BULLISH ON 2004: Canon can!

Shanghai, China – During the recently concluded Canon Asia Expo 2004 held here, Canon showcased its latest products ranging from high-end copiers, office machines and a full range of digital cameras to a refreshed line-up of digital video cameras and numerous camera lens and medical imaging products.

Closing 2003 with a total revenue of $29.9 billion and a net income of $2.6 billion, Canon marked its fourth consecutive year of sales and profit growth despite the economic downturn in the technology and consumer electronics sector.

Canon attributed this growth – an 8.8 percent increase over the previous year – to the success of its digital cameras, of which the company sold 8.6 million units worldwide in 2003. Bolstering Canon’s success is its advanced MFDs (multifunctional devices integrating printer, fax machine, scanner and copier functions into one unit).

The company is set to launch 100 new products this year and focus on the Asian market, which is rapidly and steadily expan-ding each year, eclipsing the growth in the Americas and Europe. Asia contributes roughly 10 percent to Canon’s total revenue, but the company sees the region, particularly China, as a major emerging market.

China Investments

In his keynote speech, Canon president Fujio Mitarai said, "We can now focus our energies on the task at hand – preparing for the rapid growth that we expect in the Chinese market. We will strengthen our manufacturing for China’s domestic market and invest substantially in developing our sales and service network."

In addition, Mitarai said Canon would soon be developing products geared toward Asian markets that would "consider regional characteristics."

Like many multinational companies, Canon is investing heavily to gain a foothold in China which has shown steady economic growth and which many expect will be a major market for consumer products in the coming years.

Mitarai also inaugurated last week Canon’s new manufacturing plant in Suzhou, China that has over 87,000 square meters of floor space and is the 10th plant in Asia and the largest Canon production site in the world, focusing primarily on printers and mid-range multi-function office systems.

Cell Production System

Canon’s Suzhou plant uses the efficient cell production system for manufacturing. Unlike the more common production line method, the cell system places the worker at the center of the production process. All the necessary tools and materials are made available to groups or individuals who can manufacture entire machines from scratch to packaged products.

The cell production system was originally adopted for automotive manufacture. Canon researched its viability for consumer products and was one of the first companies to adopt and refine it for its manufacturing needs.

The system has increased productivity by 30 percent, saving energy by reducing conveyor belts, decreasing the amount of space needed for operations and effectively eliminating waste caused by surplus production.

During a tour of the plant, Asian journalists were able to witness first-hand the efficiency of the cell production system which, because of its transparency, enables one to see what each worker is doing at all times. Workers showcase their skills and can, by themselves, manufacture the devices from the bottom up. In traditional production lines, workers often have minimal skills or concentrate on a singular, repetitive task.

At Canon’s Suzhou plant, there is also visible competition between cells as they try to outdo each other’s production time and churn out more finished products at the shortest period of time. Labor costs in China are very low, making it viable for Canon to staff a large production plant.

Positive Philippine Outlook

During a separate session, Satoshi Yahata, Canon Marke-ting Philippines president and chief executive officer, explained Canon’s performance in the country. The Philippine subsi-diary is recognized as one of Canon’s fastest growing in the Asian region.

The local subsidiary has consistently defied trends and despite a generally bleak economic outlook, it managed to continuously increase sales. It brought the biggest contingent of about 40 dealer representatives, to the Canon Asia Expo 2004.

Outstanding performers for Canon in the past year have been the digital camera PowerShot, IXUS and EOS lines that have enjoyed a 79.6 percent growth. Canon is the No. 1 digital camera brand in the Philippines with a market share of 40.3 percent. Its popular models in the IXUS line and the EOS 300D (digital SLR) are often sold out, resulting in waiting lists.

Canon is also gaining ground locally in the inkjet personal printer space where it is ranked third behind rivals Epson and HP. The inkjet and bubble-jet market is an interesting segment as the prices of low-end models have gone down.

Consumables, namely ink cartridges that require refilling, are the key to profit in the inkjet market. Original cartridges cost almost as much as the printers themselves, and as a result, alternative businesses such as ink-refilling stations have flourished to address the pricing issue on consumables. The digital camera revolution has also carried the printer market on its back.

Canon is one of the first manufacturers to espouse a direct-to-print methodology where digital camera owners can print directly to a printer without the need for a PC. Its key strategy is for buyers of its digital cameras to choose compatible Canon printers for convenience.

Canon is also popular for its scanner solutions and has been able to capture this market recently by offering affordable yet high-performance models.

For 2004, Canon seems poised to do well with its digital video or mini-DV cameras, a market segment where it comes third behind JVC and market leader Sony. Digital video cameras are dropping in cost while offering technological advances, rivaling more expensive semi-professional broadcast quality models.

In the copier and fax machine areas, Canon Philippines has also maintained steady sales and has consistently introduced new models to the market.

With its beefed-up focus on the region and the new products up for release in 2004, Canon is expected to pose some serious competition to its rivals and, at the same time, offer consumers a wider selection of innovatively designed products in wider price range options.