Canon Inc.

A report authored by Fatima Kifayat

Introduction:
Canon is a multinational company that originated in Japan. Its expertise lies in manufacturing imaging
and optical products, namely: cameras, video cameras, photocopy machines; medical imaging
equipment, industrial products, scanners and computer printers. The company was originally called
‘Precision Optical industry. Co’ which was later changed to Canon Inc. in 1960. In 1937 it produced
Japan’s first ever 35mm camera, shortly after Canon released an X-ray camera; followed by a zoom lens
for TV broadcasting, and Reflex Zoom 8 which was the first camera capable of zooming, ever created at
the time. In the 70s the company, notably, launched the world’s first camera with an embedded
microcomputer. During the 80s, canon branched its product line in to inkjet printers and Electro-Optical
Systems (EOS). In the 90s the first camera with an eye control AF and a digital camera was introduced.
By the early 2000s Canon also released an LCD projector. As if of today, Canon has been making
impressive improvements in its product lines, mostly to counteract the threat posed by cellphone
cameras that can potentially overtake the sales of compact cameras. Nonetheless, innovation has
always been a chief motivator in Canon’s production strategies, in due time it’ll find ways to overcome
competitive threats. [ CITATION his \l 1033 ]

Corporate Philosophy:
The corporate philosophy of a company is an expression of its values and the value it intends to offer to
target audiences through its products and services. Canon’s philosophy is Kyosei- a Japanese expression
which means living and working together for the common good- claiming that it is dedicated to seeing
people from various backgrounds and cultures “harmoniously living and working together in happiness
into the future”. [ CITATION cor \l 1033 ]

Canon has envisioned its future prospects through the ‘Excellent global corporation plan’, which is
currently in the 5th phase of operation. According to CEO Fujio Mitarai the company hopes to reorient its
main business from B2C to B2B- essentially they want to sell more products directly to other businesses.
This vision is laid out in seven goals, each goal is followed by a mission stating how the company will go
about achieving said goal.

Goals in the 5 th phase:

1) Achieve a cost of sales ratio of 45% by establishing a new production system by:
Strengthening domestic factories by integrating design, procurement, production engineering
and manufacturing technology operations. Reduce costs through automation and other
technology.
2) Reinforce and expand new businesses. Create future businesses by:
 Using management resources and M&A (mergers and acquisitions) to accelerate the expansion
of promising businesses.
3) Restructure the global sales network in accordance to market changes:
Review existing organization and reinforce Omni channel marketing (multi-channel sales)
integrating both online and conventional sale routes. Strengthen customer driven businesses
and focus on cultivating markets in emerging economies.
4) Enhance R&D capabilities through open innovation:
Develop an R&D system that encourages the usage of external technology and knowledge by
promoting contractual research with partners, domestic and foreign universities, and research
institutes.
5) Complete the three region HQ management system:
Promote M&A and complete the 3 region management plan in which US, Japan and Europe
utilize their strengths to produce a comprehensive management plan.
6) Cultivate globally competent HR:
Evaluate personnel around the globe to identify candidates for senior management positions.
7) Reestablish the Canon spirit as a foundation for new growth
[ CITATION bus \l 1033 ]

Canon’s competitive landscape:

To discuss the impact of certain forces on Canon’s profitability in the industry, we will use Porter’s Five
Forces as a guideline. All forces that pose a significant threat will be followed by countermeasures which
can lower their impact.

 Bargaining power of
buyers:
Buyers are often very
demanding, they want
the best offers at the
most minimum price
possible. The smaller the
customer base of Canon
Inc. the larger is the
bargaining power of customers, their ability to seek increasing discounts
and offers is also high. This has put great pressure on Canon’s
profitability.
Counter measures:
 Build a large customer base to reduce bargaining
power of buyers and streamline sales and the
production process.
 Bargaining power of suppliers:
 Almost all firms in the electronic industry purchase their goods from
multiple suppliers who have less control over the prices. Bargaining
power of suppliers is relatively lower.
 Threat of new entrants:

New entrants are put at a disadvantage because achieving an economies of scale is difficult, only larger
and more experienced firms can obtain a cost advantage. As such, the threat posed by new firms is low.
If certain firms do offer new value propositions to customers on lower prices, Canon can take the
following measures in response:

 Innovating new products and services that can attract new customers
and retain older ones.
 Building capacities and spending money on research and development

 Threat of substitutes:
Mobile phones with improving camera functions fulfill a customer’s
need to capture an image, they pose a small, albeit present threat to
Canon’s profitability.
To preserve sales Canon can consider these measures:
 Being service oriented rather than product oriented.
 Understand the core customer need rather than focusing on
what they are purchasing
 Increase switching costs for customers
 Industry rivalry:
Canon faces fierce competition from Sony and Nikon but it is the first
firm to maintain its position in the industry. Canon is turning ‘advanced
amateurs’ and professionals in order to sell expensive DSRL cameras.
Although Sony experienced a decline in market share, it regained its
position by releasing a mirrorless camera and manufacturing a variety of
cameras and mobile phone components. Nikon, however, has
experienced a thorough decline in market share.
To compete with industry rivals Canon can:
 Collaborate with competitors to increase market share
 Build a larger scale of operation
 Build sustainable differentiation

Pestel analysis:
In order to analyze elements in the macro environment that can impact the internal operations of
Canon, we will use a strategic tool called Pestel analysis.

Pestel analysis entails Political, Economic, Social, Technological, Environmental and Legal factors.
Canon’s pestel variables are provided below.
 Conclusion:

Primarily because of the nature of the business and geographic areas in which Canon operates
and the highly competitive nature of the industries to which it belongs, Canon is subject to a
variety of risks and uncertainties especially in the current age where the industry itself is
undergoing massive changes. To maintain its competitive edge, Canon must remain true to its
drive towards motivation, it must continue investing in R&D and promoting researching ventures
with external sources to gather more information what it can perform better. M&A should also
be taken into account as the industry is becoming increasingly dynamic. Lastly, Canon must
divert energies towards improving customer service facilities in order to build lasting customer
relationships.