EBRM06 Strategic Management Coursework

Table of Contents

1.1 Description of the company........................................................................................................3 1.2 Evaluation of the Mission Statement .........................................................................................3 1.3 Key Strategic Objectives Evaluation..........................................................................................4 2.1 PESTEL analysis.....................................................................................................................6 2.2 - Ansoffs Six Factor Model.......................................................................................................7 2.3 - Key Strategic Resources..........................................................................................................9 2.4 - Porters 5 Forces applied........................................................................................................10 2.5 - SWOT Analysis......................................................................................................................11

Part I : Description of the company, Mission Statement and Strategic Objectives

1.1 Description of the company
Founded in 1937, Canon Inc. is one of the leading multinationals in the imaging sector, it offers consumer, business to business and specialised imaging solutions. It actually employs 25,412 employees in the Tokyo headquarters and 166,980 worldwide as of December 2008 (Canon.com, 2009a). Their products are subdivided into 3 segments (Datamonitor.com, 2009a) : Business Machines ( Document scanners, Ink and Laser printers and copying machines among others) 65% of total revenues in 2008 Cameras (Digital Cameras, Interchangeable lenses, LCD projectors among others) 25.4% of Total Revenues in 2008 Optical and other products (Semiconductor production equipments, vacuum equipment for electronic components)- 9.6% of total revenues in 2008.

1.2 Evaluation of the Mission Statement

Striving to enrich lives by creating the best products possible while reducing environmental impact through technological innovation. (Canon.com, 2010b) It is possible to gauge the relevance of this mission statement using Ackoff's characteristics : By stating technological innovation Canon Inc. wants to show its position as a New Product Developer. Indeed, its progress in technological innovation can be measured by its yearly US Patents ranking. In fact, Canon Inc.'s position has been oscillating between 2nd and 3rd for 9 years now (1999 to 2008) only behind IBM. (Canon.com, 2010a) Through the vagueness of the term technology, Canon Inc. does not want to hinder any expansion possibilities in different technological sectors therefore differentiating themselves from the competition that shows their focus on imaging and optical solutions. It therefore defines where the 3

company aims to be in the future, a leader in technological innovation in general that combined with less environmental impact. This mission statement seems like it does not refer to any stakeholder at first, however, Striving to enrich lives can encapsulate everyone even if it does not constitute a clear statement concerning stakeholders. To conclude, it can be considered as inspiring to some extent, as it strives to enrich lives through the best products possible. This mission statement scores well in allowing progress to be measured, in differentiating the company from competitors and in defining where the company sees itself (in the present and future). It is also relevant to all stakeholders although its precision is debatable.

1.3 Key Strategic Objectives Evaluation

Canon Inc. follows its Excellent Global Corporation Plan 1, which is a mid-long term strategic plan covering 14 years (from 1996 to 2010) divided into 3 phases aiming to put Canon in the Top 100 companies. Currently Canon is on Phase III 2006-2010 and has 5 objectives (Canon.com, 2010c) : 1. Achieving the overwhelming No.1 position worldwide in all current core businesses 2. Expanding business operations through diversification 3. Identifying new business domains and accumulating required technologies 4. Establishing new production systems to sustain international competitiveness 5. Nurturing truly autonomous individuals and promoting effective corporate reforms

More details in Appendix A

The table below shows my assessment of these objectives using the SMART methodology.
Objectives 1

Specific

Measurable

Achievable
Achievable due to strong R&D and expertise in imaging.
2

Relevant
Yes. It will strengthen Canon's competitive edge.

Time Bound
2006 - 2010

Yes. It aims at making Canon One way of Inc. the worldwide pioneer in measuring imaging technology Innovation is through the Total US. Patent deposited in a year.

Yes. Expanding to operations Through the number Yes. Through strong to cover other display technologies. of different product lines. Yes. Different domains in which Canon operates R&D and global reputation. been partly achieved already (expansion in the medical field)

Relevant to the mission 2006 - 2010 and vision of the company. and vision of the company. 2006 - 2010

3.

Yes. Trying to conquer new technology domains

Yes. This objective has Relevant to the mission 2006 - 2010

4.

Quality reforms through quality control.

Statistically measurable.

Yes, since 2008, Canon Yes, it has to do with devoted the Tamagawa plant entirely to quality control research and process automation. product quality, brand equity and customer perception.

Not specific.

Not measurable

Difficult to say

Goes with Canon Inc.s 2006 - 2010 vision of Kyo Sei3

As shown above, apart from the last objective, all the rest comply with the SMART criteria. The availability of an Excellent Global Corporation Plan shows a high interest in expressing the evolution of the companys management objectives. It is also clear that the managers highly value it and are enthusiastic about the fact that it is there for everyone to see.

The Excellent Global Corporation Plan [...] aims to make the company admired and respected the world
(Canon.com, 2010c) This quote sums up the way all objectives and strategies are expressed in Canon Inc. throughout the years - direct, fearless and highly visionary.

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Research and Development More details in Appendix B

Part II : Tools of Analysis applied

The second part of this report includes assessments of Canon Inc.s external environment (PESTEL, Ansoffs model), competitive environment (Porters 5 Forces and Ansoff s model) and its key strategic competency. Findings of these tools represent the basis for the SWOT analysis that this part ends up with.

2.1 PESTEL analysis

This analysis shows the different key environmental variables that affect Canon Inc. directly or indirectly. Political Inter-country relations o As a multinational firm, inter-country relations is an important factor that influences research (Canon Inc.'s subsidiaries), sales and consumer perception in the related countries. Government policies and decision concerning electronic goods o The JEITA4 promotes sound manufacturing practices, trade and consumption of a variety of electronic technologies within Japan. It is influential enough to make proposals and influence government policies and decisions concerning electronic goods. Economical Overall Financial Condition Foreign Exchange Rates o Canon Inc. being a multinational company, the appreciation of the Yen against the Euro and the Dollar heavily influences its consolidated revenue from its foreign subsidiaries by decreasing the value exchanged. Social Trends in consumer tastes and perceptions o Camera sales are influenced by the evolving trends of consumers, i.e. trends in the overall design for example. Technological Technological advancement Technological regulations: Standardisation
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Japan Electronics and Information Technology Industries Association

o Canon Inc.'s visual equipment products have to follows CIPA5 guidelines in terms of inter-operability and compatibility with competitors' products, therefore there is an indirect control and supervision as to how Canon Inc. creates and further develops its products. Waste Recycling o The discovery of more efficient recycling methods for electronic and chemical goods can influence costs, manufacturing processes and reputation. Environmental Regulations concerning specific chemicals o The United Nations Environment Programme has the ability to put pressure on manufacturers and producers of chemical related products, where Canon Inc. and other imaging companies fall into, restricting the use of specific chemicals. Failure to comply will result in reputation damage. (Is-guide.com, 2009a) Legal Counterfeit products regulations o The effectiveness of counterfeit product regulations can have an impact on Canon Inc.'s and other imaging device producers sales, these regulations are enforced by the CIPA. Regulatory bodies and associations o The CIPA and the JEITA constitute important regulatory bodies covering various interests and issues in the imaging industry. Canon Inc. is particularly sensitive to economical and social factors, appreciation of the Yen can have devastating impacts, it already resulted in a substantial loss of profit during the early quarter of 2009 (Canon.com, 2010a). Any technological factor directly influences Canon Inc.s operations, as it is its core. Environmental, political and legal factors have a limited impact on Canon Inc.s objectives and performances in general.

2.2 - Ansoffs Six Factor Model

Ansoffs Six Factor model helps in analysing the overall status of the environment Canon Inc. operates in. The Low/Medium/High criteria used represent my own view of each factor. Changeability of the market environment : Low
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The Camera and Imaging Products Association

Imaging is part of the electronics industry. The imaging sector environment remains stable as to its nature and the type of products it supplies. Speed of Change : High Electronics and IT are subject to rapid change, the major players in these industries come up with notable innovations in generally less than a years time. Some of these changes might offset old range of products offered, although slowly. Intensity of Competition : High Imaging management solutions can almost be considered a commodity, due to it being used in all sectors and by professionals and individuals alike. Canon Inc. has 22 competitors in its three business segments separately - business machines, cameras and other optical devices including competitors such as Sony Corporation (in the cameras segment), Xerox (business machines and optical devices), Lexmark (business machines) and many others. (Datamonitor.com, 2009a) Fertility of technology : High As stated before, Electronics and IT industry changes rapidly, as New Product Development is what keeps these industries flourishing. The number of new products available each year within printers, cameras and other optical products is important. Discrimination by customers : Medium Businesses tend to stick to specific data management solutions they already use, where purchases are generally made as a pack and equip whole companies. In the other hand, the camera segment is highly affected, where discrimination by customers occurs in the base of marketing, brand perception and price. Pressure from governments and influence groups : Low Multinational companies that operates in electronics are subject to different governmental laws (from the countries they operate in), while there is no major pressure from governments, associations such as JEITA and CIPA consists of important players that can put pressure on particular issues or regulations to be adopted by all companies. However, most of these regulations play in favour of the electronic companies, as they are meant to protect and improve their performances.

In such a fast paced industry, I conclude from the degree of change of these factors that Canon Inc. would never have survived without its core competitive edge in order to keep up with the competition. The good news is that Canon Inc.s operations are aggressive enough to match this industry, it does not wait for innovation to come from others but rather creates it. It is also the only technological imaging company to figure in the Financial Times 500 best companies for 2009 (www.FT.com).

2.3 - Key Strategic Resources

R&D is Canon Inc.s main unique tangible competency. The number of patented creations and intellectual property ownership is among the highest worldwide (Table below) and clearly gives competitive advantage to Canon Inc. . Many competitors use Canon Inc.s technology as a basis for their products, for example, Canons laser beam printers are sold to HP as an Original Equipment Manufacturer (OEM). The main R&D efforts of Canon are concentrated on precision mechanics, fibre optics and microelectronics (J. Thomson, 2005, p116) and it began having this advantage early, since the 1970s, hence it can be considered a durable and tangible competency.

Source : Canon.com, 2010a The table above represents the cumulated number of patents given by the U.S. Patent and Trademark Office to leading innovating companies. Canon Inc.s position throughout the years is more than honourable. Main competitor Xeroxs position in the U.S Patent list was 31st in 2008. (Datamonitor.com, 2009b)

Robust Brand Value A very strong brand perception, with a rank of 33 in the Best Global Brand List 2009, and having 9

53% of the Digital SLR Camera market (Interbrand.com, 2009), is Canon Inc.s intangible competency, it substantially helps Canon Inc. imposing itself in different technological sectors therefore offering competitive superiority here as well. Along with the technological edge, brand value offers a very good momentum to the company and can be considered as a core competency, as without it, expansion to other technological sectors would have been more difficult.

2.4 - Porters 5 Forces applied

Porters Five Forces analysis helps in assessing how attractive the Imaging technology industry is. Threat of new entrants Very high capital requirements in most areas : Equipment, R&D and Advertising. Canon Inc.s income statement is included as an example6. Bargaining Power of Suppliers Either companies begin manufacturing themselves or the existing manufacturers are merged with the leading brands. Bargaining Power of Buyers In general low, however it is important to note that for Canon Inc. the bargaining power of buyers can be considered high. As an OEM manufacturer, 23% of total revenues in 2008 came from HP alone. (Datamonitor.com, 2009a, p25). Threat of Product Substitutes Camera-integrated cell phones constitute a substitute for consumer camera equipment that cannot be ignored. No major alternatives exist for business data solutions and medical equipment. Rivalry Amongst Existing Competitors This industry is highly competitive, many direct and indirect players are entering in competition with each other. Summary :
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More details in Appendix C

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Threat of new entrants : Low Bargaining Power of Suppliers : Low Bargaining Power of Buyers : High Threat of Product Substitutes : Medium Rivalry Amongst Existing Competitors : High

2.5 - SWOT Analysis

From all the previous analysis done, it is now possible to come up with a comprehensive SWOT analysis of Canon Inc.. Strengths : Innovation and technological edge Strong brand image within the digital cameras sector Decentralized and specialized research centres (in Japan, United States, UK, France) Opportunities MENA (Middle East North Africa) Region expansion (Is-guide.com , 2009b) Other imaging technological sectors Waste Recycling breakthroughs Threats Constant currency exposure : Appreciating Yen Overall financial situation Negative measures taken by Japanese Technological regulatory bodies Technological breakthrough by competitors Weak brand image when it comes to other optical products Weaknesses : Focused customer base in the business machine sector. (OEM)

SWOT Commentary : Basically, if there is any way to cope with weaknesses and threats it has to go (in my opinion at least) through some sort of innovation or specific technological breakthrough, this being what Canon Inc. does best. Strengths meeting Opportunities With proficiency and innovation in various optical technologies such as precision mechanics, incorporating new product lines will prove less difficult when done by Canon Inc. compared to a 11

brand new company. Converting Weaknesses to Strengths The weak brand perception of business imaging packages can in part be converted to a future strength with the help of the aforementioned MENA region, offering printing solutions for whole companies in the future can result in an increase of recognition of the business imaging solutions in that area, to begin with. Neutralizing threats and converting them to opportunities The external threats are mainly financial and converting these into opportunities is rather difficult. Multinational companies by definition try to reduce the foreign exchange exposure using financial instruments. Alternatively, having many research centres throughout the world increases the pace of new product development, allowing Canon Inc. to cope with possible breakthroughs made by its competitors.

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Part III : Future Strategic Options

Concerning the current corporate goals of the company, it continues to be a major leader in optical technology, innovation and R&D greatly helps Canon in practically everything it can plan for the future. The following strategic paths represent my recommendations to Canon Inc., based on all the analysis tools shown before and on further research. 1 - Expansion within medical imaging : Microscope manufacturing One of my recommendations would be an expansion in microscopy. Expanding Canon Inc.s operations to microscopy will contribute to the diversification of its product portfolio even more, and goes with its core business of imaging and optical products. With its current brand image and weight, Canon Inc. as a microscope manufacturer will not seem totally alien to that segments consumers. It can be considered an appropriate strategy. Micro-optical proficiency is already an area of expertise within Canon Inc.s R&D. This fact can make this future strategy even more attractive. It can therefore be described as feasible. This strategy is also desirable by Canon Inc., as it already began operating in medical imaging and wishes to expand in it even more, microscopy therefore seems a natural development in Canon Inc.s technological advancements. On the downside, this future path will expose Canon Inc. to 10 more competitors, including Leica, Meiji, Motic and GX Microscopes as the leaders in microscope manufacturing (GT-vision.com, 2010). Canon Inc. being more known in general, it is safe to say that it will begin with a brand image advantage. 2 Further exploration of the MENA region As shown before, it is a whole region that can not only provide additional sources of revenue but also might constitute an important opportunity to introduce different products from the standard cameras and printing solutions, while other markets are more or less saturated for a long time, 13

future economical improvements in the North African region coupled with Canon Inc.s brand perception can help it supply many companies with its printing solutions. The first steps of the 2010 free trade agreement between Morocco, Jordan, Egypt and Tunisia will ease any prospects of future expansions in the MENA region, it will be interesting to aggressively introduce new digital cameras models and business printing solutions to companies as Canon already benefits from a strong brand perception. This path is appropriate at it can serve Canon Inc. in many ways, namely revenue, brand recognition, and currency diversification. It offers a new ground where Canon Inc.s variety of products can be launched without excessive competitor pressure due to the relative novelty of these markets. This strategy is feasible as Canon Inc. is competent enough as a company to expand new markets without major difficulty. It is also desirable as it goes along with the current objectives of operation diversification. The emerging Moroccan and Tunisian markets will especially have higher growth potential within the 2010-2020 period compared to the previous decade and the demand for business and consumer goods will definitely need competent companies such as Canon Inc.. The first recommendation is probably the easiest to assess and to apply therefore I would recommend that route first to Canon Inc., an full expansion within a new market is a long process that needs time.

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References
J. Thompson with F. Martin (2005) Strategic Management 5th Edition. Thomson Learning K. Mellahi, J.G. Frynas and P. Finlay (2005) Global Strategic Management. Oxford University Press. Datamonitor (2009a) Canon Inc. Company Profile [Electronic Version]. www.datamonitor.com Datamonitor (2009b) Xerox Corporation Company Profile [Electronic Version] www.datamonitor.com Canon.com (2009) Canon Inc. Technology Highlight [Electronic Version] http://www.canon.com/technology/pdf/tech2009e.pdf Last accessed 1/04/10 Canon.com (2010a) Canon Inc. Fact book [Electronic Version]
http://www.canon.com/about/library/pdf/canon_factbook.pdf Last accessed 1/04/10 Last

accessed 20/04/10

Canon.com (2010b) Corporate Activities. http://www.canon.com/about/activities/ Last accessed 20/04/10 Canon.com (2010c) The Five Key Strategies. http://www.canon.com/about/strategies/ Last accessed 20/04/10 Canon.com (2010d) Canon Inc. Annual Report 2009 [Electronic Version]
http://www.canon.com/ir/annual/2009/report2009.pdf Last accessed 20/04/10

Canon.com (2010e) Canon's Corporate Philosophy of Kyosei. http://www.canon.com/about/philosophy Last accessed 20/04/10 Financial Times.com (2009) Financial Times 500 Best Companies [Electronic Version].
http://media.ft.com/cms/8289770e-4c79-11de-a6c5-00144feabdc0.pdf Last accessed 20/04/10

Interbrand.com (2009) Best Global Brands 2009 Ranking. http://www.interbrand.com/best_global_brands.aspx Last accessed 20/04/10 Is-guide.com (2009a) Ink cartridge manufacturers support UN project Japan. http://www.isguide.com/news/ink_cartridge_manufacturers_support_un_project_-6270.aspx Last accessed 20/04/10

Is-guide.com (2009b) Canon Middle Easy sees growing Market Asia/Middle East. http://www.isguide.com/news/canon_middle_east_sees_growing_market-6188.aspx

Last accessed 20/04/10

GT-vision.com (2010) home. http://www.gt-vision.com/ Last accessed 20/04/10

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Appendix A : The Excellent Global Corporation Plan

Source : Canon.com, 2010c

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Appendix B : The Kyo Sei Philosophy

Source : Canon.com, 2010e

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Appendix C : Canon Inc. 2009 Income Statement

Source : Canon.com, 2010d

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