ASM - Canon's Trajectory for the Future

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Canon is an industry leader in imaging technologies. Its 3 business units are in office, imaging systems and industry and others. Canon improves quality of life by allowing consumers to capture everyday moments to share. The company is of interest because it is now being threatened by smartphones. The recent strategic dilemma or strategic choice it made: Canon has failed to consider the social impact smartphones has had on consumer lifestyles. People value photo-sharing more than stunning quality images and being connected on the go. In 1996, it embarked on an Excellent Global Corporation Plan, a 6-key medium to long-term strategic plan. None of these prepared them for the drastic impact smartphones would have on revenue figures. ‘Since Apple Inc. introduced the iPhone in 2007, Canon and Nikon stocks have lost more than half their value as demand has withered in an industry they have dominated for over a decade’ (www.bloomberg.com).
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  3 Executive Summary Since the recent economic downturn, the world markets have been grappling with uncertainty. This sentiment is shared by manufacturers and service-providers globally. Companies that are affected by the slowdown have been hard-pressed to create products of value to the customer. And a global company like Canon has witnessed its point-and-shoot range of compact cameras taking a big hit, with smartphones that can multi-task now seen as a necessary accessory for almost everyone. With an external environment such as this, the leader in digital photography needs to relook strategies that will help it response to changing needs and develop relationships in regaining consumer confidence. The green message is gaining more traction in recent times and consumers are openly supporting products and services that revolve around that motive. Supporting the call for saving the environment now entails more direct participation in  product development rather than merely visiting poor countries and contributing aid, offering assistance or reducing energy consumption at the workplace. This report examines how McKinsey’s framework of 7S can bring about the changes while ensuring a strategic fit within the organisation. It recommends developing inherent capabilities as a strategy so that this can translate to core competencies for competitive advantages and lay the gravel towards achieving the project objective.  4 1.   Introduction: 1.1 The Company Canon is a listed company head-quartered in Japan with over 70 years of history. In the year 2012, it employed 196,968 staff and net sales totaled ¥$39,998 million (www.canon.com). It develops, produces and markets cameras, copying machines and optical equipment globally. Customers come from the industrial and commercial sectors to segmented populations. The focus of this report will be on Canon’s compact cameras or point -and-shoot segment. The project objective is to assess McKinsey’s 7S Model of the company and propose strategies that fit with the culture of the organization. The project title is  –    Canon’s compact trajectory for the future.   2.   Analysis of Macro-Environment 2.1 The PESTEL Landscape Japan has faced deflation for more than a decade (www.oecd.org). The current Prime Minister of Japan, Shinzo Abe, announced political plans in 2012 to invigorate the lethargic economy through fiscal stimulus, structural reforms and monetary easing with the help from Bank of Japan. The social environment is characterized by social mobility, convenience and connectivity. The third largest economy however, is a technological leader in scientific research and development, receiving the most Nobel prizes in Asia (www.nobelprize.org). The environmental quality in the nation has improved through the years with strict regulations and effective monitoring measures and their legal system which follows European law closely has managed the affairs of the country well.  5 2.2 Porter’s Five Forces Model   The digital camera industry is characterized by its imposing barriers to entry with its high capital requirements in research and development (R&D), production, logistical and marketing facilities. The threat of new entrants is relatively low. The saturated market however, points to the obvious threat of substitute products in a highly competitive environment. The bargaining power of buyers has increased with technological advancements offering a myriad of solutions. With the advent of nanotechnology and stresses placed on alternative resources for raw materials to promote a more sustainable environment, the bargaining power of suppliers has been reduced. Competitive rivalry through marketing and brand familiarity has been intense with others similarly launching new models (Porter 2008). 2.3 Ohmae’s Key Factors for Succes s The company manufactures its own products in-house to trim costs and inject quality offerings as a corporate-based strategy. The leader has differentiated its products to cater to a diverse mix of customers; this segmentation by objectives comes from its customer-based strategy. Canon’s consistent advertising and public relations in events has given rise to brand familiarity and highlighted their top position; this competitor-based strategy has led them to successfully project the power of an image (Ohmae 1991). 3.   Analysis of Micro-Environment 3.1 Tangible Resources The company’s financial resources exemplified by its efficiency ratio for 2012 is calculated  by taking expenses over revenue:    . A lower reading proves that the company is making more than it is spending. In this case, Canon spends 38 cents for every dollar it makes.  6 Its operating profit has slid from ¥378,071 in 2011 to ¥323,856 in 2012 (Canon  –   Annual Report 2012) due to the gloomy economic outlook and the rise of smartphones. The gearing ratio is calculated by taking total debt over total equity:    . As debts have to be serviced even in downturns, a high ratio puts the company in a vulnerable position. The organizational structure encourages goals to be shared amongst divisions which then  provide the impetus to create first-place products (www.canon.com). Its physical resources and strength in R&D located in Japan, the U.S. and Europe comes from its development environment where employees are highly valued. Canon’s growth is spurred on by its technological resources and it was the first Japanese company to file more than 3,000 U.S.  patents, third only to IBM and Samsung. 3.2 Intangible Resources Canon’s engineers from different departments engage themselves in community activities to exchange skillsets and technical know-how. The culture is undermined by its strong adherence to responsibility and open-mindedness which stimulates creativity, its human resources forms the core competency of the organization. Their ‘Engineer Study Abroad System’ strengthens the innovative resources and capabilities of its engineers on the international scene and shows off its scientific abilities. Canon is in the 35 th    position on Interbrand’s global brands statistics and is number 30 on their Best Global Green Brands 2013 listing (www.interbrand.com). The company is ranked 224 th  in Fortune Global 500 and 100 th  in the FT (Financial Times) Global 500 in 2012 (www.canon.com). These also form the distinctive competencies of the company.
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