Canon’s 'Mission India'

The company has an ambitious goal of Rs 700 crore by 2007. It expects growth to come from three areas—digital cameras & projectors, laser MFDs and consumables says Rahul Neel Mani

Alok Bharadwaj says that Canon is looking for a 20 percent share of the digicam market by 2007

Canon India, an IT peripherals and business communications company, is eyeing a turnover of Rs. 700 crore by 2007. The company has evolved through many phases; each and every one of these has helped it forge a stronger identity. In its first avatar in India, it was perceived as an IT peripherals company, competing with HP which is the dominant player in this segment. In the second phase, Canon diversified and came to be known as a business communications company. Now, Canon is going through a third phase where it has consolidated its rank and position in the earlier two fields and wants to duplicate its success in the consumer electronics space where it sells digital cameras and projectors. With this there are three high growth areas for Canon India– consumer electronics (digital cameras), laser MFDs and consumables.

A new roadmap, a focused approach

Canon wants to tap new opportunities, it intends to grow in terms of products and it wants to reach markets where it has a minimal presence or doesn’t play at all. A couple of years back, Canon was predominantly into the corporate and government segments for its copier and fax products. In last two years it has tapped the SMB, SOHO and consumer segments. Going forward, in the next two years, two product categories – digicams and projectors – will be the prime focus areas for Canon’s consumer strategy. These product categories are vital for it to scale its operations from business communications or automation to IT peripherals to consumer products. “It’s a big change for Canon,” says

Alok Bharadwaj, Director and GM, Consumer Imaging & Information Division, Office System Solutions (Vol.) Products, Canon India. “For us it’s the biggest transformation so far because we were never known as a consumer electronics (CE) major,” says Bharadwaj. In the next few years, Canon expects its CE products to be its biggest money-spinners.

The second product line, on which the company is betting heavily, is Laser Multifunction Devices (MFDs). “We are training people to make them understand the customer’s business and not just pushing boxes,” says Lakshmi Narayan Rao, Assistant Director, OSS Value, Canon India. As Canon has a major stake in both the high-end (enterprise) and low-end (SMB & SOHO) markets, the company’s laser MFD business will be split 60:40 in favour of enterprises

In the Laser MFD space, almost 50 percent of its business is projected to come from solutions-based devices. “The average selling value for the SME segment will further erode, whereas, despite being competitive, prices are still stable in the high-end space. But in a packaged solution, instead of cost being the primary criterion it’s the TCO and RoI that work in Canon’s favour,” says Rao. Canon is also preparing a very aggressive marketing strategy to push its value range of converged communications devices into the enterprise segment. To this end, the company is working on a strategy called “Canon to the Max”. Says Rao, “Canon, in the future, will be very aggressive in its marketing efforts. It will engage in showcasing futuristic technologies to customers, which will tell them about better productivity and efficient communications systems.”

Smaller locations are crucial

As the company went into the IT Peripherals space, it became necessary to reach B&C class cities. Now, with a consumer products thrust, the company plans to tap even smaller locations in India. “The company was earlier focussed largely on North India and that’s what gave it a lion’s share here. The second best region for Canon has been Eastern India.” Bharadwaj accepts that Canon’s penetration in the West and South is rather limited and there is a need to grow in these markets.

The fourth dimension: New channels for growth

According to Lakshmi Narayan Rao, Canon is training people to make them understand the customer’s business—and not just push MFDs

There is a fourth dimension to Canon’s roadmap – that’s channel expansion. When Canon came to India, it was selling directly. “It was logical that the company established a proper channel network. We then established the office automation and copier channel. The next channel was for IT products,” says Bharadwaj. Now since the company is selling projectors and digital cameras, it needs channels in these segments as well. Canon is looking at a CE channel for its new products.

Digital cameras are a dynamic product category and to manage this business it is necessary to have a combination of IT, photography and CE channels. “We are looking at a stronger focus on this space and there will be a sales team developing this channel,” says Bharadwaj. Canon feels compelled to create a CE channel and build a stronger presence in the corporate IT channel. It also feels that consumables are no longer bought just through the IT channel as they’ve become a convenience item. “We are now looking at expanding this channel beyond stationary shops to convenience stores such as STD booths or photo studios,” says Bharadwaj.

It’s a volume game

The digicam market was worth Rs. 100 crore in 2003. By 2007 Canon expects this to reach Rs. 500 crore. 75,000 units shipped in 2003, this will grow to 6.7 lakh units by 2007. “Canon’s share last year was just 2.5 percent. In 2004 we will have 5 percent and we are looking at 20 percent by 2007,” says Bharadwaj. Canon is projecting a turnover of Rs.700 crore by 2007 so digicams will contribute nearly 15 percent of its business by then up from 1 percent last year.

The laser MFD market in 2003 was valued at Rs. 250 crore. The copier market was another Rs. 150 crore. In 2007, these two markets combined will account for Rs. 1,000 crore.

Canon had a 25 percent share in copiers and 5 percent in laser printers in 2003. By 2007, it is projecting its laser MFD (inclusive of laser printers and copiers) market share to be 20 percent. So, Rs. 200 crore out of Canon’s expected turn over of Rs. 700 crore in 2007 should come from laser MFD products.

Every digital copier sold by Canon gives it an opportunity to earn Rs. 20,000 from consumables. Every inkjet printer that Canon sells gives an opportunity to sell Rs. 2,000 worth of consumables. Canon feels that photo studios will convert into digital studios very soon. “Every photo studio generates Rs. 60,000 worth of consumables business for passport photo printing,” says Bharadwaj. In 2003, Canon earned Rs. 40 crore from sales of consumables. This is expected to rise to Rs. 200 crore by 2007. Canon anticipates that it will get at least 30 percent of its total business from this area.

“These projections are very conservative and are based on actual estimates. One factor that can pull these projections down is erosion in the prices of these products. The units might grow but revenue may come down,” says Bharadwaj. Incidentally, Canon lost 50 percent growth for its inkjet printers, which grew at 92 percent in volumes but price erosion tarred the corresponding revenue growth.

New initiatives for SMB and SOHO

In terms of sales force, the company will look at four dedicated personnel (one in each region) to tap the Small and Medium Business (SMB) and Small Office, Home Office (SOHO) areas. These are expected to provide the highest growth and direct marketing is on the cards to push Canon products into these segments. Canon has set itself some very ambitious targets and company officials say that these are realistic. They expect that Canon may even improve upon them. It is competing with players like HP in peripherals and projectors and Xerox in the high-end MFD market and these are tough competitors to face. With aggressive marketing and cutting edge technology, Canon’s plans aren’t impossible to achieve.

Competition Analysis
Product	Competitors	Advantage Canon	Drawbacks for Canon
Digital Cameras	Fujitsu, Samsung, Casio, Sony, Kodak, Nikon, Olympus	Large distribution network, crossselling and competitive pricing	Focused camera players in the fray for market share
Inkjet printers & Inkjet AIOs	HP, Lexmark, Epson	Patented technologies and better colour printing machines	Price erosion is affecting revenue growth. HP has a strong presence nationwide. Epson, Lexmark and other players are growing stronger in markets where Canon is already present
High-end Laser MFDs	Xerox, Samsung, HP, Sharp, Ricoh, Gestetner, Toshiba	Better penetration in market, large customer wins, trusted technologies	Xerox is a major threat to Canon. HP, Toshiba, Ricoh, Samsung are catching up making it just like the inkjet MFD space
Projectors	NEC, In-Focus, Panasonic	Better products based on new technology	Canon’s late entry might go against it. Brands like NEC and Panasonic are already established

rahul@expresscomputeronline.com