Canons Strategies: Key Factors of Success within the Industry - Assignment Example

Canon’s Strategies: Key Factors of Success within the Industry According to relevant academic bibliography a company can achieve success (at strategic and at competitive level) when it focuses mainly on three issues: content, change and learning. In order to achieve this, the organizations need to develop generic competences and apply a model where they mix effectively the competences and they have appropriate measures in place. This mixture demands continuous and effective flow of information and the ability to adapt to change. All members of the company should be involved and strategy, when needed, needs to be changed accordingly. Robust measurement of strategic competences is critical. A quick review of Canon’s strategic planning is the following: Canon has applied strategic planning since 1957. The strategic approach of achieving top market position involved everyone and there was a careful planning of the resources needed in order to achieve the market position. Canon has focused on the photocopying market in the beginning and it has focused on niche marketing i.e. producing small photocopiers. It has in parallel, developed new technology. Starting from photocopiers, Canon has developed since then core competencies in printers, scanners etc. The company emphasized customer satisfaction and it is customer oriented. Based on customer satisfaction, it has developed its growth plan which is called “Excellent Global Corporation Plan”. In this plan, the goal of Canon is clearly stated i.e. top share and profitable operations. The strategic planning process involved: highly automated manufacturing plant, high –technology products and synergy. So, the structure of Canon’s strategic plan was the following: the centre set the long-term strategy whereas the business units (product divisions) implement medium-term planning acting always within the constraints placed by the centre. Crisis management and contingency planning were important in Canon’s strategic process since the company wanted to be prepared in case of adverse events. These various plans were consolidated by the centre. Each business unit/division prepares its own budget, these budgets are gathered and then the centre prepares short-term plans. The company culture is quite distinctive: people are encouraged to talk and debate. The emphasis on people is shown in the objectives of Canon for the years 2001-05 among other objectives such as product leadership, development of R&D and strong financial position. The fist step of Canon, as it is seen from the above review was to attack Xerox by following niche marketing. Canon at that time was a challenger and Xerox was the leader in the photocopying market. As a challenger, it has found a weak spot in Xerox position i.e. it has found a niche that was not served by the leader and then it attacked the leader in that front. In order to serve this niche segment Canon developed further its technological competencies. Five Forces Analysis The Five Force analysis brought by Michael E Porter (1979) helps a marketer contrasts the completive or cooperative environment. Figure below shows Canon’s five force analysis that helps determine the severity of the cooperative competitive strategy in its marketplace. Figure -1 Canon, with its decision to Beat Xerox looks at open and free flowing approach towards competition that helped them to be highly successful in its markets. Its highly innovative technology and innovative strategy remains threats for others to enter in to the industry. Canon’s customer orientation through increased customer satisfaction policies and Excellent Global Corporation plan shows how strong the market is for and how potential the customers are. There were less chances of substitute products because Canon’s core competencies were personal photocopier and this was great for the customers. Strategy Analysis: Canon’s strategic intent was “Beat Xerox” . According to Hamel and Prahalad (1989)strategic intent is a dream that energizes the whole company and it requires a stretch of resources since the current ones are not sufficient for achieving this task. The above writers developed this theory based on the post-war dramatic increase of Japanese companies and Japanese economy to levels that Western companies could not realize since they found it unrealistic. The secret of this increase was an obsession to win and this led Japan to become a global leader for 20 years. The typical process, according to the Hamel and Prahalad (1989) to develop strategicintent is : Set the Strategic intent. Here the company has to develop a sense of direction i.e. where the company wants to be in the long term, a sense of discovery i.e. formulate a view whereas the employees will be promised to explore a new competitive territory and a sense of destiny whereas here the strategic intent has a sentimental aspect i.e. it makes employees feel that the goal is worthwhile. Set the challenges : the company should find challenges that should be communicated to all employees. The strategic intent for Canon at the beginning was to “Beat Xerox” and the strategic challenge was to come up with a small photocopiers. Empowerment of the Strategic intent: this is the last step and in this stage top management is responsible to involve everybody in it by formulating an internal communication that is not imposed by the top management (top-bottom approach) but it encourages a bottom-up communication so new ideas will come from all the company. Another key success factor of Canon was the customer satisfaction philosophy and it could be said that this, as well as all Canon strategy, was based on the principles of value based management. Value based management is the approach in management that maximizes shareholder value because the organization is run on value. The organization has to create value i.e. create the appropriate strategy in order to maximize future value, then it has to manage for value through change management, organizational culture, governance, communication and leadership and finally set the appropriate measures to measure value. The above are steps that were followed by Canon i.e. it has developed the manufacture and R&D in order to satisfy customer needs efficiently, it has created a flexible organization and adaptive to changes, it promoted an open organizational culture and finally it facilitated communication from bottom to top. Measures of performance are adequately set up. If we would like to link further management theory and Canon strategy, it could be also noticed that apart from the above theories and approaches Canon has followed strategic stakeholder management. The Strategic Stakeholder Management approach was described by described by Berman et al. (1999) based on an earlier work of Edward Freeman (1984).  It is mostly an instrumental approach which states that managers must pay attention to the relationships of key stakeholders. The key assumption of this model is that marketplace success is a fundamental objective for business decisions. (Canon stated: “gaining and maintaining top market shares. At Canon, top share and profitable operations must go hand in hand”). The organizations must view their stakeholders as part of the business environment which should be managed in such as way so as to bring revenue to all. If an organization pays attention to its stakeholders then it will avoid the risk entailed in stakeholders hindering business objectives.   This is due to the fact that stakeholders control resources and these resources are necessary for achieving business objectives. (Pfeifer & Salancik 1978). The ultimate purpose of having good relationships with stakeholders is the financial success of the organization. Quinn and Jones (1995) stated 1: "Instrumental [strategic] ethics enters the picture as an addendum to the rule of wealth maximization for the manager-agent to follow" . So, according to this model stakeholders are necessary for strategy but they do not drive strategy. Their views are taken into consideration for decision-making only when their views are of strategic value to the business. This way the open atmosphere of Canon is justified because Canon wants to have employees generate new ideas which are very important for a company striving to achieve technological excellence and become a market leader. As a result, Canon’s key success factors were: innovation and open communication climate among employees, customer orientation, participation of employees in formulating the budgets and the needs of their business units and a carefully designed strategic plan which included scenario planning for adverse situations. 2. 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. ANSWER 2 Companies outside consumer electronics sector can draw very useful information and lessons from the strategies used by Japanese firms and Canon in particular. The Japanese organizations based their performance on quality management and customer satisfaction and this is what Canon also did. Nowadays, customer satisfaction is a must for companies from all sectors and quality management is used in order to increase customer satisfaction and therefore achieve sustainable competitive advantage. Canon overtook Xerox because apart from its follower – niche strategy it had a broader vision. It viewed itself as a leader in consumer electronic business and it was not limited in photocopier production. Looking back at Canon’s history, it can be noticed that a reason for overtaking Xerox was also its low price high quality strategy. It is there where it has stressed all its R&D capabilities i.e. achieving a small reliable copier at an affordable price. This way it opened the market and more people realized that they needed a photocopier at home. Canon has not pursued a very innovative strategy compared to Xerox, it has just implemented wise niche marketing, trying to satisfy the needs of this targeted customer group. It has also developed further its dealer network, that used to sell its cameras, in order that the personal copiers reach end consumer.(Markides 1997) A company pursuing innovation can use anyone of the above tactics or a combination of them. In addition, according to Prahalad and Hamel (1990) a strategy can be better formulated when the business core competencies are clearly defined and pursued. Canon’s initial core competence was in optic lenses and then it was leveraged in cameras, copiers, camcorders, ophthalmic testing equipment etc. So, a company, irrelevant of the sector it is in, should identify and exploit its core competences. Canon has followed the basic steps in designing a strategy i.e. it has set a powerful vision, it has defined a mission, it has established the core values of how the company was expected to behave and it has developed a business and operations model. Once the mission, vision and values are established, a company should implement the following just as Canon did (Howes, 2007): 1. Analyze current environment. Understand customers, competitors and stakeholders. Identify benchmarks. Canon has carefully studied its competitor Xerox and understood and studied thoroughly its chosen customer segment i.e. people whose needs will be covered by the small personal copier. 2.Identify the business opportunities that the company can respond to. Canon knew that its capabilitities in R&D and production were quite strong so it could respond to the increased demand of the chosen market segment effectively and move on to other product that they would further satisfy other customer needs. 3. Identify how the company would respond to future opportunities. Canon did it by having a highly automated manufacturing plan, developing high-technology products and by having synergies among the different divisions. In addition, Canon was prepared for the dangers of potential future adverse events by having prepared contingency plans. 4. The next step is to identify value chain and business approach. Here, the business model and the organization structure should be decided. Canon formed a model where the centre sets the long-term strategy, the product divisions do the medium-range planning, set their budgets and send their plans and budgets to the centre which consolidates them in the long-term plan. 5. Setting strategic goals. Here, the organization should identify the success factors and the measurements to control the success. Canon has set up as success factors for 2004: customer satisfaction, cost reduction and competitive products and the measurements were maintaining No1 position, develop global markets, digital cameras etc. 6. The last step is setting up the governance and management system. Issues like change management, leadership and culture arise here. Canon has achieved it by setting automated manufacturing plants where the planning needs to be developed over a number of years. These are some basic steps for strategic planning that companies from all industries can follow. The limitations are that this system requires very good market research capabilities and excellent internal MIS, tight internal organizational structure and good strategy skills since it involves identification and perfect use of core competencies. This is actually the fist step that the companies should do i.e. finding where they are good at and develop further their existing skills in order to achieve sustainable competitive advantage. Bibliography Barney, J.B. and Hesterly, W.S, (2006). Strategic Management and Competitive Advantage. Pearson Prentice Hall Berman, S.L., Wicks, A.C., Kotha, S., Jones, T.M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal. 42(5): 488-506. Freeman, R.E.(1984). Strategic Management: A stakeholder approach. Boston, MA: Pitman. Hamel,G., Prahalad, C.K. (1989). Strategic Intent. Harvard Business Review. May – June. Henry A (2007). Understanding Strategic Management. Oxford University Press : Oxford Howes, J.C.(2007). Strategic Direction Setting. Organization Performance Series. January 17. Markides, C. (1997). Strategic Innovation. MITSloan Management Review. Spring 1997. 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