Reengineering & Restructuring at Canon
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Case Code: BSTR091 Case Length: 19 Pages Period: 1990 - 2003 Pub Date: 2004 Teaching Note: Available |
Price: Rs.500 Organization: Canon Inc Industry: Office Equipment, Countries : Japan Themes: Corporate Restructuring |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Canon Under Fujio Mitarai
When Fujio took over as president of Canon, the company was structured in different divisions based on the product lines with each product division working as a separate entity. Though Canon had a wide range of products, it was not earning profits in all its product segments. The company was making losses in PCs, liquid crystal displays, optical memory cards, calculators and electric typewriters. There was no coordination among the different divisions in the company.
So much freedom was given to each division that right from hiring people to setting up overseas plants, they acted independently and without coordinating with the other divisions. In an interview with BusinessWeek, Fujio said, "These [profitable] divisions had become so independent, they didn't think in terms of what would benefit the entire company. It got to the point where divisions were building separate plants in China at the same time. If they had planned it centrally and moved to China together, they could have combined their costs. As it turned out, it cost Canon twice as much because these divisions...functioned like separate companies..."
Excellent Global Corporation - Phase I
In Phase I, Canon decided to exit from its loss-making businesses of PCs, optical memory cards and calculators. However, Canon did not opt for employee lay off and it stood by the Japanese principle of lifelong employment within the country. Instead of lay offs, Canon stopped recruitment of contract workers and transferred workers from its loss-making divisions to other product divisions. Canon announced that it would focus on products where it could achieve No. 1 position in the industry (it was already number one in cameras, and color and black & white midrange copiers). Under Fujio, Canon shifted its focus from market share to profitability. It also realized the importance of taking the whole group into consideration rather than focusing only on individual product divisions. In 1996, Fujio introduced consolidated balance sheets for all group companies...
Excellent Global Corporation - Phase II
The objectives of Phase II were to: to become number one in all core product categories, build strong R&D facilities to fuel the company's growth by developing new businesses, strengthen the finances of the company, and foster innovation among employees. To achieve the objectives of phase II, Canon announced that it would set up more manufacturing bases overseas, increase its R&D spending and focus on chip technologies such as CMOS sensors for digital cameras and cordless systems like Bluetooth. In an interview with BusinessWeek, Fujio named globalization and diversification as the two basic principles on which Canon's phase II would be implemented. He announced that the company would be concentrating on new technologies such as networking and semiconductor chips to boost the bottomline of the company. Commenting on the shift in emphasis from Phase I to Phase II, Fujio said, "If I were to characterize them, I would say that Phase I was a time for improving our "corporate quality," those factors that ensure high income and increase corporate value...
Future Prospects
By 2002, with net sales of ¥2,151,062 million, Canon reported record earnings for the third consecutive year (Refer Exhibit IV for financials of Canon). Canon emerged as number one in the copier segment and was placed among the top five in its other product categories (Refer Table VII for 2002 market share). Analysts attributed Canon's success to the management's foresightedness and its focus on profits rather than market share. However, not everyone was convinced about the success of Canon. They pointed out that Canon was able to surge ahead of Xerox in copiers only because of the internal and regulatory problems faced by Xerox. They also pointed out that with Xerox showing signs of turnaround it would be tough for Canon to retain its lead. Also, Canon's optical products business registered a loss of $10 million on a revenue of $1.03 billion in the first half of 2003. However, Fujio was not considering quitting the optical business as it provided technological inputs to other product divisions...
Exhibits
Exhibit I: A Note on Xerox
Exhibit II: Kyosei - Canon's Corporate Philosophy
Exhibit III: Canon Financial Summary For 1996-2000
Exhibit IV: Canon Financial Statements For 2001-2002
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