EBRM06

Strategic Management Coursework

Table of Contents

Part I : Description of the company, Mission Statement and Strategic Objectives.......3

1.1 Description of the company.................................................................................3

1.2 Evaluation of the Mission Statement...................................................................3

1.3 Key Strategic Objectives Evaluation...................................................................4

Part II : Tools of Analysis applied.................................................................................6

2.1 – PESTEL analysis...............................................................................................6

2.2 - Ansoff’s Six Factor Model.................................................................................7

2.3 - Key Strategic Resources....................................................................................9

2.4 - Porter’s 5 Forces applied.................................................................................10

2.5 - SWOT Analysis...............................................................................................11

Part III : Future Strategic Options...............................................................................13

References...................................................................................................................15

Appendix A : The Excellent Global Corporation Plan................................................16

Appendix B : The Kyo Sei Philosophy.......................................................................17

Appendix C : Canon Inc. 2009 Income Statement......................................................18

2

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

1.1 Description of the companyFounded 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

1 More details in Appendix A4

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

Objectives Specific Measurable Achievable Relevant Time Bound

1 Yes. It aims at making Canon

Inc. the worldwide pioneer in

imaging technology

One way of

measuring

Innovation is

through the Total

US. Patent deposited

in a year.

Achievable due to

strong R&D2 and

expertise in imaging.

Yes. It will strengthen

Canon's competitive

edge.

2006 - 2010

2 Yes. Expanding to operations

to cover other display

technologies.

Through the number

of different product

lines.

Yes. Through strong

R&D and global

reputation.

Relevant to the mission

and vision of the

company.

2006 - 2010

3. Yes. Trying to conquer new

technology domains

Yes. Different

domains in which

Canon operates

Yes. This objective has

been partly achieved

already (expansion in

the medical field)

Relevant to the mission

and vision of the

company.

2006 - 2010

4. Quality reforms through

quality control.

Statistically

measurable.

Yes, since 2008, Canon

devoted the

Tamagawa plant

entirely to quality

control research and

process automation.

Yes, it has to do with

product quality, brand

equity and customer

perception.

2006 - 2010

5 Not specific. Not measurable Difficult to say Goes with Canon Inc.’s

vision of Kyo Sei3

2006 - 2010

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 company’s 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.

2 Research and Development3 More details in Appendix B

5

Part II : Tools of Analysis applied

The second part of this report includes assessments of Canon Inc.’s external environment

(PESTEL, Ansoff’s model), competitive environment (Porter‘s 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 analysisThis 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

4 Japan Electronics and Information Technology Industries Association6

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 - Ansoff’s Six Factor ModelAnsoff’s 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

Imaging is part of the electronics industry. The imaging sector environment remains stable as to its 5 The Camera and Imaging Products Association

7

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 year’s 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.

8

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, Canon’s 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 Xerox’s 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

53% of the Digital SLR Camera market (Interbrand.com, 2009), is Canon Inc.’s intangible

9

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 - Porter’s 5 Forces appliedPorter’s 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 :

Threat of new entrants : Low

6 More details in Appendix C10

Bargaining Power of Suppliers : Low

Bargaining Power of Buyers : High

Threat of Product Substitutes : Medium

Rivalry Amongst Existing Competitors : High

2.5 - SWOT AnalysisFrom 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)

Weaknesses :

Focused customer base in the business

machine sector. (OEM)

Weak brand image when it comes to

other optical products

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

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

brand new company.11

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.

12

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 segment’s 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.

14

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.is-

guide.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.is-

guide.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

15

Appendix A : The Excellent Global Corporation Plan

Source : Canon.com, 2010c

16

Appendix B : The Kyo Sei Philosophy

Source : Canon.com, 2010e

17

Appendix C : Canon Inc. 2009 Income Statement

Source : Canon.com, 2010d

18