Gsba 582 canon presentation final r4

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Gsba 582 canon presentation final r4

  1. 1. Canon Digital Imaging Strategic Industry Analysis Devin Arbiter Natalie Ferguson Charissa Inukai Tai-Wei (David) Lin Euclid Woo Dennis Xie USC MBA PM – Globe Japan April 24, 2010 Photographer: Commerciante Di Maiali
  2. 2. Agenda <ul><li>Industry Players </li></ul><ul><li>Evolution of Digital Imaging </li></ul><ul><li>Trends and Challenges </li></ul><ul><li>Printer Market </li></ul><ul><li>Camera Market </li></ul><ul><li>Five Force Analysis </li></ul><ul><li>Sources of Competitive Advantage </li></ul><ul><li>Competitive Response </li></ul><ul><li>Differentiation Strategies </li></ul><ul><li>Environmental Analysis </li></ul><ul><li>Customer and Competitor Analysis </li></ul><ul><li>Recommendations </li></ul><ul><li>International Business Insights </li></ul>
  3. 3. Players in Digital Imaging
  4. 4. Evolution of Digital Imaging Analog/ Early Electronics Digital Cameras Printers Enablers Memory Processors Image sensors Performance Time
  5. 5. Trends and Challenges Cannibalization : Cameras encroaching on Camcorder & SLR market Commodization : Loss of technology as a competitive advantage
  6. 6. <ul><ul><li>20.2% worldwide decline </li></ul></ul><ul><ul><li>Growth areas </li></ul></ul><ul><ul><ul><li>Managed print service </li></ul></ul></ul><ul><ul><ul><li>Smart MFP </li></ul></ul></ul><ul><ul><ul><li>Document management software and services </li></ul></ul></ul>Printer Market Sources: &quot;Worldwide Printer and Printer Cartridge Sales Market Share and Statistics&quot;,   Apr. 12th, 2010, http://news.printcountry.com/2010/04/worldwide-printer-and-printer-cartridge-sales-market-share-and-statistics.html Michele Masterson, &quot;Global Printer, Copier, MFP Market Sees 20 Percent Decline in First Half of 2009&quot;, ChannelWeb, Aug. 27, 2009, http://www.crn.com/hardware/219500374 Andrew Seymour, Printer market jammed by slump in sales&quot;, Aug. 27, 2009, http://www.itp.net/566102-printer-market-jammed-by-slump-in-sales
  7. 7. Camera Market Source: “EMEA Quarterly Market Update Q4 2009 Digital Cameras”, Future Source Consuling, Mar 2010,  Daniel Lim, &quot;'Big Two' continue to stomp Digital SLR market in Japan&quot;, Dec 31, 2008
  8. 8. Five Force Analysis <ul><li>Supplier Power (low) </li></ul><ul><li>Raw material is commodity priced. </li></ul><ul><li>Canon manufacturing fabricates all chips and designs </li></ul><ul><li>Threat of New Entry (Low) </li></ul><ul><li>The brand identity play a fundamental role in the digital imaging industry </li></ul><ul><li>High fixed investments are required to compete on a global level with near commodity pricing </li></ul><ul><li>Easy access to the distribution system </li></ul><ul><li>Products are protected by patents </li></ul><ul><li>Buyer Power (High) </li></ul><ul><li>Low switching costs of point and shoot markets and little product differentiation allows buyers to pick the lowest cost option. </li></ul><ul><li>Value depreciation of older models allows down market access to technology </li></ul><ul><li>Threat of Substitutes (Medium) </li></ul><ul><li>Cell phone cameras are beginning to be competitive in terms of picture quality and functionality </li></ul><ul><li>Low switching costs </li></ul>THE BOTTOM LINE: The digital imaging industry needs to look for ways to differentiate its product or risk product commoditization. With low margins, this becomes a volume based business, which forms high entry barriers and forces out the weakest competition. <ul><li>Industry Rivalry (High) </li></ul><ul><li>The digital imaging industry is reaching saturation with sales declining globally from 2008-present. </li></ul><ul><li>Medium concentration of competitors (Nikon, HP, Kodak, Xerox, Epson) </li></ul><ul><li>Low product differentiation </li></ul>
  9. 9. Sources of Competitive Advantage Canon harnesses its sources of competitive advantages to be the lowest cost supplier to maximize Ricardian rents . <ul><li>National Differences: </li></ul><ul><li>Low cost production in east Asia </li></ul><ul><li>Local manufacturing to avoid tariffs </li></ul><ul><li>Economies of Scale: </li></ul><ul><li>6 manufacturing facilities </li></ul><ul><li>9 R&D labs </li></ul><ul><li>50 Global offices </li></ul><ul><li>Economies of Scope: </li></ul><ul><li>Fixed costs spread across $39.4 B in annual sales </li></ul><ul><li>R&D crosses every product line </li></ul><ul><li>N on-market Strategies: </li></ul><ul><li>Access to low cost Japanese debt </li></ul><ul><li>Global Learning: </li></ul><ul><li>Share local knowledge from one country to all others </li></ul><ul><li>Test new products in multiple locations </li></ul><ul><li>Global Flexibility: </li></ul><ul><li>Best of breed supply chain management </li></ul><ul><li>Global footprint to diversify unsystemic risks </li></ul>
  10. 10. Competitive Responses <ul><ul><li>Cost cutting </li></ul></ul><ul><ul><li>Expand into new area </li></ul></ul><ul><ul><li>Strategic acquisition </li></ul></ul><ul><ul><li>R&D </li></ul></ul>
  11. 11. Technology-based Product Differentiation Strategy Amid the harsh global economic climate, further acceleration of technical innovation will play an important role in opening the way to a new era .” Tsuneji Uchida, President & COO R&D Expenditure = $4.5B per annum In order to sustain this differentiation strategy, Canon must focus on marketing its digital imaging products and technologies to the target markets where it can expect to earn margins higher than the industry average .
  12. 12. Focus on High Margin Markets How to Sustain Differentiation Strategy? <ul><li>Average income USD $50,000+, above average discretionary spending </li></ul><ul><li>Mature market but high concentration of enthusiasts & early-adopters </li></ul><ul><li>Average income USD $18,000 </li></ul><ul><li>Lower margins products, but higher volume </li></ul><ul><li>Potentially “grow” into high margin market </li></ul><ul><li>Average income USD $5000 </li></ul><ul><li>Thin margins, maximize utilization capacity, economies of scale </li></ul>
  13. 13. CAGE Analysis <ul><li>Geographic Distance </li></ul><ul><li>Japan is an island away from any mainland locations </li></ul><ul><li>Local manufacturing subsidiaries alleviate shipping costs </li></ul><ul><li>Canon has developed a state of the art SCM system to minimize the effect of geography </li></ul><ul><li>Global footprint poses a communication with the home office </li></ul><ul><li>Administrative Distance </li></ul><ul><li>All Markets are open to camera’s and digital imaging, low tariffs propel international trade. Ie India has no tariffs on imports </li></ul><ul><li>Japan is a member of trades organizations such as ASEAN, GATT, and the WTO and has free trade agreements with Singapore, Mexico, etc </li></ul><ul><li>Japan lacks FTA’s with China , the US, and the EU , its 3 largest trading partners; it has local subsidiaries to bypass tariffs </li></ul><ul><li>Subject to currency fluctuations </li></ul><ul><li>Cultural Distance </li></ul><ul><ul><li>No other countries speak Japanese as a primary language </li></ul></ul><ul><ul><li>Japanese culture is very detail oriented, while the overseas employees might not bring the same attention to detail </li></ul></ul><ul><ul><li>San-Ji principles do not translate across cultures around the world </li></ul></ul><ul><ul><li>Camera’s and digital imaging translate across countries and cultures </li></ul></ul><ul><li>Economic Distance </li></ul><ul><li>Per capita income in Japan is $33,000 annually </li></ul><ul><li>Most growth opportunity come from lower income , BRIC countries </li></ul><ul><li>Japan takes advantage of local financial institutions and local subsidiaries </li></ul><ul><li>Global positioning allows Canon to take advantage of local knowledge and global efficiencies </li></ul>Though faced with significant global obstacles, Canon has created a true multi-national corporation which takes advantage of domestic institutions such as the BOJ, while achieving scale efficiencies which make products cheap enough for middle class BRIC consumers The Bottom Line:
  14. 14. Environmental Analysis of Japan <ul><li>The Environmental Analysis of Japan assesses the impact of issues on the Digital Imaging Industry. </li></ul><ul><li>Implications of environmental factors are analyzed and recommendations are presented to companies in the industry. </li></ul>
  15. 15. Environmental Analysis
  16. 16. Environmental Analysis (cont.)
  17. 17. Characteristics of Customer and Competitive Environment <ul><li>Very high and steady competition </li></ul><ul><li>Numerous substitute and accessories available </li></ul><ul><li>Influx of newer products </li></ul><ul><li>Very loyal customers </li></ul><ul><li>Popularity of digital cameras in lower income classes </li></ul><ul><li>Purchasing decisions based on features, size and technology </li></ul>
  18. 20. INTERNATIONAL BUSINESS INSIGHTS
  19. 21. QUESTIONS?

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