Canon Xerox Marketing Strategy 1970s

Marketing Case Study Reoport - Canon

The report analyses the success factors of Canon's business during their globalization in 1960s and 1970s, then next discusses the recommendation for Xerox to combat Canon. The report consists of the following sections.

* Background of the Company - history / products

* Canon Strategy

* Strengths of Canon

* Weaknesses of Canon

* Introduction to Xerox

* Xerox Strategy

* Recommendations for Xerox

Background of the Company

Canon started its business as a camera company in 1933 and began exporting the products after World War II. Since 1950s, Canon globalised its business. It established a N.Y. branch in 1955, an agent in Switzerland in 1955, built a camera assembly in Taiwan in 1971. Also, the diversification into business machines and industrial optical products was occurred aggressively during 1960s. Especially, the sales of business machine incredibly grown during 1970s and became accounting for over 70% in 1980s.

After the crisis in 1970s, Canon created the "premier company plan" and established interlinked functional organizations known as CDS, CPS, and CMS. Each organization has a clear responsibility so that they can respond quickly. This system resulted development time reduction and product efficiency improvement. Those features are a part of core competency of Canon.

Canon Strategy

During its globalization, Canon strategically diversified, invested in R&D, enhanced production and contracted OEM agreement. Firstly, the strategy in diversification was the key element of this case. As the figure 1, Ansoff's matrix shows, Canon has diversified into business machines, such as copier, and optical products, TV camera lenses etc. When Canon entered the copier business, unlike Xerox that provided big and expensive copiers for large companies, it defined the positioning of its copier as cheaper, smaller and high quality for satisfying the needs of personal-use or small companies. Also, by providing high quality services, Canon added values on its products. Once Canon increased its awareness in copier market, it developed a wide range of products to cover all the market. With this flank attack strategy, Canon was able to gained market share in whole copier market.

Figure 1. Ansoff's Matrix

Secondly, by investing in R&D, Canon marketed the products with cutting-edge technologies in short period, encouraging replacement. As a result, Canon was able to shorten the product life cycle and didn't allow other competitors to follow that short cycle. Canon increased its sales in copier business and thus invested further in new product development. In addition, the excellent production system reduced the manufacturing cost and enabled to keep providing cheaper products with higher quality. Lastly, OEM agreement also helped to reduce the cost of manufacturing, because the high production volume reduces the manufacturing cost, called as economy of scale.

Strengths of Canon

Vertically Integrated Supply Chain

Canon had a significant competitive advantage due to its presence in all areas of the value chain. Referring to Michael Porter's value chain model below:

Primary Value Chain Activities

Canon had created value in all the above activities by making its systems more efficient and reliable. Three conceptual pillars were established, that acted as horizontally interlinked systems across the company - Canon Development Systems, Canon Production System, and Canon Marketing Systems, these further strengthened the entire process.

Extensive R&D Investment

Canon always remained at the forefront of R&D for all its product lines. The R&D expenditure for Canon was increasing every year. Canon Development Systems was responsible for research of new products and for managing technological development. This provided Canon with a constant inflow of:

- New models of products to penetrate existing markets by encouraging upgrade of old models

- New Products to attack new market segments and

Figure 2: R&D / Sales of Canon

Strong OEM Strategy

OEM and joint venture strategy of Canon with various partners across the world provided them with an alternative and stable revenue stream. This revenue stream complemented the direct sales activities of Canon across the globe and proved to be a major strength in comparison to its competitors.

Global Manufacturing  Reduced Cost

Canon reduced the cost significantly by manufacturing globally. This enabled them to make use of local labour, avoid import duties and cut down the time to market the product in a foreign geography.

Reasonably Balanced Portfolio

Canon has a reasonably balanced portfolio i.e. a major chunk of the revenue generated is distributed amongst its 3 out of 4 product lines. Thus, any risk arising out of failure of new products in a particular product line is considerably mitigated.

Weaknesses of Canon:

Risk associated to being an innovator.

The target market of innovative products is aimed at those "early adopters", who are interested in trying new technology and are usually the opinion leaders. Although Canon can enjoy higher return before too many other manufacturers entered the market, the innovative products, however, involve the greatest cost and uncertainty because these are new to both the company and the marketplace. For example, in early 1980s Canon was developing "laser beam printer" technology, which was new to the market with unknown market size and customer needs . If Canon's new products