ANALYSIS OF STRATEGY OF TRANSNATIONAL CORPORATION (TNC) OPERATING IN VIETNAM

HANOI

September 26, 2012

FOREIGN TRADE UNIVERSITY

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Contents

Group members: .................................................................................................................... 2

Part I. An introduction- Background to TNC's road to Internationalism ............................ 3

1. History of Canon Corporation ..................................................................................... 3

a. Canon’s corporate philosophy ................................................................................. 3

b. Characteristics and the establishment of Canon Inc. ............................................... 3

2. Canon’s major sectors of operation ............................................................................ 4

3. Results of Canon’s business activities during the last three years ............................... 4

a. Awards and prizes .................................................................................................... 4

b. Assessment about the key performance of Canon Corporation in the period 2009 –

2011 5

4. Analysis of choice of foreign market ........................................................................... 6

Part II. Business strategies of Canon in Vietnam ................................................................ 7

1. External analysis ......................................................................................................... 7

a. Macro-environment analysis .................................................................................... 7

b. Industry analysis ...................................................................................................... 9

c. Some highlights of Canon:...................................................................................... 14

2. Analysis of strategies issues of Canon in Vietnam ..................................................... 14

a. International strategies of Canon in Vietnam ......................................................... 14

b. Business strategy of Canon in Vietnam .................................................................. 15

i. Corporate- level strategy: ................................................................................... 16

ii. Business- level strategy ...................................................................................... 17

c. Organizational structure of Canon in Vietnam........................................................ 20

d. Modes of market entry.......................................................................................... 23

e. Performance of Canon, Inc. ................................................................................... 25

Part III. Conclusion and recommendation ...................................................................... 29

1. Conclusion ................................................................................................................ 29

2. Recommendation ..................................................................................................... 29

References ........................................................................................................................... 31

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Group members:

Class: Strategic Management – QTRE312.1

1. Nguyễn Thanh Hà - 0953040105

In charge of: 2a, 2b – Part 2

2. Nguyễn Thanh Thúy – 0953040082

In charge of: Part 1 and 1a of Part 2

3. Bành Ngọc Hà – 1001030109

In charge of: 2c, 2d, 2e of Part 2

4. Đỗ Thị Mai – 0952050035

In charge of: 1b of Part 2 and Part 3

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Part I. An introduction- Background to TNC's road to

Internationalism

1. History of Canon Corporation

a. Canon’s corporate philosophy

What is the meaning of “Canon”? It means “original, official” which shows the source of

bright beginning for a prosperous future. Therefore, it is easy to understand the reason why

Canon Corporation chose this name.

The corporate philosophy of Canon is kyosei. A concise definition of this word would be

“Living and working together for the common good” but our definition is broader: “All

people, regardless of race, religion or culture, harmoniously living and working together into

the future. ” Unfortunately, the presence of imbalances in our world in such areas as trade,

income levels and the environment hinders the achievement of kyosei.

Through corporate activities based on kyosei, Canon strives to resolve imbalances in the

world. Truly global companies must foster good relations, not only with their customers and

the communities in which they operate, but also with nations and the environment. They

must also bear the responsibility for the impact of their activities on society. For this reason,

Canon's goal is to contribute to global prosperity and the well-being of mankind, which will

lead to continuing growth and bring the world closer to achieving kyosei.

b. Characteristics and the establishment of Canon Inc.

Canon Inc. (Kiyanon kabushiki-gaisha) is a Japanese multinational corporation that

specializes in the manufacture of imaging and optical products. The company was originally

founded by Goro Yoshida. Its headquarters are located in Ōta, Tokyo, Japan.

Canon had a modest beginning in a small room, where young people with a big dream

sprang up a great number of creative ideas and earnestly began their work on producing a

high-quality Japanese camera, marking the beginning of Canon.

In 1933, a small laboratory dedicated to making high-quality cameras was set up in a simple

apartment room in the Roppongi area of Tokyo. At the time, all high-quality cameras were

European with the majority coming from Germany.

Through hard work and with an enterprising spirit, in 1934, they eventually succeeded in

building a prototype, which was named Kwanon after the Buddhist goddess of mercy. One

year later, they produced a prototype for Japan’s first-ever 35 mm camera with a focal plane

shutter. During these first years the company did not have the facilities to produce their own

optical glass, so the first cameras came with Nikkor lenses from Nippon Kogaku K.K. (the

later Nikon Corporation). In 1947 the company name was changed to Canon and the first

own Serenar lenses were made.

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2. Canon’s major sectors of operation

The industry that Canon operates within is an environment which needs creativeness, non-

stop changes, high responsibilities to accomplish the task as well as contribute to the

performance of the company’s whole system. Canon is a Japanese company that meets all

these requirements.

There are three major sectors of operation that Canon focuses on:

Consumers’ products Office’s products Industry and others’ products

Digital single lens reflex cameras

Office network multifunction devices

LCD lithography systems

Compact digital cameras Laser printers Semiconductor lithography systems

Digital camcorders Laser multifunction devices Ophthalmic equipment

Lens for SLR cameras Solution software Digital radiography systems

Compact photo printers Toner cartridges Document scanners

Multifunction inkjet printers Digital production printers Handy terminals

Inkjet printers Large – format inkjet printers Color label / Card printers

Commercial photo printers Personal information products

Multimedia projectors Components

Images scanners Die bonders

Network cameras Organic LED panel manufacturing equipment

Broadcast equipment Vacuum thin-film deposition equipment

However, the percentage is unequal among these sectors. Canon Corporation shows the

biggest concern with the office’s products, which accounts for about 56% of total products.

The second is customers’ products that makes up for approximately 39% and a very small

number of products (5%) belong to industry and other fields. Because of a limited time to

accomplish the assignment, our group only focus on “camera” - one of the most typical

products of Canon.

3. Results of Canon’s business activities during the last three years

a. Awards and prizes

Year Awards and prizes Images

2009 The image-PROGRAF iPF755 received the Buyers Laboratory Inc. Pick of the Year award in the "Outstanding Wide-Format Color Inkjet Multipurpose" Category.

The EOS 5D Mark II and EOS Rebel XSi received the

2009 "Hot One Award" for best digital SLR $1,000 - $3,000 and best digital SLR under $1,000, respectively.

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2010 Canon has been selected by Business Solutions Magazine (BSM) as one of the best channel vendors. The awards were for: Image-PROGRAF iPF650 Image-PROGRAF iPF510 Image-PROGRAF iPF710 Image-PROGRAF iPF610

Canon was awarded “Outstanding achievement in the advancement of the art and science of video technology” by 2010 NAB Best of Show Black Diamond Award with 2 products: XF300 XF305

The EOS 7D was named the 2010 Hot One Award recipient in the Digital SLR category between $1,000 - $3,000.

2011 Canon received 2011 BERTL's Best Award for 2 products: Image-PROGRAF iPF8300S Image-PROGRAF iPF6300S

For the 8th year in a row, Canon U.S.A. is proud to have received the 2011 Readers' Choice Award for Service & Reliability from PCMag.com for Printers. PIXMA Pro9000 Mark II PIXMA Pro9500 Mark II

2012 The Canon Power-Shot G1 X has received the "Best

Expert Compact Camera" from the Technical Image Press Association (TIPA).

The PIXMA PRO-1 received the 2012 DP Review Gold Award.

b. Assessment about the key performance of Canon Corporation in the

period 2009 – 2011

KEY PERFORMANCE INDICATORS

2011 2010 2009

Net sales (Millions of yen) 3,557,433 3,706,901 3,209,201

Gross profit to net sales ratio 48.8% 48.1% 44.5%

R&D expense to net sales ratio 8.7% 8.5% 9.5%

Operating profit to net sales ratio 10.6% 10.5% 6.8%

Inventory turnover measured in days 46days 35days 39days

Debt to total assets ratio 0.3% 0.3% 0.3%

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Canon’s stockholder equity to total assets ratio 64.9% 66.4% 69.9%

4. Analysis of choice of foreign market

A corporation which wants to develop and rapidly become the market leader in a

competitive environment will have to expand the scale in all over the world by opening more

branches in other countries to dominate and gain more market shares than its competitors.

Canon just began from a small room, but how it quickly developed and became one of the

market leaders in imaging and optical technique industry? One of the reasons is that Canon

has a good choice of opening branches in foreign market. Canon focuses on the Asian market

which has most of the developing countries. Take China and India as an example. Although

they are developing countries, they have the prominent development of technology, the

hardship and creativeness of employees who require low salaries as well as the stable

politics, which makes a good condition for Canon to improve and diversify its products, gain

the achievements as well as expand its impact on foreign market.

Why did Canon choose Vietnam to open branches and invest? There are some main reasons:

First, the convenience of geographical area is one of the reasons Canon choose to develop in

Vietnam. Vietnam has the near distance with Japan, 3 directions adjacent to other Asian

countries and a long coastline which is easy to penetrate.

Second, Vietnam has a stable political environment, the Government encourages to

developing the technical industry and willing facilitating to this industry

Third, Vietnam economy is in development stage, if Canon invests in Vietnam market, it may

easily spread and introduce its products to domestic customers to enhance its reputation

and raise profit

Fourth, the nature of Vietnam people is industrious and creative, which can contribute to

the productivity of Canon and spring up more new ideas to diversify products and shorten

time to produce one unit of products

Fifth, the technology of Vietnam is still being improved and needs to apply foreign

technology, so Canon may quickly penetrate to Vietnam Production line and make chance to

widespread the high quality products to Vietnam market.

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Part II. Business strategies of Canon in Vietnam

1. External analysis

a. Macro-environment analysis

There are lots of macro-environment factors that may impact on the reason why Canon

chooses to open branches to develop in Vietnam and how Canon carries out the business

strategy in Vietnam market. We should focus on four main factors: Political. Economic, Social

and Technological which clearly and directly affect the performance of Canon in Vietnam

Political: Vietnam is a peaceful country (ranking 39 out of 144 in 2009) which has a very

stable political environment, low risk of military conflicts. Political stability is one of the main

factors that have helped Vietnam pursue its economic development policy. Since 1990, most

other regional countries, except Singapore, have experienced coup d’etats or political crises.

Meanwhile Vietnam has achieved political stability – factors that enable Vietnam go ahead

with its renewal process.

Besides, Vietnam also has nearly lowest protection of intellectual property. We cannot deny

the fact that Vietnam has come a long way in protecting intellectual property. To join the

World Trade Organization, Vietnam was required to meet international standards of IP

protection. It passed the new IP Law in 2006 and adopted the Berne Convention on

copyrights, for example. The result is that today Vietnam has relatively comprehensive set of

laws covering most aspects of IP rights. However, the protection of intellectual property is

still low. For example, somewhere around 90% of all software is still pirated according to the

Business Software Alliance (compared to an average of 55% in the Asia Pacific region). In

addition, Vietnam has the high encouragement of trading partners, encouraging tax

incentives for technical companies; the minimum wage is much lower than the technical

industry standard and Vietnam also gives priorities to international companies in Vietnam.

When choosing Vietnam to set up branches, Canon takes lots of advantages and easily

penetrates Vietnam market

Economic: Vietnam's economic system is gradually out into the global system and gradually

improves because of the commitment of Vietnam to WTO in 2007. Vietnam also has a stable

exchange rate and the facility is gradually developed as well as more advanced. Vietnam has

gained considerable economic development for over the last 20 years. For example, since

1990, Vietnam’s economy has made amazing progress with annual average growth of 7.5

percent. Even when many Southeast Asian countries were damaged by the Asian economic

crisis in 1997-1998, the country’s economy still kept growing. In 1999 its economic growth

rate reached 4.5 percent while other Southeast Asian countries, such as Thailand and

Indonesia fell into crisis. The growth rate can be attributed to the consistent economic policy

of integrating gradually into the global economy in line with the situation in Vietnam. In

addition, Vietnam has maintained its macro-economic policy for 20 years, in which it has

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reduced public debt and the inflation rate, ensuring a balance budget and controlling the

amount of currency in circulation.

Besides, most of Vietnam’s organizations are newly-built; the workforce is young,

enthusiastic, hard-working, creative and skilled. Then more employees are properly being

trained for specific and professional work. It can be proved by the following facts:

Almost two thirds of respondents are from privately owned organizations, and

around half of the organizations have been in operation for more than ten years.

On average around four in ten employees are aged between 16 – 25, meaning that

significant proportion of the Vietnamese workforce can be classified as being

“young”.

Levels of professional and technical training amongst staff tended to be polarized

between low and high with more than half having little or no training and more than

quarter being University graduates.

The average salary of an employee in this survey is 2.4 million dong per month.

Staff numbers and training budgets are both projected to rise in the next three years

However, the workforce management of Vietnam is in relatively low quality because of a

shortage of trainers, the fear of losing staff after training and the lack of government

legislation to help organizations retain staff. Canon can easily apply its management and

controls the operating activities of companies as well as exploit the capabilities of the

workforce in the country. In addition, the labor costs cheaper than other countries. High-

speed economic development for many years also creates favorable conditions for Canon to

introduce its products in the Vietnamese market. It can be said that the Vietnamese a

convenient market so that Canon can back up its position in world market.

Social: young people expect the global economic exchange. The more percentage of people

quickly access to the high quality and advanced technology that Canon brings to Vietnam.

Vietnamese people have high mental development to improve quality of life, higher job

responsibility which is suitable for the working style of Canon.

Technology: Technology of Vietnam is poor, limited and on track to improve and develop.

Although Vietnam has gained some achievements since becoming a member of WTO,

Vietnam still ranks behind many other developing countries in technology field. Looking at

the survey results and the World Economic Forum’s ranking in terms of technology

innovation, there is clearly a large gap in technology between Vietnam, and Thailand and

China.

Vietnam Thailand China

Technology Index 92 43 62

Technology innovation index 79 37 70

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Information and

communication index

86 55 62

Technology transfer index 66 4 37

Among the indices, Thailand is most successful in technology transfer, ranking 43rd while

Vietnam comes 92nd. This requires Vietnam to make further efforts in technology investment

and renewal. Therefore, Vietnamese workers will quickly absorb into Canon’s advanced

technology and promote the advantages of this high technology. In addition, Vietnam has

more and more skilled, creative and enthusiastic engineers who can help to develop new

ideas in order to diversify products, save time and increase the productivity.

b. Industry analysis

It is very important to determine the industry analysis to appreciate the strengths

and weaknesses of Canon Inc. in several external factors. Based on the result of industry

analysis, we will have more understanding about the factors affect to Canon in running

business all over the world and particularly in Vietnam.

An industry analysis consists of three major elements: the underlying forces at work

in the industry; the overall attractiveness of the industry; and the critical factors that

determine a company's success within the industry. In case of Canon Inc., we also focus on

those contents to determine how management team of company could make Canon Inc.

more competitive with the others.

INDUSTRY FORCES

The most important thing that we mention here is the effect of Porter’s five forces

model influence to Canon Inc. widely market including the potential of new competitors to

enter the market, the bargaining power of buyers and suppliers, the availability of substitute

goods, the competitors and the nature of competition.

New entrants:

The history of camera market shows that the first camera was built in 1685, and then

people knew more about the other brand-Kodak with by film camera version, but there are

more brands were established and ran their business in the market and they also own a lot

of competitive advantages.

As we mentioned above, Canon Inc. introduced their first camera in 1934 and

became one of Japan first-ever camera. However, they are not the first company who

produced lenses for those products instead of Nikon. At previous decades, the camera

market was known as the owner of three big brands including Kodak, Canon, and Nikon.

Nowadays, with the development of market, there are more brands enter the market and

promissory to become threatening competitors of those old brands. However, in fact, we

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can see that, Canon Inc. until now is still powerful brand with their own competitive

advantages in compare with some others including old brands such as Nikon and Kodak or

new brands such as Samsung, Sony, Rolei, etc.

For those exist competitors as Nikon, Canon Inc. has been faced with many new

innovation and creativities from them. Therefore, they have to improve their product to

create competitive advantage themselves, and then build new product for satisfying the

huge of consumer market.

Camera market is easy enough for some new companies entering to because as we

see that in recent years, there are more and more companies such as Sony or Samsung, they

also participate in this field beside some traditional products. In addition, the barriers of new

entrants are not really high with low capital requirement, low switching cost or widen

distribution channels are the main reason that make the market more complicated with lot

of big brand names move onto producing this product.

Powerful of suppliers:

Canon Inc. distributes their product in almost electronic market and also their own

store and outlet authorized. However, the concentrated level is not clearly determined by

the distribution channel, for example besides Canon, electronic supermarkets also sell many

other brands so that they can cover all those market products. Therefore, Canon cannot

easily increase the attraction to the customers by focusing on those channels.

Powerful of buyers:

Canon Inc. is defined as one of famous and attractive camera brands in recent years.

Therefore, the number of potential customers is huge. Besides, the consumer demand is also

high, so the powerful of buyers will become one of the most factors that each company

should focus on to run business effectively. Nowadays, customers have many chooses for

purchasing camera include normal and luxury products because of the changing in quality

and attractive price. The demands of customer will be based on some factors such as the

purpose of using product, the appearance or quality of product. Almost customers use

camera for personal purposes, other for business stuff, so depends on how much money

they are willing to purchase and which kind of camera they need, company can analysis the

demand of customer to build long-term plan for improving their producing.

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For example: In Chinese market, the rate of selling digital camera is increasing year-by-year. For different brands in sales, Canon ranks the first place while Sony and Nikon are all smaller. Canon has the highest market share with the rate of 27.2%, following by Sony with 16.8% and Nikon with 15.7%, etc.

According to some research of customer’s interested in camera, there are more than half of

total said that they want to buy Canon more than the other brands. It’s also one of

competitive advantages of Canon when they take full advantage of customer loyalty.

Substitute products

Going along with the development of technology and creativity, camera can’t avoid

the increasing of new products instead the others elder ones. For example, before the first

appearance of digital camera, film camera is the main product of every brand that they

always innovate their products with higher quality. However, when the first digital camera -

Sony ProMavica MVC-5000 was shown off in the market in 1989, and then Dycam Model 1

(Logitech FotoMan), camera market step-by-step moved into this market and improve those

products as target market.

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Nowadays, there are many different kinds of camera are distributed in the market. This is an example about the interest of customer in searching for some types such as Point and shoot, DSLR… As we can see, DSLR camera and Point and shoot camera with very large market share.

Competitors

Camera market is the big market with many opportunities for company to improving

their business. The number of competitors in the market for digital camera is enormous. The

competitive landscape is characterized by various type of rivals. Company has to complete

with large enterprises that offer a widespread portfolio and on the other hand there are

many highly specialized small firms that are trying to gain market shares. The main

competitive elements are technology, quality, reliability, performance, price and customer

service and support.

Example:

According to the survey concerning customer’s interest in some camera brands show

that canon is winning in the camera war, following by Nikon, Sony and some other brand

names.

Along with the technological innovation, Canon Inc. also identifies the market

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segmentation to get competitive advantages in compare with their competitors including

price wars, advertising campaigns, new products introductions, or expended services. As we

see that, Canon Inc. produces many kinds of product lines from the normal product to luxury

product with the satisfactory price. Even though there are more companies with the higher

competitive price such as Olympus, Panasonic or Samsung, Canon and Nikon are still keeping

their market shares in the high level. Customers are willing to buy the product with high

quality and also high reputation more than the other despite the product is a little bit

expensive. To mention about the advertising campaigns, Canon Inc. based on more the

loyalty of customer and their existed reputation to get customer familiar with their products.

Canon Inc. builds the specific advertising campaign for each product lines that make the

people understand more about them.

INDUSTRY ATTRACTIVENESS AND INDUSTRY SUCCESS FACTORS

“Industry attractiveness is the presence or absence of threats exhibited by each of

the industry forces”, Cook explained. How does Canon Inc. make them more attractive to

become the successful camera company? Nowadays, camera market is an open market and

promise to become the attractiveness because of the rapidly increasing in technology. For

example in Vietnam, we can see that there are more and more people take care of

photograph so on they become the most potential customer that each of camera brand

should focus on. To know more about the way that Canon get the higher attractiveness and

success, we can concentrate on the strategic of them in camera market.

COMPETITIVE ADVANTAGES

To rich the high market share and attract customer, Canon has to get competitive

advantages in compare with the other brands. Based on the UK market perspective, we have

model of competitive advantage as following:

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c. Some highlights of Canon:

Canon has achieved the lowest cost production in the overall digital camera market.

Core competency in tacit and explicit knowledge of optical and imaging technology

learnt over the years, with Canon’s tradition of innovation, ‘anticipating tomorrow’s

need’.

Integrated value chain

Canon has been able to reduce cost in every aspect of the value chain. Full ownership and

control over its value chain and production. JIT (just in time) production which saves lead

tine and production cost (Canon, 2011).

In-house fully automated production system

Its in-house production system has a dual aim of cost-reduction and product innovation

Investment in cost-saving technology Canon adopts computer aided engineering

(CAE) which includes and allows ‘prototype-less technology’

High differentiation:

Distinctive capability - inimitable reputation built over the years

Canon realizes that customers may be not willing to buy the product with some

special features in high price. They always tend to some kind of products with the high

quality and satisfactory price. Therefore, Canon focus more in increasing the quality instead

of creating too much differentiates. Besides, canon is also constantly creating value for

customers such as investment in R&D.

High quality

Canon produces their product in high quality, which is very user friendly. From the

first existence in the camera market, Canon continuously changes not only the appearance

but also the quality of products and image and creativity. There are some Canon camera

which are using by professional photographer such as Canon 60D, Canon 5D Mark II, Canon

7D, etc. with almost appreciate quality and customer’s satisfaction.

2. Analysis of strategies issues of Canon in Vietnam

a. International strategies of Canon in Vietnam

From the established day in 1934, Canon has tried its best to diversify products, for instance,

launching the first indirect X camera in Japan in 1941, inventing the electronic, physical and

medical technology in the late 1960s, especially in 1969 changing its called name “Canon

Camera Co, Inc.” into “Canon Inc.” with purpose of receive challenges to develop Canon

photocopier using the first normal paper in Japan… Canon, until now, has still continued to

diversify and differentiate its products to meet people’s demands, requiring a lot challenges.

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It is undeniable that Canon is the leading brand all over the world in manufacturing and

providing the imaging products such as printer, camera, and camcorder… Canon expands

always its distribution to almost countries as much as possible. Canon products have been

available in Vietnam since the 1980s through its authorized distributors. In the last eight

years, it established a more significant presence when it set up three production facilities in

Thang Long, Hanoi, Que Vo and Tien Son, Bac Ninh and two representative offices in Ho Chi

Minh City and Hanoi, providing employment for more than 15,000 people in the country.

The two representative offices operate under the guidance and support of Canon Singapore

Pte. Ltd., which is the regional marketing headquarter for Canon's South & Southeast Asia

region. Besides Le Bao Minh distributor, the company has more than 300 authorized service

partners in the country.

In the early 1980s, Canon launched AE-135-millimeter camera with the surpassing

characteristics. This product was so success that experts regarded it as “Chevrolet of

market”. In 1982, Canon continued to introduce the first personal photocopier with function

of self-assembly and component replacement and other various products, which increased 7

times up to USD 3.3 billion in revenue and 20 times up to USD 135 million in profit,

compared with the year 1970s. During a decade 1970-1980, Canon launched continuously

new products and won competitors in all new markets. The evidence is that in 1982, Canon

launched electronic printer and defeated directly IBM. In particular, in 1983, Canon applied

combination between differentiation and cost-leader strategy by laser printer with a one-

third price. Indeed, Canon always renews and changes product to adapt new environments,

reaching a peak of success as today.

In Vietnam, citizens have tended to update high technology and the famous brand is often

the first choice. Canon understands and keeps up with the development of society, hence,

introduces ceaselessly new and fashionable products into Vietnam market such as printer,

camera and photocopier…However, due to not having chance to find out almost regions of

Vietnam, Canon just focuses on potential cities where a large number of people have high

demands. With aim of bring customers the advanced products, Canon always hears to adapt

to Vietnamese’s demands by a wide range of new products with Vietnamese interface,

including DSLR EOS 5D Mark III, SELPHY CP 810 camera… In reality, by viewing customers as

god, Canon actually beats a lot of famous brands such as Sony to hold the first rank all over

the world in electronic products.

b. Business strategy of Canon in Vietnam

Canon's strategies have been very effective in balancing growth of market share with

profitability, with the firm controlling a significant share of focused niche markets in the

imaging industry. Cannon's strategic challenges involved identifying the markets in which it

intended to compete and developing competitive advantages to allow the firm to balance

market share and profitability growth within these markets. In the late 1960s, the firm

initially adopted a business-level strategic vision of focusing on the small camera niche that

was underserved by its major competitors using a technology that was totally different than

the existing technologies used by competitors. The strategic vision provided direction for the

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firm's strategic planning process. At the same time, the corporate planning process was

flexible enough to allow Cannon to recognize and exploit opportunities in related markets

over the long run, with the firm eventually adopting a corporate-level strategy of horizontal

diversification based on the evolution of its core competencies. Over the long run, the

development and application of Cannon's strategy has made the firm a leader in the imaging

industry group.

The generic strategy selected by Canon for its initial penetration of the camera market was

focused differentiation, which required the firm to develop the technical competencies

necessary to create a new type of photocopier technology. The focused differentiation

strategy gradually expanded to be general differentiation strategy in the broader imaging

market. This strategy was suitable for Canon's specific situation by matching the conditions

in the external environment with the resources the firm had available or could acquire in a

reasonable period of time. The strategy may not be suitable for other industries because of

differences in the nature of the industry, the conditions in the external environment, and the

resources available to the firm.

Canon’s strategies in Vietnam and Asia are in common when Canon always renews its

products to meet people’s demand and focuses differentiation to diversify products for each

region. The specified strategies of Canon applied in Vietnam will be detailed as follows:

i. Corporate- level strategy:

o Diversification strategy

Canon always becomes the most popular brand all over the world and hence, the discovery

of new potential regions to bring its products to others is indispensible. Vietnam market is a

desiring land for investors to improve its brands. Therefore, in order to create favorable

conditions for the development of brands, Canon and Le Bao Minh company have

corporated since 2003 to distribute and bring products to customers more flexible by

focusing on the potential products such as camera, photocopier…Le Bao Minh company is

main distributor of Canon in Vietnam and has significant profits as well as valuable rewards

granted by authorities. Besides, It is undeniable that by dint of cooperating with Le Bao Minh

company, Canon has strong position in Vietnam market, for example, cameras occupy 31.2$

of camera market in Vietnam… Both companies also have gained great achievements in the

development of brand, profit and market share…

o Forward vertical integration strategy

The striking milestone is that July 23th, 2012, Canon Asia Marketing Group and Canon

Singapore Pte. Ltd. announced the establishment of Canon Marketing Vietnam Company

Limited (CMV) - a new Canon marketing company in Ho Chi Minh City, Vietnam. This new

company was formed with the purpose of building systems of import, distribution, sales and

service for Canon products in Vietnam.

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In recent years, Vietnam, after joining the World Trade Organization (WTO) in January 2007,

has made important progress in the transition to the economy market and integration into

the international economy. In particular, through the open policy of economy and

government policies to expand domestic demand, Vietnam has achieved economic growth

of around 6% during the past few years, which has created an urgent need for Canon to set

up a strategic marketing system in this country. In order to meet the market, Canon has

officially established Canon Marketing Company Limited Vietnam in Ho Chi Minh City,

Vietnam.

Canon has established the representative offices in Ho Chi Minh City and Hanoi in 2002 and

2003. In addition, except for the existing products, through Canon Marketing Vietnam

Company Limited Ltd. established, Canon also focus on the expansion of the market in the

field of industrial printing products and camera and specialized camcorder in the field of

cinema.

Canon’s new marketing subsidiary, Canon Marketing Vietnam Company Limited (CMV) with

investment of $3 million from Canon Singapore, planned to start operations in August, 2012

with around 40 employees.

The new company aims to create an import, distribution, sales and services system for

Canon products in Vietnam. It will support Le Bao Minh - Canon’s authorized dealer in

Vietnam, and other dealers in areas of sales, marketing and services. “We regard the Asia

market as most important and Vietnam is definitely one of our most important markets as it

is quickly becoming one of leading economies in the region. This is due to its strong growth,

a young and hardworking workforce and the government’s commitment to develop country

further,” said by Hideki Ozawa, president of Canon Asia Marketing Group.

ii. Business- level strategy

Strategic planning at Canon fundamentally involved identifying areas in the market that are

not well served by existing members of the industry and allocating resources to exploit the

market opportunity. This aspect of the strategy was an attempt to avoid competitive threats

by exploiting opportunities in market niches ignored by competitors. Strategic groups of

firms in an industry constitute a cluster of firms following a similar strategy with the firms in

different clusters not necessarily in direct competition with each other (Henry, 2008). Firms

in the same strategic groups tend to have similar market share and respond similarly to

changes in the external environment, which results in higher competitive rivalry among

members of the same strategic group. Canon's strategic vision involved minimizing

competitive rivalry by positioning the firm in a strategic group that was comparatively small

with no firm dominating the market. As a result, Canon's strategic vision involved indirect

competition with Xerox in the camera market, with Canon pursuing a market niche in which

Xerox chose not to compete. To some degree, this decision provided additional focus for the

medium-range plan by identifying the specific type of research and development the firm

should conduct to occupy the market niche for small camera.

18

In Vietnam, the differentiation strategy of Canon is often applied, for example, launching

camera products with high technology that be suitable for Vietnamese’s preference such as

5 DIGIC image processor…"At Canon, we always listen to every thought and consumers’

need to be able to bring the best products that consumers want and welcome. We always

wanted to bring the Vietnamese consumers the most comprehensive imaging solution. The

past years, Canon has been non-stop efforts in research activities and development to bring

our customers products with the most advanced technology. Besides, we also prioritize

application of simple features, and stylish designs when developing new products. And I

hope that Canon's new products will become your companion to help users save the most

precious moments” - Mr. Nomura Shimao, Chief Representative of Canon in Vietnam said.

The following extraordinary products of Canon launched into Vietnam market is one of

clearest evidences in the differentiation strategy of Canon.

Debut Digic 5 and latest features integrated in Canon new cameras

Ho Chi Minh City, 9 November, 2011, Canon, the leader in digital imaging, announced the

launch of its new products in the second half of 2011, consisting of 5 new digital cameras

and 8 Inkjet printers. In order to carter for the growing demand of users for innovative

technology, Canon introduced the DIGIC 5 image processor first time in Vietnam market

while improving other functions of its camera, including HS System, Full HD Video capture,

High speed Burst HQ and Intelligent IS. On this occasion, Canon also highlighted its Inkjet

printer PIXMA E500 – the low cost all in one color printer.

As the year end was around the corner, the shopping spree was reaching its peak. That's why

Canon introduced a series of new technology products which ensure to meet the high

demand of customers for high-end cameras and printers. Newly rolled out cameras include

PowerShot S100, SX40 HS, SX150 IS, IXUS 1100 HS and IXUS 230 HS .

A challenging task for any professional and amateur photographer is working under low-light

conditions. Helping improve the quality of images from these situations is Canon's HS

System, where the camera's image processor and high-sensitivity image sensor work in

tandem to enhance low-light image quality. With the PowerShot S100 and SX40 HS, Canon

has introduced a new DIDIC 5 image processor, maintaining the camera's superb low-light

image quality while improving overall camera operation and color accuracy. The new image

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processor has improved noise reduction and advanced Multi-area White Balance optimizing

color tones of both subject and background under multiple light sources.

An added benefit of the DIGIC 5 image processor is the incorporation of the new High-speed

Burst HQ providing users with the ability to continuously capture a maximum of eight

frames. Besides, Canon has taken the Image Stabilization (IS) technology one step further

with the new Intelligent IS which automatically chooses from six different modes (Normal,

Macro, Panning, Dynamic, Powered, Tripod) to optimize image stabilization and help achieve

crisp, blur-free images for various shooting conditions.

Coming to users in more stylish and colorful bodies, the IXUS 230 HS packs a powerful Canon

lens into a thin metal body with a range of leading features. At the same time, users who are

a fan of HD movie can find themselves in love with Canon PowerShot S100 with Stunning Full

HD (1080p) video captured at 24 frames per second with stereo sound.

"Super Cool" EOS M and 650D Cameras

August 31th 2012, at Vietnam Consumer Digital World Expo 2012, Canon Marketing Vietnam

Company Limited brought an extraordinary experience for its customers through a

comprehensive series of sophisticated products and high-tech solutions, ranging from

compact cameras, professional cameras, lens, and camcorders to mono-functional, multi-

functional ink-jet printers, compact photo printers and scanners. The event marks an

important step in fulfilling Canon Marketing Vietnam's goal of expanding the market after its

recent establishment.

By dint of understanding the demands of Vietnamese, especially the young, Canon renews

and enhances ceaselessly its products when researching that almost Vietnamese enjoy the

fashionable and convenient cameras which have famous brand in the globe. Therefore, as a

strategic product in the launch, the first mirror less interchangeable lens camera called EOS

M will make users be surprised. The biggest breakthrough of the EOS M lies in Canon's ability

to integrate an EOS system into a compact body, with full compatibility to more than 60 new

and existing EF and EF-S lenses. Furthermore, to prevent under-exposed shots in poor

lighting conditions, EOS M is equipped with an Auto Lighting Optimizer system and especially

the HDR Backlight Compensation function– taking three images in three different exposure

levels then merging and automatically aligning it within the camera to create perfect images

with all details and highlights optimized.

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While mobile solutions such as wireless connection or the Vietnamese interface language

are highlighted as remarkable features of compact IXUS camera range to easily share photos

onto social networks, the convenience and flexibility of Canon EOS 650D's LCD lies in multi-

touch screen, even for first-time users. The most outstanding products are legendary camera

lines such as EOS 1DX and EOS 5D Mark III with cinematic standards, smart and automatic

features and new light-metering sensor technology which help produce sharp and clear

images. Besides, Canon's huge collection of spectacular lenses and accessories is also

presented and displayed at the event.

c. Organizational structure of Canon in Vietnam

Canon Inc. had built a branch in Vietnam since 2001 and started operating in 2002. Firstly,

Canon had 2 operating representative offices: one in Hanoi (started in January 2003) and the

other in Ho Chi Minh City (started in January 2004. In May 2002, Canon established the first

assembly production in Vietnam which is located in Thang Long industrial zone. After 11

years of development, Canon Vietnam now has 3 factories which are Thang Long factory,

Que Vo factory and Tien Son factory. The headquarters is at Thang Long factory. With 3

factories, Canon runs a divisional departmentalization which is illustrated as the following

chart:

Canon Vietnam has a managing board of directors which control the general operating in

Vietnam. These divisional structure groups departments together based on organizational

outputs. Each of factories runs all of its departments: R&D, finance, manufacturing. This

Canon Vietnam

Managing Director

Thang Long Industial Park

Specialised in Ink Jet Printers

Que Vo Industrial Park

Specialised in New laser printer

Tien Son Industrial Park

Secialised in large ink jet printers

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kind of organizational structure has many advantages. Firstly, this structure helps each

divisions focus on its assembly production then maximize the productivity. For example, Que

Vo factory was built on the area of 20 ha with the investment capital of US$50 million, with

the maximum capacity of 8 million laser printers per year. Besides, following divisional

departmentalization gives each factory opportunities to practice management skills and

improve human resources more effectively. Especially, each division can emphasis on its

product and goals.

Team building for Vietnam Canon workers on sport day

Training at assembly production for workers

However, departmentalization contains several disadvantages such as duplication of

resources across divisions, poor coordination across divisions. For more details about

organizational structure of Canon Vietnam, there is another perspective we can consider. It

is job-classified structure.

22

Job-classified structure specifies detailed missions for each section therefore improve the

management of the whole company.

During the time of 2002 and 2011, Canon Vietnam did not have official marketing

department or company and its own distribution channel. The only authorized distributor of

Canon in Vietnam is Le Bao Minh Company which is in charge of distributing Canon products,

warranty support and carrying out marketing strategies.

Until now, Le Bao Minh Canon has 15-year experiences of promoting Canon brand in

Vietnam. However, in August 2012, Canon Asia marketing group and Canon Singapore Ltd.

announced the establishment of Canon Marketing Vietnam Company Limited, a new Canon

Man

agem

ent

Bo

ard

Direct with production

Plan section

Project section

Indirect with production

23

marketing subsidiary in Ho Chi Minh City, Vietnam. The new company was established with

the aim of creating an import, distribution, sales and service system for Canon products in

Vietnam.

In recent years, Vietnam, which joined the World Trade Organization in January 2007, has

made great strides in transitioning to a market economy and integrating into the

international economic system. In particular, through the government's economic open-door

policy and domestic-demand expansion policies, Vietnam has achieved economic growth

approaching 6% over the past few years with further expansion expected in the future,

which has created a pressing need for Canon to establish a strategic marketing system in the

country.

In response to these circumstances, Canon has newly established Canon Marketing Vietnam

Company Limited in Ho Chi Minh City, Vietnam. Canon Marketing Vietnam Company Limited

will gradually take over the responsibilities currently handled by the existing representative

offices in order to develop Canon's presence and services to customers in Vietnam more

directly and progressively.

In addition to existing business segments, through the new marketing company, Canon also

aims to further expand its market share within industries such as production printing and

motion-picture and broadcasting production. “Establishing our own sales company will allow

us to better serve our customers as we are able to support Le Bao Minh and dealers much

more in the areas of sales, marketing and service,” said Hideki Ozawa, president of Canon

Asia Marketing Group.

d. Modes of market entry

The period of 1980s

Canon products first appeared in Vietnam in 1980s through authorized distribution channels

and individual dealers. At that time, Vietnam economic had just been defined for 5 years

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after the whole country unification. Economic environment was so poor and

underdeveloped. At that beginning, Canon gained the first-mover advantage in Vietnam

market and built the brand consciousness of Vietnamese consumers. However, all Canon

products were imported to Vietnam. The profit margin was still low and sale volumes were

not large. Even though Canon could avoid the costs of establishing manufacturing

operations, Canon had to stand high transport costs and tariff barriers of Vietnam market.

The period of 2000 – 2011

The establishment of Canon Vietnam Company in 2001 marked a big change of Canon

strategy in Vietnam. The operation of 3 Canon factories implies the pursuit of wholly owned

subsidiaries mode of entry. All 3 Canon factories were built by 100% capital of Canon Global

and Canon Asia. There are 2 main factors that can support Canon on this mode of entry.

Firstly, Canon owns the significant technological know-how in the world and Canon financial

capacity is strong to build and operate its own subsidiaries in the world. Canon Inc. has

invested 300 million USD in Vietnam to build assembly productions with the expectation of 1

billion USD exports.

According to the US Patent and Trademark Office, Canon is the third position of top ten U.S

patent holders by company 2011. It shows the technological strength of Canon Inc.

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Canon has totally 277 consolidated subsidiaries in the world with nearly 200000 employees.

A typical illustration of Canon strong financial capacity is that it is ranked 122nd at global

ranking of market capitalization according to Financial Times magazine.

Beside the advantages of operating wholly owned subsidiaries, this mode of entry is also a

challenge of management and controlling for Canon.

e. Performance of Canon, Inc.

Summary of operations

Content Millions of Yen ¥

2009 2010 2011

Net sales 3,209,201 3,706,901 3,557,433

Operating profits 217,055 387,552 378,071

Income before income taxes 219,355 392,863 374,524

Net income attributable to Canon Inc.

131,647 246,603 248,630

Sales

26

Canon’s consolidated net sale in 2011 is 3557433 million yen which is 0.4% decrease

compared to 2010’s due to the effects earthquake and floods in Thailand.

Those sales come almost from office business units which cover 53.9 % of the total sales.

Coming after office business units is consumer business units (cameras, video recorders...).

In term of sales by geographic area, Europe is the largest market of Canon that covers

31.28% of the total sales. After Europe, the American market is the second largest market of

Canon.

Operating profits

2,800,000

3,000,000

3,200,000

3,400,000

3,600,000

3,800,000

2009 2010 2011

Sales of Canon Inc. 2009 - 2011

Sales

27

Operating profit in 2011 decreased 2.4% to a total of 378071 million yen from 2010. The

ratio of operating profit to net sales increased 0.1% to 10.6% from the fiscal 2010. The major

components of operating expenses are payroll, R&D, advertising expenses and other

marketing expenses. After the effects of earthquake, Canon cuts spending and control

expenses more efficiently. Therefore, the total operating expenses decreased by 2.6% from

2010 to 2011 that leads to the increase of operating profit in 2011.

Some key performance indicators

2011 2010 2009

Net sales (Millions of yen) 3,557,433 3,706,901 3,209,201

Gross profit to net sales ratio 48.8% 48.1% 44.5%

R&D expense to net sales ratio 8.7% 8.5% 9.5%

Operating profit to net sales ratio 10.6% 10.5% 6.8%

Inventory turnover measured in days 46days 35days 39days

Debt to total assets ratio 0.3% 0.3% 0.3%

Canon’s stockholder equity to total assets ratio 64.9% 66.4% 69.9%

The Gross profit to net sales ratio of 2009 was 44.5% which was about 4% lower than Gross

profit to net sales ratio of 2010 and 2011 while Canon had to pay more R&D expense during

2009 than 2 years later. Canon was affected by the economy recession in fiscal 2009 and had

the decrease in gross profit as well as operating profit ratios despite the relatively stable

revenue.

After one year of economic recession which caused the decrease of Canon’s performance

quality, in 2010, economic conditions continued to improve broadly throughout the world,

led by the economic growth of such emerging markets as China and India.

In 2011, Canon’s performance indicators showed the level-off and insignificant decrease.

Amid increasing uncertainty in the second half of the year as the pace of recovery

decelerated due to economic downturn in the United States and Europe, the economy as a

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2009 2010 2011

Operating profits of Canon

Operating profits ofCanon

28

whole continued to grow moderately, primarily driven by emerging economies. In the United

States, a lack of improvement in employment conditions and housing problems led to a

lower rate of growth. Emerging markets, such as China and India, maintained a high rate of

growth amid concerns over the effects of tight monetary policies. In Japan, severe

circumstances persisted following the Great East Japan Earthquake in March and, just as

production activities began showing signs of recovery.

Owing to the historically high valuation of the yen combined with the effects of the

earthquake and floods, all of Canon’s businesses faced extremely demanding conditions

throughout the year. Amid this harsh environment, Group-wide efforts to swiftly restore

production in the aftermath of the disasters, coupled with efforts to maximize production

and boost sales, led to net sales for the year totaling ¥3,557.4 billion, a year-on-year decline

of 4.0%. Despite the significant negative impact of the strong yen and the effects of the

earthquake and floods, the gross profit ratio rose 0.7 points year-on-year to 48.8%, owing to

the further acceleration of production innovation activities.

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Part III. Conclusion and recommendation

1. Conclusion

Summarily, TNC Canon Vietnam has been developed more and more effectively thanks to

the efficient management of Canon Global and the favorable technological advantages.

2. Recommendation

On overall strategy, Canon should build plan to show their representative in almost

camera market in order to get higher market shares and attract customers. Besides some

authorized agencies, Canon also should also focus on some super electronic markets such as

Pico, Media, etc. with the large number of customers’ attractiveness.

First of all, we realize that Canon should improve the Cost structure to reduce cost

and get better profit from products. By integrated supply chain management and

concentration on the efficient production of key products elements, Canon could safes a lot

of types of cost and the expense for those factors will be as low as their expectation. By

running multinational strategy in Vietnam market, Canon with their new company and

authorized agency should reduce the cost structure in order to get higher profit.

For each company, market position is one of the main factors which are focused on

at the moment of beginning doing business. As Canon’s vision and mission, they should

consider of running Research and Development tools and also improve Research

partnerships to hold the market position. Along with the establishing new company in Ho Chi

Minh City, Canon should speed up in compare with other companies to get the highest

market position in camera market.

One of the most important factors that Canon must have specific plan for their

operations is product. Canon has powerful in selling DSLR camera in compare with many

others brand such as Nikon, Samsung, Sony… Therefore, they should clearly determine

where their target market and strategic products are. Canon can continue product

development and innovation with its DSLR range to maintain market dominance. On the

other hand, Canon can focus on some the strategies such as market development and

market penetration for its compact digital camera market. By using the powerful of

customer’s satisfactory in Vietnamese market, Canon should promote their staffs and their

customers to attract potential customer.

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31

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