Reengineering & Restructuring at Canon

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"We didn't diversify into everything from fans to refrigerators the way others did. That's why today we make more money than a lot of Japanese electronics and technology companies."

- Fujio Mitarai, President in 1998.¹

"We still have to build a new technology pillar for the future. I feel we are entering a tough period."

- Ichiro Endo, Head - Canon Product Development Initiative in 1998.²

The Rising Sun

In the mid-1990s, Japan's leading photocopier and camera manufacturer - Canon Inc (Canon) - embarked upon a massive reengineering program to turn itself into a truly global corporation. Fujio Mitarai, who took over as president in 1995, introduced many changes in the company's manufacturing and management processes. These changes were implemented in two phases - Excellent Global Corporation-Phase I and Phase II. By reengineering its business processes, Canon was able to revive itself without adopting painful strategies like retrenchment. In 2002, Canon's total sales were ¥ 2,940,128 million, an increase of ¥ 381,901 million from 1996. Its net income increased from ¥ 94,177 million to ¥ 190,737 million during the same period. Analysts attributed the success of Canon to the farsightedness of its management led by Fujio Mitarai. Commented Hiroshi Kato, analyst at Tkegin Investment Management Co. (Japan-based investment firm), "Mitarai is taking Canon in the right direction."3

The history of Canon dates back to 1933, when Saburo Uchida (Uchida) and Goro Yoshida (Yoshida) established Precision Optical Instruments Laboratory (POIL), at Roppongi, in the Azabu district of Tokyo. The lab was started to develop a camera to compete with the German Leica model C.⁴

In 1934, POIL introduced 'Kwanon,'⁵ Japan's first 35mm camera with a focal plane shutter. Priced at ¥195, Kwanon had a considerable price advantage over the Leica which was selling at ¥500. In 1935, POIL launched 'Hansa Canon', a 35mm focal plane-shutter camera and in the same year it also applied for 'Canon' as its trademark. In 1937, POIL was incorporated as a joint stock company under the name Precision Optical Industry, Co., Ltd (Precision), with a capital of ¥1 million. During the late 1930s, the company also started manufacturing accessories such as enlargers, filters, and special tanks for developers. In 1939, Precision began making camera lenses, and in 1940 production of X-ray cameras commenced.

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1] Desmond, Edward, Can Canon Keep Clicking?, Fortune, February 2, 1998.

2] Desmond, Edward, Can Canon Keep Clicking?, Fortune, February 2, 1998.

3] Dreyfuss, Joel, Profit Machine, Bloomberg.com, October 2003.

4] Leica was a German based company established in 1849. Initially it manufactured microscopes. By the early 1920s, it diversified into production of cameras. Its Model C was the leading camera in the world in the early 1920s and 1930s.

5] A word that originated from Buddhism and which was later the basis for the company's present name - Canon.

6] As on December 5, 2003 1$ = ¥108.329.