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Student ID: 14037302

Strategic Management Coursework Assignment


Name: Ha Thanh Nguyen
University of the West of England

Case Canon: Competing on Capabilities

The aim of this essay is to analyze the resources and capabilities of Canon
a company from Japan, then identifying if they have competitive advantage
or not. This essay focus on analyze the Resource Based View theory based on
the case of Canon. Generally, while doing this essay, it appears some difficult
as word count, knowledge, but hopefully it can be helpful for people who
work and care about this problem.

The resource based view (RBV) theory had been evaluated by a variety of
authors. Some of them said that RBV provides an explanation of competitive
heterogeneity that the important and corporate way in competitive is the
different from resources and capabilities of competitors (Helfat, C. E. and
Peteraf, M. A., 2003). However, in this essay, I focus on the RBV which
Barney had evaluated: firm resources include all assets, capabilities,
managing process, firm attributes, knowledge, etc. controlled by a firm and
to provide sustainable competitive advantages it need to be pass four tests
(V.R.I.N):

Valuable: have greater value of sources than their competitors


Rare: resources must be scarce
non-Imitable: difficult to copy
Non-substitutable: cannot be affected, changed by other rivals
capabilities

(Barney, 1991).

According to Prahalad and Hamel, core competencies can be identified


through at least three following tests: provides potential access to a lot of
segments, should contribute greatly to customers awareness of the benefits
they gain from product and should be hard to copy from competitors
(Prahalad, C. & Hamel, G., 1990). It means that core competencies are
special, unique and strong tools of the company, so they can use these
strengths to compete and surpass their competitors.
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Student ID: 14037302

Canon was founded in 1933 with the first successful product is 35mm
camera, and then known as a worldwide camera and copiers company when
they moved into Copiers with New Process (NP) system. In the case of
Canon, I mention to two core competencies: Technology and Management
system.

Resources are the assets which are owned by the business. In Canon, they
are tangible resources: financial, modern equipment, land, manufacturing;
Intangible resources: lots of patents and copyrights, technical; Human
resources: famous reputation, task culture, great human skills/ know-how
with excellent expert in technology, marketing, management, etc.
Capabilities is what the business can do. For this case, Canons capabilities is
R&D section which is invested heavily, speed of new products always have
new product to serve customers need, product design, management
development, sales and distribution, customer services, etc.

The first one is Technology - one of the most strengths of Canon. It is


valuable because Canon invested their finance and human resources in
technology. For example, the organization applied decentralized R&D
strategy (C1044). It means that the R&D department was divided into small
R&D centers and research their own product division in short to medium
term, and coordinated by an R&D headquarter group. Besides, Canon also
trade or bought specific technologies from other external partners, joint
ventures and technology transfers with other international organizations in
various areas, such as: in office equipment area (Eastman Kodak - US, Lotte
-Korea), in computer area (Apple - US, Next - US), etc. (C1045). Especially,
they were the worlds first truly personal copiers with PPC copier. They
served the needs of the small office segment that Xerox the biggest
competitor has ignored, which has 8,700,000 working population by focus
to sell PPC copier to this a potential market. It is a perfect combine between
technique and strategy management, it is Canons value which is greater
than their competitors.

Technology is rare because not many companies have the speed to launch
new products as fast as Canon. They recognize that the more exploiter new
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Student ID: 14037302


product to the market, the more success of the company. Therefore, they
have a cross-functional program called TS to reduce the 50 percent time of
development base on fostering three factors: job performance of
engineering, technological system and review all stages of products carefully
(C1045).

Furthermore, Canons products are protected by lots of patents, such as The


NP process was protected by close to 500 patents (C1042). This way not only
helps company keep the copyrights of the products under the law protection
and no competitors can copy their ideals, but also keep the customers
loyalty because of the diversity of products. Canon also builds up specialized
expertise in multiply areas and link them to offer innovative, proprietary
state-of-the-art technologies, it means that they always try to up-to-date
their products with unique technological. Those are reasons why it nonImitable.

The last step, Canon achieves Non-substitutable because Canon focus on


state-of-the-art technologies with reasonable price, sell products to all
segments, they has three corporate research centers to support state-of-theart research to product development (C1044). They has develop R&D
cooperation with the strengths of precision mechanics, microelectronics, fine
optics use newest technologies and method to research and develop their
products to meet the needs of customers. Moreover, the products are
designed to be smaller for easy transportation, simple but not old fashion,
less expensive than their competitors. The company also leveraged
technology through many new and successful products, including the laser
and bubble-jet copies (C1049).

The second also the last one is Management system. Leadership style of
Mr. Kaku CEO of Canon is Democratic. He found three independent
business units in 1978: for camera, for office equipment and for Optical
Instruments and these three business units have been operated separately,
and the result is each manufacturing of Canon only produced one type of
product. Hence, the organization applied empowered strategy (C1050). It
means the workers are respected and have more power in the company. It is
also help the decision making process as fast as possible. Hence, the young
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Student ID: 14037302


managers have change to show off their ability, improve the job performance
in the company. It is the valuable.

The reason that it is rare is the company sale its products through business
units and Original equipment manufacturing (OEM) sell product under other
brand name. In the very first time they had just moved into Copiers, to sell
the copier in Japan, they found independence organize International Image
Industry and sold copiers as an OEM to Scott Paper under its own brand
name in US (C1042).

The third step is non-Imitable. In 1987, Canon started to focus on develop


GINGA system (Global Information System for Harmonious Growth
Administration). GINGA is a communication network which is interconnect all
part of Canon into a global database and allow the managers to exchange
information in various areas (C1052). However, it is quite costly in both of
finance and time. The total cost to Canon develop this system is 20 billion
yen and completed in 1992 means that they need 5 years to complete
(C1052). For small and medium organization, it is hard to do GINGA like
Canon. It is not only need money, time, but also need an excellent expert
team. Moreover, managing brand reputation is a part of management
system. The company needs to have famous reputation to sell their products.
Canon had to build up their brand by step-by-step strategy. The new product
have to sell in home market firstly, for example the NP process was sell in
Japan market in 1968, and then in 1974, after production and distribution are
operating smoothly, the NP product line are sold in US market (C1046). To
improve brand name, Canon built up a strong dealer network in both
domestic and international market because the more close relationship with
its dealers, the more company understand and meet customers demands.
Canon also focuses on advertising to expand their brand: sponsored lots of
sport events; spending 10 percent of selling price for advertising for NP-200
introduction in 1980; spending 20 percent of the selling price for advertising
for the launch of the personal copier (C1047). Canons products has gain
trusty from customers over time. As President Kaku said: Customers must
prefer products because they bear the name Canon (C1046). With the
reasonable price and good quality, customers always believe in Canon. Brand
name is cannot copy.

Student ID: 14037302


With the surpassing develop Xerox, the incredible successful of The NP
process, Mr. Kaku still remained his colleagues that no business can keep the
eternal truth. If the world change, the organization has to change it is
necessary by recombine the sale subsidiaries and restructure their
functions to meet the customers demands (C1053). It means that Canon is
not sunk in their victory, not be arrogant that lack of vigilance with other
rivals. It is the reason why it achieves Non-substitutable.

Generally, after analyzing 2 core competencies, both of technology and


management system meet four steps of V.R.I.N, so the organization have a
sustainable competitive advantage. These core competencies can be
considered as key strategy tools which help the organization operate for
long-term and compete with other competitors because it is not easily
copied. Hence, technology not only the strength but also represent to Canon.
Mentioned to high-tech, customers will think about Canon.

In conclusion, Canon has their own strong resources and capabilities which
help the organization develop and compete in the world-wide market.
Through the Resource Based View theory and V.R.I.N framework, Canon has
established a sustainable competitive advantage.

Word count: 1,526

References

Barney, J. (1991) Firm Resources and Sustained Competitive Advantage.


Journal of Management [online]. 17 (1), pp.99.

Helfat, C.E. and Peteraf, M.A. (2003) The dynamic resource-based view:
capability lifecycles. Strategic Management Journal [online]. 24 (10), pp.9971010.

Student ID: 14037302


Prahalad, C.K. and Hamel, G. (1990) The Core Competence of the
Corporation. Harvard Business Review [online]. 68 (3), pp.79-91.