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Canon Inc Ambitious Acquisitions In The Video Surveillance Market Case Solution
Milestone Systems and Axis Communications both have enjoyed success mainly due to their technological expertise in their respective fields. However, there success will be put to the test with their merger with Canon Inc. The success of this consolidation will also depend partly on demand from those customers who want to enjoy one magic solution which provides everything that they wish for under one roof (Lewellen, 1971). The movement of industry to this phase cannot be wholly determined at the moment and will require a long time to pass first.
Following questions are answered in this case study solution
Analyse the changes taking place in Canon’s industry environment, focusing on the camera industry at the current time
Critically analyse Canon’s reasoning to diversify into the network security industry. Do you believe it has potential? What are the opportunities and threats for Canon in following this diversification?
Case Analysis for Canon Inc Ambitious Acquisitions In The Video Surveillance Market
1. Analyse the changes taking place in Canon’s industry environment, focusing on the camera industry at the current time
Canon Inc, being the market leader of the core camera business had been facing troubles lately in terms of thinning revenue streams and substitution of the camera with other products like smart phones and decreasing trend amongst the customers to carry a camera. This difficult situation forced Canon to rethink its growth strategy and finally decided to venture into a new yet related industry of network security. Moving into this new industry had its prospects and consequences. Network security industry seemed to be a potential for a growing market with no major dominant market leaders and a revenue flow of around US$ 23 billion by 2020 (Canon Global, 2017b). Canon made a number of acquisitions in the related industries which would enable it to settle firmly in the new market. The question is as to efficiently, Canon will be able to generate synergies from these mergers with the other companies and combine its core competencies of being a market leader of cameras with software and video encoding for network security (Canon Global, 2017a).
Firstly, we need to analyse the reasons to diversify into the network security industry. This can be directly linked to the increasing convenience and affordability of smart phones which were gradually receding the sales of the camera for Canon. This rising threat from the gaining popularity of smart phones and the subsequent drop in the sales of digital camera was the first doubtful indication of the future of cameras for Canon (Hitt, Hoskisson, & Kim, 1997). Further to this, the failures of big names in the camera industry like Kodak had taught Canon major lessons regarding the need to diversify and plan future strategies appropriately. The failure of Kodak had also taught Canon the importance of integration and the fast-moving shift of the consumers towards the digital products. Slow movers to change were left behind in the intense competition within the market. The above reasons can explain as to why Canon needed a major makeover for its future strategy to grow into new arenas (Lucas & Goh, 2009).
Next, we need to critically analyse whether diversification is a plausible solution for Canon Inc. With the rising popularity of substitute to cameras, Canon, well in time, recognised the need for a new growth platform. The idea was to not only compete with the smart phones but also venture into a new field of business (Sarwar & Soomro, 2013). The new focus was towards the safety and protecting human lives. Security cameras had become an increasingly important device for organisations and possessed the potential for large demand in the future. Canon being a market leader in the camera industry had a number of opportunities to capitalise through this venture. It already had a strong diversified portfolio of products, and it could leverage its business and the business acumen to set firmly in the new market. The company was also conducting strategic mergers and acquisitions which could give it the advantage to bring in internal growth.
Following this diversification can also bring in a number of threats for Canon Inc. First of all, the mergers and acquisitions will lead to huge cash outflows for the company. The synergies will not be realised until a long time, and there could be high uncertainty if the synergies will bring in positive growth for the company. The decline in the camera industry will eventually lead to a large number of digital camera companies to move into network security industry which will eventually create again string competition for Canon Inc. Lastly, just like camera industry, surveillance industry will also be replaced by better technology in the long term. Canon needs to decide if the venture will be worthwhile for a long term about the price paid (Lewellen, 1971).
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