The Canon Case

THE CANON CASE

The canon case is a beautiful example of how a firm can achieve great success by using its capabilities and resources and how the use of those resources and capabilities can impact more and more on the creation of new firm internal competences throughout time and space.

Canon, a company created in 1933, can be defined as a firm always striving to use its existing resources- in all fields, the production, the marketing and sales and especially the technology- to create new distinctive competences and by this also the basis of an competitive advantage in the overall market. The Success story begins in the late 1950`s with the introduction of the first electronic calculator, and continues up to the 1990`s with the expansion into the market of bubble jet printers.

The first challenge of Canon can be described as the creation of competition to Leica in the high quality/ high price photo industry. This development by itself created distinctive competences in the field of optics technology for the firm and led to the expansion into the micrographic equipment technology. The first "innovation" launched in the early 1960`s was the electronic calculator. To enable its production a new technology was developed that combined microelectronics with the existing technologies to incorporate thousands of transistors and diodes in the most compact way. In the late 50`s however, the research into the copier technology had begun to challenge Canon. This research was basically driven by the goal of creating a new family of copier, more precisely a new generation of ppc copier.

The copier market had been dominated by Xerox, a firm which name was considered a synonymous in respect to the copying process. Xerox was the market leader in all of the existing new technologies for copy-machines- it had introduced the low cost/ low size cpc machine and the high price/ high quality/ centralized ppc machine- and had steadily increased its sales and market share ( 93% in 1970). For the sustainability of its success it had issued 100`ds of patents and had put various barriers to entry, such as technology, image and high switching costs. The only weakness identified by Canon consisted in the fact that in 1970 the patents for the ppc technology would expire and the market for new ppc technology would become again competitive.

It came as it had to come. During the 60`s Canon started to enter the market for cpc copier by using licenses from Xerox. Finally in 1968 Canon developed a technology called new technology which could substitute all existing ppc technologies and which enabled Canon to produce ppc copiers with its own technology. The first copier was sold in 1970 in the domestic market and was fallowed soon by other new models with increased values for both consumers and producers ( more economical, compact, reliable and with higher quality). To sustain this success Canon immediately patented its technology and expanded into the licensing business. In 1973 a color version was created, in 75 the laser beam technology introduced. In 1982 Canon was producing and earning more from its copier business than from its initial photo camera business. How was this expansion possible and how did they create their competitive advantage?

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The success of the copier started when the idea was formulated to introduce a copier that targeted a segment which had been unexplored until then: the low size/ low cost/ high quality machine. The basis to produce it were the until then developed techniques of the firm itself combined with new materials, functional components, new design and production engineering technologies. The targeted market was the small office and the home user market. To achieve this goal the firm focused firstly on its resources, designed a functional as well as hierarchical value chain of capabilities and tried to establish strategic alliances with its suppliers ( the purpose was to outsource everything that could not be produced in house). Secondly the identification of a new, unexplored segment of the copier industry and the match of this segment ( the one with the highest growth in future) with the right product were the drivers for a consistent