......39
1.2 Multinational Corporation...............................................................................................39
A multinational corporation (MNC) is a corporation or enterprise that manages
production establishments or delivers services in at least two countries. Very large
multinationals have budgets that exceed those of many countries. Multinational
corporations can have a powerful influence in international relations and local
economies. Multinational corporations play an important role in globalization...............39

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1.2.1 Multinational corporate structure................................................................................40

Multinational corporations are often divided into three broad groups:.............................40
Horizontally integrated multinational corporations manage production establishments
located in different countries to produce the same or similar products. (example:
McDonalds) ............................................................................................................................40
Vertically integrated multinational corporations manage production establishment in
certain country/countries to produce products that serve as input to its production
establishments in other country/countries. (example: Adidas) ..........................................40
Diversified multinational corporations manage production establishments located in
different countries that are neither horizontally nor vertically integrated. (example:
Microsoft) ...............................................................................................................................40
1.2.3 International power.......................................................................................................40
Large multinational corporations can have a powerful influence in international
relations, given their large economic influence in politicians' representative districts, as
well as their extensive financial resources available for public relations and political
lobbying...................................................................................................................................40
Multinationals have played an important role in globalization. Prospective country
locations for Canon Inc production establishments, and sometimes regions within
countries, must compete with each other to have Canon locate their facilities (and
subsequent tax revenue, employment, and economic activity) within a region. To
compete, countries and regional political districts offer incentives to Canon such as tax
breaks, pledges of governmental assistance or improved infrastructure, or lax
environmental and labor standards. This process of becoming more attractive to foreign
investment can be characterized as a race to the bottom, a push towards greater freedom
for corporate bodies, or both.................................................................................................40
1.3 Manufacturing and Services Organization.....................................................................41
Manufacturing, a branch of industry, is the application of tools and a processing medium
to the transformation of raw materials into finished goods for sale. This effort includes all
intermediate processes required for the production and integration of a product's
components. Some industries, such as semiconductor and steel manufacturers use the
term fabrication instead. The manufacturing sector is closely connected with engineering
and Industrial Design.............................................................................................................41
Examples of major manufacturers include General Motors Corporation, Ford Motor
Company, Chrysler, Boeing, Gates Rubber Company and Pfizer. Examples in Europe
include France's Airbus and Michelin Tire. Modern proponents of Fair Trade policy and
a strong manufacturing base for the U.S. economy include economists like Paul Craig
Roberts, Ravi Batra, and Lou Dobbs....................................................................................41
1.4 Public Sector.....................................................................................................................41
The public sector is the part of economic and administrative life that deals with the
delivery of goods and services by and for the government, whether national, regional or
local. Examples of public sector activity such as delivering social security, administering,
urban planning and organizing national defenses................................................................41
The organization of the public sector (public ownership) can take several forms,
including:.................................................................................................................................41

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Direct administration funded through taxation; the delivering organization generally has
no specific requirement to meet commercial success criteria, and production decisions
are determined by government. ............................................................................................42
Publicly owned corporations (in some contexts, especially manufacturing, "State-owned
enterprises"); which differ from direct administration in that they have greater
commercial freedoms and are expected to operate according to commercial criteria, and
production decisions are not generally taken by government (although goals may be set
for them by government). ......................................................................................................42
Partial outsourcing (of the scale many businesses do, e.g. for IT services), is considered a
public sector model. ...............................................................................................................42
TASK 2....................................................................................................................................42
2.0 THE IMPORTANT OF STAKEHOLDERS ANALYSIS.............................................42
A “stakeholder” can be defined as “Any individual, group, or institution that has a vested
interest in the natural resources of the project area and/or who potentially will be
affected by project activities and have something to gain or lose if conditions change or
stay the same”. (https://intranet.panda.org).........................................................................42
Stakeholder analysis recognizes all prime and secondary stakeholders who have a vested
interest in the issues with which the development or policy is concerned. The objective of
stakeholder analysis is to expand a tactical view of the human and institutional scene, and
the associations among the different stakeholders and the issues they concern about most.
Stakeholders are persons, groups or institutions with interests in a policy, programmed
or project. Primary stakeholders are immediate communities of interest. Secondary
stakeholders are the intermediaries in the process, and may include government agencies
and other institutional bodies. ..............................................................................................42
Canon Corporate goals on Stakeholders:.............................................................................43
“Transcend border to actively fulfill our social responsibility to all humankind, in every
region of the world” (http://www.canon.com)......................................................................43
Canon formally introduced its corporate philosophy of kyosei in 1988.The definition of
this word is “Living and working together for the common good”, but the definition is
broader:...................................................................................................................................43
“All people, regardless of race, religion or culture, harmoniously living and working
together into the future.” (http://www.canon.com)..............................................................43
Based on the concept of kyosei, and in the pursuit of the “excellent global corporation”
ideal defined by this philosophy, Canon challenges to stand the responsibility for the
impact of its activities on the social order, not only in its business but also in other human
undertaking.............................................................................................................................43
First and foremost, Canon must present customers with excellent products for further
customer satisfaction while persistent their profits to its various stakeholders. Guided by
its corporate philosophy of kyosei, Canon, focuses its efforts on various activities to
comprehend a society where all people can comfortably and peacefully live together while
making significant contributions to society through its business. Canon provides products
and services with the aim of contributing to society through its technological excellence,
while at the same time promoting social and cultural support activities in response to
various needs and issues of communities worldwide. They tackle a range of important
social problems, including protection of the global environment, growth and development
of international society, educating and cultivating young people, social welfare, and
development of the arts, culture and sports..........................................................................43

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..................................................................................................................................................44
(http://www.canon.com).........................................................................................................44
True global companies must encourage good relations, not only with their customers and
the communities in which they operate, but also with nations and the environment. They
must also bear the responsibility for the impact of their activities on society. For this
reason, Canon’s goal is to contribute to global prosperity and the well-being of
humankind, which will lead to continuing growth and bring the world closer to achieving
kyosei.......................................................................................................................................44
2.1 Relations with Customers................................................................................................44
Canon products and services must exemplify “trust,” “satisfaction,” and “evolution” with
the purpose of genuinely pleases the customers who pay for them. “Trust” is an essential
part of quality, a guarantee that the product is durable and harmless. “Satisfaction” is
achieved by providing products or services that are simple to use and comprehend, plus
careful and considerate support to customers. “Evolution” is also essential to keep the
value of products and services relevant in a constantly changing world, and meet the
needs of tomorrow..................................................................................................................44
..................................................................................................................................................45
2.1.1Canon National Account Program................................................................................45
“AT CANON, WE BUILD PARTNERSHIPS WITH OUR CUSTOMERS BASED
UPON A SHARED VISION OF SUCCESS. IT IS ONLY BY HELPING THEM
ACHIEVE THEIR GOALS THAT WE ACHIEVE OURS.”(www.usa.canon.com)........45
Canon’s National Account Division to make available America’s largest corporate
customers with the most complete and effective customized imaging solutions for over
two decades. Combining innovative technologies with superior account management and
customer service, the National Account Division provides customers with technology
solutions guaranteed to increase productivity. Canon keen ability to understand their
customers needs and allows Canon to consistently exceed their expectations. Much of the
success of Canon’s National Account Program is attributable to their ability to forge
strong partnerships with their customers. Canon builds long-term relationships based on
trust, mutual respect and a shared vision of success. By working as a team, with open
communications and common goals, Canon is able to develop highly specialized imaging
solutions that meet their customers’ individual needs.........................................................45
2.2 Relations with Shareholders and Investors.....................................................................46
The Corporate Ethics and Compliance Committee is a body of executives and
representatives from each headquarters or product group operations under the
chairmanship of the President and CEO of Canon Inc. The Committee meets four times a
year to discuss and approve compliance and corporate ethics policy and associated
measures for the Canon Group. In light of the nature of the Committee, a corporate
auditor attends the meetings as an observer.........................................................................46
The primary objectives of the Corporate Ethics and Compliance Committee are: ..........46
To instill a consciousness of compliance and ethics universally throughout the Group....46
To enhance the transparency and soundness of business activities while fostering a
corporate spirit which motivates employees to unfailingly consider compliance and ethics
when making business decisions............................................................................................46
In addition to the regular members, the Committee also invited the presidents of overseas
regional headquarters as well as all the presidents of domestic group companies to attend

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meetings, where they confirmed their obligation to take the lead in ensuring thorough
compliance...............................................................................................................................46
..................................................................................................................................................46
The percentage of Canon Inc. shares owned by non-Japanese investors rose to more than
half of all outstanding shares as of December 31, 2004, and stood at 51.1% as of
December 31, 2005 (www.canon.com/ir). Canon’s IR Promotion Division therefore makes
demanding efforts to maintain close communication with non-Japanese institutional
investors. In addition to holding conference calls to explain financial results, and
traveling abroad to discuss management policy with institutional investors outside Japan,
it has also created IR bases in Europe and the United States. Furthermore, it maintains
an English-language IR website with effectively the same content as that published on its
Japanese- language website, thereby ensuring that investors inside and outside Japan
have access to the same information.....................................................................................46
2.3 Dialogue with Individual Investors..................................................................................47
The share trading unit for Canon Inc. stock was lowered from 1,000 to 100 shares to
encourage broader participation in the company by individual investors. At the same
time, Canon created a special portal for individual investors on its IR website, and
started holding briefings on the company’s activities for them. To date, two briefings
have been held in September 2004 and September 2005 and some 400 individual
investors attended each. As part of its efforts to disclose information that gives individual
investors an accurate understanding of the company’s business situation, Canon also
holds regular briefings and similar events for salespersons from securities companies as
required...................................................................................................................................47
2.4 Stakeholders Mapping......................................................................................................47
Besides the analysis of stakeholder power in terms of their ability to persuade people and
developments, it is also necessary to evaluate, to which degree the stakeholders will exert
their power. Local authorities, for instance, can have a high impact on an organization
especially Canon itself. If Canon plans to move their headquarters, local authorities
would probably try to influence this decision. However, they will only be interested to
know about other important business developments, such as introduction of new product
lines or new marketing campaign, without taking any action.............................................47
2.4.1 The power/interest matrix.............................................................................................47
The power/interest matrix provides important information on how to handle particular
stakeholders and groups. It can also indicate, if certain decisions will receive support or
resistance, and which groups have to become included in the decision process.................48
..................................................................................................................................................48
http://www.proms-g.bcs.org...................................................................................................48
2.4.1.1 Sector A (Minimal Effort)..........................................................................................48
Stakeholders in sector A neither do not have a high own interest in business plans nor do
they have to power to exert much impact. Canon should keep these groups informed in
the necessary extent, but should not invest too much effort into them. Competitors,
Government and others companies can be decline in this stage whereby competitors is a
major threats can willing to search to any information on Canon, therefore Canon should
put a minimal effort on them because they cannot effect on decision making. The
Japanese government established the Intellectual Property Policy Headquarters
(http://www.canon.com/environment) in order to strengthen the international

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competitiveness of Japanese industry. The headquarters promotes policies on intellectual

property creation, protection and utilization in a centralized and planned manner.........48
For the others company on different industries, they have low level of interest on Canon
and also they cannot effect on Canon decision making. Such as McDonald’s in the food
industry, whereby they have minimal interest on Canon. Mc Donald’s might have
interest in doing corporate partnerships in marketing promoting. ...................................49
2.4.1.2 Sector B (Keep Informed)..........................................................................................49
Stakeholders in Sector B do have a high interest in the corporation and its actions.
However, they have limited means to influence things. Despite their low power, such
stakeholders could be valuable allies in important decisions. Therefore, Canon is
advisable to keep them informed about the issues they are interested in. Communities,
Student, and Non Government Organization (NGO) can be decline in this stage.............49
Kids Area at Expos (Communities).......................................................................................49
At the environmental exhibition, Eco-Products 2005, Canon set up a kids' area in a booth
called "Canon Eco Kids." The area featured a number of creative ideas to encourage
children's interest in the environment, including computers on which they could test their
environmental knowledge by answering the questions that came up. ...............................49
..................................................................................................................................................50
Canon Eco Kids......................................................................................................................50
Environmental Lessons at Elementary and Middle Schools...............................................50
Employees of Oita Canon Materials visit local elementary and middle schools to give
environmental lessons that feature experiments and quizzes on the environment. Some
250 students have participated in the lessons since they began in 2003. Canon also
actively gives educational tours of its facilities. ...................................................................50
..................................................................................................................................................50
Environmental Lessons..........................................................................................................50
The National Center for Missing & Exploited Children (NGO).........................................50
Canon U.S.A. has been a steadfast partner and has consistently donated products and
funding to support NCMEC in the United States and the Child Find Canada in Canada
to locate missing children.......................................................................................................50
..................................................................................................................................................51
National Center for Missing and Exploited Children..........................................................51
Its staff offers support programs to help victims and their families cope with the
emotional pain associated with the search for a missing child. As part of the Canon 4
Kids program, Canon missing children ads that appear in the media reach a huge
number of Americans who might not otherwise see photos of these missing children,
thereby yielding better results...............................................................................................51
2.4.1.3 Sector C (Keep Satisfied)............................................................................................51
The relationship with stakeholders in sector C could be difficult. In this group, Canon
often finds institutional investors or legislative bodies. They behave passively most of the
time and show a low interest in corporate affairs. Despite that they can exert an
enormous impact on the organization, such as when it comes to investments. Customers,
Employees, Suppliers can be put on this stage. It is therefore necessary to analyze

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potential intentions and reactions of these groups in all major developments, and to
involve them according to their interests. ............................................................................51
Canon aims to develop responsible products for the 21st century to satisfy discerning
customers.................................................................................................................................51
Canon has long been examining how product life cycles impact the environment............52
Canon ongoing aim is to make high-performance, functional products while minimizing
the use of precious resources and eliminating waste at every stage. Canon achieved this
first with their compact high-performance cameras. Canon is determined to stay at the
forefront of environment conservation efforts. By choosing Canon, consumers can
express their concern for the environment, without sacrificing performance or
convenience.............................................................................................................................52
Promoting Employee Awareness...........................................................................................52
Canon Inc. holds a Compliance Week twice a year—once each fiscal half-year to give all
employees a chance to contemplate the meaning of compliance and corporate ethics and
recognize that they are individual missions. ........................................................................52
..................................................................................................................................................52
Compliance Week Poster.......................................................................................................52
During Compliance Week, employees take part in workplace meetings to discuss issues
related to compliance and corporate ethics that may arise in actual operations. Since
employees obtain a more concrete grasp of the meaning of compliance and compliant
behavior in the context of their own duties, these meetings yield results that passive
education programs like lectures could never deliver. Even though most employees are
normally very busy, they say that participating in workplace meetings helps resolve the
questions that arise in connection with compliance and enhances their awareness of the
issues in their daily duties. ....................................................................................................52
“Canon Inc. is carrying out a range of other initiatives to instill a high sense of corporate
ethics and compliance in its workforce.” (www.canon.com)...............................................53
Information via the Intranet..................................................................................................53
Canon Inc. has set up a website on its intranet to enhance everyday awareness of
compliance by providing constant access to information on internal rules and related
information. It also publishes the Compliance Newsletter to bring important issues to the
attention of employees............................................................................................................53
Building Strong Ties with Suppliers......................................................................................53
The assistance of suppliers is important to realizing Canon’s EQCD concept, which calls
for the delivery of high-quality, suitably priced products to customers around the world
in a timely manner while reducing the environmental weight in every feasible way.
Canon Fundamental Procurement Policies and other internal regulations are
communicated to and understood by suppliers, and then carried out with their
cooperation based on a strong working relationship...........................................................53
The EQCD Concept (http://www.canon.com/environment)................................................53
This is Canon’s basic product development policy..............................................................53
"E" stands for "Environment": "Companies are not qualified to manufacture goods if
they are incapable of environmental assurance."................................................................53
"Q" stands for "Quality": "Companies are not qualified to market goods if they are
incapable of producing quality goods."................................................................................54
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"C" and "D" stand for "Cost" and "Delivery": "Companies are not qualified to compete
if they are incapable of meeting cost and delivery requirements.".....................................54
2.4.1.4 Sector D (Key player).................................................................................................54
The most crucial stakeholders are persons with high interests and high power, to be
found in sector D. They have to be engaged in all significant growths. The success behind
Canon was not purely technological innovation; effective management strategy, which
was designed to adapt to the changing markets, played a significant role. The first of
these formulated management strategies was called the Premier Company Plan, which
was implemented in 1976 after the company was unable to pay dividends to share holders
for the first time in its history. The plan called for high revenue and debt free operation.
It also instilled five core objectives in company: corporate principles, unifying the
company’s divisions, strengthening current technology development, investing in their
employees, and improving the company’s overall framework. As the company grew and
market conditions changed, Canon continuously kept revising its strategic goals in order
to stay successful. Currently, Canon is entering into its Excellent Global Corporation
Plan Phase III, which focuses on future technologies, product expansion, and employee
satisfaction. The combination of constant technological innovation and effective
managerial strategy has lead to much of Canon’s success in the past................................54
..................................................................................................................................................55
To support such tactics, Canon can compare the actual stakeholder map with a more
favorable one. This allows revealing deviations. It is the basis to find ways on how to
reposition particular stakeholders. For instance, it is possible to influence the opinion of
an important customer by involving him in early planning stages in order to find a
solution that meets the needs of both parties. The power of a supportive department
could be increased by inviting representatives from this department into project teams
and planning committees. .....................................................................................................55
2.5 The Important of Stakeholder Analysis.........................................................................55
A stakeholder Analysis can help Canon identify any or every interest of all stakeholders
who may effect or be effect by any project or programmed and also the product by
Canon. Canon can recognize and also classified any potential conflicts or risks that could
make vulnerable the initiative by Canon. Such as customers switch to substitute product
whereby the pricing cost that impact the buyer to spend more on digital camera
especially Canon. Canon also put a high priority on building strong relationship with
their stakeholders in term of more opportunity can be develop during the
implementation. Based on the concept of kyosei, and in the pursuit of the “excellent
global corporation” ideal defined by this philosophy, Canon shares responsibility for the
impact of its activities on society, not only in its business but also in other human
endeavors. Canon have already on their third phase of Excellent Global Corporation
whereby stakeholders are the important key success together with managerial strategies
and technology invention. In 2006, Canon began Phase III of their Excellent Global
Corporation Plan. During Phase III Canon intend to pursue a course of sound growth
with new businesses born of innovation, taking into account ongoing economic
globalization and the worldwide spread of broadband networks, while maintaining the
sound profit structure and financial balance Canon have established over the past ten
years. To accomplish this, Canon plan to promote five essential strategies in an effort to
become a top 100 company globally in terms of such key business indicators as net sales,
net income, equity ratio and market capitalization. Therefore Canon are making
substantial efforts in the area of human resource development, strengthening their
education and training programs to cultivate trusted, responsible employees, and foster
global leaders. ........................................................................................................................55

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..................................................................................................................................................56
Canon Environmental Goals..................................................................................................56
At the same time, canon are focusing on maintain in leading the market by keep their
stakeholder informed on the next generation technology. Conon not only making profit
from preserve strong relationship with their stakeholders but also to promote their social
and cultural support activities in accordance with the local needs of each community.
Through these activities Canon aim to fulfill their social responsibilities as a good
corporate citizen, contributing solutions to various social problems for the benefit of the
Earth and humanity, and striving to be a company that is loved, trusted, and respected
worldwide. ............................................................................................................................57
TASK 3....................................................................................................................................57
3.0 ENVIRONMENTAL AUDIT (Porter’s Five Forces).....................................................58
The Porter 5 forces analysis is a framework for business management developed by
Michael Porter in 1979. It uses concepts developed in Industrial Organization (IO)
economics to derive 5 forces that determine the attractiveness of a market. It is also
known as FFF (Fullerton's Five Forces). Porter referred to these forces as the
microenvironment, to contrast it with the more general term macro environment. They
consist of those forces close to a company that affect its ability to serve its customers and
make a profit. A change in any of the forces normally requires a company to re-assess the
marketplace. (http://en.wikipedia.org)..................................................................................58
..................................................................................................................................................58
By using a model detailing environmental threats that may face a business, managers are
able to understand what strategic actions to make to overcome or counteract their
threats. Porter’s Five Forces is a popular environmental model that measures five
industry attributes that may threaten a firm’s success. These five threats are discussed
as they pertain to Canon Inc below.......................................................................................59
3.1 Threat of New Entry.........................................................................................................59
Assessment of the following elements allows a determination of the level of entry threat in
an industry:.............................................................................................................................59
Economies of Scale.................................................................................................................59
The likelihood of retaliation from existing industry player ................................................59
3.1.1 Economic of Scale..........................................................................................................59
Canon has over 115,583 employees. As a large volume of distributor worldwide, Canon is
able to leverage its size when negotiating with suppliers. For smaller companies with few
locations such as Konica Minolta, entering the market with competitive pricing is more
difficult because they will not have the buying power of a larger customer and will be
forced to operate under lower margins; a barrier to entry. In addition, Canon’s has a
well established and expanding distribution channels. New entrants will have a larger
shipping expense from suppliers and less efficient distribution. .......................................59
“Konica Minolta is focusing its business elsewhere. Japanese photographic equipment
maker Konica Minolta has announced plans to withdraw from the camera business.”.. .59
(http://www.hull.ac.uk/engineering)......................................................................................59
..................................................................................................................................................60
Canon Inc Centre...................................................................................................................60

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Canon Inc.

3.1.2 The likelihood of retaliation from existing industry player .......................................60

With more than 60 years in the camera experience industry and over 200 locations nation
wide, Canon has established itself as a known leader in the cameras industry although
this industry is not their major business. Canon offers a standardized product offering
within a market and can leverage its reputation. Brand recognition alone is a barrier to
new entrants in the market place. Consumers identify the Canon’s product and have
familiarly with Canon’s offering, new entrants will face consumer concern over product
offering and pricing................................................................................................................60
Digital SLR Cameras..............................................................................................................60
Canon digital single-lens-reflex (SLR) cameras support photographers in their quest to
capture split-second moments and expressions to produce outstanding photo images.
Fusing decades of camera expertise with leading-edge digital technologies, Canon
pursues the development of such proprietary key technologies as sensors, image
processors, and lenses.............................................................................................................61
Comparison between Canon EOS 400D, Nikon D80 and Sony DSLR A100......................61
..................................................................................................................................................61
The EOS 400D / Digital Rebel XTi has the same basic feature set as the other two ten
megapixel cameras here. The biggest difference is that both the Nikon D80 and Sony
DSLR-A100 offer some kind of advantage for their premium. The Nikon D80 has a much
wider range of camera control, a larger and brighter viewfinder, better ergonomics, a
bigger battery, faster USB, spot metering and surprisingly useful customizable automatic
ISO. The Sony DSLR-A100 also has better ergonomics, spot metering, a bigger battery,
faster USB and built-in CCD-shift Anti Shake (although we don't believe this to be as
effective lens image stabilization). The EOS 400D's 'on paper' advantages are listed
below, not a huge list and quite a surprise to see how the competition have not just caught
up with Canon but have overtaken them. ............................................................................61
3.2 Threat of Rivalry..............................................................................................................61
Canon’s faces a high level of competition among its major competitors. The intense level
of rivalry discourages new entrants and consolidates the industry amongst the larger
players. In effect new entrants are discouraged and smaller competitors are driven out.
..................................................................................................................................................62
3.2.1 The structure of competition.........................................................................................62
Canon encounters intense competition in all areas of its business activity throughout the
world. Canon's competitors range from some of the world's major multinational
corporations to smaller, highly specialized companies. Canon competes in a number of
different business areas, whereas many of its competitors are relatively more focused on
one or more individual industries. Consequently, Canon may face significant competition
from entities that apply greater financial, technological, sales and marketing or other
resources than Canon to their activities in a particular market segment...........................62
The principal elements of competition which Canon faces in each of its markets are
technology, quality, reliability, performance, price and customer service and support.
Canon believes that much of its ability to compete effectively depends on conducting
successful research and development activities that enable it to create new or improved
products and release them on a timely basis and at commercially attractive prices.........62
Competition in the camera industry is intense, with many established market
participants offering similar products. Canon's primary competitors in digital cameras

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are Sony Corporation, Fuji Photo Film Co., Ltd., Olympus Optical Co., Ltd., Nikon
Corporation, Casio Computer Co., Ltd. and Eastman Kodak Company..........................62
Currently, Canon shares the top position with Nikon Corporation in unit sales of
compact digital cameras, while Canon is the current leader in the digital single-lens reflex
camera segment. Canon's primary competitors in conventional film cameras are Nikon
Corporation, Konica Minolta Holdings, Inc., Pentax Corporation, Olympus Optical Co.,
Ltd., and Fuji Photo Film Co., Ltd. Hindered by the surging popularity of digital
cameras, the conventional film camera market continued to shrink in fiscal 2003. The
introduction of new models, however, enabled Canon to retain its position firmly atop
this market worldwide. Canon's primary competitors in digital video camcorders are
Sony Corporation, Victor Company of Japan Ltd. and Matsushita Electric Industrial
Co., Ltd. In fiscal 2003, Canon expanded greatly its overall market share in digital video
camcorders, especially in the United States. Canon believes that developing cameras with
increasingly high resolution and faster image processing are critical to its ability to
remain competitive in the fast-growing digital camera market segment............................62
3.2.2 Degree of differentiation ...............................................................................................63
There are almost the same when talking on digital still camera. Canon has to face their
competitors, only technology can be differentiated between Canon and others rival. Sony
Corp. is planning monthly production of 80,000 digital SLR cameras, dubbed the Alpha
DSLR-A100, which are set to go on sale next month. Canon has already produce DSLR
technology on EOS model. To be competitive in the market Canon is planning another
prototype based on OLED technology. Canon OLED displays comprise a unique group
of organic compounds derived from Canon’s research into the design of electro
photographic organic photoconductor (OPC) materials. All of the OLED components,
including luminescent and carrier injection materials, were developed to bring out their
superior properties. Canon’s light-emitting materials realize the highest standards of
efficiency and color purity.....................................................................................................63
3.3 Threat of Substitutes........................................................................................................63
A substitute is a product or service that meets customer needs in a similar or sometimes
different way than the original product or service. In the Digital camera
Industry,Canon’s general merchandise and prescriptions lack substitutes but product
differentiation in terms of total offering can create substitutes in the market. ................63
3.3.1 Buyers willingness to substitute....................................................................................64
Actual or potential substitute offerings limit prices and profits. Market requirements for
what was once known as “cameraphones” has changed drastically within the past year.
Within the next two years, mobile phones will be known more as “mobile communication
and entertainment devices”, perhaps with another name. As a result, camera
functionality on entertainment phones will move down to third spot as a market
requirement from 2nd. The phone as a communications device (voice and MMS), but
music and digital books (MP3) playing and storage will move into the 2nd most required
feature. Video capabilities will become the fourth requirement and digital radio and TV
are on the horizon. .................................................................................................................64
..................................................................................................................................................64
The K810 Cyber-shot phone is a sleek, high-performance device boasting a 3.2 megapixel
camera including auto focus and a Xenon flash. Innovative applications such as Photo Fix
help to further improve the quality of pictures, even after taken them. Illuminated
camera icons to the side of the main keypad, which light up when in camera mode, allow
user to access camera menu options at the touch of a button..............................................64

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3.3.2 The relative price and performance of substitute........................................................64

The worldwide consumer digital camera market experienced huge pricing pressure on
the low-end, primarily due to camera phone adoption, effecting DSC unit sell-through
which remained nearly flat from 2005 at a 26.3% growth rate, amassing $11.2B in street
valued revenue. Those non-branded camera vendors providing sub $150 units suddenly
found themselves in competition with branded vendors at retail selling cameras at the
same price-points. Many were forced out of the market.
(http://www.imergeconsulting.com)......................................................................................64
Cameraphones are a new platform that does not have to mimic previous analog usage
paradigms. Cameraphones are wireless and Digital Specific. They can offer features only
a digital device can provide and not be so encumbered with pre-existing usage models.
Conversely, digital still cameras have been relegated to being regarded as the
“workhorse” of capture devices, used for only the most mission critical family or social
circumstances. The perception is an “all work and no play” device to consumers............65
Digital camera providers have been so focused on getting cameras to a point where they
can mimic film cameras; they have forgotten the “digital specific aspects” of digital
cameras, the digital features that will allow a camera to go well beyond film cameras in
functionality and ease-of-use. ................................................................................................65
3.4 Threat of supplier’s bargaining power............................................................................65
Suppliers are the business that supply materials and others products into the industry.
The cost of item that bought from suppliers such as raw materials, components can have
significant impact on a company’s profitability. If suppliers have high bargaining power
over a company, then in theory the company industry is less attractive. The bargaining
power of suppliers will be high..............................................................................................65
..................................................................................................................................................66
Based on the chart given shows that Canon Inc manufacturing their product by itself to
make sure that they have the quality standard to achieve a high quality. .........................66
3.4.1 There are undifferentiated, highly value product.......................................................66
Canon’s feels little threat from suppliers. Canon’s is a large retailer with purchasing
power due to volume and a large number of suppliers. Canon’s strategy is to purchase
inventory items from many foreign and domestic suppliers. If Canon’s were to lose one
supplier, the impact would have little bearing on the business. Every competitor that is
competing with Canon Inc in Camera industry is always on the run to produce better
than others. Nikon is the first to produce Single Lenses Reflect (SLR) follow by Canon in
the next few years. In the camera industry it is highly hard to compare between others.
Only technology can differentiate them. Canon has to face their competitors, only
technology can be differentiated between Canon and others rival. Canon is pursuing the
next technology to be able to maintain the leaders in the market. Suppliers have the
major impact due to only few suppliers for raw material. For be able to compete with
others and produce a high quality of camera, Canon must maintain continue purchase a
raw material from their supplier. ....................................................................................66
3.4.2 There are many buyers & few dominant suppliers.....................................................67
Canon purchases a variety of parts and raw materials, such as glass, aluminum, plastic,
steel and chemicals for use in product manufacturing. All finished and semi-finished
products purchased from outside sources are produced in accordance with Canon's
designs and specifications. Canon purchases parts and raw materials worldwide for its
global production activities. Canon assesses and selects suppliers based on a number of
criteria, including environmental friendliness, quality, cost, stability of supply and
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Canon Inc.

financial condition. In addition, there has been a recent increase in prices of parts for
optical products, due in part to the limited number of suppliers of glass materials and
light source lasers. However, Canon has not experienced any difficulty obtaining parts or
raw materials and believes that it will be able to continue to obtain the same in sufficient
quantities to meet its needs....................................................................................................67
3.5 Threat of Buyer’s bargaining power...............................................................................67
Future sales of digital still cameras are dependent upon user upgrade cycles, which will
increase the emphasis on powerful image processors, faster analog-to-digital converters,
wireless connections for transferring pictures, more nonvolatile flash NAND memory and
higher resolution image sensors. ..........................................................................................67
..................................................................................................................................................68
Curve of Innovation of DSCs.................................................................................................68
From the curve it shows that the quality levels that can impact the purchasing power by
customers demand. Over the years demand on DSC is boost while the level of quality
enhance. That means demands over DSC are correlated to the enhancing on DSC..........68
3.5.1 There are few dominant buyers and many sellers in the industry.............................68
Nowadays almost everybody have their on electronic device mostly digital camera. People
are accepted the technology changing whereby Camera not only use for professional term
only. They make a full use as hobby also. Over the years demand on the digital camera
are boost through technology changing. ..............................................................................68
..................................................................................................................................................69
Based on the tables above buyers can be segmented into several part that is customers
that are using for simple not to consider on the technology, but the easier way to shooters.
This types of buyer re more concerning on pricing. Demand on compact camera are
more challenging whereby camera as a hobby. Almost every range are using it. SLR
model are more attractive for armature and Professional photographers. These types of
customers are dominant rather than supplier. Canon are spending more on Research and
Development to be able to maintain the market leaders in SLR model, although Nikon
their rival is the first to launch SLR model, Canon still dominate the market. With the
dominant buyer Canon is pursue next generation technology to maintain the professional
photographers pay for their Canon and gains customers loyalty. .....................................69
3.5.2 Product are standardized..............................................................................................69
In the digital still camera industry, mostly every company including Canon is focus on
imaging whereby each company are competing on the technology but still standardized
on the purpose of capturing imaging. Canon is popular on their EOS model based on
Single Lenses Reflection (SLR). Nowadays Mostly every major player in the market are
already implementing SLR technology, advantages on Canon is they is the first who
invent EOS technology. Buyer have the power to choose because majority every company
implement the same technology. .........................................................................................69
To boost sales, Canon are developing new "hybrid" models that will capture high-
resolution still pictures while also recording high-definition full-motion movies. Many of
these hybrid still/video cameras will contain high-speed CMOS image sensors. ..............70
Digital still cameras will outsell film cameras by a ratio of four to one in 2006, with 4- to
6-Mpixel point-and-shoot models for consumer compact cameras. Consumers still have
the buying power to control the market. In 2010, people mostly are expects more than 89
million digital still to be sold, accounting for more than 90 percent of all still-picture
cameras bought worldwide. ..................................................................................................70
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3.6 Ability to expand into next-generation technologies in the future................................70

Next-generation OLED (organic light emitting diode) displays are ideal for use in such
mobile devices as digital cameras and video camcorders. These self emitting displays
achieve not only high luminance and energy efficiency, but also offer high resolution
independent of the viewing angle and fast response speeds, making them well suited for
video-display applications......................................................................................................70
Organic electroluminescence occurs when voltage is applied to excite organic materials,
which, in turn, releases energy as light.................................................................................70
..................................................................................................................................................70
Structure of OLED Display...................................................................................................70
..................................................................................................................................................71
(http://www.canon.com/technology/).....................................................................................71
Canon OLED displays comprise a unique group of organic compounds derived from
Canon’s research into the design of electro photographic organic photoconductor (OPC)
materials. All of the OLED components, including luminescent and carrier injection
materials, were developed to bring out their superior properties. Canon’s light-emitting
materials realize the highest standards of efficiency and color purity. The red-light-
emitting material, which utilizes phosphorescent material, achieves 12.4 lumens/W and a
chromaticity of (0.66, 0.34), the fluorescent-based green-light-emitting material achieves
26.4 lumens/W and (0.32, 0.63), and the blue-light emitting material achieves 4.9
lumens/W and (0.15, 0.15). ....................................................................................................71
Lumens/W: luminous efficacy, expressed as the amount of light that can be generated
with 1 W of power. The value is derived by dividing the amount of light (lumens) by the
power consumption (W).........................................................................................................71
..................................................................................................................................................72
Example of OLED Display (Prototype).................................................................................72
(http://www.canon.com/technology/).....................................................................................72
The display’s top-emission structure, which emits light from the top side, increases the
aperture ratio and realizes high-luminance, low power consumption, and long life.........72
Canon is focusing its energies on the development of devices and process technologies
toward commercializing these displays in the near future. Canon aim to mass produce
high-performance OLED elements at a low cost and achieve advanced functionality in
mobile devices.........................................................................................................................72
3.7 Japanese digital camera growth to slow in 2007 (Threat).............................................72
Growth in digital camera shipments by Japanese makers in 2007 is expected to slow to
7.5 percent from a year earlier, when lower prices and a wider variety of models with
interchangeable lenses spurred growth to 22 percent. (http://today.reuters.com/news)...72
Global shipments by makers such as Canon Inc are estimated to rise to 84.9 million units
in calendar 2007 from 79.0 million units last year, according to figures released by the
Camera and Imaging Products Association..........................................................................72
Demand will continue to lose speed as shipment growth is expected to slow to 4.3 percent
in 2008, and 2.5 percent the following year, .........................................................................73

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The Tokyo-based industry group also forecast shipments of digital single-lens reflex
(DSLR) models, geared for professionals and hobbyists, will continue to show double-
digit growth in 2007, but their growth too will slow compared to 2006..............................73
This year, shipments of DSLRs are forecast to increase 13.9 percent to 5.99 million units,
lagging behind a 38.9 percent jump in 2006 to 5.26 million units.
(http://today.reuters.com/news).............................................................................................73
Canon Inc and Nikon are the dominant leaders in the market for DSLRs, while
newcomers such as Sony and Matsushita Electric Industrial are also trying to expand in
this segment as DSLRs are more profitable than compact devices.....................................73
Shipments of compact models, which have faced fierce price competition, is forecast to
increase 7 percent to 78.9 million units this year, lower than the 20.9 percent jump in
2006 led by demand in emerging markets and the United States........................................73
Other major Japanese digital camera makers include Olympus Corp. Fujifilm Holdings
Corp. and Pentax Corp. which compete against global rivals such as Eastman Kodak and
Samsung Electronics Co. .......................................................................................................73
3.8 Sony enters digital SLR camera market (Threat)..........................................................73
Sony Corp. is planning monthly production of 80,000 digital SLR cameras, dubbed the
Alpha DSLR-A100, which are set to go on sale next month. The product is a culmination
of Sony's yearlong collaboration with Japanese precision equipment maker Konica
Minolta Holdings Inc., which pulled out of the camera business in January and sold its
assets in that sector to Sony...................................................................................................73
Sony officials said the entry into SLR cameras was symbolic of how the company was
trying to revive its brand image. And they are banking on Sony appeal as digital photos
become enjoyed on high-definition TVs, shared with others through the PC and stored in
DVD players............................................................................................................................74
SLR cameras, which use interchangeable lenses and offer more manual controls, tend to
be favored by professional photographers but are also, growing in popularity among
camera enthusiasts. Sony already makes various simpler point-and-shoot digital cameras,
including the popular Cyber-shot models. (www.physorg.com).........................................74
The camera body of the DSLR-A100 will be available in July at a retail price of about
100,000 yen (US$900; €700). Lenses range in price from about 50,000 yen (US$450; €350)
to 800,000 yen (US$700;€540). The 10.2-megapixel camera will work with 19 Sony lenses.
..................................................................................................................................................74
3.9 Organizational Audit (Value Chain Analysis)................................................................74
Value Chain Analysis describes the activities that take place in a business and relates
them to an analysis of the competitive strength of the business. Influential work by
Michael Porter suggested that the activities of a business could be grouped under two
headings: ................................................................................................................................74
(1) Primary Activities - those that are directly concerned with creating and delivering a
product such as component assembly and ...........................................................................74
(2) Support Activities, which whilst they are not directly involved in production, may
increase effectiveness or efficiency such as human resource management. It is rare for a
business to undertake all primary and support activities....................................................74
3.9.1 Primary Activities..........................................................................................................74
..................................................................................................................................................75

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Canon Inc.

CANON VALUE CHAIN ANALYSIS..................................................................................75

In order to fully understand Canon’s current position in the digital camera market, the
above value chain will be used to assess Canon’s strengths and weakness in each of the
five major stages. The assessment will be based on comparison of market trends and
Canon’s response to that trend..............................................................................................75
TECHNOLOGY RESERCH AND DEVELOPMENT........................................................75
Canon over the last ten years has been in the top three companies receiving patents in the
US, an indication of strength in technology R&D. Technology R&D, which is described
below, encompasses the core image processing technology as well as new features that
market is moving towards......................................................................................................75
..................................................................................................................................................75
New Digital Imaging Processor (DIGIC II)..........................................................................75
DIGIC, Canon's proprietary Digital Imaging Processor is a core device in Canon digital
cameras. DIGIC represents the newest stage in their Digital Imaging Processor
development. Most of the functions required to process signals in a digital camera are
condensed on this single chip, which measures a mere 10 mm square. Utilizing its
proprietary technologies, Canon designed the DIGIC processor to alleviate the heavy
burden normally placed on the CPU. Furthermore, improvements to the chip's
algorithms contribute to higher image quality, autofocus (AF) precision and processing
speeds. The DIGIC II imaging processor developed in 2004 handles the increased
resolution of CCDs and has dramatically increased performance compared to the
original DIGIC........................................................................................................................76
..................................................................................................................................................76
16.7-megapixel Full Frame 35mm CMOS Sensor................................................................76
Raising the operability of a digital SLR camera to the level of film-base SLR cameras
required development of a large high-resolution CMOS image sensor (see page 61).
Digital cameras normally use smaller image sensors than the frame size (36 mm x 24
mm) of 35mm film. When an interchangeable lens is attached to digital SLR cameras
with smaller image sensors, the effective angles of view and perspectives of the captured
image differ from the focal length marked on the lens. For this reason, photographers
were unable to utilize their experience using 35mm film SLR camera lenses with digital
SLR cameras...........................................................................................................................76
..................................................................................................................................................77
iSAPS and Smile Shot.............................................................................................................77
The iSAPS technology is also Canon’s proprietary technology but similar technologies
also exist with other manufactures. iSAPS technology is Canon’s algorithm that makes
optimal adjustments to focus and other settings on the camera by measuring the distance
to the subject and brightness levels. This allows good photos to be taken effortlessly.
Other manufactures have similar technologies that automatically configure the camera
based on some external factors. Canon thus has no real advantage over its competition in
this technology. Canon is also working on a technology called Smile Shot9, which is
designed to take pictures of subjects when they are smiling. The success of such
technology is yet unknown, so it is hard to measure Canon’s performance by it. However,
since Canon is working on such innovative projects, there is likely to be at least one big
success in future. ....................................................................................................................77

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Canon Inc.

Overall, Canon is at the forefront of technological innovation for cameras. Given

Canon’s competency in the imaging technology, there is no doubt Canon will continue to
hold the leadership role in future. ........................................................................................77
DESIGN INOVATION..........................................................................................................77
Canon has constantly been working on technology to cut down on the size and the weight
of a camera. Canon was among the first producers to introduce compact cameras with its
PowerShot series. The DIGIC II chip integrated three chips in a smaller size, thus
reducing the size and weight. In addition, Canon developed ultracompact lens for their
PowerShot series which further reduced the size of the camera10. However, compared to
Sony and Kodak, Canon lags behind in design. Kodak has the pocket series which is
much slimmer than Canon’s slimmest. Sony also has many models that are “ultra-slim”.
Furthermore, Sony and Kodak have been more creative in the physical appearance of the
cameras. Sony recently released a 5 megapixel swivel camera and Kodak released one
with two lenses allowing for easier panoramic photos. Both of these designs depart from
the norm, making the camera look more “hip” but Canon has not been innovating on the
design. .....................................................................................................................................78
Large Viewing Screens ..........................................................................................................78
As customers demand smaller size, they also demand larger screens for their cameras.
Larger screen allows for easier reviewing of photos. Companies like Sony and Samsung
offer large 3 inch screens. Canon offers only the industry average, 2.5 inches. Kodak and
Sony have gone a step ahead and offer touch screens on some models. Canon, once again,
has not done so. ......................................................................................................................78
MANUFACTURING..............................................................................................................78
Before Canon starts to manufacture, it develops computer prototypes using CAD
software. This cuts down on production time, but its not a real advantage over other
competitors, because they all use CAD. Canon, however, did recently switch to cell
production, which requires a team of assemblers to put together the camera. This
increases the quality of the product and reduces the cost, because conveyor belts are no
longer needed which require significant amount of space. Canon has also tried to
incorporate “Just in Time”11 inventory system to cut down on the cost of inventory
waiting to be used. .................................................................................................................78
The physical manufacturing of cameras takes place in Japan (60%), Malaysia (20%), and
China (20%)12. Producing in these countries allows cheaper labor to be utilized. Sony
and Kodak implement similar strategies and thus Canon gains no real advantage over
Sony and Kodak with this strategy........................................................................................79
MARKETING........................................................................................................................79
All three of the big players in the market have taken drastic steps to advertise their
products. Canon in particular has hired tennis star Maria Sharapova as its spokesperson.
Canon has also managed to make itself the official camera of the NFL and introduce its
new models in a fashion show in New York. Regardless, Canon is making every effort to
market its product, however, so are the other two. Kodak paired with NASCAR and
Sony paired with various TV shows. Canon did however partner with Staples to
introduce Canon Corner where customers can test out Canon products. Thus far this
implied has been well received by customers. All in all, the effects of marketing are really
unknown because there no clear way to measure advertisement success. As a result, it is
difficult to judge Canon’s strategy. ......................................................................................79
SERVICE................................................................................................................................79

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Canon Inc.

One of the most important stages of the value chain is the services stage. Services are
provided to customers after they purchase their product to keep them satisfied with the
product and to generate revenue. The following are services that Canon needs to focus
on. ...........................................................................................................................................79
Printing and Online Storing ..................................................................................................80
Printing digital camera photos is among the most requested service by digital camera
users. Canon currently has its “Canon Gateway”, an online service that allows users to
print photos. This service is inferior to others like Shutterfly.com that offer unlimited
space to store images and easy sharing and printing. Kodak has their own Easy Share
Gallery, and smaller firms like Panasonic have patterned with Shutterfly.com to allow
easy integration with their cameras. Canon has thus fallen behind in this service Canon
has done well in selling its photo printers along with its cameras. But with a growing
trend to have the pictures printed by retail stores, Canon has not been able to capture the
retail photo printing business. Kodak and Fuji dominate on that front.............................80
3.10 Support Activities...........................................................................................................80
Canon are making significant efforts in the area of human resource development, rise
their knowledge and training programs to develop trusted, dependable employees, and
promote global leaders. Together, Canon is pursuing more impartial human resource
policies to nurture strong, independent business professionals...........................................80
Economic Activities through Maximizing Resource Efficiency..........................................80
Canon is working to exploit resource efficiency in an effort to unify the two vectors of
environmental assurance activities and economic activities. This means Canon will boost
the value of products and services while raising environmental efficiency throughout
product lifecycles In 2003, Canon put forth the dominant indicator Factor 2 as their
Vision for 2010 to put resource efficiency maximization into more real practice. Factor 2
stand for the goal of at least doubling overall lifecycle environmental efficiency by 2010,
using 2000 as the baseline date. Canon set Mid-Term Environmental Goals (2004-2005)
to serve as milestones, and in 2005 Canon achieved almost all the individual goals. This
activities are carry on as a support activities through the kyosei philosophy that
contributing to society through technology innovation........................................................80
..................................................................................................................................................81
Pattern Strategies ..................................................................................................................81
Canon has long promoted the globalization of business activities, so the company puts
even more stress on patent applications overseas than in Japan. As a result, as of the end
of 2005, Canon overcome approximately 78,000 patents and utility models globally, of
which around 26,000 were for Japan, 24,000 for North America, 22,000 for Europe, and
6,000 for other countries. Canon file patent applications overseas only after constructing
detailed filing strategies based on business strategies, and technology and product trends
in each region, and after carefully investigating the regions and countries where the
patents are necessary. The number of U.S. patents Canon own is expanding at about the
same annual rate as their consolidated net sales. In recent years, Canon have prioritized
the filing of patent applications in the Asian region, where technological innovation has
been noteworthy. In particular, China has become both an huge production site and a
major consumer nation, so Canon are stepping up their filing activities there................81
TASK 4....................................................................................................................................82
4.1 PEST Analysis (http://www.skylinecollege.com)............................................................82

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Canon evaluated the environmental factors appropriately before investing in certain

areas or country. The political environment is one of the major factor Canon put on
consideration. The stability of political is important to make sure that Canon can fully
corporate with the government on the country. For example at the time of Canon entry
India on 1997 was stable. Though the government was a coalition, yet it was pro-
liberalization. This spelt stability on the economic policies front and thus the political
environment was conducive to investment. As for Malaysia, when Canon enter the
market to built up manufacturing area, whereby Malaysia is an open country that are
invited any multinational company such as Canon to invest in the market in Malaysia.. 82
Economic environment in Europe, U.S.A, Asia too was very healthy. The economic
policies were pro-investment. Fiscal and monetary reforms were in the pipeline and
pointed towards a bright future. Public sector participation was being abetted by the
government. All in all, the economic environment too was grown. Economic globalization
and dramatic advances in information technology are greatly changing the structure of
markets around the world. In line with these changes, Canon U.S.A., Canon Europe,
Canon China, and Canon Sales in Japan have carried out the restructuring and
consolidation of Group companies in their respective regions to increase the efficiency of
sales networks, and to upgrade information systems and distribution networks. In 2005,
Canon aim to complete the sales and marketing structure reforms Canon have pursued
to date, thus increasing their selling power and efficiency..................................................82
Social environment was not of much of concern to the Canon to be investing in certain
country. They do not have high impact on Canon profitability, however based on the
kyosei philosophy concept. The ideal behind this philosophy is a society in which all
people harmoniously live and work together for the common good. Canon are putting
social environment as an important for them to keep good relationship with people
surround them. Below is several example how Canon USA are putting social
environment as one of the most stakeholder.........................................................................83
Asian American Drug Abuse Program (AADAP) (Canon Business Solutions, West, Inc.)
..................................................................................................................................................83
The AADAP’s programs, including water conservation, HIV/AIDS outreach and cross
training, Drug Court Services for the Inglewood Municipal Courts and tobacco
education, is supported by Canon Business Solutions, West, Inc. through donations.......83
Los Angeles Urban League(Canon Business Solutions, West, Inc.)....................................83
The mission of the Los Angeles Urban League is to enable African Americans and other
minorities to secure economic self-reliance, parity, power and civil rights. Canon
Business Solutions, West, Inc. supports their activities through donations.......................83
Support for Social Welfare Foundations saving Children (Canon Business Solutions,
West, Inc.)...............................................................................................................................84
Several Social Welfare Foundations, whose mission is to save children with serious
illnesses and prevent teenage prostitution, are supported by Canon Business Solutions,
West, Inc. through cash donations and products.................................................................84
Technological environment prevalent in India was very dynamic. India was fast being
recognized worldwide as the leader in Information Technology. Allied industries were
booming and India seemed to be on its way up. Though there was an associated fear that
this aspect of the technological environment posed. The development of Information
Technology threatened to produce a 'paperless office'. This was a direct threat to the
sustainability of not just Canon but the entire photocopier industry. ...............................84
4.2 Strategic Capability > Core Competency .......................................................................84

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A core competency can take various forms, including technical/subject matter know how,
a reliable process, and/or close relationships with customers and suppliers (Mascarenhas
et al. 1998). It may also include product development or culture such as employee
dedication. Modern business theories suggest that most activities that are not part of a
company's core competency should be outsourced. (http://en.wikipedia.org)...................84
A core competency is something that a firm can do well and that meets the following
three conditions specified by Hamel and Prahalad (1990): (http://en.wikipedia.org).......84
4.2.1 It provides customer benefits .......................................................................................84
In Japan and overseas, product service is provided in part by independent retail outlets
and designated service centers that receive technical training assistance from Canon.
Canon also services its products directly. Most of Canon's business machines carry
warranties of varying terms depending upon the model and the country of sale. Cameras
and camera accessories carry a one-year warranty based on normal use. Canon services
its copying machines and supplies replacement drums, parts, toner and paper. In Japan,
most customers enter into a maintenance service contract under which Canon provides
maintenance services, replacement drums and parts in return for a per-copy charge.
Copying machines which are not covered by a service contract may be serviced from time
to time by Canon or local dealers for a fee...........................................................................84
4.2.2 It is hard for competitors to imitate ............................................................................85
Accurate Reading of Delicate Light......................................................................................85
..................................................................................................................................................85
Canon's EOS-1V, EOS-1Ds Mark II N/1Ds Mark II employ a 21-zone evaluative
metering sensor linked to 45 Area AF points. This multiple-zone evaluative metering
system uses output from 21-zone sensors and AF point information to adjust exposure
instantly, calculating at high speed with their newly developed algorithm. This
configuration enables the camera to make compensations as necessary and maintain
exposure stability. It also uses an average metering element depending on periphery
conditions. This assures stable exposure even when composition changes slightly, or when
multiple metering points cover the subject. In addition to 21-zone evaluative metering,
these cameras all have six AF metering functions. Users thus benefit from a diversity of
choice, from manual to automatic exposure.........................................................................85
4.2.3 Provide potential access to avoid variety of markets..................................................86
Canon sells its products primarily through subsidiaries with responsibility for specific
geographic areas. Each subsidiary is responsible for its own market research and for
determining its sales channels, advertising and promotional activities. ............................86
In Japan, Canon sells its products primarily through Canon Sales Co., Inc., mainly to
dealers and retail outlets........................................................................................................86
In the Americas, Canon sells its products primarily through Canon U.S.A.,....................86
Inc., Canon Canada, Inc. and Canon Latin America, Inc., mainly to dealers and retail
outlets......................................................................................................................................86
In Europe, Canon sells its products primarily through Canon Europe N.V., which sells
primarily through subsidiaries or independent distributors to dealers and retail outlets in
each locality. In addition, copying machines are sold directly to end-users by Canon
(U.K.) Ltd. in the United Kingdom, and by Canon France S.A. in France........................86

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In Southeast Asia and Oceania, Canon sells its products through subsidiaries located in
those areas. In addition, copying machines are sold directly to end-users by Canon
Australia Pty. Ltd. in Australia.............................................................................................86
4.3 Expectation of Stakeholders > Culture influence from within and outside Canon......86
Canon has invited external stakeholders to comment on the quality and transparency of
their company. In keeping with the company’s interest in deepening its relationships with
stakeholders, Canon has modified the comment process to include more two-way
dialogue and more transparent discussion of issues. It is Canon’s intention to extend this
process further for the 2007 by hosting a roundtable session to gain further insight into
stakeholder expectations of the company’s management, performance and reporting.
Canon believes that third-party opinions serve two purposes. ...........................................87
Give stakeholders information that helps them judge how well Canon has met their
expectations and that hints at what can be expected from Canon in the future. ..............87
As reference for improvements in future sustainability activities.......................................87
4.3.1 Product Safety................................................................................................................87
Product safety and durability is the basis of quality that is trusted by consumers. Canon
have therefore established their own product safety technical standards that not only
meet safety standards stipulated in the law, but also consider customer perspectives on
product use. Canon conduct rigorous quality control in design, evaluation and
manufacturing to ensure “substantial safety”—a level of safety that meets these
standards.................................................................................................................................87
..................................................................................................................................................87
4.3.2 Security...........................................................................................................................88
Canon believes that, in order to protect their companies and employees from increasingly
diversified risks and maintain the trust of society, it is necessary to develop a robust risk
management system and build a crisis management system capable of rapidly and
flexibly addressing incidents should they occur. The Canon Code of Conduct-
Information Security Rules stipulates their response to security risks when they
materialize. The section clearly states that information is the source of value generated by
a company and that the ability to manage information determines whether a company
will survive. In accordance with this, Canon work to eliminate risks by clarifying the
factors that put information obtained from customers and business partners at risk of
being divulged and by establishing detailed rules and policies. In addition, because
unauthorized access to buildings and grounds leads to theft and information leaks, a
management system and code of conduct for physical security are also prescribed in the
information security section. In addition to these initiatives, Canon have constructed a
rigorous system of security export control regulations based on international standards,
and constantly work to maintain or improve their level of management...........................88
..................................................................................................................................................88
Preventing Air and Water Pollution.....................................................................................88
Canon addresses alleviation of environmental burden from operational sites by reducing
emissions of NOx*1 (nitrogen oxides) and SOx*2 (sulfur oxides), major causes of air
pollution and acid rain; reducing BOD*3 (biochemical oxygen demand) and COD*4
(chemical oxygen demand), indexes for environmental burden in water environments;
and reducing emissions of phosphorous and nitrogen, which harm water environments.
Specifically, Canon Inc have switched the type of fuel from heavy oil to kerosene, which
generates almost no SOx; Canon are eliminating the use of hazardous substances; and

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Canon Inc.

Canon have installed air pollutant removal devices like scrubbers and activated carbon
absorption filters, as well as the latest wastewater treatment devices. Canon also
regularly measure the environmental burden of emissions from operational sites under
applicable laws and regulations for each region and also under Canon voluntary in-house
rules. Environmental burden increased in 2005, however, due to increased production
volume.....................................................................................................................................89
..................................................................................................................................................89
(www.canon.com/environment).............................................................................................89
NOx (nitrogen oxides)............................................................................................................89
A major cause of air pollution, acid rain, and photochemical smog, NOx is generated
when the nitrogen in fuels is oxidized, or when nitrogen in the atmosphere is oxidized
during high-temperature combustion...................................................................................90
SOx (sulfur oxides).................................................................................................................90
A major cause of air pollution and acid rain, SOx is generated when fossil fuels such as
oil and coal are burned...........................................................................................................90
BOD (biochemical oxygen demand)......................................................................................90
The amount of oxygen consumed when microorganisms degrade organic matter in water.
..................................................................................................................................................90
COD (chemical oxygen demand)...........................................................................................90
The amount of oxygen consumed when oxidizing agents oxidize organic matter in water.
..................................................................................................................................................90
TASK 5 ...................................................................................................................................90
5.1 Historical Analysis............................................................................................................90
As the term implies, this approach to analyzing performance looks at performance over
time and in particular compares current performance with previous years in order to
highlight any significant changes. Usually, historical performance analysis looks at the
more conventional measures of performance in organizations which can be readily
quantified, such as for example, sales, market share, financial ratios and profitability.
Historical analysis of performance may indicate that performance is satisfactory
compared to previous years when in fact realistically expectations about performance
should be increased over time. In other words, historical analysis of performance can
lead to future expectations for standards of performance being too low. Finally, historical
analysis may lead to complacency about an organization’s performance and strategic
capabilities when in fact everyone else in the industry is performing much better, it is an
insular way of looking at performance..................................................................................90
..................................................................................................................................................91
From the table above shows that total sales for the year 2005 and 2006 on camera
industry for Canon. It indicate that on the 3rd quarter Canon achieve to increase their
total sales as much as 15.7% and operating profit gross into 38.1% change over the year.
Through on the 4th quarter Canon achieve to boost on unaffiliated customers to 13.8%
and their operating profit gross to 26.8%. Although 4th quarter is lower than 3rd
quarter, over the year total sales are increase 47.4% different from 2006 and 2005. As a
culmination, show that the increase in sale that projected different almost 50%. The
performance illustrate the quality product in the market and also as the market leader.
..................................................................................................................................................91

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Canon Inc.

..................................................................................................................................................92
Based on this basic management policy, Canon launched two consecutive five-year
management plans Phase I of its Excellent Global Corporation Plan in 1996 and Phase II
in 2001 with the aim of becoming a truly excellent global corporation. Through these two
five-year management plans, the company promoted a range of management reforms,
thoroughly strengthening its product competitiveness and financial base. In 1995, while
Canon posted just under ¥2.9 trillion in consolidated net sales, Canon had ¥840.0 billion
in borrowings and an interest-bearing debt ratio of 33.6%. The company’s financial
position made it difficult for them to sustain the kind of long-term investment in research
and development that is required in the manufacturing industry. ....................................92
Given these circumstances, Phase I of the Excellent Global Corporation Plan pivoted on
building a strong financial structure. Along with changing the company mindset—from
partial optimization to total optimization, and from a focus on sales to a focus on profit—
Canon initiated management innovation activities designed to address common issues
concerning all of the company’s businesses, including production methods, development
infrastructure, and global logistics........................................................................................92
Under Phase II, we worked to thoroughly bolster product strength across all of the
company’s business operations and affiliates around the world with the goal of becoming
No. 1 in the world in all their major areas of business. As a result, 2005 marked their
sixth consecutive year of sales and profit growth. Compared with 1995, the year before
Canon launched their management innovation activities, net sales increased 1.8 times, net
income expanded 6.2 times, and ROE jumped from 6.5% to 16.8%, showing the
significant strides Canon have made toward becoming a Truly Excellent Global
Corporation.............................................................................................................................93
..................................................................................................................................................93
The improvement in profitability in Canon revenue increase over the years. The Strength
on Excellent Global Corporation Plan (Phases I & II) show that how committed Canon
on pursuing the objective on strengthen their Financial Structure on phase 1 and to
become market leader in phase 2..........................................................................................93
The average value of the yen for the year was ¥116.43 to the U.S. dollar and ¥146.51 to
the euro, representing year-on-year decreases of about 5% against the U.S. dollar, and
7% against the euro. Within the camera segment, strong demand for digital SLR
cameras has fueled continued growth with particularly strong sales for the advanced-
amateur-model EOS 30D, launched in the first half of 2006, and the EOS DIGITAL
REBEL XTi, launched in the second half. This, in turn, led to expanded sales of
interchangeable lenses for SLR cameras. Sales of compact digital cameras also continued
to expand steadily with the introduction of 16 new models in 2006, including six stylish
ELPH-series models and 10 PowerShot-series models that cater to a diverse range of
shooting styles. .......................................................................................................................94
..................................................................................................................................................94
As a result, unit sales of digital cameras for the year increased by more than 20% from
the year-ago period. In the field of digital video camcorders, the launch of consumer-
market HDV models equipped with Canon HD CMOS sensors contributed to expanded
sales. Consequently, camera sales surpassed the ¥1,000.0 billion mark for the first time,
achieving total sales of ¥1,041.9 billion (U.S.$8,755 million), a year-on-year increase of
18.5%. The gross profit ratio for the camera segment also rose considerably, boosted by
such factors as substantially increased sales of new products and cost reduction efforts.
As a result, operating profit for the camera segment increased by a substantial 54.7%
year on year to ¥268.7 billion (U.S.$2,258 million)...............................................................94

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Canon Inc.

..................................................................................................................................................95
5.2 Industry Norm Analysis...................................................................................................95
They word “industry” in industry analysis can mean segment of a larger industry or the
industry itself. As for Canon that manufacturing camera, it could say that it competes in
the digital camera industry for purposes of doing a strategic analysis, even though that is
really a segment of camera industry. The purposed of doing an industry norm analysis is
..................................................................................................................................................95
The industry dominant economic characteristics.................................................................96
Changing of the industry and what causing the industry to change...................................96
The attractive of the industry................................................................................................96
5.2.1 The industry dominant economic characteristics........................................................96
Competition in the camera industry is intense, with many established market
participants offering similar products. Canon's primary competitors in digital cameras
are Sony Corporation, Fuji Photo Film Co., Ltd., Olympus Optical Co., Ltd., Nikon
Corporation, Casio Computer Co., Ltd. and Eastman Kodak Company. Currently,
Canon shares the top position with Sony Corporation in unit sales of compact digital
cameras, while Canon is the current leader in the digital single-lens reflex camera
segment. Canon's primary competitors in conventional film cameras are Nikon
Corporation, Konica Minolta Holdings, Inc., Pentax Corporation, Olympus Optical Co.,
Ltd., and Fuji Photo Film Co., Ltd. ......................................................................................96
..................................................................................................................................................96
Hindered by the surging popularity of digital cameras, the conventional film camera
market continued to shrink in fiscal 2003. The introduction of new models, however,
enabled Canon to retain its position firmly atop this market worldwide. Canon's primary
competitors in digital video camcorders are Sony Corporation, Victor Company of Japan
Ltd. and Matsushita Electric Industrial Co., Ltd. In fiscal 2003, Canon expanded greatly
its overall market share in digital video camcorders, especially in the United States.
Canon believes that developing cameras with increasingly high resolution and faster
image processing are critical to its ability to remain competitive in the fast-growing
digital camera market segment..............................................................................................97
Technological Innovation ......................................................................................................97
A rising trend in the market is to have the digital camera easily network with other
digital devices. Kodak is at this time leading this trend with their new camera that uses
Bluetooth to connect to other devices. Canon does not have any integrated wireless
connectivity in its cameras. It does provide docks and external adapters for the camera
that allow it be connected to other devices. Canon does have a direct wired connection to
certain photo printers, which eliminates the need for a computer. ....................................97
In the area of connectivity, Canon is working on its concept called “Canon over IP”. This
concept does not pertain only to camera, but all of Canon’s products. The idea behind it
is to make all their products digital and then allow for easy networking and accessibility
over the internet of those devices. Canon has finished the first phase of this concept,
known as Digital Shift, by which many devices are converted from analog to digital. Now,
Canon is working on the second phase of the concept known as the Web Shift. After the
Web Shift is complete, consumers will be able to connect their Canon devices via the
internet. There are currently security issues that need to be resolved before it can be
implemented. Eventually, Canon can market this technology with its cameras. The

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Canon Inc.

concept is truly innovative for a camera manufacturer to provide connectivity to this

scale and if Canon can implement this technology in the near future, it will become an
industry leader in camera connectivity. ...............................................................................97
Entry or Exit of major firm...................................................................................................98
Sony, the first to market a digital camera in 1981, is making a late entry into the higher
end segment of digital single-lens reflex cameras, targeting 10 percent of the global
market. The competition is more intense in the market for smaller, non-SLR digital
cameras, where other makers such as Matsushita Electric Industrial Co., Casio
Computer Co. and Olympus Optical Co. do battle. The competition is more intense in the
market for smaller, non-SLR digital cameras, where other makers such as Matsushita
Electric Industrial Co., Casio Computer Co. and Olympus Optical Co. do battle............98
5.2.2 Changing of the industry and what causing the industry to change..........................98
The interest in capturing image had evolve to become basis of digital imaging had begun
in early 1980 when Sony had first prototype a camera using a CCD (charge couple
device) to capture and storing the data on a magnetic disk drive. The breakthrough
occurred when Casio released a product, QV-10 in 1995 as it defined the basic style and
function of consumer DSC by adding a LCD monitor for instant viewing of picture taken.
By adding a LCD monitor on the DSC for instant viewing, it cultivated a whole new
customer market segment apart from the traditional/conventional camera users. DSC
also become “communication device” Conventional film camera manufacture saw this a
new growth opportunity to its stagnated camera business, while consumers electronic
firms considered this an opportunity to expend its product offering linking DSC to their
existing product such as mobile phone. In addition, the DSC industry as a whole had
played a unique roll in the proliferation of the DSC market hence expending the digital
imaging industry. ...................................................................................................................98
..................................................................................................................................................99
Curve of Innovation of DSCs.................................................................................................99
When the DSC market is still emerging, the leading manufacturer were quickly seeking
to lock in user to their own product by defining proprietary format such as digital image
format and data storage media that would force customers to use the products that the
firm could only provide. However they soon realize that penetrating the mass customers
in the direction was difficult as a user were not interest in only one technology. The
customer demand increase over time. ..................................................................................99
5.2.3 The attractive of the industry.......................................................................................99
The digital camera business of Japan's Olympus Corp. underscores how making money
in the cut-throat market is getting tougher. Sony Corp. and Canon Inc. are seen as the
strongest players in the $17 billion market, profiting even as prices fall and growth slows.
But most other makers will struggle and some might be better off exiting. The average
price of a compact digital camera will decline by 15 percent in 2004 and another 15
percent next year. The slowing growth ahead, forecasting the global market to climb
about 40 percent in 2006 to 68.5 million units and a further 22 percent to 84.1 million
next year before leveling out at 84.7 million in 2007. ..........................................................99
The spread of cell phones equipped with powerful cameras is also a worry, as some
consumers feel they do not need to buy a separate digital camera. Many digital camera
firms have cut their annual shipment targets in recent weeks, but Olympus, the worlds
third-largest after Sony and Canon, as well as Pentax Corp. and stood out with their
camera divisions....................................................................................................................100

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Canon Inc.

Even makers with hit products have fallen on hard times. Nikon Corp. is making money
on a new digital SLR, but still expects profits in its camera division to fall as prices of
compact models slide. ..........................................................................................................100
"We expect prices to keep falling. But we are shifting our product line-up towards the
high end," (www.nikon.com)...............................................................................................100
The problem with that strategy is that every digital camera company is doing the same
thing: avoid the low-end of the market where price competition has made margins razor-
thin. Camera makers will also find it increasingly difficult to attract customers by
improving quality. There is a growing consensus among consumers that three or four
megapixels, the measure of how many million picture elements are captured in a digital
snapshot, are enough to produce a high-quality shot. .......................................................100
With more than 30 players, the market is far more competitive than a few years ago.
Eastman Kodak has emerged as a formidable rival in the United States, while Matsushita
Electric Industrial is gaining traction in Japan. ................................................................100
Kodak's share of the U.S. market rose to 18.2 percent in the first half of calendar 2006
from 15.1 percent in the same period last year, according to research firm IDC. Olympus,
Nikon, Hewlett-Packard, Pentax and Sony all lost share. .................................................100
"Kodak's advantage is that they are offering cameras at lower prices and focusing on
creating better products. They are putting pressure on everybody else,"
(www.kodak.com).................................................................................................................100
Success depends not only on developing attractive products but also on getting them to
market quickly. Fuji Photo Film slashed its annual digital camera shipment target by 18
percent to 7 million units, partly because a shortage of components kept it from
launching a key model in time for the summer bonus season in Japan. Olympus expects
its camera division to lose 18 billion yen ($173 million) in the year to March as it disposes
inventory that swelled to 2.6 months at the end of September, up 53 percent year-on-
year. Still, the company is aiming for 20 percent of the global market in three years, up
from around 10 percent now. ..............................................................................................101
Olympus can nurse its camera operations back to profit in the next business year by
clearing out inventory and starting from scratch with new models. Olympus has a
relatively weak brand and was late to address two key segments -- the thin, card-sized
model and the reasonably priced digital single lens reflex (SLR) camera, a high-margin,
fast-growing segment dominated by Canon and Nikon. ...................................................101
"Our problems stem from mistakes made in product development and our failure to
correctly read market trends," (www.nikon.com).............................................................101
5.3 Benchmarking ................................................................................................................101
Benchmarking assesses the competences of an organization against the best performers
in the class. This comparison therefore is not just against organizations in the same
industry, but rather may involve comparisons against the best performers in any
industry, and from any part of the world. Benchmarking may compare a particular
aspect of an organization’s activities against the best in the class, or may look at overall
organizational performance against the best performers. So, for example, benchmarking
may for example, compare, say, the organisation’s approach to handling customer
complaints, or for example, its approach to after sales service with those organisations
which are the best performers in the selected area. Benchmarking can often be based on
partnerships across industries with a company actively seeking the help of a company
acknowledged to be the best in a particular area of activity. Obviously, the use of
benchmarking is difficult where the best performer is a close competitor.......................101

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Canon Inc.

5.3.1 Strategic Benchmarking .............................................................................................102

Phase III (2006-2010) Becoming a Top 100 Global Company...........................................102
In 2006, Canon began Phase III of their Excellent Global Corporation Plan. During
Phase III Canon intend to pursue a course of sound growth with new businesses born of
innovation, taking into account ongoing economic globalization and the worldwide
spread of broadband networks, while maintaining the sound profit structure and
financial balance Canon have established over the past ten years. To accomplish this,
Canon plan to promote five essential strategies in an effort to become a top 100 company
globally in terms of such key business indicators as net sales, net income, equity ratio and
market capitalization............................................................................................................102
................................................................................................................................................102
Canon firmly recognizes that the precarious state of the global environment, which
represents the basis of a sustainable society, is a situation that demands theirattention.
The Kyoto Protocol, the international treaty on climate change, that went into force in
February 2005, centers on the problem of global warming, which Canon must further
strengthen their efforts to address. In response to environmental problems, Canon has
targeted the maximization of resource efficiency in a way that benefits both
environmental conservation and economic development. These efforts have been directed
at the lifecycle of all Canon products as well as business operations worldwide. In 2003,
Canon established the overriding indicator Factor 2 as their Vision for 2010 in order to
put these ideas into concrete practice. Their global Group companies will strive as one to
achieve their goals by developing advanced, environmentally conscious technologies and
strengthening management systems. In addition, in order to become a truly excellent
global corporation, it is essential that each and every member of the Canon Group act in
accordance with standards and norms befitting this goal. Canon conducts thorough
compliance education for management and employees worldwide, and, since its founding,
has worked to foster strong, autonomous individuals rooted in Canon’s “Three Selfs”
concept. Canon are also working to strengthen the company’s corporate governance
systems...................................................................................................................................103
Establishing New Production Systems to Sustain International Competitiveness...........103
Canon believes that in order to further strengthen manufacturing, it is necessary to
automate labor-intensive assembly processes using highly productive automated
machinery and robots. Moreover, rapid response to change is essential to maintaining a
competitive edge in the global market. From this standpoint, Canon is working to
develop automated production lines, drawing on knowledge gained from integrating
development, production engineering and manufacturing technologies. Canon also
continue to promote greater efficiency in procurement activities and the in-house
production of key components and devices.........................................................................103
................................................................................................................................................104
Canon are making substantial efforts in the area of human resource development,
strengthening their education and training programs to cultivate trusted, responsible
employees, and foster global leaders. At the same time, Canon is pursuing more equitable
human resource policies to nurture strong, autonomous business professionals.............104
Identifying New Business Domains and Accumulating Required Technologies..............104
Canon are researching new fields of technology in their search for next-generation
business areas beyond 2010. In this pursuit, Canon are actively conducting research from
basic to advanced at their leading-edge technology research center in Tokyo, while also
forging partnerships with prominent research institutions and universities around the

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Canon Inc.

world. In the future, Canon plans to boost R&D expenditure from ¥275.0 billion (8% of
net sales) in 2004 to around ¥550.0 billion annually...........................................................104
................................................................................................................................................105
Canon signed a comprehensive partnership agreement with the Tokyo Institute of
Technology in August 2005 regarding joint research on advanced materials and imaging
technologies...........................................................................................................................105
5.3.2 Competitive Benchmarking........................................................................................105
Canon believes that these third-party opinions serve two purposes. First, they give
readers information that helps them judge how well Canon has met their expectations
and that hints at what can be expected from Canon in the future. Second, the issues
raised in these opinions can be used by Canon as reference for improvements in future
sustainability activities and in information disclosure through this report and other
media. These commentators have provided their opinions on how well this report, with a
triple-bottom-line approach improved over last year, meets their expectations regarding
information included in the report, the quality of performance it conveys, and its
usefulness for meaningful engagement................................................................................105
Third-Party Opinion from Volker Türk, Wuppertal Institute.........................................105
In this third consecutive opportunity to provide an external view on Canon’s
sustainability report, Canon have seen with appreciation that the company has taken its
commitment to seeking third-party opinions one step further. This statement is part of a
more in-depth interaction involving a telephone conference which allowed for the
discussion of a variety of issues, some of which Canon will raise here. An editorial
improvement that has made this report more accessible without loosing comprehensive
data is the disclosure of detailed information on the web with clear links to them
signalised on the printed report. In pursuing the Kyosei philosophy, Canon has set itself a
challenging and exciting agenda in aiming at becoming a “truly excellent global
corporation by pursuing environmental and social sustainability.” Their environmental
goals are clear and Canon’s performance against these targets is easy to track. Various
aspects are continuously improving and many of the mid-term environmental goals set
for 2005 have been achieved; Canon congratulate the company for these
accomplishments. The pursuit of sustainability should be further extended in the social
arena, with statements of priorities and targets on social indicators. For example, Canon
read with interest that Canon provides an “employee-friendly work environment” and
“manages human resources in compliance with the laws and social................................105
TASK 6..................................................................................................................................106
6.1 Strategic Master Planning..............................................................................................106
Canon SD630 campaign and Tennis Star Maria Sharapova.............................................106
Canon's most recent campaign featuring tennis superstar Maria Sharapova and the
PowerShot SD630 Digital Elph camera. As part of this campaign, a new commercial
titled "Attraction" first appearances in conjunction with the French Open. The
integrated campaigns include not only television, but also print, Internet, and retail
components that reaffirm Canon's relationship with. Canon shows consumers that
whenever and wherever there are great picture taking moments, Canon digital cameras
are there to capture them.....................................................................................................106
(http://www.letsgodigital.org)..............................................................................................107
Canon PowerShot SD630 Campaign - Capital Allocation.................................................107

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Canon Inc.

Additionally, the print ad will hit newsstands in early June with a two-page spread
appearing in People (6/12 issue), Entertainment Weekly (6/16 issue), In-Touch (6/19
issue) and Sports Illustrated (6/26 issue). Canon will be launching a micro-site within the
Canon PowerShot website that allows fans to view the "Attraction" TV spot; get a
behind the scenes look at the filming of the commercial including interviews with Maria
and outtakes; as well as a downloadable gallery of images. Canon is introducing the new
campaign to its dealers and retail partners through a mailing that will include a DVD of
the commercial, reprint of the print ad, media plan and bumper sticker. Canon is also
offering retailers the opportunity to tag the last five seconds of the commercial with their
specific store information for both in-store and local media buys....................................107
Canon SD 630 digital camera campaign – Employed David Letterman .........................107
Canon was the sole sponsor of the USA Today bonus section devoted to the French Open
that ran on May 26. The bonus pull-out section highlighted French Open history, player
profiles and player rankings and featured four Canon advertisements (Window unit on
the front page; 1/3-page four-color and 1/2-page black and white in the center of the
section and full-page four-color on the back page). "Attraction" will begin airing on June
1st around French Open coverage on NBC, ESPN2, ESPN SportsCenter, ESPNews and
The Tennis Channel. Concurrently, the spot will run nationally on networks such as
Comedy Central, E!, FX, MTV, Spike, TBS, TNT, and VH1 as well in key Canon spot
markets on late night newscasts and late-night programming such as, "Entertainment
Tonight," "Access Hollywood," "The Insider," "extra," "The Tonight Show with Jay
Leno," "Late Show with David Letterman," and "Late Night with Conan O'Brien."...107
Bargaining ............................................................................................................................108
For hired the big star in sport industry is cost a high expenses to Canon. They have to
consideration on the shore up expenses such as hired a professional photographer, for
capturing best quality image while build up a group for accompany the limelight for each
tournament. Canon must spend high expenses for the commercial. Canon must not only
focus on commercial barely, but also distress on others competitors that compete with the
same product. Such as Sony Corp that now is creating the new era of Cybershot. Canon
also must deem on how long that Maria Sharapova can be the in the top of tennis
industry. ...............................................................................................................................108
REFERENCES.....................................................................................................................108
https://intranet.panda.org/documents/folder.cfm?uFolderID=60976...............................108
http://www.themanager.org/resources/Stakeholder%20Management.htm.....................108
http://www.proms-g.bcs.org/histevents...............................................................................108
www.epson.co.jp/e/IR/ann_report/ar2006/11_06.pdf.........................................................108
http://en.wikipedia.org/wiki/Porter_5_forces_analysis......................................................108
http://www.canon.com/environment/eco2006e/p08.html...................................................108
http://www.skylinecollege.com/CS-Aditya.htm..................................................................108
http://sec.edgar-online.com..................................................................................................108
http://en.wikipedia.org/wiki/Core_competency..................................................................108
http://www.canon.com/environment/eco2006e/p31b.html.................................................109
http://www.canon.com/environment/report/education.html.............................................109
http://www.canon.com/technology/canon_tech/explanation/organic_el.html..................109

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Canon Inc.

http://today.reuters.com/news/articlenews.aspx?type=technologyNews&storyid=2007-01-
31T014845Z_01_T220014_RTRUKOC_0_US-JAPAN-CAMERA.xml ..........................109
http://www.physorg.com/news68825818.html....................................................................109
http://www.canon.com/environment/eco2006e/p69.html...................................................109
http://www.dpreview.com/reviews/specs/Canon/...............................................................109
http://www.eetimes.com/news/latest/showArticle.jhtml....................................................109
http://www.imergeconsulting.com/analysis122100.htm.....................................................109
http://investor.shareholder.com/cymer/releasedetail.cfm..................................................109
http://www.skylinecollege.com/CS-Aditya.htm..................................................................109
http://www.canon.com/environment/report/sustainability.html.......................................109
http://upetd.up.ac.za/thesis/available/etd-05092005-123748/unrestricted/02chapter2.pdf
................................................................................................................................................109

EXECUTIVE SUMMARY

In the early thirties, the two most popular brands of miniature cameras were
Leica and Contax, both made in Germany, the camera kingdom of the
world. These two brands attracted the camera fans, receiving enthusiastic
support throughout the world as super grade cameras. There was a
Japanese man who disassembled a Leica camera in an attempt to develop
a high-grade 35mm focal-plane-shutter rangefinder camera (hereafter
referred to as a 35mm rangefinder camera).

This person was Goro Yoshida (1900-1993). In 1933, Yoshida, together with his
brother-in-law, Saburo Uchida (1899-1982) and Takeo Maeda (1909-1975),
a former subordinate of Uchida, established the Precision Optical
Instruments Laboratory in a room of an apartment located in Azabu Ward,
Tokyo. Although it was reported that they were able to produce several
prototypes of a high-grade 35mm rangefinder camera, "Kwanon (equipped
with the Kasyapa = Kashapa lens)," no such camera is thought to exist
today. "Kwanon" became a phantom prototype camera.
(http://www.canon.com/camera-museum/history)

Canon Inc success has resulted from a strategy of internally generated growth,
selection of the best locations for its freestanding stores, a focus on
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Canon Inc.

customer service and convenience, high volume prescription sales, a focus

on profit per customer visit, and its selective implementation of technology.
www.dpreview.com indicates the firm has a wide economic moat, meaning
that Canon Inc has a more sustainable competitive advantage, based on its
high-volume stores, internal growth capacity.

BACKGROUND OF COMPANY

Canon, a Tokyo based company, was established in 1933 by Yoshida Goro and
Uchida Saburo to research and develop good quality cameras. They
managed to create Japan’s first 35mm camera in 1934 and started to
introduce other products thereafter. They also made significant
contributions to X-ray cameras, electronic calculators, Video Tape
Recorders, and copying machines into the 1970s. By the end of 1970s,
Canon had positioned itself well in the business machines market.
Throughout the 1970s, Canon also started to expand into international
markets including the Americas and Europe. As the company grew, a new
structure was necessary and so in 1978 the company was reorganized into
product divisions. Canon’s growth in imaging technology helped it move into
the SLR (Single lens reflex) camera business in 1983. In 1988 it introduced
its first digital camera, Q-PIC, however it continued to focus more on its
traditional camera business. It was not until 2000, when Canon was listed
on the New York Stock Exchange (NYSE), that it entered the digital camera
market with its popular PowerShot product line. Canon now is undoubtedly
a leader in the digital camera market, as well as in the other product
markets it competes in.

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Canon Inc.

DIGITAL CAMERA BUSINESS IN CANON INC

Canon manufactures and markets digital cameras and film cameras. Canon also
manufactures and markets digital video camcorders, lenses, and various
camera accessories. Digital cameras have become common tools to input
images into PCs. In addition to ensuring the best possible image quality
throughout its product lineup, Canon offers digital compact cameras that
are easy to use and to carry. In 2003, the compact digital camera market
continued to show significant growth. Canon introduced six new PowerShot
series and three Digital ELPH series cameras and has finally reached the
top position in the industry, in unit sales basis.

Canon's digital single-lens reflex cameras are designed to meet needs from
amateurs to professionals. These cameras incorporate innovative
technologies such as 45-point area auto-focus, eye-controlled auto-focus,
depth-of-field control, Base-stored Image Sensor (BASIS), Complementary
Metal Oxide

Semiconductor (CMOS) imaging sensors, Digital Imaging Processor (DIGIC),

and a fully electronic mount system to transmit data between the lens and
the camera chassis. Particularly in the digital single-lens reflex camera
segment, popular new product offerings including the EOS 10D and EOS
Digital Rebel (EOS 300D Digital) bolstered Canon's dominant position
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Canon Inc.

worldwide. Canon's digital single-lens reflex cameras feature the company's

proprietary, CMOS imaging sensors to offer advantages like low image
noise, and low power consumption. Both the sensor technology, and the
cameras themselves, won numerous awards in the respective industries.
Canon also offers a comprehensive line-up of conventional film cameras to
satisfy the needs of users everywhere, from models with high-performance
zoom lenses to models with large enhanced viewfinders and full water
resistance.

Hindered by the surging popularity of digital cameras, the continued shrinking of

the conventional film camera market has been a recent trend. Canon's
introduction of new models in fiscal 2003, however, enabled it to retain its
position firmly atop this market worldwide and to record a healthy level of
profitability. With a cautious eye on market trends, Canon will continue to
develop new products and maintain a firm commitment to the film camera
market.

In the camera lens segment, technological developments, including diffractive

optical elements, image stabilizer and ultrasonic motor, have helped Canon
to maintain a technical lead over other makers. Canon offers over 50 lenses
in the EF series. These high-qualities, high-performance lenses provide
outstanding performance with digital cameras as well as silver-halide
cameras, greatly contributing to Canon's sales. Due to market expansion of
digital single- lens reflex cameras, sales of middle to high-class lenses have
been increasing. The introduction of new lenses offering optimum
performance with Canon's digital single-lens reflex cameras is planned for
2008.

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Canon Inc.

KWANON (Prototype) 1934

35mm Focal-Plane Shutter Rangefinder Camera

Figure 1.1 Canon Sales by Product

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Canon Inc.

Figure 1.2 Digital Camera Market share

TASK 1

1.0 ELEMENT OF BUSINESS STRATEGY VARRIED IN DIFFERENT SECTOR

From the Warren Federal Credit Union website, it explains strategy in a two
appeal. First is Traditional Appeal and the second is New Appeal.
• Traditional Appeal – is the science and art of military command as
applied to the overall planning and conduct of large-scale combat
operations.
• New Appeal – a pattern in a stream of decisions or actions.
(http://uwacadweb.uwyo.edu)

Business can be categories into several parts that is small business,

Multinational Corporation, Manufacturing and Service Organization and
Public Sector

1.1 Small business

A small business may be defined as a business with a small number of

employees. The legal definition of "small" often varies by country and
industry, but is generally under 500 employees depending on the industry.
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Canon Inc.

These businesses are normally privately owned corporations, partnerships,

or sole proprietorships.

1.1.1 Various Industries in Small Business

Wholesaling : maximum 100 employees

Retailing : maximum yearly sales ranging from $6 million to $24.5

million on industry

Mining : maximum of 500 employees

Agriculture : maximum annual receipt of $0.75 million up to $5 million

Small business are typically are managed by the people who started and
own them. Owner of small business would rather take the risk of starting
and operating their own firm. The internet has become a small business
on ramp for teenaged entrepreneurs.

1.1.2 Franchise Small Businesses

Franchising is a way for small business owners to benefit from the

economies of scale of the big corporation (franchisor). KLG restaurants
are an example of a franchise. The small business owner can leverage a
strong brand name and purchasing power of the larger company while
keeping their own investment affordable. However, some franchisees
conclude that they suffer the "worst of both worlds" feeling they are too
restricted by corporate mandates and lack true independence. KLG has
even been sued by franchisee's who feel they have been exploited with
unreasonable costs for materials they are required to purchase from the
parent company.

1.1.3 Advantages of Small Business

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Canon Inc.

A small business can be started at a very low cost and on a part-time

basis. Small business is also well suited to internet marketing because it
can be very manageable to serve a niche, something that would have
been more difficult prior to the explosion in internet activity.

Adapting to change is crucial in business and small business, lacking

bureaucratic inertia, can often respond to the marketplace quickly. Small
businesses operators tend to be intimate with their customers and clients
resulting in greater accountability and responsiveness.

1.1.4 Problems faced by small businesses

Small businesses often face a variety of problems related to their size. A

frequent cause of bankruptcy is undercapitalization. This is often a result
of poor planning rather than economic conditions - it is common rule of
thumb that the entrepreneur should have access to a sum of money at
least equal to the projected revenue for the first year of business in
addition to his anticipated expenses. For example, if the prospective
owner thinks that he will generate $100,000 in revenues in the first year
with $150,000 in start-up expenses, then he should have no less than
$250,000 available. Failure to provide this level of funding for the company
could leave the owner liable for all of the company's debt should he end
up in bankruptcy court, under the theory of undercapitalization.

1.2 Multinational Corporation

A multinational corporation (MNC) is a corporation or enterprise that manages

production establishments or delivers services in at least two countries.

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Canon Inc.

Very large multinationals have budgets that exceed those of many

countries. Multinational corporations can have a powerful influence in
international relations and local economies. Multinational corporations play
an important role in globalization.

1.2.1 Multinational corporate structure

Multinational corporations are often divided into three broad groups:

Horizontally integrated multinational corporations manage production

establishments located in different countries to produce the same or
similar products. (example: McDonalds)

Vertically integrated multinational corporations manage production

establishment in certain country/countries to produce products that serve
as input to its production establishments in other country/countries.
(example: Adidas)

Diversified multinational corporations manage production establishments

located in different countries that are neither horizontally nor vertically
integrated. (example: Microsoft)

1.2.3 International power

Large multinational corporations can have a powerful influence in

international relations, given their large economic influence in politicians'
representative districts, as well as their extensive financial resources
available for public relations and political lobbying.

Multinationals have played an important role in globalization. Prospective

country locations for Canon Inc production establishments, and
sometimes regions within countries, must compete with each other to
have Canon locate their facilities (and subsequent tax revenue,
employment, and economic activity) within a region. To compete,
countries and regional political districts offer incentives to Canon such as
tax breaks, pledges of governmental assistance or improved

SHC0401001 40
Canon Inc.

infrastructure, or lax environmental and labor standards. This process of

becoming more attractive to foreign investment can be characterized as a
race to the bottom, a push towards greater freedom for corporate bodies,
or both.

1.3 Manufacturing and Services Organization

Manufacturing, a branch of industry, is the application of tools and a processing

medium to the transformation of raw materials into finished goods for sale.
This effort includes all intermediate processes required for the production
and integration of a product's components. Some industries, such as
semiconductor and steel manufacturers use the term fabrication instead.
The manufacturing sector is closely connected with engineering and
Industrial Design.

Examples of major manufacturers include General Motors Corporation, Ford

Motor Company, Chrysler, Boeing, Gates Rubber Company and Pfizer.
Examples in Europe include France's Airbus and Michelin Tire. Modern
proponents of Fair Trade policy and a strong manufacturing base for the
U.S. economy include economists like Paul Craig Roberts, Ravi Batra, and
Lou Dobbs.

1.4 Public Sector

The public sector is the part of economic and administrative life that deals with
the delivery of goods and services by and for the government, whether
national, regional or local. Examples of public sector activity such as
delivering social security, administering, urban planning and organizing
national defenses.

The organization of the public sector (public ownership) can take several forms,
including:

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Canon Inc.

Direct administration funded through taxation; the delivering organization

generally has no specific requirement to meet commercial success criteria,
and production decisions are determined by government.

Publicly owned corporations (in some contexts, especially manufacturing, "State-

owned enterprises"); which differ from direct administration in that they have
greater commercial freedoms and are expected to operate according to
commercial criteria, and production decisions are not generally taken by
government (although goals may be set for them by government).

Partial outsourcing (of the scale many businesses do, e.g. for IT services), is
considered a public sector model.

TASK 2

2.0 THE IMPORTANT OF STAKEHOLDERS ANALYSIS

A “stakeholder” can be defined as “Any individual, group, or institution that has a

vested interest in the natural resources of the project area and/or who
potentially will be affected by project activities and have something to gain
or lose if conditions change or stay the same”. (https://intranet.panda.org)

Stakeholder analysis recognizes all prime and secondary stakeholders who have
a vested interest in the issues with which the development or policy is
concerned. The objective of stakeholder analysis is to expand a tactical
view of the human and institutional scene, and the associations among the
different stakeholders and the issues they concern about most.
Stakeholders are persons, groups or institutions with interests in a policy,
programmed or project. Primary stakeholders are immediate communities

SHC0401001 42
Canon Inc.

of interest. Secondary stakeholders are the intermediaries in the process,

and may include government agencies and other institutional bodies.

Canon Corporate goals on Stakeholders:

“Transcend border to actively fulfill our social responsibility to all humankind, in

every region of the world” (http://www.canon.com)

Canon formally introduced its corporate philosophy of kyosei in 1988.The

definition of this word is “Living and working together for the common
good”, but the definition is broader:

“All people, regardless of race, religion or culture, harmoniously living and

working together into the future.” (http://www.canon.com)

Based on the concept of kyosei, and in the pursuit of the “excellent global
corporation” ideal defined by this philosophy, Canon challenges to stand the
responsibility for the impact of its activities on the social order, not only in its
business but also in other human undertaking.

First and foremost, Canon must present customers with excellent products for
further customer satisfaction while persistent their profits to its various
stakeholders. Guided by its corporate philosophy of kyosei, Canon, focuses
its efforts on various activities to comprehend a society where all people
can comfortably and peacefully live together while making significant
contributions to society through its business. Canon provides products and
services with the aim of contributing to society through its technological
excellence, while at the same time promoting social and cultural support
activities in response to various needs and issues of communities
worldwide. They tackle a range of important social problems, including
protection of the global environment, growth and development of
international society, educating and cultivating young people, social welfare,
and development of the arts, culture and sports.

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Canon Inc.

(http://www.canon.com)

True global companies must encourage good relations, not only with their
customers and the communities in which they operate, but also with nations
and the environment. They must also bear the responsibility for the impact
of their activities on society. For this reason, Canon’s goal is to contribute to
global prosperity and the well-being of humankind, which will lead to
continuing growth and bring the world closer to achieving kyosei.

2.1 Relations with Customers

Canon products and services must exemplify “trust,” “satisfaction,” and

“evolution” with the purpose of genuinely pleases the customers who pay
for them. “Trust” is an essential part of quality, a guarantee that the product
is durable and harmless. “Satisfaction” is achieved by providing products or
services that are simple to use and comprehend, plus careful and
considerate support to customers. “Evolution” is also essential to keep the
value of products and services relevant in a constantly changing world, and
meet the needs of tomorrow

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Canon Inc.

2.1.1Canon National Account Program

“AT CANON, WE BUILD PARTNERSHIPS WITH OUR CUSTOMERS BASED

UPON A SHARED VISION OF SUCCESS. IT IS ONLY BY HELPING
THEM ACHIEVE THEIR GOALS THAT WE ACHIEVE
OURS.”(www.usa.canon.com)

Canon’s National Account Division to make available America’s largest corporate

customers with the most complete and effective customized imaging
solutions for over two decades. Combining innovative technologies with
superior account management and customer service, the National Account
Division provides customers with technology solutions guaranteed to
increase productivity. Canon keen ability to understand their customers
needs and allows Canon to consistently exceed their expectations. Much of
the success of Canon’s National Account Program is attributable to their
ability to forge strong partnerships with their customers. Canon builds long-
term relationships based on trust, mutual respect and a shared vision of
success. By working as a team, with open communications and common

SHC0401001 45
Canon Inc.

goals, Canon is able to develop highly specialized imaging solutions that

meet their customers’ individual needs.

2.2 Relations with Shareholders and Investors

The Corporate Ethics and Compliance Committee is a body of executives and

representatives from each headquarters or product group operations under
the chairmanship of the President and CEO of Canon Inc. The Committee
meets four times a year to discuss and approve compliance and corporate
ethics policy and associated measures for the Canon Group. In light of the
nature of the Committee, a corporate auditor attends the meetings as an
observer.

The primary objectives of the Corporate Ethics and Compliance Committee are:

To instill a consciousness of compliance and ethics universally throughout the

Group

To enhance the transparency and soundness of business activities while

fostering a corporate spirit which motivates employees to unfailingly
consider compliance and ethics when making business decisions.

In addition to the regular members, the Committee also invited the presidents of
overseas regional headquarters as well as all the presidents of domestic
group companies to attend meetings, where they confirmed their obligation
to take the lead in ensuring thorough compliance.

The percentage of Canon Inc. shares owned by non-Japanese investors rose to

more than half of all outstanding shares as of December 31, 2004, and
stood at 51.1% as of December 31, 2005 (www.canon.com/ir). Canon’s IR
Promotion Division therefore makes demanding efforts to maintain close
communication with non-Japanese institutional investors. In addition to
holding conference calls to explain financial results, and traveling abroad to
discuss management policy with institutional investors outside Japan, it has

SHC0401001 46
Canon Inc.

also created IR bases in Europe and the United States. Furthermore, it

maintains an English-language IR website with effectively the same content
as that published on its Japanese- language website, thereby ensuring that
investors inside and outside Japan have access to the same information.

2.3 Dialogue with Individual Investors

The share trading unit for Canon Inc. stock was lowered from 1,000 to 100
shares to encourage broader participation in the company by individual
investors. At the same time, Canon created a special portal for individual
investors on its IR website, and started holding briefings on the company’s
activities for them. To date, two briefings have been held in September
2004 and September 2005 and some 400 individual investors attended
each. As part of its efforts to disclose information that gives individual
investors an accurate understanding of the company’s business situation,
Canon also holds regular briefings and similar events for salespersons from
securities companies as required.

2.4 Stakeholders Mapping

Besides the analysis of stakeholder power in terms of their ability to persuade

people and developments, it is also necessary to evaluate, to which degree
the stakeholders will exert their power. Local authorities, for instance, can
have a high impact on an organization especially Canon itself. If Canon
plans to move their headquarters, local authorities would probably try to
influence this decision. However, they will only be interested to know about
other important business developments, such as introduction of new
product lines or new marketing campaign, without taking any action.

2.4.1 The power/interest matrix

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Canon Inc.

The power/interest matrix provides important information on how to handle

particular stakeholders and groups. It can also indicate, if certain decisions
will receive support or resistance, and which groups have to become
included in the decision process.

http://www.proms-g.bcs.org

2.4.1.1 Sector A (Minimal Effort)

Stakeholders in sector A neither do not have a high own interest in business

plans nor do they have to power to exert much impact. Canon should keep
these groups informed in the necessary extent, but should not invest too
much effort into them. Competitors, Government and others companies can
be decline in this stage whereby competitors is a major threats can willing
to search to any information on Canon, therefore Canon should put a
minimal effort on them because they cannot effect on decision making. The
Japanese government established the Intellectual Property Policy
Headquarters (http://www.canon.com/environment) in order to
strengthen the international competitiveness of Japanese industry. The

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Canon Inc.

headquarters promotes policies on intellectual property creation, protection

and utilization in a centralized and planned manner.

For the others company on different industries, they have low level of interest on
Canon and also they cannot effect on Canon decision making. Such as
McDonald’s in the food industry, whereby they have minimal interest on
Canon. Mc Donald’s might have interest in doing corporate partnerships in
marketing promoting.

2.4.1.2 Sector B (Keep Informed)

Stakeholders in Sector B do have a high interest in the corporation and its

actions. However, they have limited means to influence things. Despite their
low power, such stakeholders could be valuable allies in important
decisions. Therefore, Canon is advisable to keep them informed about the
issues they are interested in. Communities, Student, and Non Government
Organization (NGO) can be decline in this stage.

Kids Area at Expos (Communities)

At the environmental exhibition, Eco-Products 2005, Canon set up a kids' area in

a booth called "Canon Eco Kids." The area featured a number of creative
ideas to encourage children's interest in the environment, including
computers on which they could test their environmental knowledge by
answering the questions that came up.

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Canon Inc.

Canon Eco Kids

Environmental Lessons at Elementary and Middle Schools

Employees of Oita Canon Materials visit local elementary and middle schools to
give environmental lessons that feature experiments and quizzes on the
environment. Some 250 students have participated in the lessons since
they began in 2003. Canon also actively gives educational tours of its
facilities.

Environmental Lessons

The National Center for Missing & Exploited Children (NGO)

Canon U.S.A. has been a steadfast partner and has consistently donated
products and funding to support NCMEC in the United States and the Child
Find Canada in Canada to locate missing children.

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Canon Inc.

National Center for Missing and Exploited Children

Its staff offers support programs to help victims and their families cope with the
emotional pain associated with the search for a missing child. As part of the
Canon 4 Kids program, Canon missing children ads that appear in the
media reach a huge number of Americans who might not otherwise see
photos of these missing children, thereby yielding better results.

2.4.1.3 Sector C (Keep Satisfied)

The relationship with stakeholders in sector C could be difficult. In this group,

Canon often finds institutional investors or legislative bodies. They behave
passively most of the time and show a low interest in corporate affairs.
Despite that they can exert an enormous impact on the organization, such
as when it comes to investments. Customers, Employees, Suppliers can be
put on this stage. It is therefore necessary to analyze potential intentions
and reactions of these groups in all major developments, and to involve
them according to their interests.

Canon aims to develop responsible products for the 21st century to satisfy
discerning customers.

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Canon Inc.

Canon has long been examining how product life cycles impact the environment.

Canon ongoing aim is to make high-performance, functional products while

minimizing the use of precious resources and eliminating waste at every
stage. Canon achieved this first with their compact high-performance
cameras. Canon is determined to stay at the forefront of environment
conservation efforts. By choosing Canon, consumers can express their
concern for the environment, without sacrificing performance or
convenience.

Promoting Employee Awareness

Canon Inc. holds a Compliance Week twice a year—once each fiscal half-year to
give all employees a chance to contemplate the meaning of compliance and
corporate ethics and recognize that they are individual missions.

Compliance Week Poster

During Compliance Week, employees take part in workplace meetings to

discuss issues related to compliance and corporate ethics that may arise in
actual operations. Since employees obtain a more concrete grasp of the
meaning of compliance and compliant behavior in the context of their own
duties, these meetings yield results that passive education programs like
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Canon Inc.

lectures could never deliver. Even though most employees are normally
very busy, they say that participating in workplace meetings helps resolve
the questions that arise in connection with compliance and enhances their
awareness of the issues in their daily duties.

“Canon Inc. is carrying out a range of other initiatives to instill a high sense of
corporate ethics and compliance in its workforce.” (www.canon.com)

Information via the Intranet

Canon Inc. has set up a website on its intranet to enhance everyday awareness
of compliance by providing constant access to information on internal rules
and related information. It also publishes the Compliance Newsletter to
bring important issues to the attention of employees.

Building Strong Ties with Suppliers

The assistance of suppliers is important to realizing Canon’s EQCD concept,

which calls for the delivery of high-quality, suitably priced products to
customers around the world in a timely manner while reducing the
environmental weight in every feasible way. Canon Fundamental
Procurement Policies and other internal regulations are communicated to
and understood by suppliers, and then carried out with their cooperation
based on a strong working relationship.

The EQCD Concept (http://www.canon.com/environment)

This is Canon’s basic product development policy.

"E" stands for "Environment": "Companies are not qualified to manufacture goods
if they are incapable of environmental assurance."

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Canon Inc.

"Q" stands for "Quality": "Companies are not qualified to market goods if they are
incapable of producing quality goods."

"C" and "D" stand for "Cost" and "Delivery": "Companies are not qualified to
compete if they are incapable of meeting cost and delivery requirements."

2.4.1.4 Sector D (Key player)

The most crucial stakeholders are persons with high interests and high power, to
be found in sector D. They have to be engaged in all significant growths.
The success behind Canon was not purely technological innovation;
effective management strategy, which was designed to adapt to the
changing markets, played a significant role. The first of these formulated
management strategies was called the Premier Company Plan, which was
implemented in 1976 after the company was unable to pay dividends to
share holders for the first time in its history. The plan called for high
revenue and debt free operation. It also instilled five core objectives in
company: corporate principles, unifying the company’s divisions,
strengthening current technology development, investing in their
employees, and improving the company’s overall framework. As the
company grew and market conditions changed, Canon continuously kept
revising its strategic goals in order to stay successful. Currently, Canon is
entering into its Excellent Global Corporation Plan Phase III, which focuses
on future technologies, product expansion, and employee satisfaction. The
combination of constant technological innovation and effective managerial
strategy has lead to much of Canon’s success in the past.

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Canon Inc.

To support such tactics, Canon can compare the actual stakeholder map with a
more favorable one. This allows revealing deviations. It is the basis to find
ways on how to reposition particular stakeholders. For instance, it is
possible to influence the opinion of an important customer by involving him
in early planning stages in order to find a solution that meets the needs of
both parties. The power of a supportive department could be increased by
inviting representatives from this department into project teams and
planning committees.

2.5 The Important of Stakeholder Analysis

A stakeholder Analysis can help Canon identify any or every interest of all
stakeholders who may effect or be effect by any project or programmed and
also the product by Canon. Canon can recognize and also classified any
potential conflicts or risks that could make vulnerable the initiative by
Canon. Such as customers switch to substitute product whereby the pricing
cost that impact the buyer to spend more on digital camera especially
Canon. Canon also put a high priority on building strong relationship with
their stakeholders in term of more opportunity can be develop during the

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implementation. Based on the concept of kyosei, and in the pursuit of the

“excellent global corporation” ideal defined by this philosophy, Canon
shares responsibility for the impact of its activities on society, not only in its
business but also in other human endeavors. Canon have already on their
third phase of Excellent Global Corporation whereby stakeholders are the
important key success together with managerial strategies and technology
invention. In 2006, Canon began Phase III of their Excellent Global
Corporation Plan. During Phase III Canon intend to pursue a course of
sound growth with new businesses born of innovation, taking into account
ongoing economic globalization and the worldwide spread of broadband
networks, while maintaining the sound profit structure and financial balance
Canon have established over the past ten years. To accomplish this, Canon
plan to promote five essential strategies in an effort to become a top 100
company globally in terms of such key business indicators as net sales, net
income, equity ratio and market capitalization. Therefore Canon are making
substantial efforts in the area of human resource development,
strengthening their education and training programs to cultivate trusted,
responsible employees, and foster global leaders.

Canon Environmental Goals

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Canon Inc.

At the same time, canon are focusing on maintain in leading the market by keep
their stakeholder informed on the next generation technology. Conon not
only making profit from preserve strong relationship with their stakeholders
but also to promote their social and cultural support activities in accordance
with the local needs of each community. Through these activities Canon
aim to fulfill their social responsibilities as a good corporate citizen,
contributing solutions to various social problems for the benefit of the Earth
and humanity, and striving to be a company that is loved, trusted, and
respected worldwide.

TASK 3
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Canon Inc.

3.0 ENVIRONMENTAL AUDIT (Porter’s Five Forces)

The Porter 5 forces analysis is a framework for business management developed

by Michael Porter in 1979. It uses concepts developed in Industrial
Organization (IO) economics to derive 5 forces that determine the
attractiveness of a market. It is also known as FFF (Fullerton's Five Forces).
Porter referred to these forces as the microenvironment, to contrast it with
the more general term macro environment. They consist of those forces
close to a company that affect its ability to serve its customers and make a
profit. A change in any of the forces normally requires a company to re-
assess the marketplace. (http://en.wikipedia.org)

Threat of New Entrants Competitive of Rivalry

• Economic of Scale • The structure of
• The likelihood of competition
retaliation from existing • Degree of differentiation
industry player

Supplier Power
• There are many Powers of Buyers
buyers & few • There are few
dominant suppliers dominant buyers and
• There are many sellers in the
undifferentiated, industry
highly value product • Product are
standardized

Threat of Substitute
• Buyer willingness to
substitute
• The relative price &
performance of
substitute

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By using a model detailing environmental threats that may face a business,

managers are able to understand what strategic actions to make to
overcome or counteract their threats. Porter’s Five Forces is a popular
environmental model that measures five industry attributes that may
threaten a firm’s success. These five threats are discussed as they pertain
to Canon Inc below.

3.1 Threat of New Entry

Assessment of the following elements allows a determination of the level of entry

threat in an industry:

Economies of Scale
The likelihood of retaliation from existing industry player

3.1.1 Economic of Scale

Canon has over 115,583 employees. As a large volume of distributor worldwide,

Canon is able to leverage its size when negotiating with suppliers. For
smaller companies with few locations such as Konica Minolta, entering the
market with competitive pricing is more difficult because they will not have
the buying power of a larger customer and will be forced to operate under
lower margins; a barrier to entry. In addition, Canon’s has a well established
and expanding distribution channels. New entrants will have a larger
shipping expense from suppliers and less efficient distribution.

“Konica Minolta is focusing its business elsewhere. Japanese photographic

equipment maker Konica Minolta has announced plans to withdraw from
the camera business.”

(http://www.hull.ac.uk/engineering)

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Canon Inc Centre

3.1.2 The likelihood of retaliation from existing industry player

With more than 60 years in the camera experience industry and over 200
locations nation wide, Canon has established itself as a known leader in the
cameras industry although this industry is not their major business. Canon
offers a standardized product offering within a market and can leverage its
reputation. Brand recognition alone is a barrier to new entrants in the
market place. Consumers identify the Canon’s product and have familiarly
with Canon’s offering, new entrants will face consumer concern over
product offering and pricing.

Digital SLR Cameras

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Canon digital single-lens-reflex (SLR) cameras support photographers in their

quest to capture split-second moments and expressions to produce
outstanding photo images. Fusing decades of camera expertise with
leading-edge digital technologies, Canon pursues the development of such
proprietary key technologies as sensors, image processors, and lenses.

Comparison between Canon EOS 400D, Nikon D80 and Sony DSLR A100

The EOS 400D / Digital Rebel XTi has the same basic feature set as the other
two ten megapixel cameras here. The biggest difference is that both the
Nikon D80 and Sony DSLR-A100 offer some kind of advantage for their
premium. The Nikon D80 has a much wider range of camera control, a
larger and brighter viewfinder, better ergonomics, a bigger battery, faster
USB, spot metering and surprisingly useful customizable automatic ISO.
The Sony DSLR-A100 also has better ergonomics, spot metering, a bigger
battery, faster USB and built-in CCD-shift Anti Shake (although we don't
believe this to be as effective lens image stabilization). The EOS 400D's 'on
paper' advantages are listed below, not a huge list and quite a surprise to
see how the competition have not just caught up with Canon but have
overtaken them.

3.2 Threat of Rivalry

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Canon’s faces a high level of competition among its major competitors. The
intense level of rivalry discourages new entrants and consolidates the
industry amongst the larger players. In effect new entrants are discouraged
and smaller competitors are driven out.

3.2.1 The structure of competition

Canon encounters intense competition in all areas of its business activity

throughout the world. Canon's competitors range from some of the world's
major multinational corporations to smaller, highly specialized companies.
Canon competes in a number of different business areas, whereas many of
its competitors are relatively more focused on one or more individual
industries. Consequently, Canon may face significant competition from
entities that apply greater financial, technological, sales and marketing or
other resources than Canon to their activities in a particular market
segment.

The principal elements of competition which Canon faces in each of its markets
are technology, quality, reliability, performance, price and customer service
and support. Canon believes that much of its ability to compete effectively
depends on conducting successful research and development activities that
enable it to create new or improved products and release them on a timely
basis and at commercially attractive prices.

Competition in the camera industry is intense, with many established market

participants offering similar products. Canon's primary competitors in digital
cameras are Sony Corporation, Fuji Photo Film Co., Ltd., Olympus Optical
Co., Ltd., Nikon Corporation, Casio Computer Co., Ltd. and Eastman Kodak
Company.

Currently, Canon shares the top position with Nikon Corporation in unit sales of
compact digital cameras, while Canon is the current leader in the digital
single-lens reflex camera segment. Canon's primary competitors in
conventional film cameras are Nikon Corporation, Konica Minolta Holdings,
Inc., Pentax Corporation, Olympus Optical Co., Ltd., and Fuji Photo Film
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Co., Ltd. Hindered by the surging popularity of digital cameras, the

conventional film camera market continued to shrink in fiscal 2003. The
introduction of new models, however, enabled Canon to retain its position
firmly atop this market worldwide. Canon's primary competitors in digital
video camcorders are Sony Corporation, Victor Company of Japan Ltd. and
Matsushita Electric Industrial Co., Ltd. In fiscal 2003, Canon expanded
greatly its overall market share in digital video camcorders, especially in the
United States. Canon believes that developing cameras with increasingly
high resolution and faster image processing are critical to its ability to
remain competitive in the fast-growing digital camera market segment.

3.2.2 Degree of differentiation

There are almost the same when talking on digital still camera. Canon has to
face their competitors, only technology can be differentiated between
Canon and others rival. Sony Corp. is planning monthly production of
80,000 digital SLR cameras, dubbed the Alpha DSLR-A100, which are set
to go on sale next month. Canon has already produce DSLR technology on
EOS model. To be competitive in the market Canon is planning another
prototype based on OLED technology. Canon OLED displays comprise a
unique group of organic compounds derived from Canon’s research into the
design of electro photographic organic photoconductor (OPC) materials. All
of the OLED components, including luminescent and carrier injection
materials, were developed to bring out their superior properties. Canon’s
light-emitting materials realize the highest standards of efficiency and color
purity.

3.3 Threat of Substitutes

A substitute is a product or service that meets customer needs in a similar or

sometimes different way than the original product or service. In the Digital
camera Industry,Canon’s general merchandise and prescriptions lack
substitutes but product differentiation in terms of total offering can create
substitutes in the market.

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3.3.1 Buyers willingness to substitute

Actual or potential substitute offerings limit prices and profits. Market

requirements for what was once known as “cameraphones” has changed
drastically within the past year. Within the next two years, mobile phones
will be known more as “mobile communication and entertainment devices”,
perhaps with another name. As a result, camera functionality on
entertainment phones will move down to third spot as a market requirement
from 2nd. The phone as a communications device (voice and MMS), but
music and digital books (MP3) playing and storage will move into the 2nd
most required feature. Video capabilities will become the fourth requirement
and digital radio and TV are on the horizon.

The K810 Cyber-shot phone is a sleek, high-performance device boasting a 3.2

megapixel camera including auto focus and a Xenon flash. Innovative
applications such as Photo Fix help to further improve the quality of
pictures, even after taken them. Illuminated camera icons to the side of the
main keypad, which light up when in camera mode, allow user to access
camera menu options at the touch of a button.

3.3.2 The relative price and performance of substitute

The worldwide consumer digital camera market experienced huge pricing

pressure on the low-end, primarily due to camera phone adoption, effecting
DSC unit sell-through which remained nearly flat from 2005 at a 26.3%
growth rate, amassing $11.2B in street valued revenue. Those non-branded
camera vendors providing sub $150 units suddenly found themselves in

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competition with branded vendors at retail selling cameras at the same

price-points. Many were forced out of the market.
(http://www.imergeconsulting.com)

Cameraphones are a new platform that does not have to mimic previous analog
usage paradigms. Cameraphones are wireless and Digital Specific. They
can offer features only a digital device can provide and not be so
encumbered with pre-existing usage models. Conversely, digital still
cameras have been relegated to being regarded as the “workhorse” of
capture devices, used for only the most mission critical family or social
circumstances. The perception is an “all work and no play” device to
consumers.

Digital camera providers have been so focused on getting cameras to a point

where they can mimic film cameras; they have forgotten the “digital specific
aspects” of digital cameras, the digital features that will allow a camera to
go well beyond film cameras in functionality and ease-of-use.

3.4 Threat of supplier’s bargaining power

Suppliers are the business that supply materials and others products into the
industry. The cost of item that bought from suppliers such as raw materials,
components can have significant impact on a company’s profitability. If
suppliers have high bargaining power over a company, then in theory the
company industry is less attractive. The bargaining power of suppliers will
be high.

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Canon Inc.

Based on the chart given shows that Canon Inc manufacturing their product by
itself to make sure that they have the quality standard to achieve a high
quality.

3.4.1 There are undifferentiated, highly value product

Canon’s feels little threat from suppliers. Canon’s is a large retailer with
purchasing power due to volume and a large number of suppliers. Canon’s
strategy is to purchase inventory items from many foreign and domestic
suppliers. If Canon’s were to lose one supplier, the impact would have little
bearing on the business. Every competitor that is competing with Canon Inc

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Canon Inc.

in Camera industry is always on the run to produce better than others.

Nikon is the first to produce Single Lenses Reflect (SLR) follow by Canon in
the next few years. In the camera industry it is highly hard to compare
between others. Only technology can differentiate them. Canon has to face
their competitors, only technology can be differentiated between Canon and
others rival. Canon is pursuing the next technology to be able to maintain
the leaders in the market. Suppliers have the major impact due to only few
suppliers for raw material. For be able to compete with others and produce
a high quality of camera, Canon must maintain continue purchase a raw
material from their supplier.

3.4.2 There are many buyers & few dominant suppliers

Canon purchases a variety of parts and raw materials, such as glass, aluminum,
plastic, steel and chemicals for use in product manufacturing. All finished
and semi-finished products purchased from outside sources are produced
in accordance with Canon's designs and specifications. Canon purchases
parts and raw materials worldwide for its global production activities. Canon
assesses and selects suppliers based on a number of criteria, including
environmental friendliness, quality, cost, stability of supply and financial
condition. In addition, there has been a recent increase in prices of parts for
optical products, due in part to the limited number of suppliers of glass
materials and light source lasers. However, Canon has not experienced any
difficulty obtaining parts or raw materials and believes that it will be able to
continue to obtain the same in sufficient quantities to meet its needs.

3.5 Threat of Buyer’s bargaining power

Future sales of digital still cameras are dependent upon user upgrade cycles,
which will increase the emphasis on powerful image processors, faster
analog-to-digital converters, wireless connections for transferring pictures,
more nonvolatile flash NAND memory and higher resolution image sensors.

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Curve of Innovation of DSCs

From the curve it shows that the quality levels that can impact the purchasing
power by customers demand. Over the years demand on DSC is boost
while the level of quality enhance. That means demands over DSC are
correlated to the enhancing on DSC.

3.5.1 There are few dominant buyers and many sellers in the industry

Nowadays almost everybody have their on electronic device mostly digital

camera. People are accepted the technology changing whereby Camera
not only use for professional term only. They make a full use as hobby also.
Over the years demand on the digital camera are boost through technology
changing.

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Based on the tables above buyers can be segmented into several part that is
customers that are using for simple not to consider on the technology, but
the easier way to shooters. This types of buyer re more concerning on
pricing. Demand on compact camera are more challenging whereby
camera as a hobby. Almost every range are using it. SLR model are more
attractive for armature and Professional photographers. These types of
customers are dominant rather than supplier. Canon are spending more on
Research and Development to be able to maintain the market leaders in
SLR model, although Nikon their rival is the first to launch SLR model,
Canon still dominate the market. With the dominant buyer Canon is pursue
next generation technology to maintain the professional photographers pay
for their Canon and gains customers loyalty.

3.5.2 Product are standardized

In the digital still camera industry, mostly every company including Canon is
focus on imaging whereby each company are competing on the technology
but still standardized on the purpose of capturing imaging. Canon is popular
on their EOS model based on Single Lenses Reflection (SLR). Nowadays
Mostly every major player in the market are already implementing SLR
technology, advantages on Canon is they is the first who invent EOS
technology. Buyer have the power to choose because majority every
company implement the same technology.

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Canon Inc.

To boost sales, Canon are developing new "hybrid" models that will capture high-
resolution still pictures while also recording high-definition full-motion
movies. Many of these hybrid still/video cameras will contain high-speed
CMOS image sensors.

Digital still cameras will outsell film cameras by a ratio of four to one in 2006, with
4- to 6-Mpixel point-and-shoot models for consumer compact cameras.
Consumers still have the buying power to control the market. In 2010,
people mostly are expects more than 89 million digital still to be sold,
accounting for more than 90 percent of all still-picture cameras bought
worldwide.

3.6 Ability to expand into next-generation technologies in the future

Next-generation OLED (organic light emitting diode) displays are ideal for use in
such mobile devices as digital cameras and video camcorders. These self
emitting displays achieve not only high luminance and energy efficiency, but
also offer high resolution independent of the viewing angle and fast
response speeds, making them well suited for video-display applications.

Organic electroluminescence occurs when voltage is applied to excite organic

materials, which, in turn, releases energy as light.

Structure of OLED Display

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(http://www.canon.com/technology/)

Canon OLED displays comprise a unique group of organic compounds derived

from Canon’s research into the design of electro photographic organic
photoconductor (OPC) materials. All of the OLED components, including
luminescent and carrier injection materials, were developed to bring out
their superior properties. Canon’s light-emitting materials realize the highest
standards of efficiency and color purity. The red-light-emitting material,
which utilizes phosphorescent material, achieves 12.4 lumens/W and a
chromaticity of (0.66, 0.34), the fluorescent-based green-light-emitting
material achieves 26.4 lumens/W and (0.32, 0.63), and the blue-light
emitting material achieves 4.9 lumens/W and (0.15, 0.15).

Lumens/W: luminous efficacy, expressed as the amount of light that can be

generated with 1 W of power. The value is derived by dividing the amount
of light (lumens) by the power consumption (W).

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Canon Inc.

Example of OLED Display (Prototype)

(http://www.canon.com/technology/)

The display’s top-emission structure, which emits light from the top side,
increases the aperture ratio and realizes high-luminance, low power
consumption, and long life.

Canon is focusing its energies on the development of devices and process

technologies toward commercializing these displays in the near future.
Canon aim to mass produce high-performance OLED elements at a low
cost and achieve advanced functionality in mobile devices.

3.7 Japanese digital camera growth to slow in 2007 (Threat)

Growth in digital camera shipments by Japanese makers in 2007 is expected to

slow to 7.5 percent from a year earlier, when lower prices and a wider
variety of models with interchangeable lenses spurred growth to 22 percent.
(http://today.reuters.com/news)

Global shipments by makers such as Canon Inc are estimated to rise to 84.9
million units in calendar 2007 from 79.0 million units last year, according to
figures released by the Camera and Imaging Products Association.

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Canon Inc.

Demand will continue to lose speed as shipment growth is expected to slow to

4.3 percent in 2008, and 2.5 percent the following year,

The Tokyo-based industry group also forecast shipments of digital single-lens

reflex (DSLR) models, geared for professionals and hobbyists, will continue
to show double-digit growth in 2007, but their growth too will slow compared
to 2006.

This year, shipments of DSLRs are forecast to increase 13.9 percent to 5.99
million units, lagging behind a 38.9 percent jump in 2006 to 5.26 million
units. (http://today.reuters.com/news)

Canon Inc and Nikon are the dominant leaders in the market for DSLRs, while
newcomers such as Sony and Matsushita Electric Industrial are also trying
to expand in this segment as DSLRs are more profitable than compact
devices.

Shipments of compact models, which have faced fierce price competition, is

forecast to increase 7 percent to 78.9 million units this year, lower than the
20.9 percent jump in 2006 led by demand in emerging markets and the
United States.

Other major Japanese digital camera makers include Olympus Corp. Fujifilm
Holdings Corp. and Pentax Corp. which compete against global rivals such
as Eastman Kodak and Samsung Electronics Co.

3.8 Sony enters digital SLR camera market (Threat)

Sony Corp. is planning monthly production of 80,000 digital SLR cameras,

dubbed the Alpha DSLR-A100, which are set to go on sale next month. The
product is a culmination of Sony's yearlong collaboration with Japanese
precision equipment maker Konica Minolta Holdings Inc., which pulled out
of the camera business in January and sold its assets in that sector to
Sony.

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Canon Inc.

Sony officials said the entry into SLR cameras was symbolic of how the company
was trying to revive its brand image. And they are banking on Sony appeal
as digital photos become enjoyed on high-definition TVs, shared with others
through the PC and stored in DVD players.

SLR cameras, which use interchangeable lenses and offer more manual
controls, tend to be favored by professional photographers but are also,
growing in popularity among camera enthusiasts. Sony already makes
various simpler point-and-shoot digital cameras, including the popular
Cyber-shot models. (www.physorg.com)

The camera body of the DSLR-A100 will be available in July at a retail price of
about 100,000 yen (US$900; €700). Lenses range in price from about
50,000 yen (US$450; €350) to 800,000 yen (US$700;€540). The 10.2-
megapixel camera will work with 19 Sony lenses.

3.9 Organizational Audit (Value Chain Analysis)

Value Chain Analysis describes the activities that take place in a business and
relates them to an analysis of the competitive strength of the business.
Influential work by Michael Porter suggested that the activities of a business
could be grouped under two headings:

(1) Primary Activities - those that are directly concerned with creating and
delivering a product such as component assembly and

(2) Support Activities, which whilst they are not directly involved in production,
may increase effectiveness or efficiency such as human resource
management. It is rare for a business to undertake all primary and support
activities.

3.9.1 Primary Activities

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Canon Inc.

CANON VALUE CHAIN ANALYSIS

In order to fully understand Canon’s current position in the digital camera market,
the above value chain will be used to assess Canon’s strengths and
weakness in each of the five major stages. The assessment will be based
on comparison of market trends and Canon’s response to that trend.

TECHNOLOGY RESERCH AND DEVELOPMENT

Canon over the last ten years has been in the top three companies receiving
patents in the US, an indication of strength in technology R&D. Technology
R&D, which is described below, encompasses the core image processing
technology as well as new features that market is moving towards.

New Digital Imaging Processor (DIGIC II)

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Canon Inc.

DIGIC, Canon's proprietary Digital Imaging Processor is a core device in Canon

digital cameras. DIGIC represents the newest stage in their Digital Imaging
Processor development. Most of the functions required to process signals in
a digital camera are condensed on this single chip, which measures a mere
10 mm square. Utilizing its proprietary technologies, Canon designed the
DIGIC processor to alleviate the heavy burden normally placed on the CPU.
Furthermore, improvements to the chip's algorithms contribute to higher
image quality, autofocus (AF) precision and processing speeds. The DIGIC
II imaging processor developed in 2004 handles the increased resolution of
CCDs and has dramatically increased performance compared to the
original DIGIC.

16.7-megapixel Full Frame 35mm CMOS Sensor

Raising the operability of a digital SLR camera to the level of film-base SLR
cameras required development of a large high-resolution CMOS image
sensor (see page 61). Digital cameras normally use smaller image sensors
than the frame size (36 mm x 24 mm) of 35mm film. When an

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interchangeable lens is attached to digital SLR cameras with smaller image

sensors, the effective angles of view and perspectives of the captured
image differ from the focal length marked on the lens. For this reason,
photographers were unable to utilize their experience using 35mm film SLR
camera lenses with digital SLR cameras.

iSAPS and Smile Shot

The iSAPS technology is also Canon’s proprietary technology but similar

technologies also exist with other manufactures. iSAPS technology is
Canon’s algorithm that makes optimal adjustments to focus and other
settings on the camera by measuring the distance to the subject and
brightness levels. This allows good photos to be taken effortlessly. Other
manufactures have similar technologies that automatically configure the
camera based on some external factors. Canon thus has no real advantage
over its competition in this technology. Canon is also working on a
technology called Smile Shot9, which is designed to take pictures of
subjects when they are smiling. The success of such technology is yet
unknown, so it is hard to measure Canon’s performance by it. However,
since Canon is working on such innovative projects, there is likely to be at
least one big success in future.

Overall, Canon is at the forefront of technological innovation for cameras. Given

Canon’s competency in the imaging technology, there is no doubt Canon
will continue to hold the leadership role in future.

DESIGN INOVATION
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Canon Inc.

Canon has constantly been working on technology to cut down on the size and
the weight of a camera. Canon was among the first producers to introduce
compact cameras with its PowerShot series. The DIGIC II chip integrated
three chips in a smaller size, thus reducing the size and weight. In addition,
Canon developed ultracompact lens for their PowerShot series which
further reduced the size of the camera10. However, compared to Sony and
Kodak, Canon lags behind in design. Kodak has the pocket series which is
much slimmer than Canon’s slimmest. Sony also has many models that are
“ultra-slim”. Furthermore, Sony and Kodak have been more creative in the
physical appearance of the cameras. Sony recently released a 5 megapixel
swivel camera and Kodak released one with two lenses allowing for easier
panoramic photos. Both of these designs depart from the norm, making the
camera look more “hip” but Canon has not been innovating on the design.

Large Viewing Screens

As customers demand smaller size, they also demand larger screens for their
cameras. Larger screen allows for easier reviewing of photos. Companies
like Sony and Samsung offer large 3 inch screens. Canon offers only the
industry average, 2.5 inches. Kodak and Sony have gone a step ahead and
offer touch screens on some models. Canon, once again, has not done so.

MANUFACTURING

Before Canon starts to manufacture, it develops computer prototypes using CAD

software. This cuts down on production time, but its not a real advantage
over other competitors, because they all use CAD. Canon, however, did
recently switch to cell production, which requires a team of assemblers to
put together the camera. This increases the quality of the product and
reduces the cost, because conveyor belts are no longer needed which
require significant amount of space. Canon has also tried to incorporate
“Just in Time”11 inventory system to cut down on the cost of inventory
waiting to be used.
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The physical manufacturing of cameras takes place in Japan (60%), Malaysia

(20%), and China (20%)12. Producing in these countries allows cheaper
labor to be utilized. Sony and Kodak implement similar strategies and thus
Canon gains no real advantage over Sony and Kodak with this strategy.

MARKETING

All three of the big players in the

market have taken drastic steps to advertise their products. Canon in
particular has hired tennis star Maria Sharapova as its spokesperson.
Canon has also managed to make itself the official camera of the NFL and
introduce its new models in a fashion show in New York. Regardless,
Canon is making every effort to market its product, however, so are the
other two. Kodak paired with NASCAR and Sony paired with various TV
shows. Canon did however partner with Staples to introduce Canon Corner
where customers can test out Canon products. Thus far this implied has
been well received by customers. All in all, the effects of marketing are
really unknown because there no clear way to measure advertisement
success. As a result, it is difficult to judge Canon’s strategy.

SERVICE

One of the most important stages of the value chain is the services stage.
Services are provided to customers after they purchase their product to
keep them satisfied with the product and to generate revenue. The following
are services that Canon needs to focus on.

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Printing and Online Storing

Printing digital camera photos is among the most requested service by digital
camera users. Canon currently has its “Canon Gateway”, an online service
that allows users to print photos. This service is inferior to others like
Shutterfly.com that offer unlimited space to store images and easy sharing
and printing. Kodak has their own Easy Share Gallery, and smaller firms
like Panasonic have patterned with Shutterfly.com to allow easy integration
with their cameras. Canon has thus fallen behind in this service Canon has
done well in selling its photo printers along with its cameras. But with a
growing trend to have the pictures printed by retail stores, Canon has not
been able to capture the retail photo printing business. Kodak and Fuji
dominate on that front.

3.10 Support Activities

Canon are making significant efforts in the area of human resource development,
rise their knowledge and training programs to develop trusted, dependable
employees, and promote global leaders. Together, Canon is pursuing more
impartial human resource policies to nurture strong, independent business
professionals.

Economic Activities through Maximizing Resource Efficiency

Canon is working to exploit resource efficiency in an effort to unify the two

vectors of environmental assurance activities and economic activities. This
means Canon will boost the value of products and services while raising
environmental efficiency throughout product lifecycles In 2003, Canon put
forth the dominant indicator Factor 2 as their Vision for 2010 to put resource
efficiency maximization into more real practice. Factor 2 stand for the goal
of at least doubling overall lifecycle environmental efficiency by 2010, using
2000 as the baseline date. Canon set Mid-Term Environmental Goals
(2004-2005) to serve as milestones, and in 2005 Canon achieved almost all

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the individual goals. This activities are carry on as a support activities

through the kyosei philosophy that contributing to society through
technology innovation.

Pattern Strategies

Canon has long promoted the globalization of business activities, so the

company puts even more stress on patent applications overseas than in
Japan. As a result, as of the end of 2005, Canon overcome approximately
78,000 patents and utility models globally, of which around 26,000 were for
Japan, 24,000 for North America, 22,000 for Europe, and 6,000 for other
countries. Canon file patent applications overseas only after constructing
detailed filing strategies based on business strategies, and technology and
product trends in each region, and after carefully investigating the regions
and countries where the patents are necessary. The number of U.S.
patents Canon own is expanding at about the same annual rate as their
consolidated net sales. In recent years, Canon have prioritized the filing of
patent applications in the Asian region, where technological innovation has
been noteworthy. In particular, China has become both an huge production
site and a major consumer nation, so Canon are stepping up their filing
activities there.

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TASK 4

4.1 PEST Analysis (http://www.skylinecollege.com)

Canon evaluated the environmental factors appropriately before investing in

certain areas or country. The political environment is one of the major
factor Canon put on consideration. The stability of political is important to
make sure that Canon can fully corporate with the government on the
country. For example at the time of Canon entry India on 1997 was stable.
Though the government was a coalition, yet it was pro-liberalization. This
spelt stability on the economic policies front and thus the political
environment was conducive to investment. As for Malaysia, when Canon
enter the market to built up manufacturing area, whereby Malaysia is an
open country that are invited any multinational company such as Canon to
invest in the market in Malaysia.

Economic environment in Europe, U.S.A, Asia too was very healthy. The
economic policies were pro-investment. Fiscal and monetary reforms were

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in the pipeline and pointed towards a bright future. Public sector

participation was being abetted by the government. All in all, the economic
environment too was grown. Economic globalization and dramatic
advances in information technology are greatly changing the structure of
markets around the world. In line with these changes, Canon U.S.A., Canon
Europe, Canon China, and Canon Sales in Japan have carried out the
restructuring and consolidation of Group companies in their respective
regions to increase the efficiency of sales networks, and to upgrade
information systems and distribution networks. In 2005, Canon aim to
complete the sales and marketing structure reforms Canon have pursued to
date, thus increasing their selling power and efficiency.

Social environment was not of much of concern to the Canon to be investing in

certain country. They do not have high impact on Canon profitability,
however based on the kyosei philosophy concept. The ideal behind this
philosophy is a society in which all people harmoniously live and work
together for the common good. Canon are putting social environment as an
important for them to keep good relationship with people surround them.
Below is several example how Canon USA are putting social environment
as one of the most stakeholder.

Asian American Drug Abuse Program (AADAP) (Canon Business Solutions,

West, Inc.)

The AADAP’s programs, including water conservation, HIV/AIDS outreach and

cross training, Drug Court Services for the Inglewood Municipal Courts and
tobacco education, is supported by Canon Business Solutions, West, Inc.
through donations.

Los Angeles Urban League(Canon Business Solutions, West, Inc.)

The mission of the Los Angeles Urban League is to enable African Americans
and other minorities to secure economic self-reliance, parity, power and civil
rights. Canon Business Solutions, West, Inc. supports their activities
through donations.
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Support for Social Welfare Foundations saving Children (Canon Business

Solutions, West, Inc.)

Several Social Welfare Foundations, whose mission is to save children with

serious illnesses and prevent teenage prostitution, are supported by Canon
Business Solutions, West, Inc. through cash donations and products.

Technological environment prevalent in India was very dynamic. India was fast
being recognized worldwide as the leader in Information Technology. Allied
industries were booming and India seemed to be on its way up. Though
there was an associated fear that this aspect of the technological
environment posed. The development of Information Technology
threatened to produce a 'paperless office'. This was a direct threat to the
sustainability of not just Canon but the entire photocopier industry.

4.2 Strategic Capability > Core Competency

A core competency can take various forms, including technical/subject matter

know how, a reliable process, and/or close relationships with customers
and suppliers (Mascarenhas et al. 1998). It may also include product
development or culture such as employee dedication. Modern business
theories suggest that most activities that are not part of a company's core
competency should be outsourced. (http://en.wikipedia.org)

A core competency is something that a firm can do well and that meets the
following three conditions specified by Hamel and Prahalad (1990):
(http://en.wikipedia.org)

4.2.1 It provides customer benefits

In Japan and overseas, product service is provided in part by independent retail

outlets and designated service centers that receive technical training
assistance from Canon. Canon also services its products directly. Most of
Canon's business machines carry warranties of varying terms depending

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upon the model and the country of sale. Cameras and camera accessories
carry a one-year warranty based on normal use. Canon services its copying
machines and supplies replacement drums, parts, toner and paper. In
Japan, most customers enter into a maintenance service contract under
which Canon provides maintenance services, replacement drums and parts
in return for a per-copy charge. Copying machines which are not covered
by a service contract may be serviced from time to time by Canon or local
dealers for a fee.

4.2.2 It is hard for competitors to imitate

Accurate Reading of Delicate Light

Canon's EOS-1V, EOS-1Ds Mark II N/1Ds Mark II employ a 21-zone evaluative

metering sensor linked to 45 Area AF points. This multiple-zone evaluative
metering system uses output from 21-zone sensors and AF point

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information to adjust exposure instantly, calculating at high speed with their

newly developed algorithm. This configuration enables the camera to make
compensations as necessary and maintain exposure stability. It also uses
an average metering element depending on periphery conditions. This
assures stable exposure even when composition changes slightly, or when
multiple metering points cover the subject. In addition to 21-zone evaluative
metering, these cameras all have six AF metering functions. Users thus
benefit from a diversity of choice, from manual to automatic exposure.

4.2.3 Provide potential access to avoid variety of markets

Canon sells its products primarily through subsidiaries with responsibility for
specific geographic areas. Each subsidiary is responsible for its own market
research and for determining its sales channels, advertising and
promotional activities.

In Japan, Canon sells its products primarily through Canon Sales Co., Inc.,
mainly to dealers and retail outlets.

In the Americas, Canon sells its products primarily through Canon U.S.A.,

Inc., Canon Canada, Inc. and Canon Latin America, Inc., mainly to dealers and
retail outlets.

In Europe, Canon sells its products primarily through Canon Europe N.V., which
sells primarily through subsidiaries or independent distributors to dealers
and retail outlets in each locality. In addition, copying machines are sold
directly to end-users by Canon (U.K.) Ltd. in the United Kingdom, and by
Canon France S.A. in France.

In Southeast Asia and Oceania, Canon sells its products through subsidiaries
located in those areas. In addition, copying machines are sold directly to
end-users by Canon Australia Pty. Ltd. in Australia.

4.3 Expectation of Stakeholders > Culture influence from within and outside
Canon

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Canon has invited external stakeholders to comment on the quality and

transparency of their company. In keeping with the company’s interest in
deepening its relationships with stakeholders, Canon has modified the
comment process to include more two-way dialogue and more transparent
discussion of issues. It is Canon’s intention to extend this process further
for the 2007 by hosting a roundtable session to gain further insight into
stakeholder expectations of the company’s management, performance and
reporting. Canon believes that third-party opinions serve two purposes.

Give stakeholders information that helps them judge how well Canon has met
their expectations and that hints at what can be expected from Canon in the
future.
As reference for improvements in future sustainability activities

4.3.1 Product Safety

Product safety and durability is the basis of quality that is trusted by consumers.
Canon have therefore established their own product safety technical
standards that not only meet safety standards stipulated in the law, but also
consider customer perspectives on product use. Canon conduct rigorous
quality control in design, evaluation and manufacturing to ensure
“substantial safety”—a level of safety that meets these standards

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4.3.2 Security

Canon believes that, in order to protect their companies and employees from
increasingly diversified risks and maintain the trust of society, it is
necessary to develop a robust risk management system and build a crisis
management system capable of rapidly and flexibly addressing incidents
should they occur. The Canon Code of Conduct-Information Security Rules
stipulates their response to security risks when they materialize. The
section clearly states that information is the source of value generated by a
company and that the ability to manage information determines whether a
company will survive. In accordance with this, Canon work to eliminate risks
by clarifying the factors that put information obtained from customers and
business partners at risk of being divulged and by establishing detailed
rules and policies. In addition, because unauthorized access to buildings
and grounds leads to theft and information leaks, a management system
and code of conduct for physical security are also prescribed in the
information security section. In addition to these initiatives, Canon have
constructed a rigorous system of security export control regulations based
on international standards, and constantly work to maintain or improve their
level of management.

Preventing Air and Water Pollution

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Canon addresses alleviation of environmental burden from operational sites by

reducing emissions of NOx*1 (nitrogen oxides) and SOx*2 (sulfur oxides),
major causes of air pollution and acid rain; reducing BOD*3 (biochemical
oxygen demand) and COD*4 (chemical oxygen demand), indexes for
environmental burden in water environments; and reducing emissions of
phosphorous and nitrogen, which harm water environments. Specifically,
Canon Inc have switched the type of fuel from heavy oil to kerosene, which
generates almost no SOx; Canon are eliminating the use of hazardous
substances; and Canon have installed air pollutant removal devices like
scrubbers and activated carbon absorption filters, as well as the latest
wastewater treatment devices. Canon also regularly measure the
environmental burden of emissions from operational sites under applicable
laws and regulations for each region and also under Canon voluntary in-
house rules. Environmental burden increased in 2005, however, due to
increased production volume.

(www.canon.com/environment)

NOx (nitrogen oxides)

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A major cause of air pollution, acid rain, and photochemical smog, NOx is
generated when the nitrogen in fuels is oxidized, or when nitrogen in the
atmosphere is oxidized during high-temperature combustion.

SOx (sulfur oxides)

A major cause of air pollution and acid rain, SOx is generated when fossil fuels
such as oil and coal are burned.

BOD (biochemical oxygen demand)

The amount of oxygen consumed when microorganisms degrade organic matter

in water.

COD (chemical oxygen demand)

The amount of oxygen consumed when oxidizing agents oxidize organic matter
in water.

TASK 5

5.1 Historical Analysis.

As the term implies, this approach to analyzing performance looks at

performance over time and in particular compares current performance with
previous years in order to highlight any significant changes. Usually,
historical performance analysis looks at the more conventional measures of
performance in organizations which can be readily quantified, such as for
example, sales, market share, financial ratios and profitability. Historical
analysis of performance may indicate that performance is satisfactory
compared to previous years when in fact realistically expectations about
performance should be increased over time. In other words, historical
analysis of performance can lead to future expectations for standards of
performance being too low. Finally, historical analysis may lead to
complacency about an organization’s performance and strategic capabilities

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when in fact everyone else in the industry is performing much better, it is an

insular way of looking at performance.

From the table above shows that total sales for the year 2005 and 2006 on
camera industry for Canon. It indicate that on the 3rd quarter Canon achieve
to increase their total sales as much as 15.7% and operating profit gross
into 38.1% change over the year. Through on the 4th quarter Canon achieve
to boost on unaffiliated customers to 13.8% and their operating profit gross
to 26.8%. Although 4th quarter is lower than 3rd quarter, over the year total
sales are increase 47.4% different from 2006 and 2005. As a culmination,
show that the increase in sale that projected different almost 50%. The
performance illustrate the quality product in the market and also as the
market leader.

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Based on this basic management policy, Canon launched two consecutive five-
year management plans Phase I of its Excellent Global Corporation Plan in
1996 and Phase II in 2001 with the aim of becoming a truly excellent global
corporation. Through these two five-year management plans, the company
promoted a range of management reforms, thoroughly strengthening its
product competitiveness and financial base. In 1995, while Canon posted
just under ¥2.9 trillion in consolidated net sales, Canon had ¥840.0 billion in
borrowings and an interest-bearing debt ratio of 33.6%. The company’s
financial position made it difficult for them to sustain the kind of long-term
investment in research and development that is required in the
manufacturing industry.

Given these circumstances, Phase I of the Excellent Global Corporation Plan

pivoted on building a strong financial structure. Along with changing the
company mindset—from partial optimization to total optimization, and from
a focus on sales to a focus on profit—Canon initiated management
innovation activities designed to address common issues concerning all of
the company’s businesses, including production methods, development
infrastructure, and global logistics.

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Under Phase II, we worked to thoroughly bolster product strength across all of
the company’s business operations and affiliates around the world with the
goal of becoming No. 1 in the world in all their major areas of business. As
a result, 2005 marked their sixth consecutive year of sales and profit
growth. Compared with 1995, the year before Canon launched their
management innovation activities, net sales increased 1.8 times, net
income expanded 6.2 times, and ROE jumped from 6.5% to 16.8%,
showing the significant strides Canon have made toward becoming a Truly
Excellent Global Corporation.

The improvement in profitability in Canon revenue increase over the years. The
Strength on Excellent Global Corporation Plan (Phases I & II) show that
how committed Canon on pursuing the objective on strengthen their
Financial Structure on phase 1 and to become market leader in phase 2.

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The average value of the yen for the year was ¥116.43 to the U.S. dollar and
¥146.51 to the euro, representing year-on-year decreases of about 5%
against the U.S. dollar, and 7% against the euro. Within the camera
segment, strong demand for digital SLR cameras has fueled continued
growth with particularly strong sales for the advanced-amateur-model EOS
30D, launched in the first half of 2006, and the EOS DIGITAL REBEL XTi,
launched in the second half. This, in turn, led to expanded sales of
interchangeable lenses for SLR cameras. Sales of compact digital cameras
also continued to expand steadily with the introduction of 16 new models in
2006, including six stylish ELPH-series models and 10 PowerShot-series
models that cater to a diverse range of shooting styles.

As a result, unit sales of digital cameras for the year increased by more than 20%
from the year-ago period. In the field of digital video camcorders, the launch
of consumer-market HDV models equipped with Canon HD CMOS sensors

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contributed to expanded sales. Consequently, camera sales surpassed the

¥1,000.0 billion mark for the first time, achieving total sales of ¥1,041.9
billion (U.S.$8,755 million), a year-on-year increase of 18.5%. The gross
profit ratio for the camera segment also rose considerably, boosted by such
factors as substantially increased sales of new products and cost reduction
efforts. As a result, operating profit for the camera segment increased by a
substantial 54.7% year on year to ¥268.7 billion (U.S.$2,258 million).

5.2 Industry Norm Analysis

They word “industry” in industry analysis can mean segment of a larger industry
or the industry itself. As for Canon that manufacturing camera, it could say

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that it competes in the digital camera industry for purposes of doing a

strategic analysis, even though that is really a segment of camera industry.
The purposed of doing an industry norm analysis is

The industry dominant economic characteristics

Changing of the industry and what causing the industry to change
The attractive of the industry

5.2.1 The industry dominant economic characteristics

Competition in the camera industry is intense, with many established market

participants offering similar products. Canon's primary competitors in digital
cameras are Sony Corporation, Fuji Photo Film Co., Ltd., Olympus Optical
Co., Ltd., Nikon Corporation, Casio Computer Co., Ltd. and Eastman Kodak
Company. Currently, Canon shares the top position with Sony Corporation
in unit sales of compact digital cameras, while Canon is the current leader
in the digital single-lens reflex camera segment. Canon's primary
competitors in conventional film cameras are Nikon Corporation, Konica
Minolta Holdings, Inc., Pentax Corporation, Olympus Optical Co., Ltd., and
Fuji Photo Film Co., Ltd.

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Hindered by the surging popularity of digital cameras, the conventional film

camera market continued to shrink in fiscal 2003. The introduction of new
models, however, enabled Canon to retain its position firmly atop this
market worldwide. Canon's primary competitors in digital video camcorders
are Sony Corporation, Victor Company of Japan Ltd. and Matsushita
Electric Industrial Co., Ltd. In fiscal 2003, Canon expanded greatly its
overall market share in digital video camcorders, especially in the United
States. Canon believes that developing cameras with increasingly high
resolution and faster image processing are critical to its ability to remain
competitive in the fast-growing digital camera market segment.

Technological Innovation

A rising trend in the market is to have the digital camera easily network with other
digital devices. Kodak is at this time leading this trend with their new
camera that uses Bluetooth to connect to other devices. Canon does not
have any integrated wireless connectivity in its cameras. It does provide
docks and external adapters for the camera that allow it be connected to
other devices. Canon does have a direct wired connection to certain photo
printers, which eliminates the need for a computer.

In the area of connectivity, Canon is working on its concept called “Canon over
IP”. This concept does not pertain only to camera, but all of Canon’s
products. The idea behind it is to make all their products digital and then
allow for easy networking and accessibility over the internet of those
devices. Canon has finished the first phase of this concept, known as
Digital Shift, by which many devices are converted from analog to digital.
Now, Canon is working on the second phase of the concept known as the
Web Shift. After the Web Shift is complete, consumers will be able to
connect their Canon devices via the internet. There are currently security
issues that need to be resolved before it can be implemented. Eventually,
Canon can market this technology with its cameras. The concept is truly
innovative for a camera manufacturer to provide connectivity to this scale

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and if Canon can implement this technology in the near future, it will
become an industry leader in camera connectivity.

Entry or Exit of major firm

Sony, the first to market a digital camera in 1981, is making a late entry into the
higher end segment of digital single-lens reflex cameras, targeting 10
percent of the global market. The competition is more intense in the market
for smaller, non-SLR digital cameras, where other makers such as
Matsushita Electric Industrial Co., Casio Computer Co. and Olympus
Optical Co. do battle. The competition is more intense in the market for
smaller, non-SLR digital cameras, where other makers such as Matsushita
Electric Industrial Co., Casio Computer Co. and Olympus Optical Co. do
battle.

5.2.2 Changing of the industry and what causing the industry to change

The interest in capturing image had evolve to become basis of digital imaging
had begun in early 1980 when Sony had first prototype a camera using a
CCD (charge couple device) to capture and storing the data on a magnetic
disk drive. The breakthrough occurred when Casio released a product, QV-
10 in 1995 as it defined the basic style and function of consumer DSC by
adding a LCD monitor for instant viewing of picture taken. By adding a LCD
monitor on the DSC for instant viewing, it cultivated a whole new customer
market segment apart from the traditional/conventional camera users. DSC
also become “communication device” Conventional film camera
manufacture saw this a new growth opportunity to its stagnated camera
business, while consumers electronic firms considered this an opportunity
to expend its product offering linking DSC to their existing product such as
mobile phone. In addition, the DSC industry as a whole had played a
unique roll in the proliferation of the DSC market hence expending the
digital imaging industry.

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Curve of Innovation of DSCs

When the DSC market is still emerging, the leading manufacturer were quickly
seeking to lock in user to their own product by defining proprietary format
such as digital image format and data storage media that would force
customers to use the products that the firm could only provide. However
they soon realize that penetrating the mass customers in the direction was
difficult as a user were not interest in only one technology. The customer
demand increase over time.

5.2.3 The attractive of the industry

The digital camera business of Japan's Olympus Corp. underscores how making
money in the cut-throat market is getting tougher. Sony Corp. and Canon
Inc. are seen as the strongest players in the $17 billion market, profiting
even as prices fall and growth slows. But most other makers will struggle
and some might be better off exiting. The average price of a compact
digital camera will decline by 15 percent in 2004 and another 15 percent
next year. The slowing growth ahead, forecasting the global market to climb

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about 40 percent in 2006 to 68.5 million units and a further 22 percent to

84.1 million next year before leveling out at 84.7 million in 2007.

The spread of cell phones equipped with powerful cameras is also a worry, as
some consumers feel they do not need to buy a separate digital camera.
Many digital camera firms have cut their annual shipment targets in recent
weeks, but Olympus, the worlds third-largest after Sony and Canon, as well
as Pentax Corp. and stood out with their camera divisions.

Even makers with hit products have fallen on hard times. Nikon Corp. is making
money on a new digital SLR, but still expects profits in its camera division to
fall as prices of compact models slide.

"We expect prices to keep falling. But we are shifting our product line-up towards
the high end," (www.nikon.com)

The problem with that strategy is that every digital camera company is doing the
same thing: avoid the low-end of the market where price competition has
made margins razor-thin. Camera makers will also find it increasingly
difficult to attract customers by improving quality. There is a growing
consensus among consumers that three or four megapixels, the measure of
how many million picture elements are captured in a digital snapshot, are
enough to produce a high-quality shot.

With more than 30 players, the market is far more competitive than a few years
ago. Eastman Kodak has emerged as a formidable rival in the United
States, while Matsushita Electric Industrial is gaining traction in Japan.

Kodak's share of the U.S. market rose to 18.2 percent in the first half of calendar
2006 from 15.1 percent in the same period last year, according to research
firm IDC. Olympus, Nikon, Hewlett-Packard, Pentax and Sony all lost share.

"Kodak's advantage is that they are offering cameras at lower prices and
focusing on creating better products. They are putting pressure on
everybody else," (www.kodak.com)

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Success depends not only on developing attractive products but also on getting
them to market quickly. Fuji Photo Film slashed its annual digital camera
shipment target by 18 percent to 7 million units, partly because a shortage
of components kept it from launching a key model in time for the summer
bonus season in Japan. Olympus expects its camera division to lose 18
billion yen ($173 million) in the year to March as it disposes inventory that
swelled to 2.6 months at the end of September, up 53 percent year-on-year.
Still, the company is aiming for 20 percent of the global market in three
years, up from around 10 percent now.

Olympus can nurse its camera operations back to profit in the next business year
by clearing out inventory and starting from scratch with new models.
Olympus has a relatively weak brand and was late to address two key
segments -- the thin, card-sized model and the reasonably priced digital
single lens reflex (SLR) camera, a high-margin, fast-growing segment
dominated by Canon and Nikon.

"Our problems stem from mistakes made in product development and our failure
to correctly read market trends," (www.nikon.com)

5.3 Benchmarking

Benchmarking assesses the competences of an organization against the best

performers in the class. This comparison therefore is not just against
organizations in the same industry, but rather may involve comparisons
against the best performers in any industry, and from any part of the world.
Benchmarking may compare a particular aspect of an organization’s
activities against the best in the class, or may look at overall organizational
performance against the best performers. So, for example, benchmarking
may for example, compare, say, the organisation’s approach to handling
customer complaints, or for example, its approach to after sales service
with those organisations which are the best performers in the selected area.
Benchmarking can often be based on partnerships across industries with a
company actively seeking the help of a company acknowledged to be the

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best in a particular area of activity. Obviously, the use of benchmarking is

difficult where the best performer is a close competitor.

5.3.1 Strategic Benchmarking

Phase III (2006-2010) Becoming a Top 100 Global Company

In 2006, Canon began Phase III of their Excellent Global Corporation Plan.
During Phase III Canon intend to pursue a course of sound growth with new
businesses born of innovation, taking into account ongoing economic
globalization and the worldwide spread of broadband networks, while
maintaining the sound profit structure and financial balance Canon have
established over the past ten years. To accomplish this, Canon plan to
promote five essential strategies in an effort to become a top 100 company
globally in terms of such key business indicators as net sales, net income,
equity ratio and market capitalization.

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Canon firmly recognizes that the precarious state of the global environment,
which represents the basis of a sustainable society, is a situation that
demands theirattention. The Kyoto Protocol, the international treaty on
climate change, that went into force in February 2005, centers on the
problem of global warming, which Canon must further strengthen their
efforts to address. In response to environmental problems, Canon has
targeted the maximization of resource efficiency in a way that benefits both
environmental conservation and economic development. These efforts have
been directed at the lifecycle of all Canon products as well as business
operations worldwide. In 2003, Canon established the overriding indicator
Factor 2 as their Vision for 2010 in order to put these ideas into concrete
practice. Their global Group companies will strive as one to achieve their
goals by developing advanced, environmentally conscious technologies and
strengthening management systems. In addition, in order to become a truly
excellent global corporation, it is essential that each and every member of
the Canon Group act in accordance with standards and norms befitting this
goal. Canon conducts thorough compliance education for management and
employees worldwide, and, since its founding, has worked to foster strong,
autonomous individuals rooted in Canon’s “Three Selfs” concept. Canon
are also working to strengthen the company’s corporate governance
systems.

Establishing New Production Systems to Sustain International Competitiveness

Canon believes that in order to further strengthen manufacturing, it is necessary

to automate labor-intensive assembly processes using highly productive
automated machinery and robots. Moreover, rapid response to change is
essential to maintaining a competitive edge in the global market. From this
standpoint, Canon is working to develop automated production lines,
drawing on knowledge gained from integrating development, production

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engineering and manufacturing technologies. Canon also continue to

promote greater efficiency in procurement activities and the in-house
production of key components and devices.

Canon are making substantial efforts in the area of human resource

development, strengthening their education and training programs to
cultivate trusted, responsible employees, and foster global leaders. At the
same time, Canon is pursuing more equitable human resource policies to
nurture strong, autonomous business professionals.

Identifying New Business Domains and Accumulating Required

Technologies

Canon are researching new fields of technology in their search for next-
generation business areas beyond 2010. In this pursuit, Canon are actively
conducting research from basic to advanced at their leading-edge
technology research center in Tokyo, while also forging partnerships with
prominent research institutions and universities around the world. In the
future, Canon plans to boost R&D expenditure from ¥275.0 billion (8% of
net sales) in 2004 to around ¥550.0 billion annually.

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Canon signed a comprehensive partnership agreement with the Tokyo Institute

of Technology in August 2005 regarding joint research on advanced
materials and imaging technologies

5.3.2 Competitive Benchmarking

Canon believes that these third-party opinions serve two purposes. First, they
give readers information that helps them judge how well Canon has met
their expectations and that hints at what can be expected from Canon in the
future. Second, the issues raised in these opinions can be used by Canon
as reference for improvements in future sustainability activities and in
information disclosure through this report and other media. These
commentators have provided their opinions on how well this report, with a
triple-bottom-line approach improved over last year, meets their
expectations regarding information included in the report, the quality of
performance it conveys, and its usefulness for meaningful engagement.

Third-Party Opinion from Volker Türk, Wuppertal Institute

In this third consecutive opportunity to provide an external view on Canon’s

sustainability report, Canon have seen with appreciation that the company
has taken its commitment to seeking third-party opinions one step further.
This statement is part of a more in-depth interaction involving a telephone
conference which allowed for the discussion of a variety of issues, some of

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which Canon will raise here. An editorial improvement that has made this
report more accessible without loosing comprehensive data is the
disclosure of detailed information on the web with clear links to them
signalised on the printed report. In pursuing the Kyosei philosophy, Canon
has set itself a challenging and exciting agenda in aiming at becoming a
“truly excellent global corporation by pursuing environmental and social
sustainability.” Their environmental goals are clear and Canon’s
performance against these targets is easy to track. Various aspects are
continuously improving and many of the mid-term environmental goals set
for 2005 have been achieved; Canon congratulate the company for these
accomplishments. The pursuit of sustainability should be further extended
in the social arena, with statements of priorities and targets on social
indicators. For example, Canon read with interest that Canon provides an
“employee-friendly work environment” and “manages human resources in
compliance with the laws and social

TASK 6

6.1 Strategic Master Planning

Canon SD630 campaign and Tennis Star Maria Sharapova

Canon's most recent campaign featuring tennis superstar Maria Sharapova and
the PowerShot SD630 Digital Elph camera. As part of this campaign, a new
commercial titled "Attraction" first appearances in conjunction with the
French Open. The integrated campaigns include not only television, but
also print, Internet, and retail components that reaffirm Canon's relationship
with. Canon shows consumers that whenever and wherever there are great
picture taking moments, Canon digital cameras are there to capture them.

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Canon Inc.

(http://www.letsgodigital.org)

Canon PowerShot SD630 Campaign - Capital Allocation

Additionally, the print ad will hit newsstands in early June with a two-page spread
appearing in People (6/12 issue), Entertainment Weekly (6/16 issue), In-
Touch (6/19 issue) and Sports Illustrated (6/26 issue). Canon will be
launching a micro-site within the Canon PowerShot website that allows fans
to view the "Attraction" TV spot; get a behind the scenes look at the filming
of the commercial including interviews with Maria and outtakes; as well as a
downloadable gallery of images. Canon is introducing the new campaign to
its dealers and retail partners through a mailing that will include a DVD of
the commercial, reprint of the print ad, media plan and bumper sticker.
Canon is also offering retailers the opportunity to tag the last five seconds
of the commercial with their specific store information for both in-store and
local media buys.

Canon SD 630 digital camera campaign – Employed David Letterman

Canon was the sole sponsor of the USA Today bonus section devoted to the
French Open that ran on May 26. The bonus pull-out section highlighted
French Open history, player profiles and player rankings and featured four
Canon advertisements (Window unit on the front page; 1/3-page four-color

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and 1/2-page black and white in the center of the section and full-page four-
color on the back page). "Attraction" will begin airing on June 1st around
French Open coverage on NBC, ESPN2, ESPN SportsCenter, ESPNews
and The Tennis Channel. Concurrently, the spot will run nationally on
networks such as Comedy Central, E!, FX, MTV, Spike, TBS, TNT, and
VH1 as well in key Canon spot markets on late night newscasts and late-
night programming such as, "Entertainment Tonight," "Access Hollywood,"
"The Insider," "extra," "The Tonight Show with Jay Leno," "Late Show with
David Letterman," and "Late Night with Conan O'Brien."

Bargaining

For hired the big star in sport industry is cost a high expenses to Canon. They
have to consideration on the shore up expenses such as hired a
professional photographer, for capturing best quality image while build up a
group for accompany the limelight for each tournament. Canon must spend
high expenses for the commercial. Canon must not only focus on
commercial barely, but also distress on others competitors that compete
with the same product. Such as Sony Corp that now is creating the new era
of Cybershot. Canon also must deem on how long that Maria Sharapova
can be the in the top of tennis industry.

REFERENCES

https://intranet.panda.org/documents/folder.cfm?uFolderID=60976
http://www.themanager.org/resources/Stakeholder%20Management.htm
http://www.proms-g.bcs.org/histevents
www.epson.co.jp/e/IR/ann_report/ar2006/11_06.pdf
http://en.wikipedia.org/wiki/Porter_5_forces_analysis
http://www.canon.com/environment/eco2006e/p08.html
http://www.skylinecollege.com/CS-Aditya.htm
http://sec.edgar-online.com
http://en.wikipedia.org/wiki/Core_competency
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http://www.canon.com/environment/eco2006e/p31b.html
http://www.canon.com/environment/report/education.html
http://www.canon.com/technology/canon_tech/explanation/organic_el.html
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type=technologyNews&storyid=2007-01-
31T014845Z_01_T220014_RTRUKOC_0_US-JAPAN-CAMERA.xml
http://www.physorg.com/news68825818.html
http://www.canon.com/environment/eco2006e/p69.html
http://www.dpreview.com/reviews/specs/Canon/
http://www.eetimes.com/news/latest/showArticle.jhtml
http://www.imergeconsulting.com/analysis122100.htm
http://investor.shareholder.com/cymer/releasedetail.cfm
http://www.skylinecollege.com/CS-Aditya.htm
http://www.canon.com/environment/report/sustainability.html
http://upetd.up.ac.za/thesis/available/etd-05092005-
123748/unrestricted/02chapter2.pdf

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