Canons Cooperative Corporate Strategy - Case Study Example

Running head: STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT Strategic planning at canon with a co-operative corporate style Answer- 1 Canon’s Cooperative Corporate Strategy Introduction This case study outlines Canon’s cooperative corporate strategy based on the views of Richard Lynch (2006) about Canon’s way of identifying a new market segment that was poorly served by Xerox and then establishing a strong market niche. Canon’s cooperative strategy provides a lesson how easily a market can be dominated by with the help of cooperating with an established firm rather than competing with them. Canon’s cooperative corporate strategy has attracted growing thoughts and attention within the last decade among popular journals and corporate managements. Cooperative strategy refers to a marketing and strategic planning model in which organizations put efforts to achieve their business goals through cooperation with their counterparts rather than in competition with them. According to John Child (2005), Cooperative strategy offers a mutually beneficial opportunity for collaborating firms in order to modify their positions within the industry concerned (p. 17). Canon: Becoming market leader with its cooperative strategy Canon Inc. is a Japan based Multinational Company which currently leads markets for compact digital cameras and personal use printers. Kirk W. M. Tyson (1997) viewed that Canon’s business development strategy is a blueprint for successful management activities. This explains how Canon could easily access a strong market and establish its marketing niche (p. 186). Canon was different from Japanese companies as they rarely develop strategies, but Canon put forward an excellent example of developing cooperative strategy and establishing market niche. Richard Lynch (2006) emphasizes that Canon had operated strategic planning since 1957, however it was flexible and a free-flowing perspective. (Richard Lynch, p. 499) Canon has proved to be ‘No 1’ in Total Copier market, total placements in the monochrome market, A 3 color copier and all segments of monochrome markets. It has achieved this long term objective of becoming ‘No 1’ in copier market share through continuous restructurings and effective cooperative strategic plans. Fig-1 Source: (www.authorstream.com) According to Richard Lynch (2006), Canon had strong desire to beat Xerox and thus it achieved the growth of ¥ 3,468 billion in 2004 from ¥4.2 in 1950 (p.499). When Xerox concentrated on large and corporate customers who lease large machines from them, Canon thought of new marketing strategy by designing smaller machines for individual and office use customers. Analysis on Canon’s Cooperative strategy For many years, Xerox Corporation dominated the US copier market with its strategy of emphasizing fast machines to the corporate large buyers. In 1975, Canon identified the way to enter US photocopier market. Willie Pietersen (2002) finds out the way that Canon developed its strategic vision in order to enter the US market. “Deciding not to go head - to - head with Xerox on its home turf, Canon emphasized the price and quality of its machines, and sold mostly to individual consumers or small businesses through business channel. This proved to be a very successful strategy which built up a lot of goodwill for Canon among consumers” (p. 83) Xerox Corporation’s market share had accounted to be 86 % in 1974, but once Canon entered US photocopier market with its strong strategic cooperative vision, Xerox’s market share has been declined to 17% in 1984 and 9 % in 2006. Richard Lynch (2006) describes that Canon, throughout 1960s and 1970s, developed a technology that was totally different from Xerox’s technology and patents and it identified a small photocopier market niche which was purely served by Xerox in order to apply its cooperative strategy (Richard Lynch, p. 500). Canon was targeting a different customer segment, which was not explored by Xerox. While Xerox had concentrated on large copier machines, Canon identified a new market segment for personal copiers that can be used by individuals and small business or office users. Followed by this strategic thought, Canon introduced a personal copier in 1969 without violating any of more than 500 Xerox’s registered patents. This strategy helped them to enter the large US market for copier machines and especially when individuals and office users turn to these small copiers, even large and corporate customers tend to use this small copier due to its convenience and small size. Even though, Canon was aiming mainly at small business and individual copier users, the corporate and large customers also were in great need for small copiers and thus the market became larger to Canon. Canon identified the best way to enter in to the market through low price and prime quality products. Once it identified the new segment of the market and observed that there are growing needs for personal copiers, it attained its core competences of a number of products with different size and features. Analysis on Canon’s strategy against Xerox Fig- 2 Source: (www.unitedbit.com) Canon viewed customers value as individual controlled and it focused both product and process technology. With simple designed, low speed and low price copiers, Canon was slowly dominating on the US and world market and invading Xerox’s position by targeting big corporate customers with high speed photocopiers. “Canon initially sold small copiers, and its costs were much lower than Xerox’s. As Canon began to introduce larger, higher priced products, Xerox began to lose markets share and, given its high fixed costs lost money” (Gordon Walker, 2003, p. 134). Canon entered high volume copier market in 1978 with its product called NP 8500. According to Willie Pietersen (2002), Xerox did not pay much attention at Canon’s access and once Canon achieved critical success in sales volume, it started to launch devastating attack on Xerox’s market by selling its own fast machines directly to large corporate customers (p.83). For Xerox, this small segment of the market was small niche and it thus has been ignored by them. Constantinos Markides (2000) finds out this from the words of Xerox’s Vice President during 1990s. He admitted that the Xerox was slow to react to Canon’s strategy because it underestimated the potential of this newly created market segment. “We had been late to recognize market opportunities for low-and mid range copiers and Japanese competitors like Canon were cutting in to our market share” (p.14) Customer Satisfaction, as part of cooperative strategy Apart from competitive products and cost reduction, Canon’s cooperative strategy has been also driven by customer satisfaction which was regarded to be a milestone in its strategic planning. Canon focuses on customer satisfaction on all of its annual and other reports. “The concept of ‘customer focus’ will always be a fundamental principle for the canon group. This is not a three year or long term concept. It is a permanent part of our corporate culture and mindset” (Canon annual report, 2007, p. 55) Canon: managing strategic challenges When all of Canon’s business efforts have not been on the desired track and it has experienced downturns, it has shown superior business skills. Whenever Canon faced strategic challenges, it was able to go on with its strategic plan to become No 1 in the copier market. During 1970s, when IBM and Kodak attempted to enter the market with the infrastructure Xerox had put in place to operate, Canon developed business strategies to compete with IBM and Kodak and designed a business plan to counter Xerox. With few product lines, Canon had chosen dealers for sale but not direct selling and it could reduce their costs as well (Kirk W. M. Tyson, 1997, p. 186). Two Canon’s product lines had faced life-cycle depression in 1970s caused by oil crisis. Canon faced another challenging environment when it entered low priced electronic calculator market. In these sorts of challenging situations, instead of reducing size of the company or cutting down product lines or reducing human powers, Canon did not concern the challenging factors and put efforts to go ahead with their ultimate goal of becoming No 1 in copier market. The challenging situations did not form parts of their concerns, but still the concern was to go on achieving success in uncovering new market segment and developing market niche. Conclusion Canon’s cooperative strategy is an enlightening example that helped them to become market leader for personal copiers and other products. It discovered a hidden segment of the market and established its market niche in a cooperative strategic perspective rather than competing with Xerox. This paper provides a case analysis on Canon’s cooperative corporate strategy model and discusses the ways that it could manage their strategic challenges. Answer - 2 Canon’s strategy model for other industries Cooperative corporate strategy, in which firms seek collaboration with counterparts rather than competing with them, has recently gained wide acceptance by corporate managements. Canon’s strategic model shows an example of success game in which Canon discovers a hidden market segment, enters the targeted market, develops strategic vision to beat Xerox and finally dominates on the whole copier market. When Canon identified and developed the hidden market segment, it directly increased the potential strength of the market and also the growth level and size of the industry. As a result of growth in the new segment, there can be possible decline in the established market as in the case of Xerox. This Canon strategy model gives an exceptional lesson to the firms of different industries that there would be potential segments and while it is discovered and developed, the whole market scene will be changed. Instead of competing with other firms and wasting efforts, firms can be more productive and successful with Canon’s cooperative corporate model. Why Cooperative strategy? Cooperating with other firms creates values for the customers and establishes a favorable position among competitors justifies that cooperative model is best suit for many large companies in order to be highly successful in the market. Cooperative strategy model brings significant benefits for those companies that lack particular competencies or resources. Many of the companies increasingly need to implement cooperative strategy because they face difficulties in coping successfully with the prevailing marketing environment where firms go ahead with fierce competitions and use advanced technologies as part of their innovative strategies. A large amount of investments have been spent on new products development with ever changing life cycles. Firms need to collaborate with counterparts in a very fluctuating marketing scene especially while many firms cannot adjust with financial turmoil and face difficulties of uncertainty and turbulence. Strategic planning to discover a hidden or seldom explored market segment plays crucial role in Canon’s style. There are potential market segments that may be untouched or ignored by the leading company or even if identified, the product specifications and features it offers may not be sufficient for that segment. Exploring this new segment with new product or product diversification only can fill the gap and hence it is highly important for a company in order to apply Canon’s strategy model. Factors influenced Canon’s strategy model shows that not only discovering and developing a market segment, but also many other factors play vital role in bringing company to its success goals. Companies that apply canon’s strategy need to think of other related factors as well like price, quality, dealers and product specifications. While Xerox concentrated on large corporate customers, Canon began to think of small business and individual customers. Xerox focused on product technology, but Canon focused on product and process technology When Xerox designed complicated goods with many components, Canon produced simple goods with fewer parts. When Xerox sold high speed copiers for high prices, Canon differentiated by selling low speed copiers for low price When Xerox marketed goods through own sales force, Canon looked at third party dealers Xerox gave their own services to the customers, but Canon provided third party services to their customers Through product and features diversification, Canon could achieve success in its marketing history. These provide lessons to the companies that there are many factors other than just finding and developing a hidden market segment, that all can together bring better outcomes. Zenas Block (1995) emphasizes that Canon’s model is a lesson for other companies in order to develop strategy involving reassessments of assumptions. The basic problem for Canon was to develop a product with minimum service requirements because providing services to a large market would be highly difficult for the company. In order to solve this difficulty, Canon has reassessed every features and the copier’s entire design concept was changed to minimize service needs (p.181). Canon managed its strategic challenges in a way that most other firms are not familiar with. This also shows a unique lesson to the corporate managements in order to go ahead with corporate goals. Whenever strategic challenges due to financial turmoil or product life cycle depression hit Canon, instead of cutting down the size or reducing the product lines as usually done by many other firms, Canon did not concern about challenges and stood firm with its ultimate goal to become market leader for copier market. Conclusion The second part of this case study provides a detailed analysis on what lessons to be taken from the Canon’s cooperative corporate strategy model. This outlines the importance of identifying a new market segment and developing this with the help of other influencing factors for any industry so as to explore potential growth and development within that industry. References Block Z and Ian C (1995), Corporate venturing: creating new businesses within the firm, Harvard Business Press Child J, Faulkner D and Tallman S.B (2005), Cooperative strategy, Oxford University Press Lynch R (2006), Corporate Strategy -4th. Edition, FT Prentice Hall Markides C (2000), All the right moves: a guide to crafting breakthrough strategy, Harvard Business Press Mathur S.S and Kenyon A (2007), Creating Valuable Business Strategies, Illustrated Edition, Butterworth-Heinemann Pietersen W (2002), Reinventing strategy: using strategic learning to create and sustain breakthrough performance, John Wiley and Sons Tyson K W M (1997), Competition in the 21st Century, CRC Press Walker G (2003), Modern competitive strategy, McGraw-Hill International Whittington R (2001), What is strategy, and does it matter? Edition: 2, illustrated, Cengage Learning EMEA Canon (2007) Canon Annual report 2007 Retrieved from http://www.canon.com/ir/annual/2007/report2007.pdf www.unitedbit.com (2009), Strategic innovation: how canon radically refined the customer base, Retrieved from http://www.unitedbit.com/strategic-innovation-how-canon-radically-refined-the-customer-base/ www.authorstream.com (2009), Canon 2006 Market Share Pres, Retrieved from http://www.authorstream.com/presentation/Ethan-51182-Canon-2006-Market-Share-Pres-Highlights-Segments-retail-general-office-mark-Education-ppt-powerpoint/ Read More