Strategic Planning at Cannon - Case Study Example

CANON CASE Business Analysis Questions Evaluate Canon’s strategies and how they have managed their strategic challenges and strategic changes within this. In your evaluation you will need to consider the key factors of success in relation to the different strategic groups within the industry. Support your evaluation with relevant theory and academic models. Debate whether companies outside this industry sector can draw any useful lessons from the strategies used by Canon in this industry. Provide examples of strategic areas that might be of interest to other industries and any limitations of using such information. April, 2009 1.0Introduction According to Andrew (1997:52), corporate strategy is the pattern of decisions that guide an organisation’s activities to reveal the principal objectives purposes and resources. In other words it refers to the range of business the company is to pursue, with the nature of the activities it intends to be and the nature of the economic and non-economic contribution it intends to make to its shareholders and stakeholders”. In effect, it corporate strategy maps out a sense of direction for a company’s activities. Corporate strategy in effect maps out the businesses in which an organisation intends to compete in (Andrews, 1997, Lynch 2006). To formulate its corporate strategy, many researchers have call on organization to assess their strengths and weaknesses, as well as its environmental threats and opportunities, so as to give the organization an edge in chosen among alternative courses of action. (Hofer and Schendel, 1984) cited in Schneider, (1998). Thus, it is recommended that an organization performs a SWOT (strengths, weaknesses, opportunities and threats) analysis prior to formulating corporate strategy. Today’s numerous challenges have pushed companies not to compete as individual companies but to try and corporate with other businesses in their activities (Wu & Chien 2007:2). 1.1 Canon’s strategies and how they have managed their strategic challenges and strategic changes within this. Canon an electronic company began in Japan with a typical and traditional Japanese business form having customer’s satisfaction and profit as its center of attention while specializing in the production of business machines, cameras, optical and other electronics. The company was founded by the first Chief executive officer Gerard in Japan and the father who later recruited a team of outstanding professionals to support its activities. In less than three decades of operation, the company assumed leadership role in the electronic market (Lynch 2006). Thanks to its innovative focus ideas, huge investment on research and development, good employee’s retention, and differential focus strategies, Canon innovative ideas and the company’s cost focus and differentiation strategy earned it that position. Canon case has been analyzed using some analytical models. 1.2 Canon and Poter’s Five Forces Figure 1 Adapted from Porter (1990) Five Forces framework From figure one above, Porter (1990) named the figure the five forces framework. This model was developed as a means assessing the attractiveness (Profit potential) of different industries (Porter 1990). The researcher further stipulates that, with the model, an analyst can easily identify the sources of competition in an industry or sector (Johnson et al 2005, Lynch 2006). Canon rise to leadership position in the period 1950s to 2000 in the electronic market can be explain using Porters five forces. According to the case, Canon owns 70 per cent of the world laser beam printer engine market, 40 per cent of the world bubble jet printer market, second only to Hewlett-Packard. Overall, it has a strong global base in its major product areas: photocopiers, computer peripherals, computer and Fax equipment, cameras, video recorders and optical products (Lynch 2006). Thanks to its long term relationship, innovative ideas, product differentiation and cooperative behaviours entered into with it suppliers and customers. Its position in the industry sector was greatly enhanced by the company’s ability to identify the photocopier’s market as an area of growth that created its competitive position in the sixties with strategic planning and actions channeled through this direction. This vision was marked by its intentions to catch Xerox through technological differentiation. An increase in Canon’s brand equity within these periods acted as some form of insulation, consequently consumer’s propensity to substitute was almost zero; this was insulated by Canon’s technological prowess innovation that added new product with new functionalities and features. It cost focus, quality and differentiation focus built on an efficient strategic planning enable the company to develop technology that was totally different from the Xerox patents and pursuing the small photocopier market niche, which remained poorly served by Xerox. Its extension of its product line from photocopiers, to laser printers, digital scanners, color bubble jet printing, digitised optical images and other areas made matters worst for competitors. This created core competences and core products that became cash cow given Canon a consistent ten years record of profitability. It will be noted that printing was only one of Canons areas of competence by the 90s. Strategic Planning has been on the business scene since 1960 (Mintzberg, 1994) and increasingly, business managers use it as a way to communicate their vision, maintain a flexible managerial approach and predict future trends (Langdon, 2000) thereby creating a competitive edge over time (Wootton, 2000). Mintzberg, (1994) argued that, a well wrought strategic plan helps a business to set priorities and acquire and allocate the resources needed to achieve its goals (Alison & Kaye, 2005). Consequently, a Strategic Plan can give a business the opportunity to generate a new sense of purpose and direction ( Lynch 2006, Lawrie, 2007). Canon’s technological prowess innovations turn into core competencies that acted as an entry barriers and a threat to new entrants. It focus on Its glocal strategy with foreign countries gave suppliers a low bargaining power. New products were launched at the right time. According to Porter (1985:4), the Five Forces set the rules of competition in any industry and at the same time set pace for understanding a company’s success (Lynch 2006). Canon strategic planning was not all about vision, but emphasis was on customer’s satisfaction, market share and core competencies. While acknowledging the assertion that having the right Strategic Plan can enable a business to realize its full potential (lake 2006, Lynch 2006), the assertion here is: How does Strategic Planning help a business to attain its objectives and consequently differentiate itself from competition?. Here, Canon management has not only used this to create and lay emphasis on its vision and objectives, but has capitalized on customer’s satisfaction, and gaining and maintaining market shares coupled with the needs for differentiation. 1.3Canon and Porters Competitive Advantage At the most fundamental level, it has repeatedly been argued by Porter (1985) that firms create competitive advantage by doing things in a better way. Other researchers have referred to this as doing ordinary things in an extra ordinary way. To the researcher, such an act pushes the firm to compete in an industry better which is ultimately an act of innovation. In this regard Porter assumes that, by being innovative, innovative firms are better placed to shift competition and gain a competitive advantage when rivals either fail to perceive the new way of competing or are unwilling or unable to respond (Porter 1990). This situation explains Canon’s rise to leadership position in the electronic industry in which their innovative ideas shifted it in to a generic focus and built its innovative resources and capabilities. Porter further argues that having control of the five forces in an industry is the beginning of assuming leadership position in the industry. Figure 2 Porters Competitive advantage adapted from Porter (1990) Cost leadership Low product system Low life cycle cost for Canon’s product High reliability of Canons product and non intrusive serviceability for Canons electronics. Canons unique resources, trademarks, proprietary know-how, uninstalled and installed customer base Differentiation Adequate advanced functionality Aesthetic product features Integration capabilities and upgradeability, convenient product availability in terms of quantity, location acquisition and installation. Confidence in the product Equity of Canons brand Cost focus Differentiation focus Competitive advantage is a situation where one firm has an advantage over the other to provide a particular service in an industry better thereby creating an opportunity to increase its market shares (Johnson et al 2005). Competitive advantage in an industry is dictated by the core competencies of the firm, which include the particular skills, techniques, as well as staff and suppliers achieved by the firm overtime and of which are absence to the industry mates (Johnson et al 2005). Canon through strategic planning lay emphasis on automated manufacturing, high technology products and sinkages and core competencies that provide linkages to a number of key product areas. This was further enhanced by emphasis on scenario and contingency planning. Question 2 Key Weaknesses in the Phase of Changing Environmental factors-The SWOT An organisation is part of the mega environment. According to Sacconi (2004), the resource based view of the firm hold its that resources used by an organization are sourced from the environment, this also include new resources. It is through the resources sourced from the environment that; stakeholders interactions are facilitated, new partnership develop and created (Sacconi, 2004). Through an understanding of the external environment, firms take advantage of these resources defines the nature and structure of its activities, and formulate strategies. This has been confirm by the fact that, companies today in order for them to maintain service quality, logistic standards, they periodically audit their environment and compared to overall corporate performance through benchmarking. (Sacconi 2004). In this regard, those that, fail to take advantage of their environment will lag behind. According to Johnson et al (2007), through environmental analysis we understand how a different force affects a firm’s competitive position. Today, more and more companies are engaging in corporate social responsibility reporting, which helps major stakeholders to better understand how the company interacts with its society. (Sacconi, 2004, Lynch 2006). It is only through this process that we can portray this better. If other companies benchmark the activities of Canon, the once electronic giant lost its leadership position because of failure to act with its changing environment. 2:2 Canon PLC and SWOT Analysis Threats Rise of competitors from China Strong and diverse brands of Matsushisa Competitors faster to market National Organisations irresponsible Difficulties finding their own suppliers, or owning their own farms. Xerox market leader, adapting products and strategies to changing environment. Weaknesses Some dissatisfied customers Drop off of better products Key Niche players The lack and absence of unique product with total differentiation from those of competitors. The lack of ownership of exclusive patents. Dropped and sold of many products that have not delivered reasonable profits Lack of integration of marketing, production and R&D in developing pr Matsushisa for example was known for its fastness to market, Philips was known for innovation but lack the marketing break through. Thus, even products that originated from Xerox, huge market shares fell to competitors like Canon. The main competitors can easily decentralize from its multidivisional structure following pressure from the environment. This gave Canon’s management enough backing to lay emphasis on their strategic planning and management that earned them a greater market share in the copier market Competitor’s Reaction Canon today is presently one of the market leaders in the photocopier and related business areas. Should competitors get to know the company’s position has been consolidated due to its use of the strategic planning; competitors will start benchmarking its activities. This will mean mass customization, mass production, the use of partners worldwide to benefit from the same generic focus and cost leadership strategy. However, the intensity of this depends on the available resources competitors have to sustain the fight and re-engineer things. In a later stage, emphasis will be shifted on exclusive rights with customers and suppliers leading to a series of vertical and horizontal acquisitions. In all, competitors’ final action will be consistent with Park& Russo (1996) finding that successful organisation demonstrate a particular set of mindset. To these organizations, collaboration and partnering is viewed as an opportunity not a threat. Canon and Porter’s Value Chain In addition, through an analysis of Canon’s value chain process we also realized that, through strategic planning the organizations management has been able to cut on non value adding items within the chain. Thus, Canon’s value chain is made up of only value adding activities. Figure 3 below depicts Canon value chain adapted from Porter’s (1990) value chain framework. The left boxes represent the primary activities while the right boxes represents the secondary activities Through an analysis of Canon value chain, it can be noted that at the level of the secondary activities, Canon lean manufacturing technology, internet marketing technology, production technology, the just in time production line, customer relationship management (CRM) represents a big source of Canon competitive advantage. This is because it will cost time and money for a competitor to replicate this (Lynch 2006). At the level of the primary activities, the relationship existing between Canon and its suppliers is a strategic and competitive advantage. They own most of the suppliers thus given room for just in time production manufacturing method, Total quality management etc. they have cost advantage, exhibited in the form of lower prices. 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