Canon is a Japanese Multinational Corporation headquartered in Ota, Tokyo, Japan. The company was established in Japan around 1937. The company’s predecessor Precision Optical Instruments Laboratory was formed in 1933 (Global Canon, 2020). It is specialized in imaging and optical products. Which includes the camera, photocopiers, scanner, and printers. It also provides medical equipment such as Computed Tomography (CT) scan machine, Magnetic resonance imaging (MRI), and ultrasonic machines (Global Canon, 2020). It also produces security cameras and displays for commercial and public use. While other electronics products include calculators, presenters, and measuring devices. Canon holds more than 3000 patents in the United States. Canon is one of the biggest electronics manufactures in East Asia. Porter’s five forces model is used to identify threats and business opportunities faced by Canon.
Competitive Rivalry in the Market
The electronics industry is saturated and very competitive in the East Asian region. The region is home to a few of the world’s biggest companies which include, Sony, Nikon, Samsung, & Ricoh. Its main rival is local companies Sony and Ricoh. All of these companies boost the diversified product portfolio. The revenue of Sony and Ricoh is $78,318.96M (Nikkei Asian, 2019) and $18,154.41M (Nikkei Asian, 2019). The annual revenue of Canon as compared to its rivals was $32,962.77M (Nikkei Asian, 2019). The competition is increased recently to new heights due to the saturation of products in the region and worldwide. Chinese companies in the region are developing new electronics products and posing new challenges to well-established companies.
Threat of Substitutes
The rapid innovation in electronic technology is a real threat to companies like Canon. Which also includes the improvisation of mobile cameras. The evolution of mobile cameras has already impacted Canon’s long-held camera Heritage. The Canon needs to invest in the research and development department. It has already established around 12 research and development centers around the world (Global Canon, 2020). They need to innovate new products to compete with the ones available in the market. It can decrease their profit margin but can keep them ahead in the industry. They have to meet the needs of 21st-century users to keep their clientele satisfied and brand intact.
The Threat of New Entrants
There is always a threat of new entrants in the electronics market. It is relatively medium for now. The new entrant must come with a new innovative product to compete with established companies in the world. The startup must provide alternative best of the existing product to stand out in the market. The market will retaliate against it and to keep a hold on their business share. The new startup can get some market share by reducing the price of its product. It can come with some cost. The startup needs a huge amount of capital investment to set up its brand and to keep attracting customers through it. The loyalty of the customer can also go against startups. Canon can keep its clientele by innovating new products and quality products. The threat level is medium because of the rapid evolution of technology in this century.
Bargaining Power of Buyers
The buyers will hold the power if the market is saturated and there are alternative products available in the market. The electronics market is saturated with too many companies. You can find alternative products very easily. Which paves way for buyers to hold the bargaining power. The buyers can switch between the product, due to price and quality issues. To compete in this type of business environment companies should keep their quality at best but keeping its price as low as its rival. Canon should innovate new products as well as maintain its quality. It can keep its clientele intact. If they can do it, it will provide them business safety in the market. The buyer power is higher because of the market saturation and availability of the product.
Bargaining Power of Suppliers
The majority of the electronics industry in horizontally integrated. They have outsourced the production of parts, which are key to the products. The supplier can exert its power if it holds key contracts and future integrated. Future integration with the producer can be a major part of the contract negotiations. It can cost companies a lot of money if they wanted to switch suppliers in the middle of production. To get a similar kind of quality part is also important. The suppliers can directly benefit if it can sell its products to some other company. In that case, the market is already saturated with producers. It provides an extra edge to the supplier. The supplier holds major bargaining power in this case.
References
Global Canon. (2020). Canon Fact Book 2019 – 2020. Available at: https://global.canon/en/corporate/pdf/pdf/canon-fact-book-2019-2020-4q-e.pdf
Global Canon. (2020). History. Available at: https://global.canon/en/corporate/history/01.html
Global Canon. (2020). Technology. Available at: https://global.canon/en/technology/frontier12.html
Nikkei Asian Review. (2019). Finance. Companies – Canon Inc. Available https://asia.nikkei.com/Companies/Canon-Inc
Nikkei Asian Review. (2019). Finance. Companies – Ricoh Company, Ltd. Available https://asia.nikkei.com/Companies/Ricoh-Co.-Ltd
Nikkei Asian Review. (2019). Finance. Companies – Sony Corporation. Available https://asia.nikkei.com/Companies/Sony-Corp