CANON: COMPETING ON CAPABILITIES
This report examines the competitive strategy that enabled the "camera company from Japan"1 not only to break down the monopoly enjoyed by Xerox in the copier business in the 1970s but also to grow into a highly diversified, multi-product and multinational premier company.
Specifically, the report considers (1) the competitive strategy of Canon (2) the major resources and capabilities of Canon (3) management of the development and transfer of capabilities throughout the organisation (4) Canon's strategic perspective (5) is Canon successful? (6) conclusion and key learning points
The dominant generic competitive strategy adopted by Canon is differentiation. The company deployed its technological capabilities and know-how in fine optics, precision mechanics, microelectronics and fine chemicals to develop innovative and state-of-the-art products, which were of better quality than those of its competitors. These products resulted mainly from the strong, decentralised research facilities of the company and the incredible ability of its engineers to convert research findings to new products and technological innovation. Although Canon succeeded in manufacturing products at low cost, it did not deliberately compete on the basis of low price. The quality of its products combined with significant amount of marketing and deliberate brand development efforts have established a sound reputation for Canon in the market and these underlie the competitive advantage of Canon.
Resources and capabilities
The major resources of Canon are as follows:
(1) Financial capacity: product innovation and attendant growth in sales and profits enabled provided Canon with the finance required for additional research and product development which resulted in further increases in revenue in a virtuous cycle.
(ii) Decentralised R&D and new product development: in addition to the company's main research centre which supports state-of-the-art research in optics, electronics, new materials and information technology, each product division has development centres (manned by its own R&D personnel) where 80% to 90% of the company's patentable inventions are discovered. Three corporate research centres are responsible for applying the research findings to new products development. The company also introduced programmes to reduce the time for taking new technology to market by 50%. Innovative products provide the company with competitive advantage through new sales and patents, which serve as entry barriers to competitors.
(iii) Marketing expertise: the strength of Canon's marketing expertise derived from an effective product introduction strategy, a strong dealer network, large advertising spend and brand development. New products are first introduced in the home market before they are sold overseas in order to enable the learning and experience from the home market to be transferred to international markets. Even then, new products are only introduced into the market through proven, existing channels, to minimise the risk of failure. The Company also built up a strong dealer network which supported both sales and service of copiers. Dealers had to complete a service training course before they are allowed to sell copiers. Canon regards dealers as a vital asset through which it is able to understand and respond to customers' needs on a timely basis. Brand development efforts are undertaken through advertising, corporate sponsorship and a deliberate effort to only associate unique and quality products with the brand. This was demonstrated when Canon decided not to market the inferior CPC technology licensed from RCA under the Canon name.
(iv) Partnerships and joint venture relationships: despite Canons strong technological capability, it acknowledges that it has neither the resources nor the time to develop all the technologies needed for its products. This resulted in the...
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