Canon Case Study

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Jake Kral

Canon Case Study

Executive Summary - When Canon jumped into the business in the late 1960s, most observers were skeptical. Less than a tenth the size of Xerox, Canon had no direct sales or service organization to reach the corporate market for copiers, nor did it have a process technology to by-pass the 500 patents that guarded Xerox's Plain Paper Copier. Over the next two decades, Canon rewrote the rule book on how copiers were supposed to be produced and sold as it built up $5 billion in revenues in the business, emerging as the second largest global player in terms of sales and surpassing Xerox in the number of units sold. Canon was founded in 1933 with the ambition to produce a sophisticated 35mm camera to rival that of Germany's world-class Leica model. In only two years' time, it had emerged as Japan's leading producer of high-class cameras. During the war, Canon utilized its optics expertise to produce an X-ray machine which was adopted by the Japanese military. Diversification was always very important to Canon in order to further its growth, and a new products R&D section was established in 1962 to explore the fields of copy machines, auto-focusing cameras, strobe-integrated cameras, home VCRs and electronic calculators. Canon began research into copier technology in 1959, and, in 1962, it formed a research group dedicated to developing a plain paper copier (PPC) technology. The only known PPC process was protected by hundreds of Xerox patents, but Canon felt that only this technology promised sufficient quality, speed, economy and ease of maintenance to successfully capture a large portion of the market. After studying the distribution of offices in Japan by size, Canon decided to focus on a latent segment that Xerox had ignored. This was the segment comprised of small offices who could benefit from the functionality offered by photocopiers but did not require the high speed machines available in the market.' Canon management believed that a low volume "value for money" machine could generate a large demand in this segment. Canon is admired for its technical innovations, marketing expertise, and low-cost quality manufacturing. These are the result of a long-term strategy to become a premier company. Canon's many innovative products, which enabled the company to grow quickly in the seventies and eighties ire in large part the result of a carefully orchestrated use of technology and the capacity for managing rapid technological change. Canon's effective marketing is the result of step-by-step, calculated introduction strategies. Normally, the product is first introduced and perfected in the home market before being sold internationally. By the late 1970s, Canon had built up a strong dealer network in the U.S. which supported both sales and service of the copiers. The dealer channel was responsible for rapid growth in copier sales, and, by the early 1980s, Canon copiers were sold almost exclusively through this channel. Advertising has always been an integral part of Canon's marketing strategy. President Kaku believes that Canon must have a corporate brand name which is outstanding to succeed in its diversification effort. "Customers must prefer products because they bear the name Canon", he says. Canon's goal in manufacturing is to produce the best quality at the lowest cost with the best delivery. To drive down costs, a key philosophy of the production system is to organize the manufacture of each product so that the minimum amount of time, energy and resources are required. Canon places critical importance on continued growth through diversification into new product fields. Through its research and development strategy, Canon has worked to build up specialized expertise in several areas and then link them to offer innovative, state-of-the-art products. In 1975 Canon produced the first laser printer. Over the next fifteen years, laser printers evolved as a highly successful product line under the...
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